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<TITLE>GTX, INC. - FORM S-1</TITLE>
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<B><FONT size="2">As filed with the Securities and Exchange
Commission on October&nbsp;15, 2003</FONT></B>
</DIV>

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<B><FONT size="2">Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
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<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

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<B>Washington, D.C. 20549</B>
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<B><FONT size="5">Form&nbsp;S-1</FONT></B>

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<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

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<B><FONT size="6">GTx, Inc.</FONT></B>

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<I><FONT size="2">(Exact name of registrant as specified in its
charter)</FONT></I>
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    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <B><FONT size="2">2834</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">20-0221828</FONT></B></TD>
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    <TD align="center" valign="top">
    <I><FONT size="2">(State or other jurisdiction of<BR>
    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 No.)</FONT></I></TD>
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<B><FONT size="2">GTx, Inc.</FONT></B>

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<B><FONT size="2">3 N. Dunlap Street, 3rd Floor</FONT></B>
</DIV>

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<B><FONT size="2">Van Vleet Building</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Memphis, TN 38163</FONT></B>
</DIV>

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<B><FONT size="2">(901)&nbsp;523-9700</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>
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<B><FONT size="2">Mitchell S. Steiner, M.D., F.A.C.S.</FONT></B>

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

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

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<B><FONT size="2">3 N. Dunlap Street, 3rd Floor</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Van Vleet Building</FONT></B>
</DIV>

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<B><FONT size="2">Memphis, TN 38163</FONT></B>
</DIV>

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<B><FONT size="2">(901)&nbsp;523-9700</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>
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<B><I><FONT size="2">Copies to:</FONT></I></B>

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    <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="28%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" valign="top">
    <B><FONT size="2">Robert L. Jones, Esq.<BR>
    Suzanne Sawochka Hooper, Esq.<BR>
    Cooley Godward LLP<BR>
    Five Palo Alto Square<BR>
    3000 El Camino Real<BR>
    Palo Alto, CA 94306<BR>
    (650) 843-5000</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Leigh Walton, Esq.<BR>
    Robert J. DelPriore, Esq.<BR>
    Bass, Berry &#38; Sims PLC<BR>
    100 Peabody Avenue<BR>
    Suite&nbsp;950<BR>
    Memphis, TN 38103<BR>
    (901) 543-5904</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">David E. Redlick, Esq.<BR>
    Peter N. Handrinos, Esq.<BR>
    Hale and Dorr LLP<BR>
    60 State Street<BR>
    Boston, MA 02109<BR>
    (617) 526-6000</FONT></B></TD>
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<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate date of
commencement of proposed sale to the public:</B> As soon as
practicable after the effective date of this Registration
Statement.
</FONT>

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

<P align="left">
<FONT size="2">&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>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a
post-effective amendment filed pursuant to Rule&nbsp;462(c)
under the Securities Act, 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>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a
post-effective amendment filed pursuant to Rule&nbsp;462(d)
under the Securities Act, 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>
</FONT>

<P align="left">
<FONT size="2">&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>

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

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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD colspan="5"></TD>
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    <TD></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>
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<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">Aggregate Offering</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration</FONT></B></TD>
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<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">Price(1)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Fee</FONT></B></TD>
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    <TD colspan="5"></TD>
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    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, par value $0.001 per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$86,250,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$6,977.63
    </FONT></TD>
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    <TD width="97%"></TD>
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    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of computing the
    registration fee in accordance with Rule&nbsp;457 under the
    Securities Act of 1933.
    </FONT></TD>
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<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;<B>The Registrant hereby
amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the 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 of 1933
or until the Registration Statement shall become effective on
such date as the SEC, acting pursuant to Section&nbsp;8(a), may
determine.</B>
</FONT>

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<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<FONT size="2" color="#E8112D">The information in this
preliminary prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell nor does it
seek an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.</FONT><FONT size="2"> <BR>
</FONT>
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<P align="center">
<FONT size="2" color="#E8112D">Subject to Completion. Dated
October&nbsp;15, 2003.
</FONT>

<P align="center">
<FONT size="4">&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</FONT>

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<IMG src="g85196g8519601.gif" alt="(GTx LOGO)">

<DIV align="center">
<FONT size="4">Common Stock
</FONT>
</DIV>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This is an initial public offering of shares of
common stock of GTx, Inc. All of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock are being sold by the company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for the common stock. It is currently estimated that the
initial public offering price per share will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
Application has been made for the quotation of the common stock
on the Nasdaq National Market under the symbol &#147;GTXI&#148;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">See &#147;Risk Factors&#148; on page 7 to read
about factors you should consider before buying shares of the
common stock.</FONT></I>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Neither the Securities and Exchange Commission
nor any other regulatory body has approved or disapproved of
these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.</FONT></B>

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    <TD width="73%"><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="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>
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    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
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    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
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    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Initial public offering price
    </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>
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    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting discount
    </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>

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    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds, before expenses, to GTx
    </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>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the extent that the underwriters sell more
than&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, the underwriters have the option to purchase up
to an
additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from GTx at the initial public offering price less the
underwriting discount.
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters expect to deliver the shares
against payment in New York, New York
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003.
</FONT>
<P>

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<TR>
    <TD width="29%"></TD>
    <TD width="71%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="4">Goldman, Sachs &#38; Co.</FONT></B></TD>
    <TD align="left">
</TD>
</TR>

</TABLE>

<DIV align="center">
<B><FONT size="4">SG
Cowen&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="4">Lazard</FONT></B>
</DIV>

<P align="center">
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<P align="center">
<FONT size="2">Prospectus
dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003.
</FONT>
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<!-- link1 "<FONT size="2">PROSPECTUS SUMMARY</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The following summary is qualified in its
entirety by reference to the more detailed information and
financial statements appearing elsewhere in this
prospectus.</FONT></I>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx is a biopharmaceutical company dedicated to
the discovery, development and commercialization of therapeutics
primarily related to the treatment of serious men&#146;s health
conditions. Our drug discovery and development programs are
focused on small molecules that selectively modulate the effects
of estrogens and androgens, two essential classes of hormones.
We currently have two product candidates that are in human
clinical trials. We are developing Acapodene, our most advanced
product candidate, through clinical trials for two separate
indications: (1)&nbsp;a Phase IIb clinical trial for the
reduction in the incidence of prostate cancer in men with
precancerous prostate lesions and (2)&nbsp;a planned pivotal
Phase III clinical trial for the treatment of serious side
effects of advanced prostate cancer therapy. We are initially
developing our second product candidate, Andarine, for the
treatment of cachexia from various types of cancer. Cancer
cachexia is a muscle wasting condition that is a potentially
life-threatening complication of many cancers. Andarine is the
most advanced of our internally discovered portfolio of
compounds designed to modulate the effects of hormones. We plan
to build a specialized sales and marketing capability to market
our product candidates directly to the relatively small and
concentrated community of urologists and medical oncologists in
the United States and to seek collaborators to commercialize our
product candidates outside the United States and to broader
target physician markets.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene for the Reduction in the
Incidence of Prostate Cancer in Men with Precancerous Prostate
Lesions</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prostate cancer is one of the most commonly
diagnosed cancers in men and the second leading cause of
cancer-related deaths in the United States. Scientific evidence
has established that men who have high grade, or advanced,
prostatic intraepithelial neoplasia, a precancerous prostate
lesion referred to as high grade PIN, are at high risk of
developing prostate cancer. In the United States, there are over
115,000 new cases of high grade PIN diagnosed each year, and an
estimated 9.4&nbsp;million men unknowingly harbor high grade
PIN. Currently, there is no therapy for the treatment of high
grade PIN.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are conducting a Phase IIb clinical trial in
which we have enrolled 515 patients to determine the efficacy
and safety of Acapodene for the reduction in the incidence of
prostate cancer in men with high grade PIN. In April&nbsp;2003,
we performed a planned interim analysis of the first 120
patients in this clinical trial. The interim analysis indicated
that patients who received Acapodene had a 10% to 17% incidence
of prostate cancer 12&nbsp;months after being diagnosed with
high grade PIN, depending on the dose of Acapodene, compared to
a 23% incidence in the placebo group. This represents an
approximately 26% to 57% reduction in prostate cancer incidence
in patients who received Acapodene compared to the placebo
group. The last patient is scheduled to complete this trial in
May&nbsp;2004, with final results expected in the third quarter
of 2004. We believe that our Phase&nbsp;IIb clinical trial for
the reduction in the incidence of prostate cancer in men with
high grade PIN will support a single pivotal Phase&nbsp;III
clinical trial of Acapodene for this indication. We are
evaluating the protocol and timing of this pivotal
Phase&nbsp;III clinical trial.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene for the Treatment of Side Effects
of Androgen Deprivation Therapy</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The standard medical treatment for men who have
advanced, recurrent or metastatic prostate cancer is androgen
deprivation therapy, which reduces blood levels of testosterone,
the growth factor for prostate cancer. In the United States,
more than 675,000 men are currently being treated by androgen
deprivation therapy for advanced, recurrent or metastatic
prostate cancer, with over
</FONT>
</DIV>

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

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<DIV align="left">
<FONT size="2">120,000 new patients started on this therapy each
year. Androgen deprivation therapy has serious side effects,
including: severe bone loss, or osteoporosis, leading to
skeletal fractures; hot flashes; and breast pain and
enlargement, or gynecomastia. There are no drugs approved by the
FDA for the treatment of these side effects of androgen
deprivation therapy.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have completed two six-month Phase&nbsp;II
clinical trials of Acapodene for the treatment of osteoporosis
and hot flashes, two serious side effects of androgen
deprivation therapy. The first Phase&nbsp;II clinical trial
evaluated Acapodene in 43&nbsp;patients shortly after initiation
of androgen deprivation therapy, and the second Phase&nbsp;II
clinical trial evaluated Acapodene in 46&nbsp;patients who had
been receiving androgen deprivation therapy for more than
12&nbsp;months. In the second trial, patients who received
Acapodene at the highest tested dose on average experienced a
3.5% increase in lumbar vertebral spine bone mineral density,
which is an indicator of bone strength, while the patients who
received the placebo on average experienced a 0.5% decrease in
lumbar vertebral spine bone mineral density. Only 12.5% of the
patients in this trial who received Acapodene at the highest
tested dose, compared to 50% of the patients who received the
placebo, reported experiencing an increase in the frequency of
hot flashes during the clinical trial. Our planned pivotal
Phase&nbsp;III clinical trial for this indication, which we
expect to commence in November&nbsp;2003, is principally based
on the results of our Phase&nbsp;II clinical trial that
evaluated patients who had been receiving androgen deprivation
therapy for more than 12&nbsp;months. The primary endpoint of
the trial will be the incidence of skeletal fractures, and the
secondary endpoints will include the measurement of bone loss
and the incidence of hot flashes and gynecomastia.
</FONT>

<P align="left">
<B><I><FONT size="2">Andarine for the Treatment of Cancer
Cachexia</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that Andarine has the potential to
treat testosterone deficiency in aging men, or andropause, and
related diseases, including osteoporosis and muscle wasting. Our
strategy is to develop Andarine initially for the treatment of
cachexia from various types of cancer. We selected this
indication because it represents a potentially large market and,
we believe, has a relatively well-defined clinical and
regulatory process. Depending on the results of our initial
development efforts, we may also develop Andarine for other
andropause-related conditions. For cachexia from various types
of cancer, we are developing Andarine for the treatment of both
men and women. There are approximately 1.3&nbsp;million patients
diagnosed with cancer each year in the United States. Cancer
cachexia afflicts approximately one-third of newly-diagnosed
cancer patients. There are no drugs that have been approved by
the FDA for the treatment of cancer cachexia. Although there are
two commercially available drugs that are being prescribed
off-label for the treatment of some types of cancer cachexia,
chronic use of these drugs may result in bleeding liver cysts
and liver cell tumors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have completed three Phase&nbsp;I clinical
trials of Andarine. In these trials, Andarine was well-tolerated
by all participants and there were no serious adverse events. We
observed preliminary indications in a multiple-dose Phase&nbsp;I
clinical trial in men that Andarine promoted growth activity, as
measured by levels of a growth factor in the blood. We plan to
commence a placebo-controlled, dose-finding Phase&nbsp;II
clinical trial of Andarine for the treatment of cachexia from
non-small cell lung cancer in the first half of 2004.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have a robust preclinical product candidate
pipeline of small molecules that modulate the effects of
hormones. Our current preclinical product candidate pipeline
focuses on the treatment of major indications in men&#146;s
health, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Prostarine for the treatment of benign prostatic
    hyperplasia, or BPH, a benign prostate enlargement that results
    in obstruction of the urinary tract;
    </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">Ostarine for the treatment of osteoporosis and
    andropause; and
    </FONT></TD>
</TR>

</TABLE>
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Andromustine for the treatment of prostate cancer
    that is not responsive to androgen deprivation therapy.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We believe that our drug discovery capabilities
position us well to sustain our clinical pipeline through the
design and development of nonsteroidal small molecule drugs that
modulate the effects of hormones.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were originally incorporated under the name
Genotherapeutics, Inc. in Tennessee in September&nbsp;1997. We
changed our name to GTx, Inc. in 2001, and we reincorporated in
Delaware in 2003. Our principal executive office is located at
3&nbsp;N.&nbsp;Dunlap Street, 3rd Floor, Van Vleet Building,
Memphis, Tennessee, and our telephone number is
(901)&nbsp;523-9700. Our website address is www.gtxinc.com. The
information contained in our website is not a part of this
prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Service marks, trademarks and trade names
referred to in this prospectus are the property of their
respective owners.</FONT></I>
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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="40%"></TD>
    <TD width="1%"></TD>
    <TD width="59%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by GTx
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

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

<TR>
    <TD valign="top">
    <FONT size="2">Common stock to be outstanding after the offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

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

<TR>
    <TD valign="top">
    <FONT size="2">Proposed Nasdaq National Market symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">GTXI
    </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 expect to use the net proceeds from this
    offering to fund our clinical trials and other research and
    development activities and for general corporate purposes.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of common stock to be
outstanding after this offering is based on the number of shares
outstanding as of August&nbsp;31, 2003 and excludes:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">67,000 shares of common stock issuable upon
    exercise of options issued under our current stock option plans,
    at a weighted average exercise price of $50.28 per share; 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">83,900 shares of common stock reserved for future
    issuance under our current stock option plans
    and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for future issuance under our 2003
    Equity Incentive Plan, 2003 Non-Employee Directors&#146; Stock
    Option Plan and 2003 Employee Stock Purchase Plan, which we plan
    to adopt before the completion of this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as otherwise noted, all information in
this prospectus:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumes no exercise of the underwriters&#146;
    over-allotment option;
    </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">gives effect to the conversion into common stock
    of all outstanding shares of preferred stock and dividends
    accrued thereon through August&nbsp;31, 2003; 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">gives effect to our reincorporation in Delaware,
    which will occur before the closing of this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The terms &#147;GTx,&#148; &#147;we,&#148;
&#147;us&#148; and &#147;our&#148; as used in this prospectus
refer to GTx, Inc.
</FONT>
</DIV>

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</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;&nbsp;
<FONT size="2">The summary financial information below should be
read in conjunction with &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and the financial statements, notes thereto and other financial
information included elsewhere in this prospectus. The
information presented for the six-month periods ended
June&nbsp;30, 2002 and June&nbsp;30, 2003 are derived from
unaudited financial statements and include, in the opinion of
management, all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the information for such
periods. The results for the six-month period ended
June&nbsp;30, 2003 are not necessarily indicative of the results
to be expected for the full fiscal year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pro forma net loss per share for the year ended
December&nbsp;31, 2002 and the six months ended June&nbsp;30,
2003 is computed using the weighted average number of shares of
common stock outstanding, including the pro forma effects of the
automatic conversion of our preferred stock and dividends
accrued thereon into shares of common stock effective upon the
closing of the offering as if such conversion occurred on
January&nbsp;1, 2002 and January&nbsp;1, 2003 or at the date of
the original issuance, if later. The calculation of pro forma
net loss per share attributable to common stockholders excludes
incremental common stock issuable upon exercise of options, as
its effect would be antidilutive. For the six months ended
June&nbsp;30, 2003, diluted net loss per share attributable to
common stockholders and pro forma net loss per share
attributable to common stockholders basic and diluted are
computed using the net loss excluding accrued preferred stock
dividends and the adjustment to preferred stock redemption value.
</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="48%"><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="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="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>
</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="11"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
</TR>

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

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands, except share and per share data)</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 Data:</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">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>
</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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,744</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,285</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,975</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">4,703</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">1,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,411</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">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">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">215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</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>

</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">3,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,146</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">12,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,233</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">6,289</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 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">150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><FONT size="2">&nbsp;</FONT></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>
</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">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">(3,812</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">(8,063</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">(11,866</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">(5,178</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">(6,246</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">Accrued preferred stock dividends
    </FONT></DIV>
    </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</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">(790</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">(2,147</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">(858</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">(1,366</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">Adjustment to preferred stock redemption value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,077</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">(57</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">(7,220</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">(7,036</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">4,736</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>

</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,186</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,910</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,072</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">(2,876</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>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share attributable to common
    stockholders:
    </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">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.16</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>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.34</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>

<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 used in computing net
    loss per share attributable to common stockholders:
    </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">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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="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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">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">910,000</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">910,000</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">910,000</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">910,000</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">1,869,021</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>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net loss per share attributable to
    common stockholders&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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.81</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.34</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Shares used in computing pro forma net loss per
    share attributable to common stockholders&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 align="right" valign="bottom" nowrap><FONT size="2">1,742,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,869,021</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents a summary of our
balance sheet as of June&nbsp;30, 2003:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on an actual basis;
    </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">on a pro forma basis to give effect to the
    issuance of 329,536&nbsp;shares of Series&nbsp;E cumulative
    redeemable convertible preferred stock on August&nbsp;7, 2003
    for net proceeds of approximately $20.0&nbsp;million; 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">on a pro forma as adjusted basis to reflect the
    issuance of 329,536&nbsp;shares of Series&nbsp;E cumulative
    redeemable convertible preferred stock on August&nbsp;7, 2003
    for net proceeds of approximately $20.0&nbsp;million, the
    conversion into common stock of all outstanding shares of
    preferred stock and dividends accrued thereon through
    August&nbsp;31, 2003 and the sale in this offering
    of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an assumed initial offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting the estimated underwriting discounts and
    commissions and estimated offering expenses payable by us.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" 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="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="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>
</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">As of June&nbsp;30, 2003</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="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As Adjusted</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></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" 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 Data:</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 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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,098</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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Working 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">1,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">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">4,064</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">24,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><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">Cumulative 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">60,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Deficit accumulated during development stage
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,154</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">(59,168</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 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">(58,184</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">(58,198</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>

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

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">RISK FACTORS</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Any investment in our stock involves a high
degree of risk. You should consider carefully the risks and
uncertainties described below, and all information contained in
this prospectus, before you decide whether to purchase our
common stock. If any of the following risks or uncertainties
actually occurs, our business, financial condition, results of
operations and prospects would likely suffer, possibly
materially. In addition, the trading price of our common stock
could decline due to any of these risks or uncertainties, and
you may lose part or all of your investment.</FONT></I>

<P align="center">
<B><FONT size="2">Risks Related to Our Business</FONT></B>

<P align="left">
<B><I><FONT size="2">If preclinical or clinical trials of
Acapodene, Andarine or any other product candidates that we may
develop do not produce successful results, we will be unable to
commercialize these product candidates, which will materially
harm our business.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We need to obtain regulatory approval to
commercially market Acapodene, Andarine or any other product
candidates that we may develop. To receive regulatory approval
for the commercial distribution and sale of Acapodene, Andarine
or any other product candidates that we may develop, we must
conduct, at our own expense, extensive preclinical and clinical
trials to demonstrate the safety and efficacy in humans of the
product candidates. Preclinical and clinical testing is
expensive, can take many years and has an uncertain outcome.
Failure can occur at any stage of the testing. We may experience
numerous unforeseen events during, or as a result of, the
testing process that could delay or prevent commercialization of
Acapodene, Andarine or any other product candidates that we may
develop, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our preclinical or clinical trials may produce
    negative or inconclusive results, and we may decide, or
    regulators may require us, to conduct additional preclinical or
    clinical testing;
    </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">registration or enrollment in our
    (1)&nbsp;planned pivotal Phase III clinical trial of Acapodene
    for the reduction in the incidence of prostate cancer in men
    with high grade PIN, (2)&nbsp;planned pivotal Phase III clinical
    trial of Acapodene for the treatment of osteoporosis, hot
    flashes and gynecomastia as side effects of androgen deprivation
    therapy for advanced prostate cancer and (3)&nbsp;planned Phase
    II clinical trial of Andarine for the treatment of cachexia from
    non-small cell lung cancer may be slower than we currently
    anticipate, resulting in significant delays;
    </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 Food and Drug Administration, or FDA, may
    require more than a single pivotal Phase&nbsp;III clinical trial
    of Acapodene for the reduction in the incidence of prostate
    cancer in men with high grade PIN in order to grant marketing
    approval of Acapodene for this 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">the safety and efficacy results attained in our
    clinical trials for Acapodene or Andarine may be less positive
    than the results obtained in our earlier clinical trials for
    Acapodene or Andarine;
    </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 our clinical trials may be greater
    than we currently anticipate;
    </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">after reviewing trial results, we may abandon
    projects that we expected to be promising;
    </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, regulators or institutional review boards may
    suspend or terminate our clinical trials if the participating
    patients are being exposed to unacceptable health risks;
    </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">regulators or institutional review boards may
    suspend or terminate clinical research for various reasons,
    including noncompliance with regulatory requirements; 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 effects of Acapodene, Andarine or any other
    product candidates that we may develop may not be the desired
    effects or may include undesirable side effects or other
    characteristics that may delay or preclude regulatory approval
    or limit their commercial use if approved.
    </FONT></TD>
</TR>

</TABLE>

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

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Success in preclinical testing and early clinical
trials does not ensure that later clinical trials will be
successful, and interim results of a clinical trial do not
necessarily predict final results. For example, the interim
results from our Phase IIb clinical trial of Acapodene for the
reduction in the incidence of prostate cancer in men with high
grade PIN do not necessarily predict favorable final results
from the trial or from our planned pivotal Phase&nbsp;III
clinical trial. Further, bone mineral density changes observed
in our Phase&nbsp;II clinical trials of Acapodene for the
treatment of osteoporosis, hot flashes and gynecomastia as side
effects of androgen deprivation therapy for advanced prostate
cancer are not necessarily indicative of the results that will
be demonstrated in our planned larger pivotal Phase&nbsp;III
clinical trial.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not know whether our current or any future
clinical trials will demonstrate safety and efficacy
sufficiently to result in marketable products. Our failure to
adequately demonstrate the safety and efficacy of Acapodene,
Andarine or any other product candidates that we may develop
will prevent receipt of regulatory approval and, ultimately,
commercialization of Acapodene, Andarine or any other product
candidates that we may develop, which will materially harm our
business.
</FONT>

<P align="left">
<B><I><FONT size="2">Delays in clinical testing could result in
increased costs to us and delay our ability to generate
revenue.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant delays in clinical testing or
termination of clinical testing could materially impact our
product development costs. We do not know whether planned
clinical trials will begin on time, will need to be restructured
or will be completed on schedule, if at all. Clinical trials can
be delayed for a variety of reasons, including delays related to:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">obtaining regulatory approval to commence a
    clinical trial;
    </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">clinical holds;
    </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">negotiating acceptable clinical trial agreement
    terms with prospective trial sites;
    </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">obtaining institutional review board approval to
    conduct a clinical trial at a prospective site;
    </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">recruiting patients to participate in a clinical
    trial;
    </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">competition for clinical investigators or
    clinical trial subjects;
    </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">shortage or lack of availability of clinical
    trial 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">the need to repeat clinical trials; 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 failure of third parties conducting and
    overseeing the operations of our clinical trials to perform
    their contractual or regulatory obligations in a timely fashion.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, delays in or termination of clinical
trials due to exposure of clinical trial subjects to
unacceptable health risks or noncompliance with regulatory
requirements could also occur. If we have significant delays in
or termination of clinical trials, our financial results and the
commercial prospects for Acapodene, Andarine or any other
products that we may develop will be adversely impacted, our
costs could increase and our ability to generate revenue could
be impaired.
</FONT>

<P align="left">
<B><I><FONT size="2">We may not be successful in our efforts to
develop a pipeline of product candidates.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A key element of our strategy is to discover and
develop a pipeline of small molecule product candidates. We are
seeking to do so primarily through our internal research
programs. Research programs to identify product candidates
require substantial technical, financial and human resources,
whether or not we ultimately identify any product 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="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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; 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">on further study, potential product candidates
    may 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;&nbsp;
<FONT size="2">If we are unable to develop suitable product
candidates, our business may suffer.
</FONT>

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

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<P align="center">
<B><FONT size="2">Risks Related to Regulatory Approval of our
Product Candidates</FONT></B>

<P align="left">
<B><I><FONT size="2">We and our collaborators are subject to
extensive regulation, which can be costly and time-consuming to
comply with and may subject us to unanticipated delays or
prevent us from obtaining the required approvals to
commercialize Acapodene, Andarine or any other product
candidates that we may develop.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acapodene, Andarine and any other product
candidates that we may develop, and the preclinical and clinical
trials and manufacturing and distribution activities associated
with their development, are subject to comprehensive regulation
by the FDA and other regulatory agencies in the United States
and by comparable authorities in other countries. The process of
obtaining regulatory approvals is expensive, often takes many
years, if approval is obtained at all, and can vary
substantially based upon the type, complexity and novelty of the
product candidates involved.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Applicants for FDA approval must submit extensive
preclinical and clinical data as well as information about
product manufacturing processes and facilities and other
supporting information to the FDA. Varying interpretations of
the data obtained from preclinical and clinical testing could
delay, limit or prevent regulatory approval of a product
candidate. Changes in the FDA approval policy during the
development period, or changes in regulatory review for each
submitted product application, may also cause delays in the
approval or rejection of an application. The FDA has substantial
discretion in the approval process and may disagree with our or
any collaborator&#146;s interpretations of such data, which also
could cause delays of an approval or rejection of an
application. Even if the FDA approves a product candidate, the
approval may limit the uses or conditions for which a product
may be marketed, or may require further studies. The FDA also
can withdraw product clearances and approvals for failure to
comply with regulatory requirements or if problems follow
initial marketing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FDA&#146;s and foreign regulatory
agencies&#146; statutes, regulations or policies may change, and
additional government regulations or statutes may be enacted
that could prevent or delay regulatory approval of our product
candidates. We cannot predict the likelihood, nature or extent
of adverse governmental regulation that might arise from future
legislative or administrative action, either in the United
States or abroad.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have only limited experience in filing and
prosecuting the applications necessary to gain regulatory
approvals. The FDA may refuse to accept any application or may
decide that our data is insufficient for approval and require
additional preclinical, clinical or other studies. For example,
while we believe that our ongoing Phase&nbsp;IIb clinical trial
of Acapodene for the reduction in the incidence of prostate
cancer in men with high grade PIN will support a single pivotal
Phase&nbsp;III clinical trial of Acapodene for this indication,
we cannot assure you that the FDA will not require more than one
pivotal Phase&nbsp;III clinical trial in order to grant
marketing approval of Acapodene for this indication. We will not
be able to commercialize Acapodene, Andarine or any other
product candidates that we may develop until we obtain FDA
approval in the United States and approval from comparable
authorities in other countries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The approval procedure varies among countries and
can involve additional testing beyond that required by the FDA.
The time required to obtain approval in other countries may
differ from that required to obtain 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not expect to receive regulatory approval
for the commercial sale of Acapodene, Andarine or any other
product candidate for a number of years. The inability to obtain
FDA approval or approval from comparable authorities in other
countries would prevent us from commercializing Acapodene,
Andarine or any other product candidates that we may develop in
the United States or other countries.
</FONT>

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

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<P align="left">
<B><I><FONT size="2">Even if Acapodene, Andarine or any other
product candidates or products that we may develop receive
regulatory approval, we may still face development and
regulatory difficulties relating to such product candidates or
products.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we receive regulatory approval to sell
Acapodene, Andarine or any other product candidates that we may
develop, the FDA and foreign regulatory authorities may,
nevertheless, impose significant restrictions on the indicated
uses, conditions for use, labeling, advertising, promotion,
marketing or production of such product, or impose ongoing
requirements for post-approval studies, including additional
research and development and clinical trials. In addition,
regulatory agencies subject a marketed product, its manufacturer
and the manufacturer&#146;s facilities to continual review and
periodic inspections. If we discover previously unknown problems
with a product, a regulatory agency may impose restrictions on
that product or on us or any collaborators, including requiring
us or our collaborators to withdraw the product from the market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will be subject to ongoing FDA requirements,
including required submissions of safety and other post-market
information, registration requirements, current Good
Manufacturing Practice, or cGMP, regulations, requirements
regarding the distribution of samples to physicians and
recordkeeping requirements. The cGMP regulations include
requirements relating to quality control and quality assurance,
as well as the corresponding maintenance of records and
documentation. The manufacturing process must consistently
produce quality batches of the product, and the manufacturer
must develop methods for testing the quality, purity and potency
of the final drugs. Additionally, we must select and test
appropriate packaging and conduct chemistry stability studies to
demonstrate that the product does not undergo unacceptable
deterioration over its shelf-life.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we or any collaborators fail to comply with
applicable regulatory requirements, a regulatory agency may:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">issue warning letters;
    </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">impose civil or criminal penalties;
    </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">suspend or withdraw our regulatory approval;
    </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">suspend or terminate any of our ongoing 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">refuse to permit the import or export of our
    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">refuse to approve pending applications or
    supplements to approved applications that we file;
    </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">impose restrictions on our or our
    collaborators&#146; operations, including closing a
    manufacturing facility; 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">seize or detain products or require a product
    recall.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FDA&#146;s and foreign regulatory
agencies&#146; statutes, regulations or policies may change, and
additional government regulation or statutes may be enacted,
which could increase post-approval regulatory requirements, or
delay, suspend or prevent marketing of any approved products. We
cannot predict the likelihood, nature or extent of adverse
governmental regulation that might arise from future legislative
or administrative action, either in the United States or abroad.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to Our Intellectual
Property</FONT></B>

<P align="left">
<B><I><FONT size="2">We are dependent upon our licenses from
Orion Corporation and the University of Tennessee Research
Foundation to develop and commercialize Acapodene, Andarine and
two of our preclinical product candidates; if these licenses
terminate, we may be unable to develop and commercialize these
product candidates.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a license and supply agreement with Orion
Corporation, we have a license from Orion to develop, use,
market and distribute toremifene, the active pharmaceutical
ingredient in Acapodene,
</FONT>

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

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<DIV align="left">
<FONT size="2">under Orion&#146;s patents covering the
composition of matter of toremifene. This license is limited to
the fields of the prevention and treatment of prostate cancer
and the prevention and treatment of osteoporosis, hot flashes
and gynecomastia as side effects of androgen deprivation therapy
in the treatment of prostate cancer. Without this license, we
would not have the right to commercialize Acapodene for any
indication prior to the expiration of Orion&#146;s composition
of matter patents. We paid Orion an initial license fee and have
agreed to pay Orion a royalty based on net sales of Acapodene
and a share of any consideration received by us for sublicensing
our rights under the agreement. If we are acquired prior to the
first regulatory approval of a product for use in the licensed
field, we will be obligated to pay Orion a one-time fee of up to
$1.0&nbsp;million at the time of acquisition. The agreement
requires us to achieve specified minimum sales requirements of
Acapodene in the United States or pay royalties on the shortfall
amount.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The term of our license from Orion continues on a
country-by-country basis until the date of expiration or
invalidation of the last to expire or be invalidated of our
licensed patent rights. Orion has the right to terminate the
license as a result of a material breach of the agreement by us
that is not cured, our bankruptcy or the acquisition of us by a
direct competitor of Orion with respect to toremifene.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Orion may require us to modify our final
Acapodene development plans for specified major markets if such
development plans could adversely affect toremifene outside of
the field that Orion has licensed to us. Any required
modifications may limit our ability to maximize the commercial
potential of Acapodene. In addition, we and our affiliates are
prohibited from selling a product that competes with toremifene
in the licensed field in major countries located outside of the
European Union during the term of the agreement and in major
countries in the European Union through October 2006. This
noncompetition provision may limit our ability to commercialize
any other compounds in the licensed field even if we believe
that other compounds have more commercial potential than
Acapodene. The binding effect of this noncompetition provision
on our affiliates, as well as Orion&#146;s right to terminate
the agreement if we are acquired by a direct competitor of Orion
with respect to toremifene, may make it more difficult for us to
be acquired by some potential buyers even if we determine that a
sale of the company would be in the best interests of our
stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have exclusive, worldwide licenses from the
University of Tennessee Research Foundation under its method of
use patents relating to toremifene for the reduction in the
incidence of prostate cancer in men with high grade PIN and its
composition of matter and method of use patents and patent
applications relating to Andarine, Ostarine and Prostarine.
Without these licenses, we would not be able to commercialize
Acapodene for the reduction in the incidence of prostate cancer
in men with high grade PIN or Andarine, Ostarine or Prostarine
for any indication prior to the expiration of University of
Tennessee Research Foundation&#146;s patents. We have agreed to
pay the University of Tennessee Research Foundation a royalty
based on net sales of these product candidates and sublicense
income. The term of each of the licenses is the longer of
20&nbsp;years or the term of any licensed patent having a valid
claim covering the licensed technology. The University of
Tennessee Research Foundation has the right to terminate each of
the licenses under specified circumstances, including in the
event that we breach the agreement and do not cure the breach or
in the case of our bankruptcy. We are obligated to use
commercially reasonable efforts to develop and commercialize
products based on the licensed patents and patent applications.
These obligations could require us to take actions related to
the development of Acapodene, Andarine, Ostarine and Prostarine
that we would otherwise not take. These required actions may be
costly and may divert our resources from other activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we are unable to maintain our licenses from
Orion and the University of Tennessee Research Foundation, we
would likely not be able to develop and commercialize Acapodene,
Andarine, Ostarine or Prostarine for any indication. In
addition, the terms of our agreements with Orion and the
University of Tennessee Research Foundation may adversely affect
our operations, financial results or competitive business
position.
</FONT>

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

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<P align="left">
<B><I><FONT size="2">Because it is difficult and costly to
protect our proprietary rights, we may not be able to ensure
their protection.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our commercial success will depend in part on
obtaining and maintaining patent and trade secret protection for
Acapodene, Andarine and any other product candidates or products
that we may develop, the methods used to manufacture these
product candidates and products and the methods for treating
patients using these product candidates and products. It will
also depend on our successfully defending these patents and
pending patent applications against third-party challenges and
in other similar proceedings, and enforcing these patents
against third-party infringers. We will be able to protect our
product candidates, any products that we may develop and our
technologies from unauthorized use by third parties only to the
extent that valid and enforceable patents or trade secrets cover
them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The patent covering the composition of matter of
toremifene, the active pharmaceutical ingredient in Acapodene,
that we have licensed from Orion will expire in the United
States in 2009, in Europe in 2003 or 2008, depending on the
country, and in Japan in 2005. We also have licensed from the
University of Tennessee Research Foundation method of use
patents in the United States and pending patent applications
internationally related to the use of Acapodene for the
reduction in the incidence of prostate cancer in men with high
grade PIN. The method of use patents issued in the United States
related to the use of Acapodene for this indication will expire
in 2019. We also have our own pending method of use patent
applications in the United States and internationally related to
the use of Acapodene for the prevention and treatment of
osteoporosis, hot flashes and gynecomastia as side effects of
androgen deprivation therapy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The patent covering the composition of matter of
the active pharmaceutical ingredient in Andarine that we have
licensed from the University of Tennessee Research Foundation
will expire in the United States in 2021. We have also licensed
from the University of Tennessee Research Foundation rights to
pending patent applications internationally covering the
composition of matter of the active pharmaceutical ingredient in
Andarine and pending patent applications in the United States
and internationally related to, among other things, methods for
treating cancer cachexia with Andarine. We also have our own
pending patent applications in the United States and
internationally related to methods of using Andarine.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">It is possible that patents will not issue in
respect of some or all of our or our licensed patent
applications. If the patent applications do not yield issued
patents, or if they yield patents with narrow claims, we may be
subject to direct competition in countries in which our licensed
composition of matter patents have expired.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The patent positions of biopharmaceutical
companies can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain
unresolved and as to which relevant laws and procedures are
constantly shifting. No consistent policy regarding the breadth
or interpretation of claims allowed in patents has emerged to
date in the United States. Further, the specific content of
patents and patent applications that are necessary to support
and interpret patent claims is highly uncertain due to the
complex nature of the relevant legal, scientific and factual
issues. Furthermore, the policies governing biotechnology
patents outside the United States are even more uncertain.
Changes in either patent laws or in interpretations of patent
laws in the United States and other countries may diminish the
value of our intellectual property or narrow the scope of our
patent protection. Accordingly, we cannot predict the breadth of
claims that may be allowed in a pending patent application, nor
can we predict the interpretation, scope, validity or
enforceability of claims in our own or in any third party&#146;s
patents.
</FONT>

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

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The degree of future protection for our
proprietary rights, or the proprietary rights that we license
from others, is uncertain because legal means afford only
limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. For example:
</FONT>
<P>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">others might have been the first to make the
    inventions covered by each of our or our licensors&#146; pending
    patent applications and issued patents;
    </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">others might have been the first to file patent
    applications for these inventions;
    </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">others may independently develop similar or
    alternative technologies or duplicate any of these 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">it is possible that none of our or our
    licensors&#146; pending patent applications will result in
    issued patents;
    </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 issued patents or pending patent applications
    or the patents or patent applications that we license from
    others may not provide a basis for commercially-viable products,
    may not provide us with any competitive advantages or may be
    challenged by 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">we may not develop additional proprietary
    technologies that are patentable;
    </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 patents of others may have an adverse effect
    on our business; 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">patents may be successfully challenged by
    competitors filing abbreviated new drug applications, or ANDAs,
    or new drug applications in which the applicant does not own or
    have a legal right of reference to all of the data required for
    approval, or 505(b)(2) NDAs, resulting in approval of
    competitors&#146; products for the same intended use.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also rely on trade secrets to protect our
technology, especially where we do not believe that patent
protection is appropriate or obtainable. However, trade secrets
are difficult to protect. Our employees, consultants,
contractors, outside scientific collaborators and other advisors
may unintentionally or willfully disclose our confidential
information to competitors, and confidentiality agreements may
not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. Enforcing a claim that a
third party illegally obtained and is using our trade secrets is
expensive and time-consuming, and the outcome is unpredictable.
In addition, courts outside the United States are sometimes less
willing to protect trade secrets than courts in the United
States. Moreover, our competitors may independently develop
equivalent knowledge, methods and know-how. Failure to obtain or
maintain trade secret protection could adversely affect our
competitive business position.
</FONT>

<P align="left">
<B><I><FONT size="2">Off-label sale or use of toremifene, the
active pharmaceutical ingredient in Acapodene, may result in
reduced sales of Acapodene and pricing pressure.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In all countries in which we hold or have
licensed rights to patents or patent applications related to
Acapodene, the composition of matter patents will expire before
the method of use patents. Furthermore, with respect to the
method of use of Acapodene for the treatment of side effects of
androgen deprivation therapy worldwide and the method of use of
Acapodene for the reduction in the incidence of prostate cancer
in men with high grade PIN outside the United States, we have
only pending patent applications. Method of use patents are more
difficult to enforce than composition of matter patents because
of the risk of off-label sale or use of the subject compounds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event that patents issue in respect of our
pending method of use patent applications, after the expiration
of the patent covering the composition of matter of toremifene
in a particular country, competitors could market and sell
generic versions of toremifene at doses and in formulations that
are bioequivalent to Acapodene for uses other than the
indications for Acapodene covered by these pending method of use
patent applications, and physicians would be permitted to
prescribe generic versions of toremifene for indications that
are protected by our or our licensors&#146; method of use
patents and pending patent applications. After the expiration of
the patent covering the composition of matter of toremifene in a
particular country, if patents do not issue in respect of our
pending method of use patent applications related to the use of
Acapodene for the treatment of side effects of androgen
deprivation therapy worldwide and the use of Acapodene for the
reduction
</FONT>

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

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<DIV align="left">
<FONT size="2">in the incidence of prostate cancer in men with
high grade PIN outside the United States, competitors could
market and sell generic versions of toremifene at doses and in
formulations bioequivalent to Acapodene for these indications.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our license from Orion is limited to the use of
toremifene for the prevention and treatment of prostate cancer
and the prevention and treatment of osteoporosis, hot flashes
and gynecomastia as side effects of androgen deprivation therapy
in the treatment of prostate cancer. Orion has licensed Shire
Pharmaceuticals Group in the United States and other parties
elsewhere in the world to market, sell and distribute toremifene
for the treatment of advanced breast cancer and could license
other parties to market, sell and distribute toremifene for
other indications in the United States and elsewhere. This
further increases the risk of off-label competition developing
for Acapodene for the indications for which we are developing
this product candidate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Off-label sale or use of generic toremifene
products, including products marketed and sold by other
licensees of Orion, for the indications for which we are
developing Acapodene could decrease our sales of Acapodene and
could lead to pricing pressure if such products become available
at competitive prices and in dosages that are appropriate for
the indications for which we are developing Acapodene.
</FONT>

<P align="left">
<B><I><FONT size="2">If we are sued for infringing intellectual
property rights of third parties, it will be costly and
time-consuming; an unfavorable outcome in litigation would have
a material adverse effect on our business.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to commercialize Acapodene, Andarine
and any other product candidates or products that we may develop
depends upon our ability to develop, manufacture, market and
sell such product candidates or products without infringing the
proprietary rights of third parties. Our drug discovery and
development efforts are focused on selective estrogen receptor
modulators, or SERMs, and selective androgen receptor
modulators, or SARMs. Acapodene is a SERM, and Andarine is a
SARM. Numerous United States and foreign issued patents and
pending patent applications, which are owned by third parties,
exist in the general field of SERMs and SARMs. In addition,
because patent applications can take many years to issue, there
may be currently pending applications, unknown to us, which may
later result in issued patents that cover the production,
manufacture, commercialization or use of Acapodene, Andarine or
any other product candidates or products that we may develop. In
addition, the production, manufacture, commercialization or use
of Acapodene, Andarine or any other product candidates or
products that we may develop may infringe existing patents of
which we are not aware.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is a substantial amount of litigation
involving patent and other intellectual property rights in the
biotechnology and biopharmaceutical industries generally. If a
third party claims that we infringe on its intellectual
property, we could face a number of issues, including:
</FONT>
<P>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">infringement and other intellectual property
    claims which, with or without merit, can be expensive and
    time-consuming to litigate and can divert management&#146;s
    attention from our business;
    </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">substantial damages for past infringement that we
    would have to pay if a court decides that any product that we
    may develop infringes on a third party&#146;s patent;
    </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 court prohibiting us from selling or licensing
    any product that we may develop unless the patent holder
    licenses the patent to us, which it is not required to do;
    </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">if a license is available from a patent holder,
    we may have to pay substantial royalties or grant a cross
    license to our patents; 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">redesigning the formulation of our product
    candidate or any product that we may develop so it does not
    infringe, which may not be possible or could require substantial
    funds and time.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">14
</FONT>

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<P align="center">
<B><FONT size="2">Risks Related to Our Dependence on Third
Parties</FONT></B>

<P align="left">
<B><I><FONT size="2">If we are unable to continue relationships
or contracts with third parties to manufacture Acapodene,
Andarine or any other product candidates or products that we may
develop in sufficient quantities and at an acceptable cost,
clinical development and commercialization of our product
candidates could be delayed, and we may be unable to meet
clinical or commercial demand for these product candidates or
products.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not currently own or operate manufacturing
facilities for the production of clinical or commercial
quantities of Acapodene or Andarine. We currently rely and
expect to continue to rely on third parties for the manufacture
of Acapodene, Andarine and any other product candidates or
products that we may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Orion, our only supplier of Acapodene, has agreed
to supply us with, and we have agreed to purchase from Orion,
our worldwide requirements of Acapodene in finished tablet form
at specified transfer prices under a license and supply
agreement. Our agreement with Orion may be terminated for a
variety of reasons. Following such a termination, we would
obtain the right to manufacture Acapodene under specified
circumstances. We would also be able to manufacture Acapodene
after expiration of the agreement as a result of the expiration
of Orion&#146;s patents with respect to the composition of
matter of toremifene. However, in the event that Orion
terminates the agreement as a result of a material breach of the
agreement by us that is not cured, our bankruptcy or the
acquisition of us by a direct competitor of Orion with respect
to toremifene, we would not obtain the right to manufacture
Acapodene and could not do so until Orion&#146;s patents or
related market exclusivity with respect to the composition of
matter of toremifene expire.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Orion may terminate its obligation to supply us
with toremifene if marketing approval for Acapodene in the
licensed field is not granted in the United States by
December&nbsp;31, 2007 or upon the expiration or invalidation of
the last valid claim of the licensed Orion patent rights in the
United States, or, subject to a prior notice requirement, if
Orion permanently ceases the manufacture of toremifene. In these
circumstances, we will have the right to manufacture Acapodene,
but we would be required to make arrangements with a qualified
alternative supplier to do so.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into an agreement with ChemSyn
Laboratories, a department of EaglePicher Technologies, LLC,
under which ChemSyn has agreed to manufacture Andarine for us in
a quantity that we believe is sufficient to supply clinical
trials of Andarine for the treatment of cachexia from various
types of cancer and initial commercialization of Andarine for
this indication. We do not have a contract with ChemSyn for the
supply of Andarine for full-scale commercialization.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not be able to maintain or renew these or
any other third-party manufacturing arrangements on acceptable
terms, if at all. If we are unable to continue relationships
with Orion and ChemSyn, or to do so at an acceptable cost, or if
these suppliers fail to meet our requirements for Acapodene or
Andarine for any reason, we would be required to obtain
alternate suppliers, which we may not be permitted to do for
Acapodene under our license agreement with Orion in some
circumstances. Any inability to obtain alternate suppliers,
including an inability to obtain approval of an alternate
supplier from the FDA, would delay or prevent the clinical
development and commercialization of Acapodene or Andarine and
result in our inability to meet clinical or commercial demand
for these product candidates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Third parties may not manufacture our product
candidates or products in a cost effective or timely manner. If
manufacturing is not performed in a timely manner, the clinical
development of our product candidates or their submission for
regulatory approval could be delayed, and our ability to deliver
Acapodene, Andarine or any product candidates or products that
we may develop on a timely basis could be impaired or precluded.
</FONT>

<P align="center"><FONT size="2">15
</FONT>
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<P align="left">&nbsp;&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
product candidates or products ourselves, including:
</FONT>
<P>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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; 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 possible termination or nonrenewal 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;&nbsp;
<FONT size="2">Our product candidates and any products that we
may develop may compete with other product candidates and
products for access to manufacturing facilities. For example,
the active pharmaceutical ingredient in Acapodene, toremifene,
is also the active pharmaceutical ingredient in Fareston. Orion
also manufactures Fareston for Shire Pharmaceuticals Group,
which markets it in the United States for the treatment of
advanced breast cancer in post-menopausal women.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot be certain that our present or future
manufacturing partners will be able to comply with cGMP
regulations and other FDA regulatory requirements or similar
regulatory requirements outside the United States. Failure of
our third-party manufacturers or us to comply with applicable
regulations could result in sanctions being imposed on us,
including fines, injunctions, civil penalties, failure of
regulatory authorities to grant marketing approval of our
product candidates, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product
candidates or products, operating restrictions and criminal
prosecutions, any of which could significantly and adversely
affect our business. Changing manufacturers may require
revalidation of the manufacturing process and procedures in
accordance with FDA mandated cGMP regulations. This revalidation
may be costly and time-consuming.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current and anticipated future dependence
upon others for the manufacture of Acapodene and Andarine and
our anticipated dependence upon others for the manufacture of
any other product candidates or products that we may develop may
adversely affect our future profit margins and our ability to
develop product candidates, to commercialize any product
candidates or products that we may develop on a timely and
competitive basis and to meet the demand for any approved
products.
</FONT>

<P align="left">
<B><I><FONT size="2">We currently depend on a single source
supplier for Acapodene, and we are currently purchasing Andarine
from a single supplier. The loss of either of these suppliers
could delay our clinical trials or prevent or delay
commercialization of Acapodene or Andarine.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, we rely on Orion as a single source
supplier for Acapodene, and we are currently purchasing Andarine
from ChemSyn as a single supplier. Establishing additional or
replacement suppliers for Acapodene or Andarine may take a
substantial amount of time, and in some circumstances our
agreement with Orion may prevent us from obtaining an alternate
supplier with respect to Acapodene. If we have to switch to a
replacement supplier, we may face additional regulatory delays,
and the manufacture and delivery of Acapodene or Andarine could
be interrupted for an extended period of time, which may delay
completion of our clinical trials or commercialization of
Acapodene or Andarine. If we are unable to obtain an adequate
supply of Acapodene or Andarine, our clinical trials will be
delayed. As a result, regulatory approval of Acapodene or
Andarine could be delayed, or may not be received at all.
</FONT>

<P align="left">
<B><I><FONT size="2">We rely on third parties to help conduct
our preclinical development activities and clinical trials. If
these third parties do not successfully carry out their
contractual duties or regulatory obligations or meet expected
deadlines, we may not be able to obtain regulatory approval for
or commercialize Acapodene, Andarine or any other product
candidates that we may develop.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not have the ability to independently
conduct clinical trials for Acapodene, Andarine or any other
product candidates that we may develop, and we must rely on
third parties, such as contract research organizations, medical
institutions, clinical investigators and contract laboratories to
</FONT>

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

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<DIV align="left">
<FONT size="2">conduct our clinical trials. In addition, we rely
on third parties to assist with our preclinical development of
product candidates. If these third parties do not successfully
carry out their contractual duties or regulatory obligations or
meet expected deadlines, if the third parties need to be
replaced, or if the quality or accuracy of the data they obtain
is compromised due to the failure to adhere to our clinical
protocols or regulatory requirements or for other reasons, our
preclinical development activities or clinical trials may be
extended, delayed, suspended or terminated, and we may not be
able to obtain regulatory approval for or successfully
commercialize Acapodene, Andarine or any other product
candidates that we may develop.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">We expect to be dependent upon
collaborative arrangements to complete the development and
commercialization of some of our product candidates. These
collaborative arrangements may place the development of our
product candidates outside of our control, may require us to
relinquish important rights or may otherwise be on terms
unfavorable to us.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to enter into collaborative
arrangements with third parties for clinical trials,
development, manufacturing, regulatory approvals and
commercialization of some of our product candidates. We may not
be successful in entering into these collaborative arrangements.
If we fail to enter into additional collaborative agreements on
favorable terms, our business, financial condition and results
of operations could be materially adversely affected. Dependence
on collaborative arrangements will subject us to a number of
risks, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may not be able to control the amount and
    timing of resources that our collaborators may devote to the
    product candidates;
    </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 experience financial
    difficulties;
    </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">should a collaborator fail to develop or
    commercialize one of our compounds or product candidates, we may
    not receive any future milestone payments and will not receive
    any royalties for this compound or product candidate;
    </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">business combinations or significant changes in a
    collaborator&#146;s business strategy may also adversely affect
    a collaborator&#146;s willingness or ability to complete its
    obligations under any arrangement; 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">a collaborator could independently move forward
    with a competing product candidate developed either
    independently or in collaboration with others, including our
    competitors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Collaborative arrangements with third parties are
often terminated or allowed to expire. Such terminations or
expirations could adversely affect us financially as well as
harm our business reputation.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to Commercialization</FONT></B>

<P align="left">
<B><I><FONT size="2">The commercial success of any products that
we may develop will depend upon the degree of market acceptance
among physicians, patients, health care payors and the medical
community.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any products that we may develop may not gain
market acceptance among physicians, patients, health care payors
and the medical community. The degree of market acceptance of
Acapodene, Andarine or any other products that we may develop,
if approved for commercial sale, will depend on a number of
factors, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market acceptance of SERMs and SARMs;
    </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 prevalence and severity of any 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">potential advantages over alternative treatments;
    </FONT></TD>
</TR>

</TABLE>

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

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability to offer Acapodene and Andarine for
    sale at competitive prices;
    </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">relative convenience and ease of administration;
    </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 strength of marketing and distribution
    support; 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">sufficient third-party coverage or reimbursement.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Acapodene, Andarine or any other product
candidates that we may develop are approved by the FDA or a
similar foreign authority but do not achieve an adequate level
of acceptance by physicians, health care payors and patients, we
may not generate material product revenue and we may not become
profitable.
</FONT>

<P align="left">
<B><I><FONT size="2">If we are unable to establish sales and
marketing capabilities or enter into agreements with third
parties to market and sell Acapodene and Andarine, we may be
unable to generate product revenue.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not have a sales organization and have no
experience as a company in the sales, marketing and distribution
of pharmaceutical products. In order to commercialize any
products that we may develop, we must develop our sales,
marketing and distribution capabilities or make arrangements
with a third party to perform these services. If we are unable
to establish adequate sales, marketing and distribution
capabilities, independently or with others, we will not be able
to generate material product revenue and will not become
profitable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Acapodene or Andarine is approved for
commercial sale, we currently plan to establish our own
specialized sales force to market Acapodene and, for selected
indications, Andarine to urologists and medical oncologists in
the United States. Developing a sales force is expensive and
time-consuming and could delay any product launch. We might not
be able to develop our sales and marketing and distribution
capability. If we are unable to establish this capability, we
will need to contract with third parties to market and sell
Acapodene and Andarine in the United States. We will also need
to establish sales, marketing and distribution capabilities in
the United States for potential indications of Andarine that
cannot be addressed by our planned specialized sales force and
outside of the United States for both Acapodene and Andarine,
which is likely to require contracting with third parties. To
the extent that we enter into arrangements with third parties to
perform sales, marketing and distribution services, our product
revenues are likely to be lower than if we market and sell
Acapodene, Andarine or any other product we may develop
ourselves.
</FONT>

<P align="left">
<B><I><FONT size="2">If we are unable to obtain acceptable
prices or adequate coverage and reimbursement from third-party
payors for any products that we may develop, our revenues and
prospects for profitability will suffer.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to commercialize any products that we
may develop is highly dependent on the extent to which coverage
and reimbursement for such products will be available from:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">governmental payors, such as Medicare and
    Medicaid;
    </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">private health insurers, including managed care
    organizations; 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">other third-party payors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many patients will not be capable of paying for
any products that we may develop themselves and will rely on
third-party payors to pay for their medical needs. Currently,
Medicare does not have a broad-based outpatient prescription
drug benefit that covers products self-administered by patients.
State Medicaid programs generally have outpatient prescription
drug coverage, subject to state regulatory restrictions, for the
population eligible for Medicaid. The availability of coverage
or reimbursement for prescription drugs under private health
insurance and managed care plans varies based on the type of
contract or plan purchased.
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A primary trend in the United States health care
industry is toward cost containment. In addition, in some
foreign countries, particularly 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 product candidates or
products to other available therapies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Large governmental and private payors, managed
care organizations, prescription benefit managers and similar
organizations are exerting increasing influence on decisions
regarding the use of, and reimbursement levels for, particular
treatments. Such third-party payors are challenging the prices
charged for medical products and services, and many third-party
payors limit reimbursement for newly-approved health care
products. In particular, third-party payors may limit the
indications for which they will reimburse patients who use any
products that we may develop. Cost-control initiatives could
decrease the price we might establish for products that we may
develop, which would result in lower product revenues to us. If
the reimbursement for any products that we may develop decreases
or if governmental and other third-party payors do not provide
coverage or reimbursement for any products that we may develop,
our revenues and prospects for profitability will suffer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Another development that may affect the pricing
of drugs is proposed Congressional action regarding drug
reimportation into the United States. Proposed legislation would
allow the reimportation of approved drugs originally
manufactured in the United States back into the United States
from other countries where the drugs are sold at a lower price.
If legislation or regulations were passed allowing the
reimportation of drugs, they could decrease the price we receive
for any products that we may develop, negatively affecting our
revenues and prospects for profitability.
</FONT>

<P align="left">
<B><I><FONT size="2">Legislative or regulatory reform of health
care systems may affect our ability to sell any products
profitably.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, there have been a number of
legislative and regulatory proposals to change the public
financing of health care in ways that could adversely affect our
ability to sell any products that we may develop profitably.
Federal and state proposals and health care reforms are likely.
Our results of operations could be materially adversely affected
depending on the type of health care reforms that are adopted,
if any.
</FONT>

<P align="left">
<B><I><FONT size="2">If product liability lawsuits are brought
against us, we will incur substantial liabilities and may be
required to limit commercialization of any products that we may
develop.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We face an inherent risk of product liability
exposure related to the testing of Acapodene, Andarine or any
other product candidates that we may develop in human clinical
trials and will face an even greater risk if we commercially
sell any products that we may develop. In the future, an
individual may bring a liability claim against us if any product
candidates or products that we may develop cause, or merely
appear to have caused, an injury. If we cannot successfully
defend ourselves against the product liability claim, we will
incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">decreased demand for any product candidates or
    products that we may develop;
    </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">injury to our reputation;
    </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 clinical trial participants;
    </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">costs to defend the related 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">substantial monetary awards to trial participants
    or patients;
    </FONT></TD>
</TR>

</TABLE>

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

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">loss of revenue; 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 inability to commercialize any products that
    we may develop.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have product liability insurance that covers
our clinical trials up to a $5&nbsp;million annual aggregate
limit. We intend to expand our insurance coverage to include the
sale of commercial products if marketing approval is obtained
for any products that we may develop. Insurance coverage is
increasingly expensive. We may not be able to maintain insurance
coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any
liability that may arise.
</FONT>

<P align="left">
<B><I><FONT size="2">If our competitors are better able to
develop and market products that are more effective than any
products that we may develop, our commercial opportunity will be
reduced or eliminated.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We face competition from established
pharmaceutical and biotechnology companies, as well as from
academic institutions, government agencies and private and
public research institutions. Various products are currently
marketed or sold and used off-label for some of the diseases and
conditions that we are targeting, and a number of companies are
or may be developing new treatments. In addition, physicians are
permitted to prescribe legally available drugs for uses that are
not described in the drug&#146;s labeling and that differ from
those uses tested and approved by the FDA. Such off-label uses
are common across medical specialties. The occurrence of such
off-label uses could significantly reduce our ability to market
and sell any products that we may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our competitors have significantly
greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing
approved products than we do. Smaller or early-stage companies
may also prove to be significant competitors, particularly
through collaborative arrangements with large and established
companies. Our commercial opportunity will be reduced or
eliminated if our competitors develop and commercialize products
that are safer, more effective, have fewer side effects or are
less expensive than any products that we may develop. These
third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing
clinical trial sites and patient registration for clinical
trials, as well as in acquiring technologies and technology
licenses complementary to our programs or advantageous to our
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that our ability to compete effectively
will depend upon our ability to:
</FONT>
<P>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">successfully and rapidly complete clinical trials
    and obtain requisite regulatory approvals in a cost-effective
    manner;
    </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">obtain and maintain proprietary rights to any
    products that we may develop;
    </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">build an adequate specialized sales and marketing
    infrastructure;
    </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 collaborative arrangements for
    marketing and sales; 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">attract and retain key personnel.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">Risks Related to Employees and
Growth</FONT></B>

<P align="left">
<B><I><FONT size="2">If we fail to attract and keep senior
management and key scientific personnel, we may be unable to
successfully develop or commercialize Acapodene, Andarine or any
other product candidates or products that we may
develop.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success depends on our continued ability to
attract, retain and motivate highly qualified management,
clinical and scientific personnel and on our ability to develop
and maintain important relationships with leading academic
institutions, clinicians and scientists. We are highly dependent
upon our senior management and scientific staff, particularly
Dr.&nbsp;Mitchell S. Steiner. All of our employees are at-will
employees and can terminate their employment at any time. We do
not carry
</FONT>

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

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<DIV align="left">
<FONT size="2">&#147;key person&#148; insurance covering members
of senior management, other than $15&nbsp;million of insurance
covering Dr. Steiner. If we are not able to attract and keep
senior management and key scientific personnel, we may not be
able to successfully develop or commercialize Acapodene,
Andarine or any other product candidates that we may develop.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">We will need to increase the number of our
managerial, operational, financial and other employees, and we
may experience difficulties in managing growth.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to continue our clinical trials and
commercialize Acapodene, Andarine or any other product
candidates that we may develop, we will need to expand the
number of our managerial, operational, financial and other
employees. We currently anticipate that we will need between 150
and 250 additional employees by the time that Acapodene or
Andarine is initially commercialized, including 50 to 80 sales
representatives. While to date we have not experienced
difficulties in recruiting and hiring qualified individuals, the
competition for qualified personnel in the biotechnology field
is intense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future growth will impose significant added
responsibilities on members of management, including the need to
identify, recruit, maintain and integrate additional employees.
Our future financial performance and our ability to
commercialize Acapodene, Andarine or any other product
candidates that we may develop and to compete effectively will
depend, in part, on our ability to manage any future growth
effectively. To that end, we must be able to:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">manage our research and development efforts
    effectively;
    </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">manage our clinical trials effectively;
    </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">integrate additional management, administrative
    and sales and marketing 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">develop our administrative, accounting and
    management information systems and controls; 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">hire and train additional qualified personnel.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not be able to accomplish these tasks, and
our failure to accomplish any of them could harm our business
and financial results.
</FONT>

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

<P align="left">
<B><I><FONT size="2">We have incurred losses since inception and
anticipate that we will incur continued losses for the
foreseeable future.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a development stage company with a limited
operating history. Currently, we have no products approved for
commercial sale, and, to date, we have not generated any product
revenue. We have financed our operations and internal growth
almost exclusively through private placements of preferred
stock. We have devoted substantially all of our efforts to
research and development, including clinical trials. We have
incurred losses in each year since our inception in 1997. Net
losses were $11.9&nbsp;million in 2002, $8.1&nbsp;million in
2001 and $3.8&nbsp;million in 2000. For the six months ended
June&nbsp;30, 2003, net losses were $6.2&nbsp;million. As of
June&nbsp;30, 2003, we had a deficit accumulated during the
development stage of $59.2&nbsp;million. We expect our research
and development expenses to increase in connection with the
following:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ongoing Phase IIb clinical trial and planned
    pivotal Phase&nbsp;III clinical trial of Acapodene for the
    reduction in the incidence of prostate cancer in men with high
    grade PIN;
    </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 planned pivotal Phase&nbsp;III clinical trial
    of Acapodene for the treatment of side effects of androgen
    deprivation therapy for advanced prostate cancer;
    </FONT></TD>
</TR>

</TABLE>

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

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our planned Phase&nbsp;II clinical trial of
    Andarine for the treatment of cachexia from non-small cell lung
    cancer; 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">any other clinical trials that we may initiate.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, subject to regulatory approval of
Acapodene or Andarine, we expect to incur sales and marketing
and increased manufacturing expenses. As a result, we expect to
continue to incur significant and increasing operating losses
for the foreseeable future. These losses have had and will
continue to have an adverse effect on our stockholders&#146;
equity and working capital. Because of the numerous risks and
uncertainties associated with developing small molecule drugs,
such as Acapodene and Andarine, we are unable to predict the
extent of any future losses or when we will become profitable,
if at all.
</FONT>

<P align="left">
<B><I><FONT size="2">We currently have no source of revenue and
may never become profitable.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to become profitable depends upon our
ability to generate revenue. Our ability to generate product
revenue depends heavily on our success in completing our
clinical trials and commercializing Acapodene or Andarine. To
date, neither Acapodene nor Andarine has generated any revenue,
and we do not know when or if Acapodene or Andarine will
generate revenue. Our ability to generate revenue depends on a
number of factors, including the other risk factors described in
this section of this prospectus. We do not anticipate that we
will generate product revenue for a number of years or achieve
profitability for at least several years after generating
material revenue. If we are unable to generate revenue, we will
not become profitable, and we may be unable to continue our
operations.
</FONT>

<P align="left">
<B><I><FONT size="2">We will need substantial additional funding
and may be unable to raise capital when needed, which would
force us to delay, reduce or eliminate our product development
programs or commercialization efforts.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Developing small molecule drugs, conducting
clinical trials and marketing any products that we may
successfully develop is expensive. We will need to raise
additional capital to:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fund our operations and 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">continue our research and development; 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">commercialize Acapodene, Andarine or any other
    product candidates that we may develop, if any such product
    candidates receive regulatory approval for commercial sale.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the net proceeds from this
offering, our existing cash resources and interest on these
funds will be sufficient to meet our projected operating
requirements through the end of 2005. Our future funding
requirements will depend on many factors, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the scope, rate of progress and cost of our
    clinical trials and other research and development 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">future clinical trial results;
    </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 terms and timing of any collaborative,
    licensing and other arrangements that we may establish;
    </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 and timing 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">the cost and timing of establishing sales,
    marketing and distribution capabilities;
    </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 establishing clinical and commercial
    supplies of our product candidates and any products that we may
    develop;
    </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 effect of competing technological and market
    developments;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">22
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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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 filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights; 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 extent to which we acquire or invest in
    businesses, products and technologies, although we currently
    have no commitments or agreements relating to any of these types
    of transactions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until we can generate a sufficient amount of
product revenue, if ever, we expect to finance future cash needs
through public or private equity offerings, debt financings or
corporate collaboration and licensing arrangements, as well as
through interest income earned on cash balances. We cannot be
certain that additional funding will be available on acceptable
terms, or at all. If adequate funds are not available, we may be
required to delay, reduce the scope of or eliminate one or more
of our research and development programs or our
commercialization efforts.
</FONT>

<P align="left">
<B><I><FONT size="2">Raising additional funds by issuing
securities or through collaboration and licensing arrangements
with third parties may cause dilution to existing stockholders
or require us to relinquish rights to our technologies,
Acapodene, Andarine or any other product candidates that we may
develop.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may raise additional funds through public or
private equity offerings, debt financings or corporate
collaboration and licensing arrangements. We cannot be certain
that additional funding will be available on acceptable terms,
or at all. If we raise additional funds by issuing equity
securities, our stockholders may experience dilution. Debt
financing, if available, may involve restrictive covenants. Any
debt financing or additional equity that we raise may contain
terms that are not favorable to us or our stockholders. If we
raise additional funds through collaboration and licensing
arrangements with third parties, it will be necessary to
relinquish some rights to our technologies, Acapodene, Andarine
or any other product candidates that we may develop, or grant
licenses on terms that are not favorable to us.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to the Offering</FONT></B>

<P align="left">
<B><I><FONT size="2">Market volatility may affect our stock
price and the value of your investment.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our stock price is likely to be volatile. The
market prices for securities of biopharmaceutical companies in
general have been highly volatile and may continue to be highly
volatile in the future. The following factors, in addition to
other risk factors described in this section, may have a
significant impact on the market price of our common stock:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">adverse results or delays in 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">the timing of achievement of our clinical,
    regulatory and other milestones, such as the commencement of
    clinical development, the completion of a clinical trial or the
    receipt of regulatory approval;
    </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">announcement of FDA approval or non-approval of
    Acapodene, Andarine or any other product candidates that we may
    develop or delays in the FDA review 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">actions taken by regulatory agencies with respect
    to Acapodene, Andarine or any other product candidates that we
    may develop, our clinical trials or our sales and marketing
    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 commercial success of any product approved by
    the FDA or foreign counterpart;
    </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 the United States and
    foreign countries;
    </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 health care 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">any intellectual property infringement lawsuit
    involving us;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">23
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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements of technological innovations or new
    products by us or 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">market conditions for the biotechnology or
    pharmaceutical industries in general;
    </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">actual or anticipated fluctuations in our results
    of operation;
    </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 financial estimates or recommendations
    by securities analysts;
    </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">sales of large blocks 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">sales of our common stock by our executive
    officers, directors and significant 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">changes in accounting principles; 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 loss of any of our key scientific or
    management personnel.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In particular, investors purchasing common stock
in this offering may not be able to resell their shares at or
above the initial public offering price. The stock markets in
general, and the markets for biotechnology stocks in particular,
have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies.
These broad market fluctuations may adversely affect the trading
price of our common stock. In the past, class action litigation
has often been instituted against companies whose securities
have experienced periods of volatility in market price. Any such
litigation brought against us could result in substantial costs
and divert management&#146;s attention and resources, which
would hurt our business, financial condition and results of
operations.
</FONT>

<P align="left">
<B><I><FONT size="2">The ownership interests of our officers,
directors and largest stockholders could conflict with the
interests of our other stockholders.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on our outstanding shares as of
August&nbsp;31, 2003, after this offering, our officers,
directors and holders of 5% or more of our outstanding common
stock will beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock, after giving effect to the conversion into
common stock of all outstanding shares of our preferred stock
and dividends accrued thereon through August&nbsp;31, 2003, but
assuming no exercise of the underwriters&#146; over-allotment
option and no exercise of outstanding options. As a result,
these stockholders, acting together, will be able to control all
matters requiring approval by our stockholders, including the
election of directors and the approval of mergers or other
business combination transactions. The interests of this group
of stockholders may not always coincide with our interests or
the interests of other stockholders.
</FONT>

<P align="left">
<B><I><FONT size="2">Anti-takeover provisions in our charter
documents and under Delaware law could make an acquisition of
us, which may be beneficial to our stockholders, more difficult
and may prevent attempts by our stockholders to replace or
remove our current management.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provisions in our certificate of incorporation
and our bylaws that will become effective upon the completion of
this offering may delay or prevent an acquisition of us or a
change in our management. In addition, these provisions may
frustrate or prevent any attempts by our stockholders to replace
or remove our current management by making it more difficult for
stockholders to replace members of our Board of Directors.
Because our Board of Directors is responsible for appointing the
members of our management team, these provisions could in turn
affect any attempt by our stockholders to replace current
members of our management team. These provisions include:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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">a prohibition on actions by our stockholders by
    written consent;
    </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 issue
    preferred stock without stockholder approval, which could be
    used to institute a &#147;poison pill&#148; that would work to
    dilute the stock ownership
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">24
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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">of a potential hostile acquirer, effectively
    preventing acquisitions that have not been approved by our Board
    of Directors; 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">limitations on the removal of directors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Moreover, because we are incorporated in
Delaware, we are governed by the provisions of Section&nbsp;203
of the Delaware General Corporation Law, which prohibits a
person who owns in excess of 15% of our outstanding voting stock
from merging or combining with us for a period of three years
after the date of the transaction in which the person acquired
in excess of 15% of our outstanding voting stock, unless the
merger or combination is approved in a prescribed manner.
Finally, these provisions establish advance notice requirements
for nominations for election to our Board of Directors or for
proposing matters that can be acted upon at stockholder
meetings. These provisions would apply even if the offer may be
considered beneficial by some stockholders.
</FONT>

<P align="left">
<B><I><FONT size="2">We may allocate the net proceeds from this
offering in ways that you and other stockholders may not
approve.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to use the net proceeds from this
offering to fund our clinical trials and other research and
development capabilities and for general corporate purposes. Our
management will, however, have broad discretion in the
application of the net proceeds from this offering and could
spend the proceeds in ways that do not necessarily improve our
results of operations or enhance the value of our common stock.
</FONT>

<P align="left">
<B><I><FONT size="2">Future sales of our common or preferred
stock could lower the market price of our common
stock.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on our outstanding shares as of
August&nbsp;31, 2003, after this offering, we will have
outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, after giving effect to the conversion of all
outstanding shares of our preferred stock and dividends accrued
thereon through August&nbsp;31, 2003, but assuming no exercise
of the underwriters&#146; over-allotment option and no exercise
of outstanding options. Of these shares, the shares being
offered in this offering will be freely tradable under federal
and state securities laws. Each of our officers, directors and
stockholders and the holders of substantially all of our
outstanding options have agreed, subject to specified
exceptions, that, without the prior written consent of Goldman,
Sachs &#38; Co., they will not, directly or indirectly, sell,
offer, contract to sell, transfer the economic risk of ownership
in, make any short sale, pledge or otherwise dispose of any
shares of our capital stock or any securities convertible into
or exchangeable or exercisable for or any other rights to
purchase or acquire our capital stock for a period of
180&nbsp;days from the date of this prospectus. Goldman, Sachs
&#38; Co. may, in its sole discretion, permit early release of
shares subject to the lock-up agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assuming that all of our preferred stock and
accrued dividends had been converted into common stock on
August&nbsp;31, 2003, all but 331,218 of the 2,232,944 shares of
our common stock that are not being sold in this offering, but
which would have been outstanding as of August&nbsp;31, 2003,
will be eligible for sale in the public market 180&nbsp;days
after the effective date of the registration statement of which
this prospectus is a part under Rules&nbsp;144, 144(k) and 701
under the Securities Act of 1933, subject in some cases to
volume and other limitations. In addition, of the 67,000 shares
issuable upon exercise of options to purchase our common stock
outstanding as of August&nbsp;31, 2003, approximately 10,247
shares will be vested and eligible for sale 180&nbsp;days after
the date of this prospectus. Promptly following this offering,
we intend to register the shares of common stock that are
authorized for issuance under our employee and non-employee
director equity incentive plans. Once we register these shares,
they can be freely sold in the public market upon issuance,
subject to the lock-up agreements referred to above and the
restrictions imposed on our affiliates under Rule&nbsp;144.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if we propose to register any of our
securities under the Securities Act either for our own account
or for the accounts of other security holders after this
offering, the holders of
</FONT>

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<DIV align="left">
<FONT size="2">registration rights generally will be entitled to
include their shares of common stock. In addition, two holders
of demand registration rights may require us on not more than
two occasions each to effect a registration under the Securities
Act with respect to shares of common stock owned by these
stockholders or their affiliates or transferees. In the future,
we may also issue additional shares to our employees, directors
or consultants, in connection with collaborations or
acquisitions and in follow-on offerings to raise additional
capital.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to these factors, sales of a substantial
number of shares of our common stock in the public market could
occur at any time. Such sales could reduce the market price of
our common stock.
</FONT>

<P align="left">
<B><I><FONT size="2">If you purchase our common stock in this
offering, you will incur immediate and substantial dilution in
the book value of your shares.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The assumed initial public offering price is
substantially higher than the book value per share of our common
stock. Investors purchasing common stock in this offering will
pay a price per share that substantially exceeds the book value
of our assets after subtracting our liabilities. Further,
investors purchasing common stock in this offering will
contribute
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total amount invested by stockholders since our
inception, but will own only
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the shares of common stock outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This dilution is due to our investors who
purchased shares prior to this offering having paid
substantially less than the price offered to the public in this
offering when they purchased their shares and the exercise of
stock options granted to our employees. As a result of this
dilution, investors purchasing stock in this offering may
receive significantly less than the purchase price paid in this
offering in the event of a liquidation.
</FONT>

<P align="center"><FONT size="2">26
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<!-- link1 "<FONT size="2">SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus contains forward-looking
statements. The forward-looking statements are contained
principally in the sections entitled &#147;Prospectus
Summary,&#148; &#147;Risk Factors,&#148; &#147;Use of
Proceeds,&#148; &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and
&#147;Business.&#148; These statements involve known and unknown
risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially
different from any future results, performances or achievements
expressed or implied by the forward-looking statements.
Forward-looking statements include statements about:
</FONT>
<P>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the anticipated progress of our research,
    development and clinical 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">our ability to market, commercialize and achieve
    market acceptance for Acapodene, Andarine or any other product
    candidates or products that we may develop;
    </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 generate additional product
    candidates for clinical testing;
    </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 protect our intellectual property
    and operate our business without infringing upon the
    intellectual property rights of others; 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 estimates regarding the sufficiency of our
    cash resources.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In some cases, you can identify forward-looking
statements by terms such as &#147;anticipates,&#148;
&#147;believes,&#148; &#147;could,&#148; &#147;estimates,&#148;
&#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148;
&#147;plans,&#148; &#147;potential,&#148; &#147;predicts,&#148;
&#147;projects,&#148; &#147;should,&#148; &#147;will,&#148;
&#147;would,&#148; and similar expressions intended to identify
forward-looking statements. Forward-looking statements reflect
our current views with respect to future events, are based on
assumptions and subject to risks and uncertainties. We discuss
many of these risks in this prospectus in greater detail under
the heading &#147;Risk Factors.&#148; Given these uncertainties,
you should not place undue reliance on these forward-looking
statements. Also, forward-looking statements represent our
estimates and assumptions only as of the date of this
prospectus. You should read this prospectus and the documents
that we reference in this prospectus and have filed as exhibits
to the registration statement, of which this prospectus is a
part, completely and with the understanding that our actual
future results may be materially different from what we expect.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as required by law, we assume no
obligation to update any forward-looking statements publicly, or
to update the reasons actual results could differ materially
from those anticipated in any forward-looking statements, even
if new information becomes available in the future.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">USE OF PROCEEDS</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that our net proceeds from the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
if the underwriters exercise their over-allotment option in
full, based upon an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. The
principal purposes of this offering are to obtain additional
capital and to create a public market for our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to use approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds from this offering to fund our clinical
trials and other research and development activities and
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
for general corporate purposes. In addition, we may use a
portion of the net proceeds from this offering to acquire
equipment, products, technologies or businesses, although we
currently have no commitments or agreements relating to any of
these types of transactions. We believe that the net proceeds
from this offering, our existing cash resources and interest on
these funds will be sufficient to meet our projected operating
requirements through the end of 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While we have estimated the particular uses for
the net proceeds to be received upon the completion of this
offering, we cannot specify these uses with certainty.
Accordingly, our management will have broad discretion in the
application of the net proceeds, and investors will be relying
on the judgment of our management regarding the application of
the proceeds of this offering. Pending these uses, we plan to
invest the net proceeds in short-term, interest bearing
obligations, investment grade instruments, certificates of
deposit or direct or guaranteed obligations of the United
States. The goal with respect to the investment of these net
proceeds is capital preservation and liquidity so that such
funds are readily available to fund our research and development
operations.
</FONT>

<!-- link1 "<FONT size="2">DIVIDEND POLICY</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends on outstanding shares of our preferred
stock accrue and are payable at the time these shares are
converted into shares of common stock, which will occur upon
completion of this offering. These dividends are payable solely
in shares at the time of conversion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have never declared or paid any cash dividends
on our capital stock. We currently intend to retain any future
earnings to fund the development and expansion of our business,
and therefore we do not anticipate paying cash dividends on our
common stock in the foreseeable future. Any future determination
to pay dividends will be at the discretion of our Board of
Directors.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">CAPITALIZATION</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our capitalization
as of June&nbsp;30, 2003:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on an actual basis;
    </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">on a pro forma basis to give effect to the
    issuance of 329,536 shares of Series&nbsp;E cumulative
    redeemable convertible preferred stock on August&nbsp;7, 2003
    for net proceeds of approximately $20.0&nbsp;million; 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">on a pro forma as adjusted basis to reflect the
    issuance of 329,536 shares of Series&nbsp;E cumulative
    redeemable convertible preferred stock on August&nbsp;7, 2003
    for net proceeds of approximately $20.0&nbsp;million, the
    conversion into common stock of all outstanding shares of
    preferred stock and dividends accrued thereon through
    August&nbsp;31, 2003 and the sale in this offering
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting the estimated underwriting discounts and
    commissions and estimated offering expenses payable by us.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The information in this table is based on shares
outstanding as of June&nbsp;30, 2003 and excludes:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">45,750&nbsp;shares of common stock issuable upon
    exercise of options issued under our current stock option plans,
    at a weighted average exercise price of $48.79&nbsp;per share;
    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">105,150&nbsp;shares of common stock reserved for
    future issuance under our current stock option plans
    and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for future issuance under our 2003
    Equity Incentive Plan, 2003 Non-Employee Directors&#146; Stock
    Option Plan and 2003 Employee Stock Purchase Plan, which we plan
    to adopt before the completion of this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the information below in
conjunction with the financial statements and the related notes
thereto and &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; included
elsewhere in this prospectus.
</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="60%"><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>
    <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 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">As of June&nbsp;30, 2003</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="7"></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">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As Adjusted</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="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></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">(in thousands, except share data)</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">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,098</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative redeemable convertible preferred
    stock, no par value:
    </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">
    <FONT size="2">1,227,500 shares authorized and 902,419 shares
    issued and outstanding, actual; 1,677,500 authorized and
    1,231,955&nbsp;shares issued and outstanding, pro forma; and no
    shares authorized, issued or outstanding, pro forma as adjusted
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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>

</TR>

<TR>
    <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 valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, $0.001 par value:
    </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">
    <FONT size="2">10,000,000 shares authorized, actual and pro
    forma; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized pro forma as adjusted; 910,000 shares issued and
    outstanding, actual; 910,000&nbsp;shares issued and outstanding,
    pro forma;
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding, pro forma as adjusted
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Deficit accumulated during the development stage
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,154</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">(59,168</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"><FONT 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">(58,184</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">(58,198</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"><FONT 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 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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,458</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 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">29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">DILUTION</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The historical net tangible book value of our
common stock as of June&nbsp;30, 2003 was $(58.2)&nbsp;million,
or $(63.94) per share, based on the number of shares of common
stock outstanding as of June&nbsp;30, 2003. Historical net
tangible book value per share is determined by dividing our
total tangible assets less total liabilities by the actual
number of outstanding shares of our common stock. The pro forma
net tangible book value of our common stock as of June&nbsp;30,
2003 was $22.5&nbsp;million, or $10.20 per share. Pro forma net
tangible book value per share is determined by dividing our
total tangible assets less total liabilities after giving effect
to the issuance of 329,536 shares of Series&nbsp;E cumulative
redeemable convertible preferred stock in August 2003 and the
conversion of all of our outstanding shares of preferred stock
and dividends accrued thereon through June&nbsp;30, 2003 into
common stock by the actual number of shares of our common stock
plus the number of shares issuable upon conversion of all of our
outstanding shares of preferred stock and dividends accrued
thereon through June&nbsp;30, 2003 into common stock after
giving effect to the issuance of 329,536 shares of Series&nbsp;E
cumulative redeemable convertible preferred stock in August 2003
as if such conversion had occurred on June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After giving effect to the sale of common stock
offered in this offering at the assumed public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, and after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us,
our pro forma as adjusted net tangible book value as of
June&nbsp;30, 2003 would have been approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. This represents an immediate increase in
pro forma net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors purchasing our common stock in this
offering. The following table illustrates this per share
dilution to the new investors:
</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="75%"><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="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 valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assumed initial public offering price
    </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 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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Historical net tangible book value per share as
    of June&nbsp;30, 2003
    </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">(63.94</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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share as of
    June&nbsp;30, 2003
    </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">10.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Increase in pro forma net tangible book value per
    share attributable to this offering
    </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"><FONT 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">Pro forma as adjusted net tangible book value per
    share after offering
    </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"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Dilution per share to new investors in this
    offering
    </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 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 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 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;&nbsp;
<FONT size="2">The following table summarizes, on a pro forma as
adjusted basis as of June&nbsp;30, 2003, the differences between
the number of shares of common stock purchased from us, the
total consideration and the average price per share paid by
existing stockholders and by the new investors, before deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us, at an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share:
</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="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="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="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="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="3%"><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>
    <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">Shares Purchased</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total Consideration</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="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Price</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</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">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Existing stockholders
    </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 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">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><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">New investors
    </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><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
    </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 align="right" valign="bottom" nowrap><FONT size="2">100.0</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><FONT 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">100.0</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><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>
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the underwriters exercise their option to
purchase additional shares of our common stock in full in this
offering, the pro forma as adjusted net tangible book value per
share after the offering would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the increase in pro forma net tangible book value per
share to existing stockholders would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and the dilution to new investors purchasing shares in
this offering would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the underwriters exercise their over-allotment
option in full, the number of shares held by new investors will
increase
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total number of shares of our common stock outstanding
after this offering.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The existing stockholders amounts in the table
above have been calculated on a pro forma basis, which includes
shares outstanding as of June&nbsp;30, 2003 and excludes:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">45,750&nbsp;shares of common stock issuable upon
    exercise of options issued under our current stock option plans,
    at a weighted average exercise price of $48.79 per share; 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">105,150&nbsp;shares of common stock reserved for
    future issuance under our current stock option plans
    and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for future issuance under our 2003
    Equity Incentive Plan, 2003 Non-Employee Directors&#146; Stock
    Option Plan and 2003 Employee Stock Purchase Plan, which we plan
    to adopt before the completion of this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After this offering and assuming the exercise in
full of all of the foregoing options, our pro forma as adjusted
net tangible book value per share as of June&nbsp;30, 2003 would
be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, representing an immediate increase in net tangible book
value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution in net
tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors.
</FONT>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">SELECTED FINANCIAL DATA</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected financial data below should be read
in conjunction with &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and the financial statements, notes thereto and other financial
information included elsewhere in this prospectus. The selected
financial data for each of the five fiscal years in the period
ended December&nbsp;31, 2002 are derived from our financial
statements which have been examined and reported upon by Ernst
&#38; Young LLP, independent public accountants. See
&#147;Experts.&#148; The data presented for the six-month
periods ended June&nbsp;30, 2002 and June&nbsp;30, 2003 are
derived from unaudited financial statements and include, in the
opinion of management, all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the data
for such periods. The results for the six-month period ended
June&nbsp;30, 2003 are not necessarily indicative of the results
to be expected for the full fiscal year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pro forma net loss per share for the year ended
December&nbsp;31, 2002 and the six&nbsp;months ended
June&nbsp;30, 2003 is computed using the weighted average number
of shares of common stock outstanding, including the pro forma
effects of the automatic conversion of our preferred stock and
dividends accrued thereon into shares of common stock effective
upon the closing of the offering as if such conversion occurred
on January&nbsp;1, 2002 and January&nbsp;1, 2003 or at the date
of the original issuance, if later. The calculation of pro forma
net loss per share attributable to common stockholders excludes
incremental common stock issuable upon exercise of options, as
its 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="32%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><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="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><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="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><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="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><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="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="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><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="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="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&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="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">Cumulative</FONT></B></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="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">Period from</FONT></B></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="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">24, 1997</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" 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">inception) to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></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">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">June 30, 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>
    <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="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center"><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="31" align="center"><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="31" align="center" nowrap><B><FONT size="1">(in thousands, except share and per share data)</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 Data:</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>
    <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">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>
    <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 align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">185</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">518</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,679</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,744</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9,285</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,975</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,703</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,298</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">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">179</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">256</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">1,203</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">2,187</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">2,405</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">1,105</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">1,411</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">8,457</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">Depreciation
    </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">19</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">45</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">80</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">215</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">332</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">153</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">175</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">865</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>
    <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">383</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">819</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">3,962</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">8,146</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">12,022</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">5,233</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">6,289</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">31,620</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">Other income:
    </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>
    <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><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 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">225</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">&#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">&#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">225</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">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">42</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">69</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">150</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">83</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">156</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">55</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">43</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">543</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>
    <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 other 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">267</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">69</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">150</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">83</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">156</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">55</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">43</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">768</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>
    <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">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">(116</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">(750</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">(3,812</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">(8,063</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">(11,866</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">(5,178</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">(6,246</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">(30,852</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">Accrued preferred stock dividends
    </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">(82</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">(297</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">(790</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">(2,147</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">(858</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">(1,366</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">(4,684</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">Adjustment to preferred stock redemption value
    </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">(21,077</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">(57</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">(7,220</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">(7,036</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">4,736</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">(23,618</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>
    <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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(116</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(832</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(25,186</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(8,910</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(21,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13,072</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,876</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(59,154</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>
    <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">Net loss per share attributable to common
    stockholders:
    </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>
    <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><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(.13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(.91</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(14.36</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">(3.16</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><FONT size="1">&nbsp;</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>
    <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><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">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(.13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(.91</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(14.36</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">(3.34</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><FONT size="1">&nbsp;</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>
    <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><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">Weighted average shares used in computing net
    loss per share attributable to common stockholders:
    </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>
    <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">Basic
    </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">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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"><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>
    <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><FONT size="1">&nbsp;</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">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">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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">1,869,021</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"><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>
    <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><FONT size="1">&nbsp;</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">Pro forma net loss per share attributable to
    common stockholders&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><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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(6.81</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(3.34</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><FONT size="1">&nbsp;</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><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><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><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">Shares used in computing pro forma net loss per
    share attributable to common stockholders&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><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">1,742,563</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">1,869,021</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"><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 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><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><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to June&nbsp;30, 2003, the following
table presents a summary of our balance sheet:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on an actual basis; 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">on a pro forma basis to give effect to the
    issuance of 329,536 shares of Series&nbsp;E cumulative
    redeemable convertible preferred stock on August&nbsp;7, 2003
    for net proceeds of approximately $20.0&nbsp;million.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" 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="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="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>
    <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="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="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="19"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of June 30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" 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">1998</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></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">Actual</FONT></B></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><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>
    <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="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="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="27"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands)</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">Balance Sheet Data (at period end):</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>
    <TD><FONT size="2">&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">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">748</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,112</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">23,098</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">Working 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">742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,530</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">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">871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,117</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">10,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,064</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">24,050</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">Cumulative 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">&#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">1,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,656</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">Deficit accumulated during development stage
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(116</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">(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">(26,135</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">(35,045</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">(56,278</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">(59,154</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">(59,168</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">Total stockholders&#146;
    </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">(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">854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,165</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">(34,075</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">(55,308</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">(58,184</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">(58,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT>" -->

<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;&nbsp;
<I><FONT size="2">The following discussion and analysis should
be read in conjunction with our financial statements and related
notes included elsewhere in this prospectus. This discussion may
contain forward-looking statements based upon current
expectations that involve risks and uncertainties. Our actual
results and the timing of selected events could differ
materially from those anticipated in these forward-looking
statements as a result of several factors, including those set
forth under &#147;Risk Factors&#148; and elsewhere in this
prospectus.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx is a biopharmaceutical company dedicated to
the discovery, development and commercialization of therapeutics
primarily related to the treatment of serious men&#146;s health
conditions. Our drug discovery and development programs are
focused on small molecules that selectively modulate the effects
of estrogens and androgens, two essential classes of hormones.
We currently have two product candidates that are in human
clinical trials. We are developing Acapodene, our most advanced
product candidate, through clinical trials for two separate
indications: (1)&nbsp;a Phase IIb clinical trial for the
reduction in the incidence of prostate cancer in men with
precancerous prostate lesions and (2)&nbsp;a planned pivotal
Phase III clinical trial for the treatment of serious side
effects of advanced prostate cancer therapy. We are initially
developing our second product candidate, Andarine, for the
treatment of cachexia from various types of cancer. Andarine is
the most advanced of our internally discovered portfolio of
compounds designed to modulate the effects of hormones. We plan
to build a specialized sales and marketing capability to market
our product candidates directly to the relatively small and
concentrated community of urologists and medical oncologists in
the United States and seek collaborators to commercialize our
product candidates where the target physician market is broader
than urologists and medical oncologists and outside the United
States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To date, we have not generated any product
revenue, and we have financed our operations and internal growth
almost exclusively through private placements of preferred
stock. We are a development stage company and have incurred
significant losses since our inception in 1997 as we have
devoted substantially all of our resources to research and
development, including our clinical trials. As of June&nbsp;30,
2003, we had a deficit accumulated during the development stage
of $59.2 million. Our accumulated deficit resulted primarily
from:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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 activities
    associated with Acapodene for the reduction in the incidence of
    prostate cancer in men with high grade PIN, including our Phase
    IIb clinical trial; Acapodene for the treatment of side effects
    of androgen deprivation therapy, including two Phase II clinical
    trials; Andarine for the treatment of cachexia from various
    forms of cancer, including three Phase I clinical trials; and
    other product candidates;
    </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 and administrative expenses; 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">non-cash dividends and adjustments to the
    preferred stock redemption value of $28.3&nbsp;million related
    to our cumulative redeemable convertible preferred stock. See
    &#147;Critical Accounting Policies&nbsp;&#151; Adjustment to
    Preferred Stock Redemption Value.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to continue to incur net losses over
the next several years as we continue our clinical development
and research and development activities, apply for regulatory
approvals, establish sales and marketing capabilities and expand
our operations.
</FONT>

<P align="center">
<B><FONT size="2">Research and Development</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception, we have been focused on drug
discovery and development programs. Research and development
expenses represented approximately 75% of our total operating
</FONT>

<P align="center"><FONT size="2">34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">expenses for the six-month period ended
June&nbsp;30, 2003. Research and development expenses include
our expenses for:
</FONT>
</DIV>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">personnel associated with our research 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">screening and identification of product
    candidates;
    </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">formulation and synthesis 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">manufacturing;
    </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 studies, including toxicology studies;
    </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">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">regulatory affairs; 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">quality assurance activities.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table identifies for each of our
major drug discovery and development programs our lead product
candidates, the development phase of each lead product
candidate, the status of each lead product candidate and
research and development spending for each lead product
candidate for each of the periods presented. Research and
development spending for past periods is not indicative of
spending in future periods.
</FONT>

<P align="center">
<B><FONT size="2">Research &#38; Development Spending</FONT></B>

<DIV align="center">
<B><FONT size="2">(in thousands)</FONT></B>
</DIV>

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

<TR>
    <TD width="22%"><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="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><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="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="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="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="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="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></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></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>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Program/</FONT></B></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Inception</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Product</FONT></B></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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">Through</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Candidate/</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Development</FONT></B></TD>
    <TD></TD>
    <TD></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>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Indication</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">Status</FONT></B></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">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>
</TR>

<TR>
    <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>
    <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">SERM Program</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>
    <TD><FONT size="2">&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">
    <B><FONT size="2">Acapodene</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>
    <TD><FONT size="2">&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">&#149;&nbsp;Reduction in the incidence of
    prostate cancer in men with high grade PIN
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Phase IIb clinical trial
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Enrollment complete; last patient scheduled to
    complete trial in May 2004; final results expected in the third
    quarter of 2004
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3,168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">9,934</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">&#149;&nbsp;Side effects of androgen deprivation
    therapy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pivotal Phase&nbsp;III clinical trial planned
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pivotal Phase&nbsp;III clinical trial expected to
    commence in November 2003
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,171</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">
    <B><FONT size="2">SARM Program</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>
    <TD><FONT size="2">&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">
    <B><FONT size="2">Andarine</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>
    <TD><FONT size="2">&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">&#149;&nbsp;Cachexia from various types of cancer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Three Phase&nbsp;I clinical trials completed
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Phase&nbsp;II clinical trials for treatment of
    cachexia from non-small cell lung cancer scheduled to begin in
    the first half of 2004
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">8,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is a risk that any drug discovery and
development program may not produce revenue. Moreover, because
of uncertainties inherent in drug discovery and development,
including those factors described in the &#147;Risk
Factors&#148; section of this prospectus, we may not be able to
successfully develop and commercialize any of the product
candidates included in the table above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Drug development in the United States is a
process that includes several steps defined by the FDA. The FDA
approval process for a new drug involves completion of
preclinical studies and the submission of the results of these
studies to the FDA, together with proposed clinical protocols,
manufacturing information, analytical data and other information
in an Investigational New Drug application, or IND, which must
become effective before human clinical trials may begin.
Clinical development typically involves three phases of study:
Phase&nbsp;I, II and III. The most significant costs associated
with clinical development are the Phase&nbsp;III clinical trials
as they tend to be the longest and largest studies conducted
during the drug development process. After completion of
clinical trials, a New Drug application, or NDA, may be
submitted to the FDA. In responding to an NDA, the FDA may
refuse to file the application, or if accepted for filing, the
FDA may grant marketing approval, request additional information
or deny the application if it determines that the application
does not provide an adequate basis for approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The successful development of our product
candidates is highly uncertain. We cannot reasonably estimate or
know the nature, timing and estimated costs of the efforts
necessary to complete the development of, or the period in which
material net cash inflows are expected to commence from, any of
our product candidates due to the numerous risks and
uncertainties associated with developing drugs, including the
uncertainty of:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the scope, rate of progress and cost of our
    clinical trials and other research and development 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">future clinical trial results;
    </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 terms and timing of any collaborative,
    licensing and other arrangements that we may establish;
    </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 and timing 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">the cost and timing of establishing sales,
    marketing and distribution capabilities;
    </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 establishing clinical and commercial
    supplies of our product candidates and any products that we may
    develop;
    </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 effect of competing technological and market
    developments; 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 cost of filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any failure to complete the development of our
product candidates in a timely manner could have a material
adverse effect on our operations, financial position and
liquidity. A discussion of the risks and uncertainties
associated with completing our projects on schedule, or at all,
and some consequences of failing to do so, are set forth in the
&#147;Risk Factors&#148; section of this prospectus.
</FONT>

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

<P align="left">
<B><I><FONT size="2">Comparison of Six Months Ended
June&nbsp;30, 2003 and June&nbsp;30, 2002</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Research and
Development.</FONT></I></B><FONT size="2"> Research and
development expenses increased 17.5% to $4.7&nbsp;million for
the six months ended June&nbsp;30, 2003 from $4.0&nbsp;million
for the six months ended June&nbsp;30, 2002. This increase was
primarily due to an increase in clinical trial expenses for the
Phase&nbsp;IIb clinical trial of Acapodene for the reduction in
the incidence of prostate cancer in men with high grade PIN of
approximately $422,000, as enrollment in the clinical trial was
completed in May
</FONT>

<P align="center"><FONT size="2">36
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">2003 and Phase&nbsp;I clinical trial expenses for
Andarine of approximately $559,000. These increases were offset
in part by a reduction in research and development spending on
other product candidates by approximately $195,000.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that research and development
expenditures will continue to increase substantially during 2003
and subsequent years due to (1)&nbsp;the planned commencement in
November 2003 of a pivotal Phase&nbsp;III clinical trial of
Acapodene for the treatment of side effects of androgen
deprivation therapy, (2)&nbsp;the completion of the current
Phase IIb clinical trial in 2004 and planned commencement of a
pivotal Phase&nbsp;III clinical trial of Acapodene for the
reduction in the incidence of prostate cancer in men with high
grade PIN and (3)&nbsp;the continued development of Andarine,
including a Phase&nbsp;II clinical trial scheduled to begin in
the first half of 2004. We expect to expand the scope of our
drug discovery and development programs in future periods, which
may result in substantial increases in research and development
expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">General and
Administrative.</FONT></I></B><FONT size="2"> General and
administrative expenses consist primarily of the costs of
administrative personnel and related facilities and legal,
accounting, human resources, information technology, public
relations and other professional services. In the future,
general and administrative expenses will also include the costs
of sales and marketing. General and administrative costs
increased 27% to $1.4&nbsp;million for the six months ended
June&nbsp;30, 2003 from $1.1&nbsp;million for the six months
ended June&nbsp;30, 2002. The increase was primarily due to an
increase in salary and benefits expense of approximately
$111,000 resulting from increases in staffing levels, annual
salary increases and increased health insurance costs and an
approximate $69,000 increase in legal fees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that general and administrative
expenditures will increase during 2003 and subsequent years due
to increasing payroll, public company expenses, our initial
commercialization expenses, business development costs and
expanded operational infrastructure.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Interest
Income.</FONT></I></B><FONT size="2"> Interest income for the
six months ended June&nbsp;30, 2003 was $43,000 and decreased
from the corresponding period in 2002 as a result of a decrease
in the average cash and cash equivalents balance and overall
interest rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Adjustment to Preferred Stock Redemption
Value.</FONT></I></B><FONT size="2"> The adjustment to preferred
stock redemption value consists of the amount of the change in
the redemption value, which is the greater of the liquidation
value and fair value, of the preferred stock. For the
six&nbsp;months ended June&nbsp;30, 2003, the amount of the
adjustment was a decrease of $4.7&nbsp;million. For the
six&nbsp;months ended June&nbsp;30, 2002, the amount of the
adjustment was an increase of $7.0&nbsp;million. See
&#147;Critical Accounting Policies&nbsp;&#151; Adjustment to
Preferred Stock Redemption Value.&#148;
</FONT>

<P align="left">
<B><I><FONT size="2">Comparison of Years Ended December&nbsp;31,
2002 and December&nbsp;31, 2001</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Research and
Development.</FONT></I></B><FONT size="2"> Research and
development expenses increased 62% to $9.3&nbsp;million for the
year ended December&nbsp;31, 2002 from $5.7&nbsp;million for the
year ended December&nbsp;31, 2001. This increase was primarily
due to an increase in clinical trial expenses for the Phase IIb
clinical trial of Acapodene for the reduction in the incidence
of prostate cancer in men with high grade PIN of approximately
$732,000 and an increase in clinical trial expenses for two
Phase&nbsp;II clinical trials of Acapodene for the treatment of
side effects of androgen deprivation therapy of approximately
$807,000. In addition, preclinical toxicology studies,
formulation and synthesis activities, manufacturing activities
and clinical development activities for Andarine increased
research and development expenses by approximately
$1.7&nbsp;million. Research and development expenses related to
other product candidates increased by approximately $297,000 for
the year ended December&nbsp;31, 2002 as compared to the prior
year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">General and
Administrative.</FONT></I></B><FONT size="2"> General and
administrative expenses increased 10% to $2.4&nbsp;million for
the year ended December&nbsp;31, 2002 from $2.2&nbsp;million for
the year ended December&nbsp;31, 2001. This increase was
primarily due to an increase in salary and benefits expense
</FONT>

<P align="center"><FONT size="2">37
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">by approximately $419,000 associated with
increases in staffing levels, offset by a reduction in legal
fees of approximately $72,000 and travel expenses of
approximately $40,000. In addition, general and administrative
expenses for the year ended December&nbsp;31, 2001 included
interest expense on notes payable of approximately $71,000.
There were no notes outstanding in the year ended
December&nbsp;31, 2002.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Interest
Income.</FONT></I></B><FONT size="2"> Interest income increased
87% to approximately $156,000 for the year ended
December&nbsp;31, 2002 from approximately $83,000 for the year
ended December&nbsp;31, 2001. The increase was principally
attributable to higher average cash and cash equivalents
balances during the year ended December&nbsp;31, 2002 as
compared to the prior year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Adjustment to Preferred Stock Redemption
Value.</FONT></I></B><FONT size="2"> For the year ended
December&nbsp;31, 2002, the adjustment to preferred stock
redemption value was an increase of $7.2&nbsp;million compared
to an increase of $57,000 for the year ended December&nbsp;31,
2001. The adjustments were due to a change in the redemption
value of the preferred stock.
</FONT>

<P align="left">
<B><I><FONT size="2">Comparison of Years Ended December&nbsp;31,
2001 and December&nbsp;31, 2000</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Research and
Development.</FONT></I></B><FONT size="2"> Research and
development expenses increased 114% to $5.7&nbsp;million for the
year ended December&nbsp;31, 2001 from $2.7&nbsp;million for the
year ended December&nbsp;31, 2000. This increase was primarily
due to an increase in research and development expenses for
Andarine of approximately $2.3&nbsp;million, which included
preclinical toxicology studies, formulation and synthesis
activities, manufacturing activities and clinical development
activities, and an increase in clinical trial expenses for the
Phase&nbsp;IIb clinical trial of Acapodene for the reduction in
the incidence of prostate cancer in men with high grade PIN of
approximately $450,000. Research and development expenses on
other product candidates increased by approximately $325,000 for
the year ended December&nbsp;31, 2001 compared to the prior year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">General and
Administrative.</FONT></I></B><FONT size="2"> General and
administrative expenses increased 83% to $2.2&nbsp;million for
the year ended December&nbsp;31, 2001 from $1.2&nbsp;million for
the year ended December&nbsp;31, 2000. This increase was
primarily due to an increase in salary and benefits expense by
approximately $460,000 associated with increases in staffing
levels, an increase of occupancy expense of approximately
$105,000, an increase in legal fees of approximately $112,000,
as well as increases in other general and administrative
expenses. In addition, general and administrative expenses for
the year ended December&nbsp;31, 2001 included interest expense
on notes payable of approximately $71,000. There were no notes
outstanding in the year ended December&nbsp;31, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Interest
Income.</FONT></I></B><FONT size="2"> Interest income decreased
45% to $83,000 for the year ended December&nbsp;31, 2001 from
$150,000 for the year ended December&nbsp;31, 2000. The decrease
was principally attributable to lower average cash and cash
equivalents balances during the year ended December&nbsp;31,
2001 as compared to the prior year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Adjustment to Preferred Stock Redemption
Value.</FONT></I></B><FONT size="2"> For the year ended
December&nbsp;31, 2001, the adjustment to preferred stock
redemption value was an increase of $57,000 compared to an
increase of $21.1&nbsp;million for the year ended
December&nbsp;31, 2000. The adjustments were due to a change in
the redemption value of the preferred stock.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not generated any product revenue, and we
have financed our operations and internal growth almost
exclusively through private placements of preferred stock. We
have incurred significant losses since our inception in 1997. As
of June&nbsp;30, 2003, we had a deficit accumulated during the
development stage of $59.2&nbsp;million.
</FONT>

<P align="center"><FONT size="2">38
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes our issuances of
preferred stock through August&nbsp;31, 2003.
</FONT>

<CENTER>
<TABLE width="90%" 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="12%"><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="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD 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">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Approximate Gross Proceeds</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>
    <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></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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">A
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">May 1999
    </FONT></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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,455</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">B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">July 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">277,500</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><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">C
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">October 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">260,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD 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">D
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">July 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">164,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,000</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">E
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">August 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">329,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At August&nbsp;31, 2003, we had cash and cash
equivalents of $21.4&nbsp;million. At June&nbsp;30, 2003, we had
cash and cash equivalents of $3.1&nbsp;million, compared to
$8.9&nbsp;million at December&nbsp;31, 2002, $8.8&nbsp;million
at December&nbsp;31, 2001 and $2.7&nbsp;million at
December&nbsp;31, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash used in operating activities was
$10.6&nbsp;million and $5.8&nbsp;million for the year ended
December&nbsp;31, 2002 and the six months ended June&nbsp;30,
2003. The use of cash in both periods resulted primarily from
funding our net losses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash used in investing activities was
$313,000 and $39,000 for the year ended December&nbsp;31, 2002
and the six months ended June&nbsp;30, 2003. This was primarily
for the purchase of research and development equipment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net cash provided by financing activities, which
resulted from the sale of preferred stock, was
$11.0&nbsp;million for the year ended December&nbsp;31, 2002.
There were no financing activities during the six months ended
June&nbsp;30, 2003. On August&nbsp;7, 2003, we sold
329,536&nbsp;shares of Series&nbsp;E preferred stock and
received gross proceeds of $20.0&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the net proceeds from this
offering, our current cash resources and interest on these funds
will be sufficient to meet our projected operating requirements
through the end of 2005. In addition to the net proceeds of this
offering, we estimate that we will need to raise additional
funds in the amount of approximately $70&nbsp;million, assuming
that we do not enter into collaborative arrangements for any of
our product candidates, in order to commercialize Acapodene and
Andarine for the indications currently being tested.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our forecast of the period of time through which
our financial resources will be adequate to support our
projected operating requirements is a forward-looking statement
and involves risks and uncertainties, and actual results could
vary as a result of a number of factors, including the factors
discussed in the &#147;Risk Factors&#148; section of this
prospectus. We have based this estimate on assumptions that may
prove to be wrong, and we could utilize our available capital
resources sooner than we currently expect. Because of the
numerous risks and uncertainties associated with the development
of our product candidates and other research and development
activities, including risks and uncertainties that could impact
the rate of progress of our development activities, we are
unable to estimate with certainty the amounts of increased
capital outlays and operating expenditures associated with our
current and anticipated clinical trials and other research and
development activities. Our future funding requirements will
depend on many factors, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the scope, rate of progress and cost of our
    clinical trials and other research and development 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">future clinical trial results;
    </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 terms and timing of any collaborative,
    licensing and other arrangements that we may establish;
    </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 and timing 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">the cost and timing of establishing sales,
    marketing and distribution capabilities;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">39
</FONT>

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<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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 establishing clinical and commercial
    supplies of our product candidates and any products that we may
    develop;
    </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 effect of competing technological and market
    developments;
    </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 filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights; 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 extent to which we acquire or invest in
    businesses, products and technologies, although we currently
    have no commitments or agreements relating to any of these types
    of transactions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not anticipate that we will generate
product revenue for a number of years. Until we can generate a
sufficient amount of product revenue, if ever, we expect to
finance future cash needs through public or private equity
offerings, debt financings or corporate collaboration and
licensing arrangements, as well as through interest income
earned on cash balances. We do not currently have any
commitments for future external funding. We cannot be certain
that additional funding will be available on acceptable terms,
or at all. To the extent that we raise additional funds by
issuing equity securities, our stockholders may experience
dilution, and debt financing, if available, may involve
restrictive covenants. To the extent that we raise additional
funds through collaboration and licensing arrangements, it may
be necessary to relinquish some rights to our technologies or
product candidates, or grant licenses on terms that are not
favorable to us. If adequate funds are not available, we may be
required to delay, reduce the scope of or eliminate one or more
of our research or development programs or to obtain funds
through collaborations with others that are on unfavorable terms
or that may require us to relinquish rights to some of our
technologies or product candidates that we would otherwise seek
to develop on our own.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have no long-term debt, and, as of
June&nbsp;30, 2003, we had contractual obligations related to a
facilities lease as follows:
</FONT>

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

<TR>
    <TD width="51%"><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="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="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="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>
</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><B><FONT size="1">(in thousands)</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">Less than</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After 5</FONT></B></TD>
</TR>

<TR>
    <TD></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">1 year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1-3 years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">4-5 years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">years</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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contractual obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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><FONT 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;&nbsp;
<FONT size="2">Our long-term commitments under the operating
lease shown above consist of payments relating to a lease for
laboratory and office space at 3&nbsp;North Dunlap Street,
Memphis, Tennessee. This lease expires on September&nbsp;30,
2005. This lease is terminable by either party on
90&nbsp;days&#146; notice. The table above excludes contingent
payments under the license agreements to which we are a party.
</FONT>

<P align="center">
<B><FONT size="2">Critical Accounting Policies</FONT></B>

<P align="left">&nbsp;&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,
liabilities, revenues, expenses and related disclosures. Actual
results could differ from those estimates. We believe that the
following critical accounting policies affect the more
significant judgments and estimates used in the preparation of
our financial statements.
</FONT>

<P align="left">
<B><I><FONT size="2">Accounting for Income Taxes</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our income tax policy records the estimated
future tax effects of temporary differences between the tax
basis of assets and liabilities and amounts reported in the
accompanying balance sheets, as well as operating loss and tax
credit carryforwards. We have recorded a full valuation
allowance to reduce our deferred tax assets as, based on
available objective evidence, it is more likely than not that
the deferred tax asset will not be realized. In the event that
we determine that we will be able to
</FONT>

<P align="center"><FONT size="2">40
</FONT>

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<DIV align="left">
<FONT size="2">realize our deferred tax assets in the future, an
adjustment to the valuation allowance would increase net income
in the period such determination is made.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Stock-Based Compensation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with Accounting Principles Board
Opinion No.&nbsp;25 and related interpretations, we do not
recognize compensation expense when we issue stock options to
employees and non-employee directors, unless the exercise price
is below the fair market value of the stock on the date of
grant. Our compensation expense would have been approximately
$111,000&nbsp;higher and our diluted net loss per share would
have been approximately $0.13&nbsp;higher in 2002 had we
recognized an expense equal to the estimated fair market value
of employee stock options granted through December&nbsp;31, 2002
amortized over the vesting period of the options. For more
information on this subject, you should refer to Note&nbsp;11 to
our financial statements included elsewhere in this prospectus.
</FONT>

<P align="left">
<B><I><FONT size="2">Adjustment to Preferred Stock Redemption
Value</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recognize changes in the redemption value of
our preferred stock immediately as they occur and adjust the
carrying value of the preferred stock to equal the redemption
value at the end of each reporting period. The preferred stock
is subject to redemption on or after August&nbsp;31, 2006 at a
price per share equal to the greater of (1)&nbsp;the liquidation
value, which includes accrued dividends or (2)&nbsp;the fair
value calculated on an as-if converted to common stock basis. We
determine fair value considering factors such as the share price
of preferred stock issuances, achievement of significant
milestones in the clinical trials and general market conditions.
Although we consider these factors in determining fair value,
this determination is, by its nature, subjective and subject to
change in the future based upon a number of factors. The changes
in redemption value affect the loss attributable to common
stockholders, the preferred stock carrying values and the
deficit accumulated during the development stage.
</FONT>

<P align="center">
<B><FONT size="2">Quantitative and Qualitative Disclosures about
Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our exposure to market risk for changes in
interest rates relates to our cash equivalents on deposit in
highly liquid money market funds. The primary objective of our
cash investment activities is to preserve principal while at the
same time maximizing the income we receive from our invested
cash without significantly increasing risk of loss. We do not
use derivative financial instruments in our investment
portfolio. Our cash and investments policy emphasizes liquidity
and preservation of principal over other portfolio
considerations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have operated primarily in the United States.
Accordingly, we do not have any material exposure to foreign
currency rate fluctuations. However, if we are successful in our
efforts to commercialize Acapodene, our exposure to foreign
currency rate fluctuations may increase because we are obligated
to pay Orion in Euros.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, the Financial Accounting
Standards Board, or FASB, issued SFAS No.&nbsp;148
&#147;Accounting for Stock-Based
Compensation&nbsp;&#151;&nbsp;Transition and Disclosure,&#148;
which provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based employee compensation. SFAS No.&nbsp;148 also
requires that disclosures of the pro forma effect of using the
fair value method of accounting for stock-based employee
compensation be displayed more prominently and in a tabular
format. Additionally, SFAS No.&nbsp;148 requires disclosure of
the pro forma effect in interim financial statements. The
transition and annual disclosure requirements of SFAS
No.&nbsp;148 are effective for fiscal years ended after
December&nbsp;15, 2002. The interim disclosure
</FONT>

<P align="center"><FONT size="2">41
</FONT>

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<DIV align="left">
<FONT size="2">requirements are effective for interim periods
beginning after December&nbsp;15, 2002. The adoption of this
standard did not have a material impact on our financial
statements.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued FASB
Interpretation No.&nbsp;46, &#147;Consolidation of Variable
Interest Entities, an Interpretation of ARB No.&nbsp;51.&#148;
FIN&nbsp;46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics
of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties.
FIN 46 is effective immediately for all new variable interest
entities created or acquired after January&nbsp;31, 2003. For
variable interest entities created or acquired prior to
February&nbsp;1, 2003, the provisions of FIN&nbsp;46 must be
applied for the first interim or annual period ending after
December&nbsp;15, 2003. We did not have any ownership in any
variable interest entities as of December&nbsp;31, 2002. We will
apply the consolidation requirement of FIN&nbsp;46 in future
periods if we own any interest in any variable interest entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued SFAS No.&nbsp;150,
&#147;Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.&#148; SFAS
No.&nbsp;150 requires that certain financial instruments, which
under previous guidance could be accounted for as equity, be
classified as liabilities in the statement of financial
position. SFAS No.&nbsp;150 is effective for financial
instruments entered into or modified after May&nbsp;31, 2003. We
do not expect the adoption of SFAS No.&nbsp;150 to have a
significant impact on our financial statements.
</FONT>

<P align="center"><FONT size="2">42
</FONT>

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<!-- link1 "<FONT size="2">BUSINESS</FONT>" -->

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx is a biopharmaceutical company dedicated to
the discovery, development and commercialization of therapeutics
primarily related to the treatment of serious men&#146;s health
conditions. Our drug discovery and development programs are
focused on small molecules that selectively modulate the effects
of estrogens and androgens, two essential classes of hormones.
We currently have two product candidates that are in human
clinical trials. We are developing Acapodene, our most advanced
product candidate, through clinical trials for two separate
indications: (1)&nbsp;a Phase&nbsp;IIb clinical trial for the
reduction in the incidence of prostate cancer in men with
precancerous prostate lesions and (2)&nbsp;a planned pivotal
Phase III clinical trial for the treatment of serious side
effects of advanced prostate cancer therapy. We are initially
developing our second product candidate, Andarine, for the
treatment of cachexia from various types of cancer. Andarine is
the most advanced of our internally discovered portfolio of
compounds designed to modulate the effects of hormones.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our most advanced product candidate is Acapodene,
which we are developing to reduce the incidence of prostate
cancer in men with precancerous prostate lesions. We have
licensed from Orion Corporation the right to develop, market and
distribute toremifene, the active pharmaceutical ingredient in
Acapodene, worldwide in the field of the prevention and
treatment of prostate cancer and the treatment of the principal
side effects of prostate cancer therapies. Scientific evidence
has established that men who have high grade, or advanced,
prostatic intraepithelial neoplasia, a precancerous prostate
lesion referred to as high grade PIN, are at high risk of
developing prostate cancer. Currently, there is no therapy for
the treatment of high grade PIN. We are conducting a
Phase&nbsp;IIb clinical trial in which we have enrolled
515&nbsp;patients to determine the efficacy and safety of
Acapodene in reducing the incidence of prostate cancer in men
with high grade PIN. The last patient is scheduled to complete
this trial in May&nbsp;2004, with final results expected in the
third quarter of 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are also developing Acapodene for the
treatment of side effects of androgen deprivation therapy, which
reduces blood levels of testosterone and is the only medical
treatment for men who have advanced, recurrent or metastatic
prostate cancer. Androgen deprivation therapy has serious side
effects, including: severe bone loss, or osteoporosis, leading
to skeletal fractures; hot flashes; and breast pain and
enlargement, or gynecomastia. There are no drugs approved by the
FDA for the treatment of these side effects of androgen
deprivation therapy. We have completed two Phase&nbsp;II
clinical trials of Acapodene for this indication and expect to
commence a pivotal Phase&nbsp;III clinical trial in November
2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our second product candidate is Andarine, which
we are initially developing for the treatment of cachexia from
various types of cancer, a potentially life-threatening
complication of many cancers. There are no drugs that have been
approved by the FDA for the treatment of cancer cachexia.
Although there are two commercially available drugs that are
being prescribed off-label for the treatment of some types of
cancer cachexia, chronic use of these drugs may result in
bleeding liver cysts and liver cell tumors. We discovered
Andarine internally through our drug discovery program. We have
completed three Phase&nbsp;I clinical trials of Andarine, and we
plan to commence a placebo-controlled, dose-finding
Phase&nbsp;II clinical trial for the treatment of cachexia from
non-small cell lung cancer in the first half of 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have a robust preclinical product candidate
pipeline of small molecules that modulate the effects of
hormones. Our current preclinical product candidate pipeline
focuses on the treatment of major indications in men&#146;s
health, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Prostarine for the treatment of benign prostatic
    hyperplasia, or BPH, a benign prostate enlargement that results
    in obstruction of the urinary tract;
    </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">Ostarine for the treatment of osteoporosis and
    andropause; 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">Andromustine for the treatment of prostate cancer
    that is not responsive to androgen deprivation therapy.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">43
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<P align="left">
<FONT size="2">We believe that our drug discovery capabilities
position us well to sustain our clinical pipeline through the
design and development of nonsteroidal small molecule drugs that
modulate the effects of hormones.
</FONT>

<P align="center">
<B><FONT size="2">Scientific Background on Estrogens and
Androgens</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Both estrogens and androgens are hormones that
play critical roles in men&#146;s health, regulating not only
the reproductive system, but also having important effects on
the muscular, skeletal, cardiovascular and central nervous
systems. In order for the body to function properly, a balance
must exist between estrogens and androgens.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Estrogens prevent bone loss and osteoporosis and
reduce the risk of skeletal fractures. In aging men, there is a
gradual increase in estrogen levels in the blood, which may
promote BPH, initiate prostate cancer and cause gynecomastia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Testosterone is the predominant androgen in men.
Testosterone is important for mental well-being and for
masculine physical characteristics, such as muscle size and
strength, bone strength and male pattern hair growth and loss.
Testosterone also stimulates sebaceous glands, which can cause
acne. Male reproductive health is also dependent on testosterone
to maintain sexual interest, fertility, erectile function and
normal prostate growth. In aging men, there is a gradual
decrease in testosterone levels, leading to loss of muscle mass
and strength, reduced bone mineralization resulting in
osteoporosis and bone fractures, erectile dysfunction, decreased
sexual interest, depression and mood changes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order for estrogens and androgens to perform
their physiologic functions, they must interact with and
activate their hormone receptors. Hormone receptors are sites
located in tissues where hormones bind. Once a hormone binds
with its receptor, a series of cellular events is activated,
resulting in estrogenic or androgenic tissue effects.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pharmaceuticals that target hormone receptors for
estrogens or androgens have been prescribed for over
50&nbsp;years. The drugs that have been used to stimulate
androgen receptors are natural or synthetic hormones, known as
steroids. Steroids activate hormone receptors in all tissue
types in a non-selective manner. The absence of selectivity may
result in unwanted side effects, such as the potential
stimulation of latent prostate cancer, aggravation of existing
BPH, acne, hair growth and gynecomastia. Testosterone products
also have many pharmacologic limitations, such as an inability
to administer them orally. Instead, they must be given by
intramuscular injections, patches or gels. The delivery methods
of testosterone products are inconvenient for patients and in
some cases result in inconsistent levels of testosterone in the
blood.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are also classes of small molecules that
are not steroids, but which bind to hormone receptors. These
small molecules may either stimulate or block hormone receptors
depending on the type of tissue in which the receptor is found.
A drug that can either block or stimulate the same hormone
receptor is called a receptor modulator. A drug that can either
block or stimulate a receptor in a tissue-selective manner may
be able to mimic the beneficial, and at the same time minimize
the unwanted, effects of natural or synthetic hormones.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A selective estrogen receptor modulator, or SERM,
is a small molecule that binds to and selectively modulates
estrogen receptors. SERMs have the ability to either stimulate
or block estrogen&#146;s activity in different tissue types.
SERMs have been shown to stimulate estrogen&#146;s beneficial
action in bone and block estrogen&#146;s harmful activity in the
breast. In addition, we believe that SERMs have the potential to
block estrogen&#146;s harmful activity in the prostate. Examples
of SERMs currently on the market include tamoxifen, which has
been prescribed to treat female and male breast cancer, and
raloxifene, which is used to prevent and treat female
post-menopausal osteoporosis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Similarly, a selective androgen receptor
modulator, or SARM, is a small molecule that binds to and
selectively modulates androgen receptors. In men, we believe
that SARMs will be able to
</FONT>

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<DIV align="left">
<FONT size="2">stimulate testosterone&#146;s beneficial action
in bone, muscle and brain, while blocking testosterone&#146;s
harmful action in the prostate and skin. We further believe that
SARMs will have the ability to either cross or not cross into
the central nervous system and to selectively modulate receptors
depending on tissue type. As a result, although no SARMs have
been commercialized to date, we believe that SARMs could be
developed to treat a range of medical conditions and
physiological functions, including: (1)&nbsp;low testosterone
conditions, such as hypogonadism and andropause; (2)&nbsp;muscle
wasting conditions of chronic diseases, such as cancer, AIDS,
end stage renal disease, or ESRD, and neurodegenerative
disorders, as well as muscle wasting from trauma and burns;
(3)&nbsp;disorders of the central nervous system, such as low
libido, depression and other mood disorders; (4)&nbsp;male
reproductive functions, such as infertility, male contraception
and erectile dysfunction; (5)&nbsp;prostate disorders, such as
high grade PIN, BPH and prostate cancer; and (6)&nbsp;other
conditions, such as anemia, hair loss and male osteoporosis.
</FONT>
</DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes key information
about our product candidates:
</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="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="31%"><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="31%"><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">Development</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Program</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Product Candidate/Indication</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Phase</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Status</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 align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><B><FONT size="2">SERM</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">Acapodene<BR>
    </FONT></B><FONT size="2">-&nbsp;Reduction in the incidence of
    prostate cancer in men with high grade PIN
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top"><FONT size="2">Phase IIb clinical trial</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Enrollment complete; last patient scheduled to
    complete trial in May&nbsp;2004; final results expected in the
    third quarter of&nbsp;2004
    </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 align="left" valign="top">
    <FONT size="2">-&nbsp;Side effects of androgen deprivation
    therapy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top"><FONT size="2">Pivotal Phase&nbsp; III clinical trial planned</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pivotal Phase&nbsp;III clinical trial expected to
    commence in November&nbsp;2003
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><B><FONT size="2">SARM</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">Andarine<BR>
    </FONT></B><FONT size="2">-&nbsp;Cachexia from various types of
    cancer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top"><BR><FONT size="2">Three Phase&nbsp;I clinical trials completed</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <BR>
    <FONT size="2">Phase&nbsp;II clinical trials for treatment of
    cachexia from non- small cell lung cancer scheduled to begin in
    the first half of&nbsp;2004
    </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 align="left" valign="top">
    <B><FONT size="2">Prostarine<BR>
    </FONT></B><FONT size="2">-&nbsp;BPH
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><BR><FONT size="2">Preclinical</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <BR>
    <FONT size="2">Preclinical studies to support IND in progress
    </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 align="left" valign="top">
    <B><FONT size="2">Ostarine<BR>
    </FONT></B><FONT size="2">-&nbsp;Male osteoporosis and andropause
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><BR><FONT size="2">Preclinical</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <BR>
    <FONT size="2">Preclinical studies to support IND in progress
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><B><FONT size="2">Anticancer</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">Andromustine<BR>
    </FONT></B><FONT size="2">-&nbsp;Prostate cancer that is not
    responsive to androgen deprivation therapy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><BR><FONT size="2">Preclinical</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <BR>
    <FONT size="2">Preclinical studies to support IND in progress
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our most advanced product candidate, Acapodene,
is a SERM. Acapodene is taken orally and is being developed for
a once-a-day dosing schedule. We have licensed from Orion the
right to develop, market and distribute toremifene, the active
pharmaceutical ingredient in Acapodene, worldwide in the field
of the prevention and treatment of prostate cancer and the
prevention and treatment of osteoporosis, hot flashes and
gynecomastia as side effects of androgen deprivation therapy for
prostate cancer. Toremifene is an FDA-approved SERM product for
the treatment of
</FONT>

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<FONT size="2">advanced breast cancer in post-menopausal women
that has been marketed in the United States as Fareston by Shire
Pharmaceuticals Group since 1999 and by other companies in other
countries for over 10&nbsp;years. We licensed rights to
toremifene based on our belief that a SERM potentially could
reduce the incidence of prostate cancer in men with high grade
PIN and the established safety and efficacy record of toremifene
in the treatment of post-menopausal women with advanced breast
cancer. Orion manufactures commercial quantities of toremifene
for Shire and is supplying us with Acapodene under a supply
agreement.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The two indications for which we are developing
Acapodene target different patient populations:
(1)&nbsp;patients who have been diagnosed with high grade PIN,
but do not yet have prostate cancer; and (2)&nbsp;patients who
have been diagnosed with advanced, recurrent or metastatic
prostate cancer and are being treated with androgen deprivation
therapy.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene for the Reduction in the
Incidence of Prostate Cancer in Men with High Grade
PIN</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Scientific Overview.
</FONT></I></B><FONT size="2">Patients who have an abnormal
result from a serum PSA test, a prostate cancer blood test that
is commonly administered to men as part of physical
examinations, or an abnormal digital rectal examination undergo
a prostate biopsy to determine whether they have prostate
cancer. High grade PIN, rather than prostate cancer, is detected
in approximately 10% of the patients who undergo prostate
biopsies. Over the last 17&nbsp;years, scientific evidence has
established that men who have high grade PIN are at high risk of
developing prostate cancer. Scientific studies have shown that
prostate cancer is found in approximately 30% to 71% of high
grade PIN patients within one year of a high grade PIN diagnosis
and in 45% to 80% of high grade PIN patients within five years
of a high grade PIN diagnosis. Because of this correlation
between high grade PIN and prostate cancer, we believe that
treating high grade PIN may reduce the incidence of prostate
cancer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Estrogens play an important role in the
initiation of prostate cancer. One way estrogens may influence
the initiation of prostate cancer is by stimulating high grade
PIN and causing it to progress into prostate cancer. Estrogen
receptors are found in the prostate and in high grade PIN
lesions. In animal models of prostate cancer, blocking
estrogens&#146; action has been shown to regress high grade PIN
and reduce the incidence of prostate cancer. Because Acapodene
is designed to directly block estrogen receptors, we believe
that it has the potential to reduce the incidence of prostate
cancer in men with high grade PIN.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Potential Market.
</FONT></I></B><FONT size="2">Prostate cancer is one of the most
commonly diagnosed cancers in men and the second leading cause
of cancer-related deaths in the United States. There are 400,000
new cases of prostate cancer diagnosed and 239,000 prostate
cancer deaths annually worldwide. In the United States, there
are over 115,000 new cases of high grade PIN diagnosed each
year, and an estimated 9.4&nbsp;million men unknowingly harbor
high grade PIN.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because there is currently no therapy for the
treatment of high grade PIN, patients who are diagnosed with
high grade PIN are subjected to repeat biopsies immediately
after diagnosis and then every three to six months in order to
detect the progression of high grade PIN into prostate cancer.
Prostate biopsies are performed through an ultrasound probe
placed in the rectum. Hollow needles are then inserted into the
prostate to obtain a core of tissue. Complications from this
procedure include bleeding, pain, prostate infection and
life-threatening blood infection. Because the prostate biopsy
technique randomly samples the prostate gland with a relatively
thin needle, both prostate cancer and high grade PIN may be
missed by the biopsy. Patients with high grade PIN are exposed
to the potential complications and the discomfort of invasive,
repeat prostate biopsies and suffer the mental anguish of
fearing that a diagnosis of prostate cancer may be imminent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clinical Trials.
</FONT></I></B><FONT size="2">In 2000, we completed a Phase IIa
clinical trial of Acapodene in 21 patients with high grade PIN.
The trial was conducted at the University of Tennessee. The
primary endpoint of the trial was the presence of high grade
PIN. Each participant in the trial received a daily oral dose of
Acapodene for four months. The trial was open label and not
placebo-controlled, and we did
</FONT>

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</FONT>

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<FONT size="2">not perform long-term follow-up on the patients
in the trial. Each patient underwent a prostate biopsy to detect
high grade PIN at the beginning and end of the four-month trial
period. Results showed that 72% of the trial participants had no
detectable high grade PIN in the prostate biopsy performed at
the end of the trial period. Based on studies reported in
scientific literature, only approximately 18% of patients with
untreated high grade PIN would be expected to have no high grade
PIN detected in their repeat biopsy. There were no serious
adverse events attributable to Acapodene in this trial.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the results from our Phase IIa clinical
trial, in 2001, we began a placebo-controlled, randomized Phase
IIb clinical trial in men with recently diagnosed high grade PIN
to determine the efficacy and safety of a daily dose of
Acapodene at three dose levels for 12&nbsp;months. The primary
endpoint of the trial is the incidence of prostate cancer, and
the secondary endpoint of the trial is the presence of high
grade PIN. Study patients undergo a series of eight core
prostate biopsies at six months and again at 12&nbsp;months. In
order to minimize the inclusion of patients who have, at the
time of their enrollment in the trial, prostate cancer that was
missed in their initial biopsy, patients in whom prostate cancer
is detected six months after enrollment are removed from the
trial. Therefore, the prostate cancer incidence will be
determined based only on patients who receive Acapodene or the
placebo for the entire 12&nbsp;months. The trial is being
conducted at 64&nbsp;clinical sites across the United States and
is fully enrolled with approximately 515 patients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A planned interim analysis of the first 120
patients in this clinical trial who underwent prostate biopsies
at six and again at 12&nbsp;months was conducted in April 2003.
Results of the interim analysis showed that patients who
received Acapodene had a 10% to 17% incidence of prostate cancer
12&nbsp;months after being diagnosed with high grade PIN,
depending on the dose of Acapodene, compared to a 23% incidence
in the placebo group. This represents an approximately 26% to
57% reduction in prostate cancer incidence in those patients who
received Acapodene compared to the placebo group.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To date, three serious adverse events have been
reported in the 515&nbsp;patients participating in this
Phase&nbsp;IIb clinical trial. Because the safety results are
blinded, we do not know whether these events were experienced by
participants receiving Acapodene or the placebo. However, we
have not observed any trend relating these three serious adverse
events to Acapodene.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The last patient is scheduled to complete this
Phase&nbsp;IIb clinical trial in May 2004, with final results
expected in the third quarter of 2004. We believe that our
Phase&nbsp;IIb clinical trial for the reduction in the incidence
of prostate cancer in men with high grade PIN will support a
single pivotal Phase&nbsp;III clinical trial of Acapodene for
this indication. We are evaluating the protocol and timing of
this pivotal Phase&nbsp;III trial.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene for the Treatment of Side Effects
of Androgen Deprivation Therapy</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Scientific
Overview.</FONT></I></B><FONT size="2"> The standard medical
treatment for patients who have advanced, recurrent or
metastatic prostate cancer is androgen deprivation, which is
accomplished either surgically by removal of the testes, or
chemically by treatment with luteinizing hormone releasing
hormone agonists, known as LHRH agonists. LHRH agonists work by
shutting off luteinizing hormone secretion by the pituitary
gland, which stops testosterone production by the testes.
Examples of commercially marketed LHRH agonists are Lupron and
Zoladex.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Side effects associated with LHRH agonists
include bone loss leading to osteoporosis and skeletal
fractures, muscle weakness, hot flashes, gynecomastia,
depression, loss of libido and erectile dysfunction. In
particular, of the patients treated with LHRH agonists,
approximately 60% experience osteoporosis, 22% develop bone
fractures, 55% to 80% experience hot flashes and 25% experience
gynecomastia. Bone loss leading to osteoporosis and skeletal
fractures is a significant clinical problem because prostate
cancer patients who develop skeletal fractures have shorter
survival rates compared to patients who do not develop skeletal
fractures, with the median survival time shortened by
39&nbsp;months. Hot flashes occur because of the lack of
testosterone in the brain. Hot
</FONT>

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<FONT size="2">flashes experienced by prostate cancer patients
taking LHRH agonists tend to be severe, frequent and protracted.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the results of our Phase&nbsp;II
clinical trials and our preclinical testing of Acapodene, as
well as known information about toremifene, we believe that
Acapodene has estrogenic activity both in bone, which may
prevent osteoporosis, and in the brain, which may reduce hot
flashes. In addition, based on the same data and information, we
believe that Acapodene can block estrogen&#146;s action in the
male breast, which may prevent and treat gynecomastia. As a
consequence, we believe that Acapodene has the potential to
treat three serious side effects of LHRH agonists: osteoporosis,
hot flashes and gynecomastia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Potential
Market.</FONT></I></B><FONT size="2"> In the United States, more
than 675,000 men are currently being treated with androgen
deprivation therapy for advanced, recurrent or metastatic
prostate cancer, with over 120,000 new patients started on this
therapy each year. An increasing number of prostate cancer
patients are being treated by androgen deprivation with LHRH
agonists earlier than in the past because of two main factors.
First, medical studies have shown that early androgen
deprivation therapy prolongs the survival of prostate cancer
patients. Second, the serum PSA test is detecting disease
earlier than in the past. However, the effect of this trend is
that the side effects of androgen deprivation therapy now
contribute significantly to the morbidity, and in some cases the
mortality, of men with prostate cancer. Physicians are
prescribing some drugs on an off-label basis to help ameliorate
some of the individual side effects of androgen deprivation
therapy. These drugs include bisphosphonates for osteoporosis,
Megace and antidepressants for hot flashes and tamoxifen for
gynecomastia. Radiation is also used to treat gynecomastia.
However, no single therapy is available to treat multiple side
effects of androgen deprivation therapy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clinical
Trials.</FONT></I></B><FONT size="2"> We have completed two
Phase&nbsp;II clinical trials of Acapodene for the treatment of
osteoporosis and hot flashes in patients with advanced,
recurrent or metastatic prostate cancer. The first Phase&nbsp;II
trial was conducted at five clinical sites across the United
States and treated 43&nbsp;patients with advanced, recurrent or
metastatic prostate cancer shortly after initiation of treatment
with LHRH agonists. The second of these trials was conducted at
three clinical sites across the United States and treated
46&nbsp;patients with advanced, recurrent or metastatic prostate
cancer who had been receiving LHRH agonists for more than
12&nbsp;months. In each trial, participants were randomized to
either a daily oral dose of Acapodene or a placebo for six
months. The primary endpoint of both trials was bone mineral
density. The secondary endpoint of both trials was the incidence
of hot flashes. We measured bone mineral density and hot flash
symptoms at entry into each of the clinical trials and at six
months. We did not evaluate the effects of Acapodene on
gynecomastia in either of these trials. There were no serious
adverse events attributable to Acapodene in either of our
Phase&nbsp;II clinical trials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our first Phase&nbsp;II clinical trial, which
evaluated 43 patients shortly after initiation of treatment with
LHRH agonists, patients who received Acapodene at the highest
tested dose on average experienced an approximately 2% decrease
in lumbar vertebral spine bone mineral density at six months,
while the patients who received the placebo on average
experienced an approximately 4% decrease in lumbar vertebral
spine bone mineral density at six months. At the lower tested
doses, Acapodene, as compared to the placebo, did not have a
meaningfully different effect on lumbar vertebral spine bone
mineral density. There was no significant difference between
Acapodene and the placebo in the incidence of hot flashes at any
tested dose.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our second Phase&nbsp;II clinical trial, which
evaluated 46 patients who had been receiving LHRH agonists for
more than 12&nbsp;months, patients who received Acapodene at the
highest tested dose on average experienced a 3.5% increase in
lumbar vertebral spine bone mineral density, while the patients
who received the placebo on average experienced a 0.5% decrease
in lumbar vertebral spine bone mineral density. Only 12.5% of
the patients in this trial who received Acapodene at the highest
tested dose, compared to 50% of the patients who received the
placebo, reported experiencing an increase in the frequency of
hot flashes during the clinical trial. The magnitude of
</FONT>

<P align="center"><FONT size="2">48
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<DIV align="left">
<FONT size="2">the bone changes seen in treated patients in this
Phase&nbsp;II clinical trial were similar to those reported for
each of raloxifene and bisphosphonates in post-menopausal women
with osteoporosis and bisphosphonates being prescribed off-label
to men with prostate cancer. However, bisphosphonates have not
been shown to have any effect on hot flashes. At the lower
tested doses, Acapodene, as compared to the placebo, did not
have a meaningfully different effect on lumbar vertebral spine
bone mineral density or frequency of hot flashes.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to commence in November 2003 a pivotal
Phase&nbsp;III clinical trial of Acapodene in patients
undergoing androgen deprivation therapy for advanced, recurrent
or metastatic prostate cancer. We are designing this pivotal
Phase&nbsp;III clinical trial principally based on the results
of our Phase&nbsp;II clinical trial that evaluated patients who
had been receiving LHRH agonists for more than 12&nbsp;months.
The primary endpoint of the trial will be the incidence of
skeletal fractures. The secondary endpoints of the trial will
include the measurement of bone loss and the incidence of hot
flashes and gynecomastia. We expect that over 60&nbsp;clinical
sites across the United States will participate in this study.
Approximately 1,200 patients with advanced, recurrent or
metastatic prostate cancer who have been receiving androgen
deprivation therapy for at least 24&nbsp;months and who have
significant existing bone loss, or osteopenia, will be
randomized to receive either a placebo or a daily dose of
Acapodene for 24 months.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our second product candidate, Andarine, a SARM,
is the most advanced of our internally discovered portfolio of
compounds designed to target hormone receptors. Andarine is
taken orally and is being developed for a once-a-day dosing
schedule. We believe that Andarine has the potential to treat
andropause and related diseases, including male osteoporosis and
muscle wasting. Our strategy is to develop Andarine initially
for the treatment of a cachexia from various types of cancer. We
selected this indication because it represents a potentially
large market and, we believe, has a relatively well-defined
clinical and regulatory process. Depending on the results of our
initial development efforts, we may also develop Andarine for
other andropause-related conditions. For cachexia from various
types of cancer, we are developing Andarine for the treatment of
both men and women.
</FONT>

<P align="left">
<B><I><FONT size="2">Andarine for the Treatment of Cancer
Cachexia</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Scientific
Overview.</FONT></I></B><FONT size="2"> Cachexia is defined as
the loss of over 5% of a patient&#146;s original body weight.
Most of the weight loss attributable to cachexia comes from the
loss of lean body weight, resulting from muscle wasting. Cancer
causes the body to go into a starvation-like state that causes
cachexia. Cancer cachexia is diagnosed in approximately
one-third of newly-diagnosed cancer patients and accounts for
approximately 20% of cancer deaths. Weight loss is one of the
most important indicators of how long a cancer patient will live
since the survival of a patient with cancer is greatly impacted
by the degree and rate of muscle wasting. A cancer
patient&#146;s response to cancer chemotherapy is diminished by
weight loss. Cachexia results in weakness, fatigue and
immobility. A greater lean body weight may increase activity
levels, quality of life, response to chemotherapy and,
ultimately, survival time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Testosterone increases lean body weight in both
men and women. One of the causes of cancer cachexia may be
reduced levels of testosterone. Testosterone therapy, however,
is not used for the treatment of cancer cachexia for two
reasons. First, the delivery methods for testosterone are
inconvenient for patients and in some cases result in
inconsistent levels of testosterone in the blood. Testosterone
cannot be given orally, but rather is given only by
intramuscular injections, patches or gels. Second, testosterone
has a number of undesirable side effects, such as the potential
stimulation of latent prostate cancer, aggravation of existing
BPH and gynecomastia in men and masculinizing effects in women
such as acne and facial hair.
</FONT>

<P align="center"><FONT size="2">49
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that Andarine is similar to
testosterone in activating androgen receptors in muscle, thereby
promoting lean body weight, but that it does not stimulate
sebaceous glands, the cause of hair growth and acne, or the
prostate, which exacerbates BPH. In addition, Andarine is taken
orally, which makes it convenient to administer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Potential
Market.</FONT></I></B><FONT size="2"> There are approximately
1.3&nbsp;million patients diagnosed with cancer each year in the
United States. Cancer cachexia afflicts approximately one-third
of newly-diagnosed cancer patients. Over 30 clinical trials of
supplemental nutritional support alone have reported little or
no benefit in counteracting cachexia in cancer patients
receiving chemotherapy or radiation. There are no drugs that
have been approved by the FDA for the treatment of cancer
cachexia. Although there are two commercially available drugs,
both steroids, that are being prescribed off-label for the
treatment of some types of cancer cachexia, chronic use of these
drugs may result in bleeding liver cysts and liver cell tumors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clinical
Trials.</FONT></I></B><FONT size="2"> We have completed three
Phase&nbsp;I clinical trials of Andarine in a total of
86&nbsp;healthy male and female volunteers. We tested Andarine
for safety and tolerance in single and multiple doses. Results
from our Phase&nbsp;I trials support once-a-day oral dosing, and
no serious adverse events were observed at any single or
multiple dose tested. We observed preliminary indications in the
multiple-dose Phase&nbsp;I clinical trial in men that Andarine
promoted growth activity, as measured by levels of a growth
factor in the blood known as IGF-1, without affecting the
sebaceous glands. We believe that these observations support the
potential ability of Andarine to selectively modulate androgen
receptors in a tissue-specific manner.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We plan to commence a placebo-controlled
dose-finding Phase&nbsp;II clinical trial of Andarine in the
first half of 2004 for the treatment of cachexia from non-small
cell lung cancer. Cancer cachexia occurs frequently with lung
cancer, and the ensuing loss of lean body weight cannot be
attributed solely to reduced dietary intake. There are a large
number of patients, both male and female, with advanced lung
cancer and cancer cachexia, and lung cancer is representative of
several other types of cancer. As a result, we selected this
patient population to determine the safety and efficacy of
Andarine in the treatment of cachexia from non-small cell lung
cancer. In our planned Phase&nbsp;II clinical trial, we
anticipate that approximately 150&nbsp;patients who have
non-small cell lung cancer and cancer cachexia will be
randomized to receive either a daily oral dose of Andarine or a
placebo for 12&nbsp;weeks. The primary endpoint of the trial
will be muscle performance, and the secondary endpoints will be
lean body weight and other body composition measurements.
</FONT>

<P align="center">
<B><FONT size="2">Prostarine and Ostarine</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are also developing other SARM product
candidates, including:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Prostarine for the treatment of BPH; 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">Ostarine for the treatment of osteoporosis and
    andropause.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In animal models, Prostarine shrinks the prostate
gland, and Ostarine prevents bone loss and builds bone and
muscle. We are conducting preclinical and toxicology studies to
support the commencement of clinical trials.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Patients who have advanced, recurrent or
metastatic prostate cancer are initially treated with androgen
deprivation therapy. Since prostate cancer is dependent on
androgens, including testosterone, to grow, the reduction in
testosterone forces prostate cancer into remission.
Unfortunately, with time, prostate cancer circumvents the need
for testosterone and comes out of remission. Once prostate
cancer no longer responds to androgen deprivation, it is
referred to as hormone refractory.
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Building on the technology of our SARM discovery
program, we have designed and are developing a small molecule,
Andromustine, that is designed to specifically target androgen
receptors and kill cancer cells. The Andromustine molecule has
two components: (1)&nbsp;the SARM part of the molecule, which is
designed to bind to the androgen receptor located on prostate
cancer cells; and (2)&nbsp;the chemotherapeutic part of the
molecule, which is designed to damage the DNA of prostate cancer
cells. In cell culture, Andromustine selectively kills human
metastatic prostate cancer cells. Because advanced prostate
cancers, including hormone refractory prostate cancer, have more
androgen receptors than the normal prostate, Andromustine is
designed to bind to and selectively kill advanced prostate
cancer cells.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are over 675,000 men in the United States
being treated with LHRH agonists and other hormonal therapies
for prostate cancer. Hormone refractory prostate cancer will
eventually occur in a majority of these patients. There is
currently no effective chemotherapy for hormone refractory
prostate cancer. Once a patient develops hormone refractory
prostate cancer, his prognosis is poor.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are in the process of conducting preclinical
and animal toxicology studies to support the commencement of
clinical trials of Andromustine.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Steroid hormone therapies, which include estrogen
and testosterone therapies, have been used to treat humans for
many years. Steroid hormones cannot, by their nature, have
selective effects in various tissues. As a result, they have
unintended side effects, which limit their clinical value.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SERM drugs, such as tamoxifen and raloxifene,
have achieved commercial success in treating women as
nonsteroidal small molecules that modulate hormone receptors in
a tissue selective way and minimize some of the side effects of
natural hormones. We believe that the success of SERMs indicates
that it is possible to design and develop classes of
nonsteroidal small molecule drugs to modulate hormone receptors
in addition to estrogen receptors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that our drug discovery expertise
positions us well to sustain our clinical pipeline through the
design and development of nonsteroidal small molecule drugs that
modulate hormone receptors. Our 19&nbsp;in-house medicinal
chemists and scientists provide us with significant discovery
and development expertise. Using our capabilities in hormone
receptor biology and medicinal chemistry, we are able to target
many hormone receptors and generate compounds that are designed
to address the shortcomings of natural hormone therapies. We
augment our internal drug discovery capabilities through
agreements with two universities that provide for our close
collaboration with an additional 15 scientists, whose research
is largely dedicated to our drug discovery program.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We design and synthesize new compounds based on
computer, or <I>in silico, </I>models of a hormone
receptor&#146;s binding sites. We continually modify and improve
these <I>in silico </I>models to reflect our study of the
activity of new compounds in the laboratory, in which we
determine the link between chemical structures and biological
activity, or structure-activity relationships.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also have significant medicinal scale-up
capabilities, which facilitate our rapid synthesis and
evaluation of new compounds. Throughout our discovery process,
we build diversity into our chemistry structures in order to
improve our likelihood of success in developing novel compounds
that have the potential to treat multiple indications. Through
this approach, we have generated a clinical product candidate
for the androgen receptor, Andarine, as well as additional
preclinical compounds of the SARM class and other structurally
diverse classes.
</FONT>

<P align="center"><FONT size="2">51
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to develop and commercialize
small molecule drugs to target serious men&#146;s health
conditions. Key elements of our strategy to achieve this
objective are to:
</FONT>

<P align="left">
<B><I><FONT size="2">Maximize Commercial Potential of
Acapodene</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Obtain Regulatory Approval of
Acapodene.</FONT></I></B><FONT size="2"> We are focused on
completing clinical trials, obtaining regulatory approval and
preparing for the potential commercial launch of Acapodene.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Retain Commercial Rights to Acapodene and
Establish Sales and Marketing
Infrastructure.</FONT></I></B><FONT size="2"> We intend to
retain all commercial rights to Acapodene in the United States.
We believe that we can effectively market Acapodene to the
target physician audience of urologists and medical oncologists,
principally urological oncologists, in the United States through
a small, specialty sales force that we plan to build. We plan to
collaborate with pharmaceutical companies to commercialize,
market and sell Acapodene in Europe and Asia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Extend Life Cycle of
Acapodene.</FONT></I></B><FONT size="2"> We intend to
reformulate Acapodene with the goals of seeking longer
intellectual property protection in the European and Asian
markets and extending its life cycle in the United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Develop Noninvasive Diagnostic Test for
High Grade PIN.</FONT></I></B><FONT size="2"> We plan to
collaborate with a large diagnostics company to develop a
noninvasive, accurate blood test to detect high grade PIN. We
believe that men would be more willing to be tested for high
grade PIN if the diagnostic test were less invasive than a
prostate biopsy. Given the large number of patients with
undiagnosed high grade PIN, we believe that the development of a
noninvasive test will increase the detection of high grade PIN
and thereby expand the already large potential market for
Acapodene.
</FONT>

<P align="left">
<B><I><FONT size="2">Maximize Commercial Potential of
Andarine</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Pursue Clinical Development of
Andarine.</FONT></I></B><FONT size="2"> We intend to continue to
aggressively pursue the clinical development of Andarine for the
treatment of cachexia from various types of cancer. In addition,
we may develop Andarine for the treatment of other causes of
cachexia, including ESRD, which represents a large potential
market with unmet medical needs. Andarine could also potentially
be developed and commercialized for other men&#146;s health
indications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Strategically Seek
Collaborators.</FONT></I></B><FONT size="2"> Because it would
require a large sales force to address the cancer cachexia
market and because of the risks and costs of developing Andarine
for cachexia from various types of cancer, we plan to seek one
or more collaborators for the development and commercialization
of Andarine for cancer cachexia resulting from all types of
cancer other than urological cancers. We also plan to seek a
collaborator for potential Andarine indications requiring a
large sales force. For Andarine indications for which the target
physician market is likely to overlap with that of Acapodene,
including cancer cachexia resulting from urological cancers and
indications related to andropause, our plan is to market and
sell Andarine ourselves or to co-promote it with a collaborator
in the United States, and, in the rest of the world, to seek a
collaborator.
</FONT>

<P align="left">
<B><I><FONT size="2">Build upon Our SARM and other Drug
Discovery Capabilities to Sustain Our Small Molecule Product
Candidate Pipeline</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to develop additional SARMs and other
small molecule products to treat diseases that affect large
numbers of patients and that are underserved by available
alternatives. While our drug discovery efforts to date have
focused on SERM and SARM technologies, we believe that we have
the capability to discover additional drug candidates that
target other hormone receptors. We plan to further strengthen
our drug discovery, medicinal chemistry and preclinical
pharmacology groups to sustain our pipeline of nonsteroidal
small molecules designed to modulate a range of hormone
receptors.
</FONT>

<P align="center"><FONT size="2">52
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<P align="center">
<B><FONT size="2">Licenses and Collaborative
Relationships</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have established and intend to continue to
pursue licenses from and collaborative relationships with
pharmaceutical companies and academic institutions.
</FONT>

<P align="left">
<B><I><FONT size="2">Orion Corporation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a license and supply agreement with Orion,
we have a license from Orion to develop, use, market and
distribute toremifene, the active pharmaceutical ingredient of
Acapodene, under Orion&#146;s patents covering the composition
of matter of toremifene. This license is limited to the fields
of the prevention and treatment of prostate cancer and the
prevention and treatment of osteoporosis, hot flashes and
gynecomastia as side effects of androgen deprivation therapy in
the treatment of prostate cancer. We have a right of first
negotiation on a country-by-country basis to negotiate further
agreements with Orion for the development, sale and distribution
of specified products containing toremifene that are therapeutic
equivalents of Acapodene for other indications excluding breast
cancer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of the agreement, we paid Orion
an initial license fee and have agreed to pay Orion a royalty
based on net sales of Acapodene and a share of any consideration
we receive for sublicensing our rights under the agreement. We
also are required to pay Orion up to $1.0&nbsp;million if we are
acquired before we receive marketing approval for the use of
Acapodene in the licensed field.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The agreement requires us to achieve specified
minimum sales requirements of Acapodene in the United States or
pay Orion royalties on the shortfall amount. Orion may require
us to modify our final Acapodene development plans for specified
major markets if such plans could adversely affect Fareston or
toremifene outside of the licensed field. We have granted Orion
a right of first negotiation for Scandinavian marketing rights
to Acapodene and to European rights if we do not have a
sublicensee in the United States to whom we have granted
European marketing rights. We have also agreed to negotiate with
Orion for a limited period of time the terms of an agreement
granting Orion the exclusive right to distribute Acapodene in
Japan, South Korea, China and Taiwan for use in the licensed
field. We and our affiliates are prohibited from selling a
product that competes with toremifene in the licensed field in
major countries located outside the European Union during the
term of the agreement and in major countries in the European
Union through October 2006.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The term of our license from Orion continues on a
country-by-country basis until the date of expiration or
invalidation of the last to expire or be invalidated of our
licensed patent rights. Each party has the right to terminate
the license under specified circumstances, including in the
event of a material breach by the other party that is not cured,
bankruptcy of the other party or if the other party is acquired
by a direct competitor with respect to toremifene. We also have
the right to terminate the agreement in any country if we decide
to discontinue the applications or withdraw the applications for
regulatory approval of Acapodene due to adverse reactions or
safety issues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The license includes a right for us to use
toremifene for research required to obtain regulatory approval.
The results of such research are jointly owned by us and Orion,
and may be exploited by Orion outside our licensed field.
</FONT>

<P align="left">
<B><I><FONT size="2">University of Tennessee Research
Foundation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have exclusive, worldwide licenses from the
University of Tennessee Research Foundation under its method of
use patents relating to toremifene for the reduction in the
incidence of prostate cancer in men with high grade PIN and its
composition of matter and method of use patents and patent
applications relating to Andarine to market, distribute and sell
licensed products. We also have exclusive, worldwide licenses
from the University of Tennessee Research Foundation under its
composition of matter and method of use patent applications
relating to Prostarine and Ostarine to market, distribute and
sell licensed products.
</FONT>

<P align="center"><FONT size="2">53
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of these license agreements, we
have agreed to pay the University of Tennessee Research
Foundation a royalty based on net sales of licensed products and
sublicense income. We are also obligated to pay the University
of Tennessee Research Foundation an annual license maintenance
fee under each license agreement. The term of each of the
license agreements is the longer of 20&nbsp;years or the term of
any licensed patent having a valid claim covering the licensed
technology. After the term of each license agreement expires, we
will have a perpetual, royalty-free license to the technology
licensed under that agreement. The University of Tennessee
Research Foundation has the right to terminate each of the
agreements under specified circumstances, including in the event
that we breach the agreement and do not cure the breach or in
the case of our bankruptcy. We are obligated to use commercially
reasonable efforts to develop and commercialize products based
on the licensed patents and patent applications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the license agreements, we assign to
the University of Tennessee Research Foundation specified
patentable inventions arising out of or related to the licensed
patents. Upon our request, the University of Tennessee Research
Foundation will amend the license agreements to confirm our
exclusive licenses to such inventions assigned by us to the
University of Tennessee Research Foundation.
</FONT>

<P align="left">
<B><I><FONT size="2">National Cancer Institute</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are providing the National Cancer Institute
with Acapodene for their use in an independent Phase II clinical
trial of Acapodene at the University of Pittsburgh. The
objective of the trial is to assess the biological effects of
Acapodene on the prostate gland. In this trial, 80 patients who
have been diagnosed with prostate cancer will be given a single
oral daily dose of Acapodene for 12&nbsp;weeks prior to surgical
removal of their cancerous prostate.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not currently own or operate manufacturing
facilities for the production of clinical or commercial
quantities of Acapodene or Andarine. We currently rely and
expect to continue to rely on third parties for the manufacture
of Acapodene, Andarine and any other product candidates or
products that we may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We purchase Acapodene from Orion under a license
and supply agreement providing for clinical and commercial
supply of Acapodene. Orion has agreed to supply us with, and we
have agreed to purchase from Orion, our worldwide requirements
of Acapodene in finished tablet form at specified transfer
prices. Orion&#146;s manufacturing facility also produces
commercial quantities of toremifene tablets for Fareston and
complies with cGMP regulations. The methods used to manufacture
Acapodene are similar to those used to produce the 60 mg
toremifene tablet that has been approved by the FDA for the
treatment of advanced breast cancer and is marketed in the
United States as Fareston. The raw materials necessary to
manufacture toremifene are readily available, but Orion is our
only supplier of toremifene tablets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Orion may terminate its obligation to supply us
with toremifene if:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">marketing approval for Acapodene for use in the
    licensed field is not granted in the United States by
    December&nbsp;31, 2007 or upon the expiration or invalidation of
    the last valid claim of the licensed Orion patent rights in the
    United States; 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">subject to a prior notice requirement, if Orion
    permanently ceases the manufacture of toremifene.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our license and supply agreement with Orion does
not provide us with the current right to manufacture toremifene.
However, there are a number of circumstances in which Orion is
required to grant manufacturing rights to us, including
following termination of its supply obligation as set forth
above, failure by Orion to supply product for 90&nbsp;days or to
supply product in dosages or formulations
</FONT>

<P align="center"><FONT size="2">54
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<FONT size="2">other than the dosages and formulations specified
in the agreement or termination of the agreement by us following
a breach by Orion. We would also be able to manufacture
Acapodene after expiration of the license agreement as a result
of the expiration of Orion&#146;s patents with respect to the
composition of matter of toremifene. However, in the event that
Orion terminates the license agreement as a result of a material
breach of the agreement by us that is not cured, our bankruptcy
or the acquisition of us by a direct competitor of Orion with
respect to toremifene, we would not obtain the right to
manufacture Acapodene and could not do so until Orion&#146;s
patents or related market exclusivity with respect to the
composition of matter of toremifene expire.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into an agreement with ChemSyn
Laboratories, a department of EaglePicher Technologies, LLC,
under which ChemSyn has agreed to manufacture Andarine for us in
a quantity that we believe is sufficient to supply clinical
trials of Andarine for the treatment of cachexia from various
types of cancer and initial commercialization of Andarine for
this indication. We do not have a contract with ChemSyn for the
supply of Andarine for full-scale commercialization. The active
ingredient in Andarine is manufactured using a four-step
synthetic process that uses commercially available starting
materials and raw materials for each step. There are no
complicated chemistries or unusual equipment required in the
manufacturing process.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The biotechnology and biopharmaceutical
industries are characterized by rapidly advancing technologies,
intense competition and a strong emphasis on proprietary
products. We face competition from many different sources,
including commercial pharmaceutical and biotechnology
enterprises, academic institutions, government agencies and
private and public research institutions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our competitors have significantly
greater financial resources and expertise in research and
development, manufacturing, preclinical testing, clinical
trials, regulatory approvals and marketing approved products
than we do. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative
arrangements with large and established companies. Our
commercial opportunity will be reduced or eliminated if our
competitors develop and commercialize products that are safer,
more effective, have fewer side effects or are less expensive
than Acapodene, Andarine or any other products that we may
develop. These third parties compete with us in recruiting and
retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for
clinical trials, as well as in acquiring technologies and
technology licenses complementary to our programs or
advantageous to our business.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene for the Reduction in the
Incidence of Prostate Cancer in Men with High Grade
PIN</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, there are no products that would
compete with Acapodene for the treatment of high grade PIN to
reduce the incidence of prostate cancer.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene for the Treatment of Side Effects
of Androgen Deprivation Therapy</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, there are no products that have been
approved by the FDA to treat multiple side effects of androgen
deprivation therapy. We are aware of a number of marketed drugs
that are prescribed off-label for the treatment of single side
effects. For example, Evista, Eli Lilly&#146;s trade name for
raloxifene, Fosamax, a bisphosphonate marketed by Merck, and
Actonel, a bisphosphonate marketed by Aventis and Proctor &#38;
Gamble, are each prescribed off-label for the treatment of
osteoporosis. Effexor, marketed by Wyeth Pharmaceuticals,
Catapres, marketed by Boehringer Ingelheim, and Megace, marketed
by Bristol Myers Squibb, are prescribed off-label to treat hot
flashes caused by androgen deprivation therapy. External beam
radiation is used to treat male gynecomastia. There are
significant side effects associated with the off-label use of
these drugs and radiation treatment. Most patients would need to
take several different drugs and potentially receive radiation
treatments to treat multiple side effects of androgen
deprivation therapy. In contrast, we
</FONT>

<P align="center"><FONT size="2">55
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<FONT size="2">believe that Acapodene, as a single product
candidate, has the potential to treat multiple side effects.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Andarine for the Treatment of Cancer
Cachexia</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are no drugs that have been approved by the
FDA for the treatment of cancer cachexia. Although there are two
commercially available drugs, Nandrolone and Oxandrin, that are
being prescribed off-label for the treatment of some types of
cancer cachexia, chronic use of these drugs may result in
bleeding liver cysts and liver cell tumors. Nandrolone is an
oral steroid that is available from Steris Laboratories, a
subsidiary of Watson Pharmaceuticals. Oxandrin, marketed by
Savient Pharmaceuticals, is prescribed for the treatment of
involuntary weight loss associated with severe trauma, chronic
infection or intensive surgery, as well as off-label for cancer
cachexia. Oxandrin is a tissue non-selective steroid that has
the potential to stimulate latent prostate cancer and breast
cancer and cause virilization in women. Both Nandrolone and
Oxandrin, as steroid drugs, have the potential to cause severe
liver toxicities. Andarine is not a steroid, and we believe that
it will be tissue-selective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, as to both Acapodene and Andarine,
there may be product candidates of which we are not aware at an
earlier stage of development. If any are successfully developed
and approved, they could compete directly with our product
candidates, if approved for commercial sale.
</FONT>

<P align="center">
<B><FONT size="2">Sales and Marketing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not currently have any sales and marketing
capabilities. In order to commercialize any products that are
approved for commercial sale, we must either develop a sales and
marketing infrastructure or collaborate with third parties with
sales and marketing experience. We plan to build a small,
highly-focused, specialty sales and marketing infrastructure,
which we expect to include 50 to 80 sales representatives, to
market Acapodene to the relatively small and concentrated
community of urologists and medical oncologists, principally
urological oncologists, in the United States. We believe that
the urology and medical oncology market in the United States is
readily accessible by a limited sales and marketing presence due
to the concentration of prescribing physicians. We plan to
establish collaborations with pharmaceutical companies to
commercialize Acapodene in Europe and Asia for prostate
cancer-related conditions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because it would require a large sales force to
address the cancer cachexia market and because of the risks and
costs of developing Andarine for cachexia from various types of
cancer, we plan to seek one or more collaborators for the
development and commercialization of Andarine for cancer
cachexia resulting from all types of cancer other than
urological cancers. We also plan to seek a collaborator for
potential Andarine indications requiring a large sales force.
For Andarine indications for which the target physician market
is likely to overlap with that of Acapodene, including cancer
cachexia resulting from urological cancers and indications
related to andropause, our plan is to market and sell Andarine
ourselves or to co-promote it with a collaborator in the United
States, and, in the rest of the world, to seek a collaborator.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will be able to protect our technology from
unauthorized use by third parties only to the extent it is
covered by valid and enforceable patents or is effectively
maintained as trade secrets. Accordingly, patents and other
proprietary rights are an essential element of our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For Acapodene, in the United States and
internationally we have a license from Orion under its patent
covering the composition of matter of toremifene, the active
pharmaceutical ingredient in Acapodene. The patent will expire
in the United States in 2009 in Europe in 2003 or 2008,
depending on the country, and in Japan in 2005. Market
exclusivity will continue to be available for toremifene in the
European Union until 2006 based on marketing approval that has
been granted to
</FONT>

<P align="center"><FONT size="2">56
</FONT>

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<FONT size="2">Fareston. Under current European Union law, a
period of exclusivity is provided to marketing authorization
holders whose products meet the criteria for exclusivity and
whose product applications go through the central approval
procedure administered by the European Agency for the Evaluation
of Medicinal Products, or EMEA. Current European Union law does
not provide for an additional period of exclusivity where the
holder of a marketing authorization obtains approval by the EMEA
or a member state regulatory body of a new indication. This
European Union exclusivity protection period operates
independently of any patent protection that a product might
enjoy and bars anyone from applying for approval, within the
European Union, of a medicinal product that is &#147;essentially
similar&#148; to toremifene.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have licensed from the University of Tennessee
Research Foundation method of use patents in the United States
and pending patent applications internationally related to the
use of Acapodene for the reduction in the incidence of prostate
cancer in men with high grade PIN. The method of use patents
issued in the United States related to the use of Acapodene for
this indication will expire in 2019.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have our own pending method of use patent
applications in the United States and internationally related to
the use of Acapodene for the treatment of osteoporosis,
gynecomastia and hot flashes as side effects of androgen
deprivation therapy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In all countries in which we hold or have
licensed rights to patents or patent applications related to
Acapodene, the composition of matter patents will expire before
the method of use patents. Furthermore, with respect to the
method of use of Acapodene for the treatment of osteoporosis,
hot flashes and gynecomastia as side effects of androgen
deprivation therapy worldwide and the method of use of Acapodene
for the reduction in the incidence of prostate cancer in men
with high grade PIN outside the United States, we have only
pending patent applications. Method of use patents are more
difficult to enforce than composition of matter patents because
of the risk of off-label sale or use of the subject compounds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event that patents issue in respect of our
pending method of use patent applications, after the expiration
of the patent covering the composition of matter of toremifene
in a particular country, competitors could market and sell
generic versions of toremifene at doses and in formulations that
are bioequivalent to Acapodene for uses other than the
indications for Acapodene covered by these pending method of use
patent applications, and physicians would be permitted to
prescribe generic versions of toremifene for indications that
are protected by our or our licensors&#146; method of use
patents and pending patent applications. After the expiration of
the patent covering the composition of matter of toremifene in a
particular country, if patents do not issue in respect of our
pending method of use patent applications related to the use of
Acapodene for the treatment of osteoporosis, hot flashes and
gynecomastia as side effects of androgen deprivation therapy
worldwide and the method of use of Acapodene for the reduction
in the incidence of prostate cancer in men with high grade PIN
outside the United States, competitors could market and sell
generic versions of toremifene at doses and in formulations that
are bioequivalent to Acapodene for these indications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our license from Orion is limited to the use of
toremifene for the prevention and treatment of prostate cancer
and the prevention and treatment of osteoporosis, hot flashes
and gynecomastia as side effects of androgen deprivation therapy
in the treatment of prostate cancer. Orion has licensed Shire
Pharmaceuticals Group in the United States and other parties
elsewhere in the world to market, sell and distribute toremifene
for the treatment of advanced breast cancer and could license
other parties to market, sell and distribute toremifene for
other indications in the United States and elsewhere.
Shire&#146;s product is marketed as Fareston and is currently
available only in a 60 mg dose. While we believe that the doses
of Acapodene for the indications for which we are developing
Acapodene will be different from the dose currently approved by
the FDA for Fareston, there may be off-label use of Fareston in
place of Acapodene for the indications for which we intend to
seek regulatory approval of Acapodene. Additionally, after the
expiration of the patent covering the
</FONT>

<P align="center"><FONT size="2">57
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<FONT size="2">composition of matter of toremifene in some
countries and the expiration of market exclusivity rights that
have been granted for toremifene in Europe, competitors could
market and sell generic versions of Fareston in a 60 mg dose.
Therefore, if Fareston becomes available at competitive prices
and in doses that are appropriate for the indications for which
we are developing Acapodene, off-label sales of Fareston or
generic versions of Fareston could reduce sales of Acapodene.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For Andarine, in the United States we have a
license from the University of Tennessee Research Foundation
under its patents related to the composition of matter and
formulations of, and methods of using, the active pharmaceutical
ingredient in Andarine. In the United States, the patents
covering the composition of matter and formulations of the
active pharmaceutical ingredient in Andarine will expire in
2021. We also have a license from the University of Tennessee
Research Foundation to its pending patent applications in the
United States related to methods of synthesizing the active
pharmaceutical ingredient in Andarine and methods for treating
cancer cachexia with Andarine. We also have a license from the
University of Tennessee Research Foundation to pending patent
applications internationally covering the composition of matter
of the active pharmaceutical ingredient of Andarine,
pharmaceutical compositions of Andarine, formulations of the
active pharmaceutical ingredient in Andarine, methods of
synthesis of the active pharmaceutical ingredient in Andarine,
methods for treating cancer cachexia with Andarine and some
other methods of using Andarine. We also have our own pending
patent applications in the United States and internationally
related to methods of using Andarine.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For Prostarine, we have a license from the
University of Tennessee Research Foundation under its pending
patent applications in the United States and internationally
covering the composition of matter of the active pharmaceutical
ingredient in Prostarine, pharmaceutical compositions and
formulations of Prostarine and methods of synthesizing the
active pharmaceutical ingredient in Prostarine. We also have our
own pending patent applications in the United States and
internationally related to methods for treating BPH using
Prostarine.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For Ostarine, we have a license from the
University of Tennessee Research Foundation under its pending
patent applications in the United States and internationally
covering the composition of matter of the active pharmaceutical
ingredient in Ostarine, pharmaceutical compositions and
formulations of Ostarine and methods of synthesizing the active
pharmaceutical ingredient in Ostarine. We also have our own
pending patent applications in the United States and
internationally related to methods for treating male
osteoporosis and andropause using Ostarine.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For Andromustine, we have pending patent
applications of our own in the United States and internationally
covering the composition of matter of the active pharmaceutical
ingredient in Andromustine, pharmaceutical compositions of
Andromustine, methods of synthesizing the active pharmaceutical
ingredient in Andromustine and methods for treating prostate
cancer that is not responsive to androgen deprivation therapy
using Andromustine.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also rely on trade secrets, technical know-how
and continuing innovation to develop and maintain our
competitive position. We seek to protect our proprietary
information by requiring our employees, consultants,
contractors, outside scientific collaborators and other advisors
to execute non-disclosure and assignment of invention agreements
on commencement of their employment or engagement, through which
we seek to protect our intellectual property. Agreements with
our employees also prevent them from bringing the proprietary
rights of third parties to us. We also require confidentiality
or material transfer agreements from third parties that receive
our confidential data or materials.
</FONT>

<P align="center"><FONT size="2">58
</FONT>

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

<P align="left">
<B><I><FONT size="2">New Drug Development and Approval
Process</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Numerous governmental authorities in the United
States and other countries extensively regulate the testing,
clinical development, manufacturing and marketing of
pharmaceutical products and ongoing research and development
activities. In the United States, the FDA rigorously reviews
pharmaceutical products under the Federal Food, Drug, and
Cosmetic Act and regulations. Non-compliance with applicable
requirements can result in administrative and judicial
sanctions, including warning letters, clinical holds, fines,
recall or seizure of products, injunctions, total or partial
suspension of production, refusal of the government to approve
marketing applications or allow entry into supply contracts,
refusal to permit import or export of products, civil penalties,
criminal prosecution and other actions affecting a company and
its products. The FDA also has the authority to revoke
previously granted marketing authorizations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To secure FDA approval, an applicant must submit
extensive preclinical and clinical data, as well as information
about product manufacturing processes and facilities and other
supporting information to the FDA for each indication to
establish a product candidate&#146;s safety and effectiveness.
The development and approval process takes many years, requires
the expenditure of substantial resources and may be subject to
delays or limitations of approval or rejection of the
application. Even if the FDA approves a product, the approval is
subject to post-marketing surveillance, adverse drug experience
and other recordkeeping and reporting obligations, and may
involve ongoing requirements for post-marketing studies. The FDA
also may place conditions on any approvals that could restrict
the commercial applications, advertising, promotion or
distribution of these products. Product approvals may be
withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing.
</FONT>

<P align="left">
<B><I><FONT size="2">Preclinical and Clinical
Testing</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Preclinical studies involve laboratory evaluation
of product characteristics and animal studies to assess the
biological activity and safety of the product. In some cases,
long-term preclinical studies are conducted while clinical
studies are ongoing. The FDA, under its Good Laboratory
Practices regulations, regulates preclinical studies. Violations
of these regulations can, in some cases, lead to invalidation of
the studies, requiring these studies to be replicated. When the
preclinical testing is considered adequate by the sponsor to
demonstrate the safety and scientific rationale for initial
human studies, the results of the preclinical tests, together
with manufacturing information and analytical data, are
submitted to the FDA as part of an Investigational New Drug
application, or IND. The IND becomes effective, if not rejected
by the FDA, within 30&nbsp;days after FDA receives the IND. The
FDA may, at any time during the 30-day period after filing of an
IND or at any future time, impose a clinical hold on proposed or
ongoing clinical trials, on various grounds, including that the
study subjects are or would be exposed to an unreasonable and
significant health risk. If the FDA imposes a clinical hold,
clinical trials cannot commence or recommence without FDA
authorization and then only under terms authorized by the FDA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clinical trials involve the administration of the
investigational product candidates to humans under the
supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical
Practice, or GCP, under protocols submitted to the FDA as part
of the IND. In addition, each clinical trial must be approved
and conducted under the auspices of an Investigational Review
Board, or IRB, and with patient informed consent. The IRB will
consider, among other things, ethical factors and the safety of
human subjects.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clinical trials are conducted in three sequential
phases, but the phases may overlap. Phase&nbsp;I clinical trials
usually involve between 20 and 80&nbsp;healthy human subjects or
more, depending on the disease. The goal of the Phase&nbsp;I
clinical trial is to establish initial data about the safety and
tolerance of the product candidates in humans. In Phase&nbsp;II
clinical trials, controlled studies are
</FONT>

<P align="center"><FONT size="2">59
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<FONT size="2">conducted on an expanded population of patients
with the targeted disease. The primary purpose of these tests is
to evaluate the effectiveness of the drug candidate on the
volunteer patients as well as to determine if there are any side
effects or other risks associated with the drug. Phase&nbsp;III
trials involve even larger patient populations, often with
several hundred or even several thousand patients depending on
the use for which the drug is being studied. Phase&nbsp;III
trials are intended to establish the overall risk-benefit ratio
of the drug and provide, if appropriate, an adequate basis for
product labeling. During all clinical trials, physicians monitor
the patients to determine effectiveness and to observe and
report any reactions or other safety risks that may result from
use of the drug candidate.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Product Formulation and
Manufacture</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Concurrent with clinical trials and preclinical
studies, companies must develop information about the chemistry
and physical characteristics of the drug and finalize a process
for manufacturing the product. In addition, manufacturers,
including contract manufacturers, are required to comply with
the applicable FDA cGMP regulations. The cGMP regulations
include requirements relating to quality control and quality
assurance, as well as the corresponding maintenance of records
and documentation. The manufacturing process must be capable of
consistently producing quality batches of the product and the
manufacturer must develop methods for testing the quality,
purity and potency of the final drugs. Additionally, appropriate
packaging must be selected and tested and chemistry stability
studies must be conducted to demonstrate that the product does
not undergo unacceptable deterioration over its shelf-life.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Compliance with cGMP regulations also is a
condition of new drug application approval. The FDA must approve
manufacturing facilities before they can be used in the
commercial manufacture of drug products. In addition,
manufacturing establishments are subject to preapproval
inspections and unannounced periodic inspections.
</FONT>

<P align="left">
<B><I><FONT size="2">New Drug Application Process</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After the completion of the clinical trial phases
of development, if the sponsor concludes that there is
substantial evidence that the drug candidate is safe and
effective for its intended use, the sponsor may submit a new
drug application, or NDA, to the FDA. The application must
contain all of the information on the drug candidate gathered to
that date, including data from the clinical trials, and be
accompanied by a user fee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FDA determines whether an NDA as submitted is
acceptable for filing. The FDA may refuse to file an
application, in which case the FDA retains one-half of the user
fee. If the submission is accepted for filing, the FDA begins an
in-depth review of the application. As part of this review, the
FDA may refer the application to an appropriate advisory
committee, typically a panel of clinicians, for review,
evaluation and a recommendation. The FDA is not bound by the
recommendation of an advisory committee. Under the Prescription
Drug User Fee Act, or PDUFA, submission of an NDA with clinical
data requires payment of a fee, with some exceptions. In return,
FDA assigns a goal of six or 12&nbsp;months from filing of the
application to return of a first &#147;complete response,&#148;
in which the FDA may approve the product or request additional
information. There can be no assurance that an application will
be approved within the performance goal timeframe established
under PDUFA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the FDA evaluations of the NDA and the
manufacturing facilities are favorable, the FDA may issue an
approval letter authorizing commercial marketing of the drug
candidate for specified indications. The FDA could also issue an
approvable letter, which usually contains a number of conditions
that must be met in order to secure final approval of the new
drug application. When and if those conditions have been met to
the FDA&#146;s satisfaction, the FDA will issue an approval
letter. On the other hand, if the FDA&#146;s evaluation of the
NDA submission or manufacturing facilities is not favorable, the
FDA may refuse to approve the NDA or issue a non-approvable
letter.
</FONT>

<P align="center"><FONT size="2">60
</FONT>

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<P align="left">
<B><I><FONT size="2">Marketing Approval and Post-marketing
Obligations</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the FDA approves an application, the drug
becomes available for physicians to prescribe. Periodic reports
must be submitted to the FDA, including descriptions of any
adverse reactions reported. The FDA may require post-marketing
studies, also known as Phase&nbsp;IV studies, as a condition of
approval. In addition to studies required by the FDA after
approval, trials and studies are often conducted to explore new
indications. The purpose of these trials and studies and related
publications is to develop data to support additional
indications for the drug, which must be approved by the FDA, and
to increase its acceptance in the medical community. In
addition, some post-marketing studies are done at the request of
the FDA to develop additional information regarding the safety
of a product.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any products manufactured or distributed pursuant
to FDA approvals are subject to continuing regulation by the
FDA, including recordkeeping requirements, reporting of adverse
experiences with the drug, drug sampling and distribution
requirements, notifying the FDA and gaining its approval of
certain manufacturing or labeling changes, complying with
certain electronic records and signature requirements, and
complying with FDA promotion and advertising requirements. Drug
manufacturers and their subcontractors are required to register
their establishments and are subject to periodic unannounced
inspections for compliance with good manufacturing practice
requirements. Also, newly discovered or developed safety or
effectiveness data may require changes to a product&#146;s
approved labeling, including the addition of new warnings and
contraindications, or even in some instances revocation or
withdrawal of the approval.
</FONT>

<P align="left">
<B><I><FONT size="2">Drug Price Competition and Patent Term
Restoration Act of 1984</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Drug Price Competition and Patent Term
Restoration Act of 1984, known as the Hatch-Waxman Act, a
portion of a product&#146;s patent term that was lost during
clinical development and application review by the FDA may be
restored. The Hatch-Waxman Act also provides for a statutory
protection, known as exclusivity, against the FDA&#146;s
acceptance or approval of certain competitor applications. The
Hatch-Waxman Act also provides the legal basis for the approval
of abbreviated new drug applications, or ANDAs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Patent term restoration can compensate for time
lost during product development and the regulatory review
process by returning up to five years of patent life for a
patent that covers a new product or its use. This period is
generally one-half the time between the effective date of an IND
and the submission date of an NDA, plus the time between the
submission date of an NDA and the approval of that application.
Patent term restorations, however, are subject to a maximum
extension of five years, and the patent term restoration cannot
extend the remaining term of a patent beyond a total of
14&nbsp;years. The application for patent term extension is
subject to approval by the United States Patent and Trademark
Office in conjunction with the FDA. It takes at least six months
to obtain approval of the application for patent term extension.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Hatch-Waxman Act also provides for a period
of statutory protection for new drugs that receive NDA approval
from the FDA. If a new drug receives NDA approval as a new
chemical entity, meaning that the FDA has not previously
approved any other new drug containing the same active entity,
then the Hatch-Waxman Act prohibits an ANDA or a 505(b)(2) NDA,
an NDA where the applicant does not own or have a legal right of
reference to all of the data required for approval, to be
submitted by another company for a generic version of such drug,
with some exceptions, for a period of five years from the date
of approval of the NDA. The statutory protection provided
pursuant to the Hatch-Waxman Act will not prevent the filing or
approval of an NDA, as opposed to an ANDA or 505(b)(2) NDA, for
any drug, including, for example, a drug with the same active
ingredient, dosage form, route of administration, strength and
conditions of use. In order to obtain an NDA, however, a
competitor would be required to conduct its own clinical trials.
If NDA approval is received for a new drug containing an active
ingredient that was previously approved by the FDA but the NDA
is for a drug that includes an innovation over the previously
approved drug, for example, an
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">NDA approval for a new indication or formulation
of the drug with the same active ingredient, and if such NDA
approval was dependent upon the submission to the FDA of new
clinical investigations, other than bioavailability studies,
then the Hatch-Waxman Act prohibits the FDA from making
effective the approval of an ANDA or 505(b)(2) NDA for a generic
version of such drug for a period of three years from the date
of the NDA approval. This three year exclusivity, however, only
covers the innovation associated with the NDA to which it
attaches. Thus, the three year exclusivity does not prohibit the
FDA, with limited exceptions, from approving ANDAs or 505(b)(2)
NDAs for drugs containing the same active ingredient but without
the new innovation.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While the Hatch-Waxman Act provides certain
patent restoration and exclusivity protections to innovator drug
manufacturers, it also permits the FDA to approve ANDAs for
generic versions of their drugs. The ANDA process permits
competitor companies to obtain marketing approval for a drug
with the same active ingredient for the same uses but does not
require the conduct and submission of clinical studies
demonstrating safety and effectiveness for that product. Instead
of safety and effectiveness data, an ANDA applicant needs only
to submit data demonstrating that its product is bioequivalent
to the innovator product as well as relevant chemistry,
manufacturing and product data.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Finally, the Hatch-Waxman Act requires, in some
circumstances, an ANDA or 505(b)(2) NDA applicant to notify the
patent owner and the holder of the approved NDA of the factual
and legal basis of the applicant&#146;s opinion that the patent
is not valid or will not be infringed. Upon receipt of this
notice, the patent owner and the NDA holder have 45&nbsp;days to
bring a patent infringement suit in federal district court and
obtain a 30&nbsp;month stay against the company seeking to
reference the NDA the NDA holder could still file a patent suit
after the 45&nbsp;days, but if they did, they would not have the
benefit of the 30 month stay. The discovery, trial and appeals
process in such suits can take several years. If such a suit is
commenced, the Hatch-Waxman Act provides a 30-month stay on the
approval of the competitor&#146;s ANDA or 505(b)(2) NDA. If the
litigation is resolved in favor of the competitor or the
challenged patent expires during the 30-month period, unless
otherwise extended by court order, the stay is lifted and the
FDA may approve the application. Under regulations recently
issued by the FDA, the patent owner and the NDA holder have the
opportunity to trigger only a single 30-month stay per ANDA or
505(b)(2) NDA. Once the ANDA or 505(b)(2) NDA applicant has
notified the patent owner and the NDA holder of the
infringement, the applicant cannot be subjected to another
30-month stay, even if the applicant becomes aware of additional
patents that may be infringed by its product.
</FONT>

<P align="left">
<B><I><FONT size="2">Pharmaceutical Pricing and
Reimbursement</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In both domestic and foreign markets, sales of
any products for which we receive regulatory approval for
commercial sale will depend in part on the availability of
reimbursement from third-party payors. Third-party payors
include government health administrative authorities, managed
care providers, private health insurers and other organizations.
These third-party payors are increasingly challenging the price
and examining the cost-effectiveness of medical products and
services. In addition, significant uncertainty exists as to the
reimbursement status of newly approved healthcare product
candidates. We may need to conduct expensive pharmacoeconomic
studies in order to demonstrate the cost-effectiveness of our
products. Our product candidates may not be considered
cost-effective. Adequate third-party reimbursement may not be
available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product
development. The United States and state governments continue to
propose and pass legislation designed to reduce the cost of
healthcare. Adoption of new legislation could further limit
reimbursement for pharmaceuticals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The marketability of any products for which we
receive regulatory approval for commercial sale may suffer if
the government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, an increasing emphasis
on managed care in the United States has and will continue to
increase the pressure on pharmaceutical pricing.
</FONT>

<P align="center"><FONT size="2">62
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We sublease approximately 18,500&nbsp;square feet
of laboratory and office space in Memphis, Tennessee, under an
operating lease through September 2005. This lease is terminable
by either party on 90&nbsp;days&#146; notice. We believe that
our existing facilities will be sufficient to meet our
requirements through 2005.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2003, we had
43&nbsp;employees, of whom 13 were Ph.D.s and&nbsp;4 were M.D.s.
None of our employees is subject to a collective bargaining
agreement. We believe that we have good relations with our
employees.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are not currently involved in any material
legal proceedings.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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

<!-- link1 "<FONT size="2">Directors, Executive Officers and Other Key Employees</FONT>" -->

<P align="center">
<B><FONT size="2">Directors, Executive Officers and Other Key
Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information about
our directors, executive officers and other key employees as of
August&nbsp;31, 2003.
</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="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="45%"><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(s)</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">
    <I><FONT size="2">Directors and Executive Officers</FONT></I></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">J.R. Hyde, III(1)(2)(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">60</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">Mitchell S. Steiner, M.D., F.A.C.S.&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">42</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 Vice-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">Marc S. Hanover
    </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">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President, Chief Operating Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Henry P. Doggrell
    </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">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">General Counsel and Secretary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark E. Mosteller
    </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">40</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
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rosemary Mazanet, M.D., Ph.D.(1)(2)(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">47</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">John H. Pontius(1)(2)(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">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">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Other Key Employees</FONT></I></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">K. Gary Barnette, Ph.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">36</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 of Regulatory Affairs
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert S. Boger, 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">56</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 of Clinical Development
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Karen A. Veverka Ph.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">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 of Preclinical Development
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael A. Whitt, Ph.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">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 of Molecular Biology
    </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="3%"></TD>
    <TD width="97%"></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 Nominating and Corporate Governance
    Committee
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">J.R. Hyde, III
</FONT></I></B><FONT size="2">has served as the Chairman of our
Board of Directors since November 2000. Since 1989,
Mr.&nbsp;Hyde has been the sole stockholder and President of
Pittco Holdings, Inc., a private, institutional investment
company. Since 1996, when Mr.&nbsp;Hyde made a substantial
contribution to support Dr.&nbsp;Steiner&#146;s research,
Mr.&nbsp;Hyde has been instrumental in forming and financing GTx
and is our largest stockholder. Mr.&nbsp;Hyde was the Chairman
of the Board of Directors of AutoZone, Inc. from 1986 to 1997
and the Chief Executive Officer of AutoZone from 1986 to 1996.
He was also Chairman and Chief Executive Officer of
Malone&nbsp;&#38; Hyde, AutoZone&#146;s former parent company,
from 1972 until 1988. Mr.&nbsp;Hyde is a director of AutoZone,
Inc. and FedEx Corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Mitchell S. Steiner, M.D., F.A.C.S.,
</FONT></I></B><FONT size="2">a co-founder of GTx, has served as
our Chief Executive Officer and Vice-Chairman of our Board of
Directors since our inception in September 1997. Prior to
founding GTx, Dr.&nbsp;Steiner held numerous academic
appointments, including Chairman and Professor of Urology,
Director of Urologic Oncology and Research and the Chair of
Excellence in Urologic Oncology at the University of Tennessee.
Dr.&nbsp;Steiner holds a B.A. in Molecular Biology from
Vanderbilt University and an M.D. from the University of
Tennessee, and performed his surgery and urologic training at
The Johns Hopkins Hospital.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Marc S.
Hanover,</FONT></I></B><FONT size="2"> a co-founder of GTx, has
served as our President and Chief Operating Officer and a
director since our inception in September 1997. Prior to joining
GTx, Mr.&nbsp;Hanover was a founder of Equity Partners
International, Inc., a private equity firm in Memphis,
Tennessee, and participated as a founder and investor in three
healthcare companies. From 1985 to 1997, Mr.&nbsp;Hanover was a
Senior Vice President and a member of the Executive Management
Committee of National Bank of Commerce, now National Commerce
Financial Corporation, in Memphis, Tennessee. Mr.&nbsp;Hanover
holds a B.S. in Biology from the University of Memphis and an
M.B.A. in Finance from the University of Memphis.
</FONT>

<P align="center"><FONT size="2">64
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Henry P. Doggrell
</FONT></I></B><FONT size="2">has served as our General Counsel
and Secretary since October 2001. From April 1998 to August
2001, Mr.&nbsp;Doggrell was Senior Vice President, Corporate
Affairs at Buckeye Technologies, Inc., a specialty cellulose
company, where he was responsible for matters including
corporate finance, investor relations, mergers and acquisitions,
intellectual property and licensing and strategic development.
From 1996 to 1998, Mr.&nbsp;Doggrell served as General Counsel
and Secretary of Buckeye Technologies. Prior to joining Buckeye
Technologies, Mr.&nbsp;Doggrell was a partner of the Baker,
Donelson, Bearman, Caldwell and Berkowitz law firm from 1988 to
1996, where he served as a member of the law firm management
committee and Chair of the firm&#146;s Corporate Securities
department. Mr.&nbsp;Doggrell holds a B.S. in Commerce from the
University of Virginia and a J.D. from Vanderbilt University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Mark E. Mosteller
</FONT></I></B><FONT size="2">has served as our Chief Financial
Officer since August 2001. From April 1997 to August 2001,
Mr.&nbsp;Mosteller was an Executive Vice President of Union
Planters Bank National Association, a subsidiary of Union
Planters Corporation, a bank holding company, and Chief
Operating Officer of Union Planters Mortgage, the mortgage
division of Union Planters Bank National Association. From 1994
to 1997, Mr.&nbsp;Mosteller was the Chief Financial Officer of
Boatmen&#146;s National Mortgage, Inc., the mortgage subsidiary
of Boatmen&#146;s Bancshares, Inc. From 1984 to 1994,
Mr.&nbsp;Mosteller was employed as an audit senior manager with
Ernst&nbsp;&#38; Young LLP. Mr.&nbsp;Mosteller is a certified
public accountant and holds a B.S. in Accounting from the
University of Tennessee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Rosemary Mazanet, M.D., Ph.D.
</FONT></I></B><FONT size="2">has served as a director since
October 2001. Dr.&nbsp;Mazanet has served as Chief Scientific
Officer and a General Partner of Oracle Partners,&nbsp;L.P., a
private equity fund, since 1998. Prior to joining Oracle
Partners, Dr.&nbsp;Mazanet served as the Director of Clinical
Research at Amgen, Inc., a pharmaceutical company.
Dr.&nbsp;Mazanet is a member of the Board of Directors of the
University of Pennsylvania School of Medicine. She trained in
internal medicine at the Brigham and Women&#146;s Hospital and
in oncology at the Dana Farber Cancer Institute, both part of
the Harvard Medical system, where she was a staff physician
prior to joining Amgen. Dr.&nbsp;Mazanet holds a B.A. in Biology
from the University of Virginia and an M.D. and a Ph.D. in
Anatomy from the University of Pennsylvania.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">John H. Pontius
</FONT></I></B><FONT size="2">has served as a director since
April 1999. Mr.&nbsp;Pontius has been the President of Pittco
Management,&nbsp;LLC, since 1991. From 1986 to 1991,
Mr.&nbsp;Pontius served as the chief financial officer of the
City of Memphis, Tennessee. Mr.&nbsp;Pontius is a certified
public accountant and holds a B.S. in Accounting from the
University of Tennessee. Mr.&nbsp;Pontius has served as a member
of the Board of Trustees of the University of Tennessee since
2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">K.&nbsp;Gary Barnette, Ph.D.
</FONT></I></B><FONT size="2">has served as our Director of
Regulatory Affairs since December 2001. From May 1998 to
December 2001, Dr.&nbsp;Barnette was Assistant Director and then
Director, Regulatory Affairs at Solvay Pharmaceuticals, Inc., a
specialty pharmaceutical company. From March 1995 to May 1998,
Dr.&nbsp;Barnette was a Clinical Pharmacology and
Biopharmaceutics Reviewer at the FDA, where he reviewed in the
Divisions of Reproductive and Urologic Drug Products, Metabolic
and Endocrine Drug Products and Gastrointestinal and Coagulation
Drug Products. Dr.&nbsp;Barnette holds a B.S. in Biology from
Salem College, and a Ph.D. in Basic Pharmaceutical Sciences from
West Virginia University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Robert S. Boger, M.D.
</FONT></I></B><FONT size="2">has served as our Director of
Clinical Development since May 2003. From January 2002 until he
joined GTx, Dr.&nbsp;Boger was a private consultant specializing
in medicine, pharmacology and clinical research. From 1997 to
January 2002, Dr.&nbsp;Boger was Director of Clinical Research
for Transplantation and Immunology for Novartis Pharmaceuticals.
From 1996 to 1997, Dr.&nbsp;Boger served as Director of Medical
Research and Clinical Science Leader of Roche&#146;s
CellCeptTransplant program. Prior to joining Roche, Dr. Boger
served as both Associate Director, Clinical Research and Medical
Director, Renin Inhibitor Venture for Abbott Laboratories.
Dr.&nbsp;Boger holds a B.A. in Biophysics from Amherst College
and an M.D. from Harvard Medical School. Dr.&nbsp;Boger is board
certified in internal medicine, nephrology and clinical
pharmacology.
</FONT>

<P align="center"><FONT size="2">65
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Karen A. Veverka, Ph.D.
</FONT></I></B><FONT size="2">has served as our Director of
Preclinical Development since August 2000. Dr.&nbsp;Veverka is a
co-inventor of several patents held by GTx in the area of
medical applications of SARMs. From 1996 to September 2000,
Dr.&nbsp;Veverka was a post-doctoral research fellow at
St.&nbsp;Jude Children&#146;s Research Hospital.
Dr.&nbsp;Veverka holds a B.S. in Biochemistry from Kansas State
University and a Ph.D. from Mayo Graduate School/The Mayo
Foundation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Michael A. Whitt, Ph.D.
</FONT></I></B><FONT size="2">has served as our Director of
Molecular Biology since April 2001. Dr.&nbsp;Whitt is the
co-inventor of several patents licensed to GTx. Dr.&nbsp;Whitt
has been on the faculty in the Department of Molecular Sciences
at the University of Tennessee Health Sciences since 1991.
Dr.&nbsp;Whitt holds a B.A. in Microbiology from the University
of Kansas and a Ph.D. in Microbiology from the University of
California, Davis. Dr.&nbsp;Whitt received his post-doctoral
training at the Yale University School of Medicine.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of this offering, we will
have an authorized Board of Directors consisting of five
members. In accordance with the terms of our certificate of
incorporation and bylaws, which will become effective upon
completion of this offering, the Board of Directors will be
divided into three classes, Class&nbsp;I, Class&nbsp;II and
Class&nbsp;III, with each class serving staggered three-year
terms. Upon the completion of this offering, the members of the
classes will be divided as follows:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the class&nbsp;I director will be
    Dr.&nbsp;Mazanet, and her term will expire at the annual meeting
    of stockholders to be held in 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">the class&nbsp;II directors will be
    Mr.&nbsp;Hanover and Mr.&nbsp;Pontius, and their term will
    expire at the annual meeting of stockholders to be held in 2005;
    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 class&nbsp;III directors will be
    Dr.&nbsp;Steiner and Mr.&nbsp;Hyde, and their term will expire
    at the annual meeting of stockholders to be held in 2006.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation that will become
effective upon the completion of this offering provides that the
authorized number of directors may be changed only by resolution
of the Board of Directors. Any additional directorships
resulting from an increase in the number of directors will be
distributed between the three classes so that, as nearly as
possible, each class will consist of one-third of the directors.
This classification of the Board of Directors may have the
effect of delaying or preventing changes in the control or
management of GTx.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our directors may be removed only for cause by
the affirmative vote of the holders of a majority of our voting
stock.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Board of Directors has an audit committee, a
compensation committee and a nominating and corporate governance
committee.
</FONT>

<P align="left">
<B><I><FONT size="2">Audit Committee</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our audit committee consists of Mr.&nbsp;Hyde,
Dr.&nbsp;Mazanet and Mr.&nbsp;Pontius. The functions of the
audit committee include:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">meeting with our management periodically to
    consider the adequacy of our internal controls, the objectivity
    of our financial reporting and our accounting policies and
    practices;
    </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 with our independent auditors and with
    internal financial personnel regarding these matters;
    </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">selecting and engaging our independent auditors;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">66
</FONT>

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<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing our financial statements and reports
    and discussing the statements and reports with our management,
    including any significant adjustments, management judgments and
    estimates, new accounting policies and disagreements with
    management; 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 our financial plans and reporting
    recommendations to our full board for approval and to authorize
    action.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Both our independent auditors and internal
financial personnel will regularly meet privately with our audit
committee and have unrestricted access to this committee.
</FONT>

<P align="left">
<B><I><FONT size="2">Compensation Committee</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our compensation committee consists of
Mr.&nbsp;Hyde, Dr.&nbsp;Mazanet and Mr. Pontius. The functions
of the compensation committee include:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and, as it deems appropriate,
    recommending to our Board of Directors, policies, practices and
    procedures relating to the compensation of our directors and
    executive officers and the establishment and administration of
    our employee benefit plans;
    </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">exercising administrative authority under our
    stock plans and employee benefit plans; 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">advising and consulting with our officers
    regarding managerial personnel and development.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Nominating and Corporate Governance
Committee</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our nominating and corporate governance committee
consists of Mr.&nbsp;Hyde, Dr.&nbsp;Mazanet and
Mr.&nbsp;Pontius. The functions of the nominating and corporate
governance committee include:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and recommending nominees for election
    as 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">assessing the performance of the 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">developing guidelines for board composition; 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 administering our corporate
    governance guidelines and considering other issues relating to
    corporate governance.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, Mr.&nbsp;Pontius, Dr.&nbsp;Steiner,
our Chief Executive Officer, and Mr.&nbsp;Hanover, our President
and Chief Operating Officer, served as the members of our
Compensation Committee. In October 2003, Mr.&nbsp;Hyde and
Dr.&nbsp;Mazanet replaced Dr.&nbsp;Steiner and Mr.&nbsp;Hanover
as members of our Compensation Committee. None of our executive
officers currently serves, or in the past year has served, as a
member of the Board of Directors or compensation committee of
any entity that has one or more executive officers serving on
our Board of Directors or compensation committee.
</FONT>

<P align="left">
<B><I><FONT size="2">Director Compensation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not provided cash compensation to any
director for his or her service as a director. However,
following the completion of this offering, we intend to provide
cash compensation at a rate of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
regular meeting of the Board of Directors and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
committee meeting to all non-employee directors. In addition, we
will reimburse directors for their reasonable expenses incurred
in attending meetings of the Board of Directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the completion of this offering, all
employee directors will be eligible to participate in our 2003
Employee Stock Purchase Plan, as more fully described in the
section entitled &#147;Benefit Plans&nbsp;&#151; 2003 Employee
Stock Purchase Plan.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2003 Non-Employee Directors&#146; Stock
Option Plan, which will become effective upon completion of this
offering, provides for the automatic grant of options to
purchase shares of
</FONT>

<P align="center"><FONT size="2">67
</FONT>

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<DIV align="left">
<FONT size="2">common stock to our non-employee directors. Prior
to adoption of our 2003 Non-Employee Directors&#146; Stock
Option Plan, we did not make option grants to our non-employee
directors. Upon completion of this offering, each of our
non-employee directors will receive an initial option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and annual option grants to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock starting at the annual stockholders meeting to
be held in 2004. Please refer to the section entitled
&#147;Benefit Plans&nbsp;&#151; 2003 Non-Employee
Directors&#146; Stock Option Plan&#148; for a more detailed
explanation of the terms of these stock options.
</FONT>
</DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the compensation
awarded or paid to, or earned by, our chief executive officer
and our three other most highly compensated executive officers
for the fiscal year ended December&nbsp;31, 2002 whose total
annual salary and bonus exceeded $100,000. We refer to these
executive officers in this prospectus as our &#147;named
executive officers.&#148;
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</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="70%"><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="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
</TR>

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

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mitchell S. Steiner, M.D., F.A.C.S.&nbsp;</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">175,000</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">Chief Executive Officer
    </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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marc S. Hanover
    </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">180,000</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">President and Chief Operating Officer
    </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 bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Henry P. Doggrell
    </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">178,750</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">General Counsel and Secretary
    </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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark E. Mosteller
    </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">135,417</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">Chief Financial Officer
    </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>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">Stock Option Grants in Last Fiscal
Year</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted and will continue to grant
options to our executive officers and employees under our
benefit plans. In 2002, we granted options to purchase a total
of 4,500 shares of our common stock to our employees; none of
these grants was made to our named executive officers.
</FONT>

<P align="center">
<B><FONT size="2">Fiscal Year End Option Values</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the number of
shares of common stock subject to vested and unvested stock
options held as of December&nbsp;31, 2002 by each of our named
executive officers. Because there was no public market for our
common stock as of December&nbsp;31, 2002, amounts described in
the following table under the heading &#147;Value of Unexercised
In-the-Money Options at December&nbsp;31, 2002&#148; are
determined by multiplying the number of shares underlying the
options by
</FONT>

<P align="center"><FONT size="2">68
</FONT>

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<DIV align="left">
<FONT size="2">the difference between an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and the per share option exercise price. None of our named
executive officers exercised any stock options during 2002.
</FONT>
</DIV>

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

<TR>
    <TD width="44%"><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="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="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="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Securities Underlying</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="7" align="center" nowrap><B><FONT size="1">Unexercised Options 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="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002 (#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002&nbsp;($)</FONT></B></TD>
</TR>

<TR>
    <TD></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">Exercisable</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>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mitchell S. Steiner, M.D., F.A.C.S.&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>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marc S. Hanover
    </FONT></DIV>
    </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">Henry P. Doggrell
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">Mark E. Mosteller
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">
<B><FONT size="2">Change in Control Arrangements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 1999 Stock Option Plan, 2000 Stock Option
Plan, 2001 Stock Option Plan and 2002 Stock Option Plan provide
that in the event of a change in control of us, all shares
subject to option awards under the plans will immediately vest
and be converted into cash, options or stock of equivalent value
in the surviving organization under terms and conditions that
substantially preserve the economic status of plan participants.
For this purpose, a change in control includes (1)&nbsp;a sale
or disposition of more than 50% of our issued and outstanding
voting stock; (2)&nbsp;a merger or consolidation in which our
stockholders immediately before the transaction own less than
50% of the outstanding voting securities of the surviving entity
immediately after the transaction; or (3)&nbsp;a sale or
disposition of all or substantially all of our assets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our employment agreements with our executive
officers and other key employees contain provisions triggered by
a change of control. See &#147;Employment Agreements.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2003 Equity Incentive Plan provides that in
the event of specified corporate transactions, all outstanding
options and stock appreciation rights under the incentive plan
will be assumed, continued or substituted for by any surviving
or acquiring entity. If the surviving or acquiring entity elects
not to assume, continue or substitute for such awards, the
vesting provisions of such equity awards will be accelerated and
such equity awards will be terminated if not exercised prior to
the effective date of the corporate transaction. Other forms of
equity awards, such as restricted stock awards, may have their
repurchase or forfeiture rights assigned to the surviving or
acquiring entity. If such repurchase or forfeiture rights are
not assigned, then such equity awards will become fully vested.
Following specified change in control transactions, the vesting
and exercisability of specified equity awards generally will be
accelerated only if the awardee&#146;s award agreement so
specifies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2003 Non-Employee Directors&#146; Stock
Option Plan provides that in the event of specified corporate
transactions, all outstanding options under the plan will be
either assumed, continued or substituted for by any surviving
entity. If the surviving or acquiring entity elects not to
assume, continue or substitute for such options, the vesting and
exercisability of such options will be accelerated in full and
such options will be terminated if not exercised prior to the
effective date of such corporate transaction. In the event of
specified changes of control, the vesting and exercisability of
outstanding options under the Plan granted to non-employee
directors whose service has not terminated prior to such change
in control, other than as a condition of such change in control,
shall be accelerated in full.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2003 Employee Stock Purchase Plan provides
that in the event of specified corporate transactions, any then
outstanding rights to purchase our stock under the
2003&nbsp;Employee Stock Purchase Plan will be assumed,
continued or substituted for by the surviving or acquiring
entity. If the surviving or acquiring entity elects not to
assume, continue or substitute rights, then the
participants&#146; accumulated contributions will be used to
purchase shares of our common stock within
</FONT>

<P align="center"><FONT size="2">69
</FONT>

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<DIV align="left">
<FONT size="2">ten days prior to such corporate transaction and
such purchase rights will terminate immediately thereafter.
</FONT>
</DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of our named executive officers has entered
into an employment agreement with us. These employment
agreements provide for salary as well as other customary
benefits and terms. Pursuant to their employment agreements,
Dr.&nbsp;Steiner, Mr.&nbsp;Hanover, Mr.&nbsp;Doggrell and
Mr.&nbsp;Mosteller are entitled to receive an annual salary of
$240,000, $180,000, $190,000 and $160,000. In addition, our
Board of Directors has the discretion to award bonus
compensation to our named executive officers. Each employment
agreement is terminable by either us or the named executive
officer at any time. If we experience a change of control and
the named executive officer&#146;s employment is terminated
without cause, or if the named executive officer terminates his
employment for good reason, at any time within six months after
the change of control, then such named executive officer will
receive continued payment of his then base salary for a period
of one year after the termination date. Dr.&nbsp;Steiner and
Mr.&nbsp;Hanover have each agreed not to compete with us during
the term of their employment and for a period of two years after
their employment ends. If we undergo a change of control, the
two year period will be shortened to one year.
</FONT>

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

<P align="left">
<B><I><FONT size="2">1999 Stock Option Plan and 2000 Stock
Option Plan</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We adopted the 1999 Stock Option Plan in August
1999 and the 2000 Stock Option Plan in November 2000. Neither
the 1999 Stock Option Plan nor the 2000 Stock Option Plan has a
stated termination date. However, the committee of the Board of
Directors that administers the 1999 Stock Option Plan and 2000
Stock Option Plan may terminate or suspend the 1999 Stock Option
Plan and 2000 Stock Option Plan at any time. The 1999 Stock
Option Plan and 2000 Stock Option Plan provide for the grant of
nonstatutory stock options to directors, officers and employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Share Reserve.
</FONT></I></B><FONT size="2">An aggregate of 3,000 shares of
common stock are reserved for issuance under the 1999 Stock
Option Plan. Options to purchase an aggregate of 3,000 shares of
common stock were outstanding under the 1999 Stock Option Plan
as of August&nbsp;31, 2003. An aggregate of 12,750 shares of
common stock are reserved for issuance under the 2000 Stock
Option Plan. Options to purchase an aggregate of 9,750 shares of
common stock were outstanding under the 2000 Stock Option Plan
as of August&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares subject to stock options that have expired
or otherwise terminated under the 1999 Stock Option Plan or 2000
Stock Option Plan without having been exercised in full and
grants that are settled in cash rather than stock again become
available for the grant of awards under the 1999 Stock Option
Plan or 2000 Stock Option Plan. Shares issued under the 1999
Stock Option Plan or 2000 Stock Option Plan may be previously
unissued shares or reacquired shares bought on the market or
otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Administration.
</FONT></I></B><FONT size="2">The 1999 Stock Option Plan and
2000 Stock Option Plan are administered by a committee of our
Board of Directors. Subject to the terms of the 1999 Stock
Option Plan and 2000 Stock Option Plan, the committee determines
recipients, the number of stock options to be granted and the
terms and conditions of the stock options. Subject to the
limitations set forth below, the committee also determines the
exercise price of options granted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Stock Options.
</FONT></I></B><FONT size="2">Stock options under the 1999 Stock
Option Plan and 2000 Stock Option Plan are granted pursuant to
stock option agreements. The exercise price for a stock option
cannot be less than the fair market value of the common stock on
the date of grant. Options granted under the 1999 Stock Option
Plan and 2000 Stock Option Plan vest one-third on the third
anniversary of the date of grant, one-third on the fourth
anniversary of the date of grant, and one-third on the fifth
</FONT>

<P align="center"><FONT size="2">70
</FONT>

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<DIV align="left">
<FONT size="2">anniversary of the date of grant. If the 1999
Stock Option Plan or the 2000 Stock Option Plan is terminated,
all outstanding options will become fully vested and exercisable.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The term of stock options granted under the 1999
Stock Option Plan and 2000 Stock Option Plan may not exceed
10&nbsp;years. If an optionee&#146;s service relationship with
us ceases due to voluntary retirement, at or after age 65 or
after age 55 with no fewer than 10&nbsp;years of service, death,
disability or involuntary termination, other than a termination
for cause, but including any involuntary termination as a result
of a change of control, any vested shares may be exercised at
any time within 10&nbsp;years following the date of grant of the
option. If an optionee&#146;s relationship with us ceases for
any other reason, any unvested option shall be forfeited
immediately and the date of such termination will be the last
date on which a vested option can be exercised. Any vested but
unexercised options will terminate upon the optionee competing
with us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acceptable consideration for the purchase of
common stock issued under the 1999 Stock Option Plan and 2000
Stock Option Plan include cash or, at the discretion of the
committee, common stock, a deferred payment arrangement or other
legal consideration approved by the committee. Generally, an
optionee may not transfer a stock option other than by will or
the laws of descent and distribution unless the optionee holds a
nonstatutory stock option that provides otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Changes in
Control.</FONT></I></B><FONT size="2"><I> </I>The 1999 Stock
Option Plan and 2000 Stock Option Plan provide that in the event
of a change in control of us, all shares subject to option
awards under the plans shall immediately vest and be converted
into cash, options or stock of equivalent value in the surviving
organization under terms and conditions that substantially
preserve the economic status of plan participants. For this
purpose, a change in control includes (1)&nbsp;a sale or
disposition of more than 50% of our issued and outstanding
voting stock; (2)&nbsp;a merger or consolidation in which our
stockholders immediately before the transaction own less than
50% of the outstanding voting securities of the surviving entity
immediately after the transaction; or (3)&nbsp;a sale or
disposition of all or substantially all of our assets.
</FONT>

<P align="left">
<B><I><FONT size="2">2001 Stock Option Plan and 2002 Stock
Option Plan</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In October 2001, we adopted the 2001 Stock Option
Plan. Our Board of Directors amended the 2001 Stock Option Plan
in November 2001. The 2001 Stock Option Plan will terminate in
October 2011 unless the Board of Directors terminates it
earlier. In August 2002, we adopted the 2002 Stock Option Plan.
The 2002 Stock Option Plan will terminate in August 2012 unless
the Board of Directors terminates it earlier. The 2001 Stock
Option Plan and the 2002 Stock Option Plan provide for the grant
of options that are:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">incentive stock options, as defined under the
    Internal Revenue Code of 1986, as amended, or the Code, which
    may be granted solely to employees, including officers; 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">nonstatutory stock options, which may be granted
    to directors, employees, including officers, or consultants.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Share
Reserve.</FONT></I></B><FONT size="2"><I> </I>An aggregate of
35,150 shares of common stock are reserved for issuance under
the 2001 Stock Option Plan. Options to purchase an aggregate of
32,250 shares of common stock were outstanding under the 2001
Stock Option Plan as of August&nbsp;31, 2003. An aggregate of
100,000 shares of common stock are reserved for issuance under
the 2002 Stock Option Plan. Options to purchase an aggregate of
22,000 shares of common stock were outstanding under the 2002
Stock Option Plan as of August&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares subject to stock options that have expired
or otherwise terminated under the 2001 Stock Option Plan or 2002
Stock Option Plan without having been exercised in full again
become available for the grant of awards under the 2001 Stock
Option Plan or 2002 Stock Option Plan. Shares issued under the
2001 Stock Option Plan or 2002 Stock Option Plan may be
previously unissued shares or reacquired shares bought on the
market or otherwise.
</FONT>

<P align="center"><FONT size="2">71
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Administration.</FONT></I></B><FONT size="2"><I>
</I>The 2001 Stock Option Plan and 2002 Stock Option Plan are
administered by a committee of our Board of Directors. Subject
to the terms of the 2001 Stock Option Plan and 2002 Stock Option
Plan, the committee determines the recipients, the number and
type of stock options to be granted and the terms and conditions
of the stock options. Subject to the limitations set forth
below, the committee also determines the exercise price of
options granted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Stock
Options.</FONT></I></B><FONT size="2"><I> </I>Stock options are
granted under the 2001 Stock Option Plan and 2002 Stock Option
Plan pursuant to stock option agreements. The exercise price for
an incentive stock option cannot be less than the fair market
value of the common stock on the date of grant. There is no
restriction on the exercise price for a nonstatutory stock
option. Unless otherwise specified in an option agreement,
options granted under the 2001 Stock Option Plan or 2002 Stock
Option Plan vest one-third on the third anniversary of the date
of grant, one-third on the fourth anniversary of the date of
grant, and one-third on the fifth anniversary of the date of
grant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The term of stock options granted under the 2001
Stock Option Plan or 2002 Stock Option Plan may not exceed
10&nbsp;years. Unless otherwise provided for in the stock option
agreement, options granted under the 2001 Stock Option Plan or
2002 Stock Option Plan terminate three months after termination
of the optionee&#146;s employment or service as a director of
GTx or an affiliate unless (1)&nbsp;the termination is due to
the optionee&#146;s disability, in which case the option may
provide that it may be exercised at any time within one year
following termination of employment or relationship;
(2)&nbsp;the termination is due to the death of optionee or
death occurs within three months after the termination of the
optionee, in which case the option may provide that it may be
exercised at any time within 18&nbsp;months following the death
of optionee; or (3)&nbsp;the termination is due to voluntary
retirement, subject to some conditions, in which case the option
may be exercised at any time within five years of the date of
retirement subject to the express term of the option. Any vested
but unexercised options will terminate upon the optionee
competing with us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acceptable consideration for the purchase of
common stock issued under the 2001 Stock Option Plan or 2002
Stock Option Plan include cash or, at the discretion of the
committee, common stock, a deferred payment arrangement or other
legal consideration approved by the committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, an optionee may not transfer a stock
option other than by will or the laws of descent and
distribution unless the optionee holds a nonstatutory stock
option that provides otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Tax Limitations on Stock Option
Grants.</FONT></I></B><FONT size="2"> Incentive stock options
may be granted only to our employees. The aggregate fair market
value, determined at the time of grant, of shares of our common
stock with respect to incentive stock options that are
exercisable for the first time by an optionee during any
calendar year under all of our stock plans may not exceed
$100,000. The options or portions of options that exceed this
limit are treated as nonstatutory stock options. No incentive
stock option, and before our stock is publicly traded, no
nonstatutory stock option, may be granted to any person who, at
the time of the grant, owns or is deemed to own stock possessing
more than 10% of our total combined voting power or any
affiliate unless the following conditions are satisfied:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the option exercise price must be at least 110%
    of the fair market value of the stock subject to the option on
    the date of grant; 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 term of any incentive stock option award must
    not exceed five years from the date of grant.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Changes in
Control.</FONT></I></B><FONT size="2"><I> </I>The 2001 Stock
Option and 2002 Stock Option Plan provide that in the event of a
change in control of us, all shares subject to option awards
under the plans shall immediately vest and be converted into
cash, options or stock of equivalent value in the surviving
organization under terms and conditions that substantially
preserve the economic status of plan participants. For this
purpose, a change in control includes (1)&nbsp;a sale or
disposition of more than 50% of our issued and outstanding
voting stock; (2)&nbsp;a merger or consolidation in which our
stockholders immediately before the transaction own less than
50% of the outstanding voting
</FONT>

<P align="center"><FONT size="2">72
</FONT>

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<DIV align="left">
<FONT size="2">securities of the surviving entity immediately
after the transaction; or (3)&nbsp;a sale or disposition of all
or substantially all of our assets.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">2003 Equity Incentive Plan</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We adopted and our stockholders approved our 2003
Equity Incentive Plan
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2003
to become effective upon the closing of this offering. The 2003
Equity Incentive Plan will terminate when the Board of Directors
terminates the plan. The 2003 Equity Incentive Plan provides for
the grant of nonstatutory stock options, restricted stock
awards, stock appreciation rights, phantom stock rights and
other forms of equity compensation, which may be granted to
employees, including officers, non-employee directors and
consultants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Share
Reserve.</FONT></I></B><FONT size="2"><I> </I>An aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be reserved for issuance under the 2003
Equity Incentive Plan, which amount will be increased annually
on January 1st of each year, from 2004 until 2013, by five
percent of the number of shares of common stock outstanding on
such date. However, the Board of Directors has the authority to
designate a smaller number of shares by which the authorized
number of shares of common stock will be increased on such date.
As of the date hereof, no shares of common stock have been
issued under the 2003 Equity Incentive Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following types of shares issued under the
2003 Equity Incentive Plan may again become available for the
grant of new awards under the 2003 Equity Incentive Plan:
restricted stock that is repurchased prior to it becoming fully
vested; shares withheld for taxes; shares used to pay the
exercise price of an option in a net exercise; and shares
tendered to the company to pay the exercise price of an option.
In addition, shares subject to stock options that have expired
or otherwise terminated without having been exercised in full
may again become available for the grant of new awards under the
2003 Equity Incentive Plan. Shares issued under the 2003 Equity
Incentive Plan may be previously unissued shares or reacquired
shares bought on the market or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Administration.
</FONT></I></B><FONT size="2">Our Board of Directors will
administer the 2003 Equity Incentive Plan. The Board of
Directors may delegate authority to administer the 2003 Equity
Incentive Plan to a committee. Subject to the terms of the 2003
Equity Incentive Plan, our Board of Directors or its authorized
committee, the plan administrator determines recipients, grant
dates, the numbers and types of equity awards to be granted and
the terms and conditions of the equity awards, including the
period of their exercisability and vesting. Subject to the
limitations set forth below, the plan administrator will also
determine the exercise price of options granted, the purchase
price for rights to purchase restricted stock and, if
applicable, phantom stock and the strike price for stock
appreciation rights.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Nonstatutory Stock Options.
</FONT></I></B><FONT size="2">Nonstatutory stock options will be
granted pursuant to nonstatutory stock option agreements. The
2003 Equity Incentive Plan administrator determines the exercise
price for a nonstatutory stock option. Options granted under the
incentive plan vest at the rate specified in the option
agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, the plan administrator determines the
term of nonstatutory stock options granted under the 2003 Equity
Incentive Plan. Unless the terms of an optionee&#146;s
nonstatutory stock option agreement provide otherwise, if an
optionee&#146;s service relationship with us, or any affiliate
or ours, ceases due to disability or death, the optionee, or his
or her beneficiary, may exercise any vested options up to
12&nbsp;months in the event of disability, or 18&nbsp;months in
the event of death, after the date such service relationship
ends. If an optionee&#146;s relationship with us, or any
affiliate of ours, ceases for any reason other than disability
or death, the optionee may exercise any vested options up to
three months from cessation of service, unless the terms of the
stock option agreement provide for earlier or later termination.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acceptable consideration for the purchase of
common stock issued upon the exercise of a nonstatutory stock
option will be determined by the Board of Directors and may
include cash,
</FONT>

<P align="center"><FONT size="2">73
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<DIV align="left">
<FONT size="2">common stock previously owned by the optionee, a
deferred payment arrangement, a broker assisted exercise, the
net exercise of the option and other legal consideration
approved by the plan administrator.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, an optionee may not transfer a
nonstatutory stock option other than by will or the laws of
descent and distribution unless the nonstatutory stock option
agreement provides otherwise. However, an optionee may designate
a beneficiary who may exercise the option following the
optionee&#146;s death.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Restricted Stock Awards.
</FONT></I></B><FONT size="2">Restricted stock awards are
purchased through a restricted stock award agreement. The
purchase price for restricted stock awards must be at least the
par value of the stock. The purchase price for a restricted
stock award may be payable in cash, the recipient&#146;s past
services performed for us, or any other form of legal
consideration. Rights to acquire shares under a restricted stock
award may not be transferred other than by will or by the laws
of descent and distribution.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Stock Appreciation Rights.
</FONT></I></B><FONT size="2">Stock appreciation rights are
granted pursuant to stock appreciation rights agreements. The
plan administrator determines the strike price for a stock
appreciation right. A stock appreciation right granted under the
incentive plan vests at the rate specified in the stock
appreciation right agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The plan administrator determines the term of
stock appreciation rights granted under the incentive plan.
Unless the terms of an optionee&#146;s stock appreciation right
agreement provide otherwise, if an awardee&#146;s service
relationship with us, or any affiliate or ours, ceases due to
disability or death, the awardee, or his or her beneficiary, may
exercise any vested stock appreciation right up to
12&nbsp;months in the event of disability, and 18&nbsp;months in
the event of death, after the date such service relationship
ends. If an awardee&#146;s relationship with us, or any
affiliate of ours, ceases for any reason other than disability
or death, the awardee may exercise any vested stock appreciation
rights up to three months from cessation of service, unless the
terms of the stock appreciation right agreement provide for
earlier or later termination.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Phantom Stock
Awards.</FONT></I></B><FONT size="2"><I> </I>Phantom stock
awards are granted pursuant to phantom stock award agreements. A
phantom stock award may require the payment of at least par
value. Payment of any purchase price may be made in cash, the
recipient&#146;s past services performed for us or any other
form of legal consideration acceptable to the plan
administrator. Rights to acquire shares under a phantom stock
agreement may not be transferred other than by will or by the
laws of descent and distribution.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Other Equity Awards.
</FONT></I></B><FONT size="2">The plan administrator may grant
other awards based in whole or in part by reference to our
common stock. The plan administrator will set the number of
shares under the award, the purchase price, if any, the timing
of exercise and vesting and any repurchase rights associated
with such awards. Unless otherwise specifically provided for in
the award agreement, such awards may not be transferred other
than by will or by the laws of descent and distribution.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Changes in Control.
</FONT></I></B><FONT size="2">In the event of specified
corporate transactions, all outstanding options and stock
appreciation rights under the incentive plan either will be
assumed, continued or substituted for by any surviving or
acquiring entity. If the surviving or acquiring entity elects
not to assume, continue or substitute for such awards, the
vesting provisions of such equity awards will be accelerated and
such equity awards will be terminated if not exercised prior to
the effective date of the corporate transaction. Other forms of
equity awards such as restricted stock awards may have their
repurchase or forfeiture rights assigned to the surviving or
acquiring entity. If such repurchase or forfeiture rights are
not assigned, then such equity awards will become fully vested.
Following specified change in control transactions, the vesting
and exercisability of specified equity awards generally will be
accelerated only if the awardee&#146;s award agreement so
specifies.
</FONT>

<P align="center"><FONT size="2">74
</FONT>

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<P align="left">
<B><I><FONT size="2">2003 Non-Employee Directors&#146; Stock
Option Plan</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We adopted and our stockholders approved our 2003
Non-Employee Directors&#146; Stock Option Plan
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2003
to become effective upon the closing of this offering. The
Non-Employee Directors&#146; Plan provides for the automatic
grant of nonstatutory stock options to purchase shares of common
stock to our non-employee directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Share Reserve.
</FONT></I></B><FONT size="2">The aggregate number of shares of
common stock that may be issued pursuant to options granted
under the Non-Employee Directors&#146; Plan
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
which amount will be increased annually on January 1st of each
year, from 2004 and until 2013, by the number of shares of
common stock subject to options granted during the prior
calendar year. However, the Board of Directors has the authority
to designate a smaller number of shares by which the authorized
number of shares of common stock will be increased. As of the
date hereof, no shares of common stock have been issued under
the Non-Employee Directors&#146; Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Administration.
</FONT></I></B><FONT size="2">Our Board of Directors will
administer the Non-Employee Directors&#146; Plan. The exercise
price of the options granted under the Non-Employee
Directors&#146; Plan will be equal to the fair market value of
the common stock on the date of grant. No option granted under
the Non-Employee Directors&#146; Plan may be exercised after the
expiration of ten years from the date it was granted. Options
granted under the Non-Employee Directors&#146; Plan are not
transferable other than by will or by the laws of descent and
distribution and are exercisable during the life of the optionee
only by the optionee. However, an optionee may designate a
beneficiary who may exercise the option following the
optionee&#146;s death. An optionee whose service relationship
with the us or any of our affiliates, whether as a non-employee
director of the company or subsequently as an employee, director
or consultant of either the company or an affiliate, ceases for
any reason may exercise vested options for the term provided in
the option agreement, three months generally, 12&nbsp;months in
the event of disability and 18&nbsp;months in the event of death.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Automatic Grants.
</FONT></I></B><FONT size="2">Pursuant to the terms of the
Non-Employee Directors&#146; Plan, upon the completion of this
offering, each non-employee director will automatically be
granted an option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, the initial grant. Any individual who becomes a
non-employee director after this offering will automatically be
granted the initial grant upon election to the Board of
Directors. Any person who is a non-employee director on the date
of an annual meeting of our stockholders automatically will be
granted an option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, the annual grant, on such date; <I>provided,
however, </I>that each non-employee director who has been a
non-employee director for less than 12&nbsp;months at the time
of the annual meeting of our stockholders will receive an annual
grant that has been reduced <I>pro rata</I> for each full
quarter prior to the date of grant during which such person did
not serve as a non-employee director. On the date of each annual
meeting of our stockholders, each non-employee director will
receive an option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
for each membership on a committee of the Board of Directors
such non-employee director will be on for the upcoming year, the
committee grant. Committee grants vest and become exercisable
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;equal monthly installments.
Initial grants and annual grants vest
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;equal monthly installments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Changes in
Control.</FONT></I></B><FONT size="2"> In the event of specified
corporate transactions, all outstanding options under the
Non-Employee Directors&#146; Plan will be either assumed,
continued or substituted for by any surviving entity. If the
surviving or acquiring entity elects not to assume, continue or
substitute for such options, the vesting and exercisability of
such options will be accelerated in full and such options will
be terminated if not exercised prior to the effective date of
such corporate transaction. In the event of specified changes of
control, the vesting and exercisability of outstanding options
under the Non-Employee Directors&#146; Plan granted to
non-employee directors whose service has not terminated prior to
such change in control, other than as a condition of such change
in control, shall be accelerated in full.
</FONT>

<P align="center"><FONT size="2">75
</FONT>

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<P align="left">
<B><I><FONT size="2">2003 Employee Stock Purchase
Plan</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We adopted and our stockholders approved our 2003
Employee Stock Purchase Plan
in &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;2003
to become effective upon the closing of this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Share Reserve.
</FONT></I></B><FONT size="2">The purchase plan authorizes the
issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock pursuant to purchase rights granted to our
employees or to employees of any of our affiliates, which amount
will be increased on January 1st of each year, from 2004 until
2023, by the lesser
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the number of shares of common stock outstanding on that
date. However, the Board of Directors has the authority to
designate a smaller number of shares by which the authorized
number of shares of common stock will be increased on each date.
The 2003 Employee Stock Purchase Plan is intended to qualify as
an &#147;employee stock purchase plan&#148; within the meaning
of Section&nbsp;423 of the Code. As of the date hereof, no
shares of common stock have been purchased under the 2003
Employee Stock Purchase Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Administration.
</FONT></I></B><FONT size="2">Our Board of Directors will
administer the 2003 Employee Stock Purchase Plan, but such
administration may be delegated to a committee of the Board of
Directors. The 2003 Employee Stock Purchase Plan provides a
means by which employees may purchase our common stock. The 2003
Employee Stock Purchase Plan is implemented by offerings of
rights to eligible employees. Under the 2003 Employee Stock
Purchase Plan, we may specify offerings with a duration of not
more than 27&nbsp;months, and may specify shorter purchase
periods within each offering. The first offering under the 2003
Employee Stock Purchase Plan will begin on the effective date of
this offering and will be
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;months in duration
with purchases occurring every six months. Unless otherwise
determined by the Board of Directors, common stock is purchased
for accounts of employees participating in the Employee Stock
Purchase Plan at a price per share equal to 85% of the fair
market value of a share of our common stock on the date of
purchase. Generally, all regular employees, including executive
officers, who customarily work more than 20 hours per week and
are customarily employed by us or by any of our affiliates for
more than five months per calendar year may participate in the
2003 Employee Stock Purchase Plan and may contribute, normally
through payroll deductions, up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of their earnings for the purchase of common stock under the
2003 Employee Stock Purchase Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Limitations.
</FONT></I></B><FONT size="2">Eligible employees may be granted
rights only if the rights, together with any other rights
granted under the 2003 Employee Stock Purchase Plan, do not
permit such employee&#146;s rights to purchase our stock to
accrue at a rate which exceeds $25,000 of the fair market value
of such stock for each calendar year in which such rights are
outstanding. No employee shall be eligible for the grant of any
rights under the 2003 Employee Stock Purchase Plan if
immediately after such rights are granted, such employee has
voting power over five percent or more of our outstanding
capital stock measured by vote or value.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Changes in
Control.</FONT></I></B><FONT size="2"> In the event of specified
corporate transactions, any then outstanding rights to purchase
our stock under the 2003 Employee Stock Purchase Plan will be
assumed, continued or substituted for by the surviving or
acquiring entity. If the surviving or acquiring entity elects
not to assume, continue or substitute rights, then the
participants&#146; accumulated contributions will be used to
purchase shares of our common stock within ten days prior to
such corporate transaction and such purchase rights will
terminate immediately thereafter.
</FONT>

<P align="left">
<B><I><FONT size="2">401(k) Plan</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain a retirement and deferred savings
plan for our employees. The retirement and deferred savings plan
is intended to qualify as a tax-qualified plan under
Section&nbsp;401 of the Code. The retirement and deferred
savings plan provides that each participant may contribute up to
15% of his or her pre-tax compensation, up to a statutory limit,
which is $12,000 in 2003. Under the plan, each employee is fully
vested in his or her deferred salary contributions. Employee
contributions are held and invested by the plan&#146;s trustee.
The retirement and deferred savings plan also permits us to make
discretionary contributions and matching contributions, subject
to established limits and a vesting schedule. To date, we have
not made any discretionary contributions to the retirement and
deferred savings plan on behalf of participating employees.
</FONT>

<P align="center"><FONT size="2">76
</FONT>

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<P align="center">
<B><FONT size="2">Limitations on Directors&#146; Liability and
Indemnification Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As permitted by Delaware law, we have adopted
provisions in our certificate of incorporation and bylaws, both
of which will become effective upon the completion of this
offering, that limit or eliminate the personal liability of
directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the corporation, a director exercise an informed
business judgment based on all material information reasonably
available to him or her. Consequently, a director will not be
personally liable to us or our stockholders for monetary damages
or breach of fiduciary duty as a director, except for liability
for:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any breach of the director&#146;s 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">any act or omission not in good faith or that
    involves 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">any act related to unlawful stock repurchases,
    redemptions or other distributions or payments of dividends; 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">any transaction from which the director derived
    an improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These limitations of liability do not limit or
eliminate our rights or any stockholder&#146;s rights to seek
non-monetary relief, such as injunctive relief or rescission.
These provisions will not alter a director&#146;s liability
under federal securities laws. Our certificate of incorporation
that will become effective upon the completion of this offering
also authorizes us to indemnify our officers, directors and
other agents to the fullest extent permitted under Delaware law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As permitted by Delaware law, our bylaws also
provide that:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we will indemnify our directors, officers,
    employees and other agents to the fullest extent permitted by
    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">we may advance expenses to our directors,
    officers, employees and other agents in connection with a legal
    proceeding to the fullest extent permitted by law; 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 rights provided in our bylaws are not
    exclusive.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that indemnification under our bylaws
covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in
connection with their services to us, regardless of whether our
bylaws permit such indemnification. We have obtained such
insurance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the indemnification provided for
in our certificate of incorporation and bylaws, we have entered,
and intend to continue to enter, into separate indemnification
agreements with each of our directors and executive officers
which may be broader than the specific indemnification
provisions contained in the Delaware General Corporation Law.
These indemnification agreements may require us, among other
things, to indemnify our directors and executive officers for
some expenses, including attorneys&#146; fees, judgments, fines
and settlement amounts incurred by a director or executive
officer in any action or proceeding arising out of his service
as one of our directors or executive officers, or any of our
subsidiaries or any other company or enterprise to which the
person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain
qualified individuals to serve as directors and executive
officers. There is no pending litigation or proceeding involving
any of our directors or executive officers to which
indemnification is required or permitted, and we are not aware
of any threatened litigation or proceeding that may result in a
claim for indemnification.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

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<!-- link1 "<FONT size="2">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</FONT>" -->

<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a description of transactions
since May 1999 to which we have been a party, in which the
amount involved in the transaction exceeds $60,000, and in which
any of our directors, executive officers or holders of more than
5% of our capital stock had or will have a direct or indirect
material interest, other than the employment agreements, which
are described elsewhere.
</FONT>

<P align="center">
<B><FONT size="2">Preferred Stock Issuances</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We sold shares of our preferred stock in private
financings as follows:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">200,000 shares of our Series&nbsp;A preferred
    stock at a price of $7.275 per share in May 1999;
    </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">277,500 shares of our Series&nbsp;B preferred
    stock at a price of $18.018 per share in July 2000;
    </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">260,154 shares of our Series&nbsp;C preferred
    stock at a price of $57.658 per share in October 2001;
    </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">164,765 shares of our Series&nbsp;D preferred
    stock at a price of $66.762 per share in July 2002; 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">329,536 shares of our Series&nbsp;E preferred
    stock at a price of $60.692 per share in August 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The investors in these financings included the
following executive officers, directors, holders of more than 5%
of our securities and the immediate family members and
affiliated entities of each:
</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="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="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="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></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series B</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series C</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series D</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series E</FONT></B></TD>
</TR>

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

<TR>
    <TD align="center" nowrap><B><FONT size="1">Investors</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</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">
    <I><FONT size="2">Directors</FONT></I></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">J.R. Hyde, III
    </FONT></DIV>
    </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">277,500</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">77,718</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">74,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">283,777</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 H. Pontius
    </FONT></DIV>
    </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">1,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Executive Officers</FONT></I></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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark E. Mosteller
    </FONT></DIV>
    </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">824</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">Henry P. Doggrell
    </FONT></DIV>
    </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">1,236</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">
    <I><FONT size="2">Immediate Family Members</FONT></I></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">Patricia B. Pontius
    </FONT></DIV>
    </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">1,648</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">Kathryn K. Mosteller
    </FONT></DIV>
    </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">824</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">Beverly R. Doggrell
    </FONT></DIV>
    </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">412</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">
    <I><FONT size="2">5% Stockholders</FONT></I></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">Entities affiliated with Oracle Partners,
    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">&#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">173,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,478</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">
    <I><FONT size="2">Affiliated Entities</FONT></I></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">Pittco Associates, L.P.(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">&#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">9,000</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">&#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">Memphis Biomed Ventures I, 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">&#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">14,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,477</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">Equity Partners XII, LLC(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">&#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">6,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<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">Pittco Associates, L.P. is affiliated with both
    Mr.&nbsp;Hyde and Mr.&nbsp;Pontius.
    </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">Memphis Biomed Ventures&nbsp;I, L.P. is
    affiliated with Mr.&nbsp;Hyde.
    </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">Mr.&nbsp;Hanover is the sole managing member of
    Equity Partners&nbsp;XII, LLC.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">78
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Registration Rights Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into registration rights
agreements with three of our preferred stockholders and their
affiliates and transferees. Pursuant to the registration rights
agreements, if we propose to register any of our securities
under the Securities Act either for our own account or for the
account of other security holders after this offering, the
holders of registration rights will be entitled to include their
1,310,076&nbsp;shares of common stock. In addition, holders of
approximately 1,276,970 shares of common stock may require us,
on not more than two occasions at any time beginning
approximately six months from the date of the closing of this
offering, to file a registration statement under the Securities
Act with respect to their shares of common stock. For more
information concerning the registration rights agreements,
please see &#147;Description of Capital Stock&nbsp;&#151;
Registration Rights Agreements.&#148;
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into separate indemnification
agreements with our directors and executive officers, in
addition to the indemnification provided for in our bylaws. See
&#147;Management&nbsp;&#151; Limitations on Directors&#146;
Liability and Indemnification Agreements.&#148;
</FONT>

<P align="center">
<B><FONT size="2">Transactions with Mr.&nbsp;Hyde</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2001, we borrowed $4.25&nbsp;million from
Mr.&nbsp;Hyde pursuant to the terms of a promissory note that
bore interest at a rate of 9% per annum. All amounts due under
the note were paid in full in October 2001. We paid
Mr.&nbsp;Hyde $71,000 of interest in 2001.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">PRINCIPAL STOCKHOLDERS</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information as of
August&nbsp;31, 2003 regarding the beneficial ownership of our
common stock by:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></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 own beneficially five percent or more 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">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; 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">all our directors and executive officers as a
    group.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares owned and percentage
ownership in the following table is based on 910,000 shares of
common stock outstanding on August&nbsp;31, 2003, the conversion
of all outstanding shares of our preferred stock and the
dividends accrued thereon through August&nbsp;31, 2003 into
1,322,944 shares of common stock and the issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
in this offering. The information assumes no exercise of the
underwriters&#146; over-allotment option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each individual or entity shown on the table has
furnished information with respect to beneficial ownership.
Except as otherwise indicated below, the address of each
officer, director and five percent stockholder listed below is
c/o GTx, Inc., 3&nbsp;N.&nbsp;Dunlap Street, 3rd&nbsp;Floor, Van
Vleet Building, Memphis, Tennessee 38163.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have determined beneficial ownership in
accordance with the rules of the Securities and Exchange
Commission. These rules generally attribute beneficial ownership
of securities to persons who possess sole or shared voting power
or investment power with respect to those securities. In
addition, the rules include shares of common stock issuable
pursuant to the exercise of stock options that are either
immediately exercisable or exercisable within 60&nbsp;days of
August&nbsp;31, 2003. These shares are deemed to be outstanding
and beneficially owned by the person holding those options for
the purpose of computing the percentage ownership of that
person, but they are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.
Unless otherwise indicated, the persons or entities identified
in this table have sole voting and investment power with respect
to all shares shown as beneficially owned by them.
</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="46%"><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>
    <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 colspan="2"></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" align="center" nowrap><B><FONT size="1">Percentage of Shares</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">Outstanding</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="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Beneficial Owner (Name and Address)</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">Before Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After Offering</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>
</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>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with Oracle Partners, L.P.(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">299,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.4</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><FONT size="2">&nbsp;</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">200 Greenwich Avenue
    </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">Greenwich, CT 06830
    </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 bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Directors and Named 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>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J.R. Hyde, III(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">1,010,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Mitchell S. Steiner, M.D., F.A.C.S.(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">618,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Marc S. Hanover(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">197,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Mark E. Mosteller(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">828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><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">Henry P. Doggrell(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">18,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><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">John H. Pontius(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">72,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Rosemary Mazanet, M.D., 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">&#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><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">All executive officers and directors as a group
    (7&nbsp;persons)(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">1,901,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85.2</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>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<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">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents beneficial ownership of less than 1%
    of our outstanding common stock.
    </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">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 79,436 shares held by Oracle Partners,
    L.P., 200,674 shares held by Oracle Investment Management, Inc.
    and 19,860 shares held by Oracle Institutional Partners, L.P.
    Larry N. Feinberg is the managing member of the general partner
    of Oracle Partners, L.P. and Oracle Institutional Partners, L.P.
    and
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">80
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<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 align="left">
    <FONT size="2">the President of Oracle Investment Management,
    Inc. Mr.&nbsp;Feinberg disclaims beneficial ownership of these
    shares except to the extent of his pecuniary interest in the
    named entities.
    </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">Includes 10,422 shares held by Pittco Associates,
    L.P., an entity controlled by Mr.&nbsp;Hyde, 22,200 shares held
    by trusts of which Mr.&nbsp;Hyde is the trustee or co-trustee
    and 33,106 shares held by Memphis Biomed Ventures&nbsp;I, L.P.,
    an entity controlled by Mr.&nbsp;Hyde. Does not include 21,420
    shares beneficially owned by Mr.&nbsp;Hyde&#146;s wife of which
    Mr.&nbsp;Hyde disclaims beneficial ownership.
    </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">Consists of shares held by LD,&nbsp;Jr., LLC, an
    entity owned by Dr.&nbsp;Steiner.
    </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">Includes 96,244 shares held by Equity
    Partners&nbsp;XII, LLC, an entity controlled by
    Mr.&nbsp;Hanover, and 59,540 shares held by trusts of which
    Mr.&nbsp;Hanover is the trustee.
    </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">Does not include 828 shares beneficially owned by
    Mr.&nbsp;Mosteller&#146;s wife of which Mr.&nbsp;Mosteller
    disclaims beneficial ownership.
    </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">Includes 11,100 shares held by a trust of which
    Mr.&nbsp;Doggrell is the co-trustee with Mr.&nbsp;Hyde and 6,000
    shares that Mr.&nbsp;Doggrell has the right to acquire within
    60&nbsp;days of August&nbsp;31, 2003 through the exercise of
    stock options. Does not include 414&nbsp;shares beneficially
    owned by Mr.&nbsp;Doggrell&#146;s wife of which
    Mr.&nbsp;Doggrell disclaims beneficial ownership.
    </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">Includes 66,600 shares held by trusts of which
    Mr.&nbsp;Pontius is the trustee. Does not include 7,341 shares
    beneficially owned by Mr.&nbsp;Pontius&#146; wife of which
    Mr.&nbsp;Pontius disclaims beneficial ownership.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For purposes of determining the number of shares
    beneficially owned by directors and executive officers as a
    group, any shares held in trusts to which both Mr.&nbsp;Doggrell
    and Mr.&nbsp;Hyde are co-trustees are counted only once.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">81
</FONT>

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<!-- link1 "<FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT>" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following description of our capital stock
gives effect to the amendment and restatement of our certificate
of incorporation and bylaws, which will occur before the closing
of this offering, and the conversion of our preferred stock and
dividends accrued thereon through August&nbsp;31, 2003 into
1,322,944 shares of common stock, which will occur upon the
closing of this offering, as if such conversion had occurred on
August&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, our authorized
capital stock will consist
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $0.001 per share, and 5,000,000
shares of preferred stock, par value $0.001 per share.
</FONT>

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

<P align="left">
<B><I><FONT size="2">Outstanding Shares</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, we had 910,000 shares
of common stock issued and outstanding and 1,231,955 shares of
preferred stock issued and outstanding that, together with
dividends accrued thereon through August&nbsp;31, 2003, are
convertible into 1,322,944 shares of common stock held by
30&nbsp;stockholders. In addition, as of August&nbsp;31, 2003,
options to purchase 67,000 shares of common stock were issued
and outstanding. Based on our outstanding capital stock as of
August&nbsp;31, 2003, upon completion of this offering, there
will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding, assuming no exercise of the
underwriters&#146; over-allotment option or exercise of
outstanding stock options.
</FONT>

<P align="left">
<B><I><FONT size="2">Voting Rights</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each holder of our common stock is entitled to
one vote for each share on all matters submitted to a vote of
the stockholders, including the election of directors. Under our
certificate of incorporation and bylaws, our stockholders will
not have cumulative voting rights. Because of this, the holders
of a majority of the shares of common stock entitled to vote in
any election of directors can elect all of the directors
standing for election, if they should so choose.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to preferences that may be applicable to
any then outstanding preferred stock, holders of common stock
are entitled to receive ratably those dividends, if any, as may
be declared from time to time by the Board of Directors out of
legally available funds.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of our liquidation, dissolution or
winding up, holders of common stock will be entitled to share
ratably in the net assets legally available for distribution to
stockholders after the payment of all of our debts and other
liabilities and the satisfaction of any liquidation preference
granted to the holders of any outstanding shares of preferred
stock.
</FONT>

<P align="left">
<B><I><FONT size="2">Rights and Preferences</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of common stock have no preemptive,
conversion or subscription rights, and there are no redemption
or sinking fund provisions applicable to the common stock. The
rights, preferences and privileges of the 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 in the future.
</FONT>

<P align="center"><FONT size="2">82
</FONT>

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<P align="left">
<B><I><FONT size="2">Fully Paid and Nonassessable</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of our outstanding shares of common stock
are, and the shares of common stock to be issued pursuant to
this offering will be, fully paid and nonassessable.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, the Board of
Directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock
in one or more series, to establish from time to time the number
of shares to be included in each such series, to fix the rights,
preferences and privileges of the shares of each wholly unissued
series and any qualifications, limitations or restrictions
thereon, and to increase or decrease the number of shares of any
such series, but not below the number of shares of such series
then outstanding. The Board of Directors may authorize the
issuance of preferred stock with voting or conversion rights
that could adversely affect the voting power or other rights of
the holders of the common stock. The issuance of preferred
stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other
things, have the effect of delaying, deferring or preventing a
change in control of GTx and may adversely affect the market
price of the common stock and the voting and other rights of the
holders of common stock.
</FONT>

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

<P align="left">
<B><I><FONT size="2">Demand Registration Rights</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, at any time after the
closing of this offering, the holders of 1,276,970 shares of our
common stock and their transferees may require us, on not more
than two occasions from each holder of demand rights, to file a
registration statement under the Securities Act with respect to
their shares of common stock, and we will be required to use our
best efforts to effect the registration.
</FONT>

<P align="left">
<B><I><FONT size="2">Piggyback Registration Rights</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, at any time after the
closing of this offering, if we propose to register any of our
securities under the Securities Act either for our own account
or for the account of other stockholders, the holders of
approximately 1,310,076 shares of common stock will be entitled
to notice of the registration and will be entitled to include
their shares of common stock in the registration statement.
These registration rights are subject to specified conditions
and limitations, including the right of the underwriters to
limit the number of shares included in any such registration
under some circumstances.
</FONT>

<P align="left">
<B><I><FONT size="2">Expenses of Registration</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will pay all expenses relating to any demand
or piggyback registration, other than underwriting discounts and
commissions.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These registration rights expire only upon the
sale of all shares of common stock that have registration
rights. However, we are not required to maintain the
effectiveness of a registration statement if the shares of
common stock included in such registration statement may be sold
without restriction pursuant to Rule&nbsp;144(k) under the
Securities Act.
</FONT>

<P align="center"><FONT size="2">83
</FONT>

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<P align="center">
<B><FONT size="2">Delaware Anti-Takeover Law and Certain
Provisions of</FONT></B>

<DIV align="center">
<B><FONT size="2">our Certificate of
Incorporation&nbsp;and&nbsp;Bylaws</FONT></B>
</DIV>

<P align="left">
<B><I><FONT size="2">Delaware Law</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are governed by Section&nbsp;203 of the
Delaware General Corporation Law. In general, Section&nbsp;203
prohibits a public Delaware corporation from engaging in a
&#147;business combination&#148; with an &#147;interested
stockholder&#148; 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. A &#147;business combination&#148; includes
mergers, asset sales or other transactions resulting in a
financial benefit to the stockholder. An &#147;interested
stockholder&#148; is a person who, together with affiliates and
associates, owns, or within three years, did own, 15% or more of
the corporation&#146;s outstanding voting stock. These
provisions may have the effect of delaying, deferring or
preventing a change in our control.
</FONT>

<P align="left">
<B><I><FONT size="2">Certificate of Incorporation and Bylaw
Provisions</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation that will become
effective upon the completion of this offering provides that our
Board of Directors will be divided into three classes of
directors, with each class serving a staggered three-year term.
The classification system of electing directors may tend to
discourage a third party from making a tender offer or otherwise
attempting to obtain control of us and may maintain the
composition of our current Board of Directors, as the
classification of the Board of Directors generally increases the
difficulty of replacing a majority of directors. In addition,
our certificate of incorporation will:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide that any action required or permitted to
    be taken by our stockholders must be effected at a duly called
    annual or special meeting of stockholders and may not be
    effected by any consent 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">provide that the authorized number of directors
    may be changed only by resolution of the Board of Directors; 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">eliminate cumulative voting for directors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our bylaws that will become
effective upon completion of this offering will provide that
special meetings of our stockholders may be called only by the
chairman of the Board of Directors, our chief executive officer
or by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors. Without
cumulative voting, holders of a majority of our common stock may
be able to elect all of the members of our Board of Directors if
they so chose.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These and other provisions contained in our
certificate of incorporation and bylaws could delay or
discourage some types of transactions involving an actual or
potential change in our control or change in our management,
including transactions in which stockholders might otherwise
receive a premium for their shares over then current prices, and
may limit the ability of stockholders to remove current
management or approve transactions that stockholders may deem to
be in their best interests and, therefore, could adversely
affect the price of our common stock.
</FONT>

<P align="center">
<B><FONT size="2">Nasdaq National Market Listing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have applied to quote our common stock on the
Nasdaq National Market under the proposed trading symbol
&#147;GTXI.&#148;
</FONT>

<P align="center">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Transfer Agent and Registrar for our common
stock is expected to
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The transfer agent&#146;s address
is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="center"><FONT size="2">84
</FONT>

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<!-- link1 "<FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT>" -->

<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. Market sales of shares or the
availability of shares for sale may decrease the market price of
our common stock prevailing from time to time. As described
below, only a portion of our outstanding shares of common stock
will be available for sale shortly after this offering due to
contractual and legal restrictions to resale. Nevertheless,
sales of substantial amounts of common stock in the public
market after these restrictions lapse, or the perception that
such sales could occur, could adversely affect the market price
of the common stock and could impair our future ability to raise
capital through the sale of our equity securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future sales of our common stock and the
availability of our common stock for sale may depress the market
price for our common stock. Upon completion of this offering,
shares of common stock will be outstanding, assuming no exercise
of the underwriters&#146; over-allotment option and no exercise
of options. All of the shares sold in this offering will be
freely tradable. Except as set forth below, the remaining shares
of common stock outstanding after this offering will be
restricted as a result of securities laws or lock-up agreements.
These remaining shares will be available for sale in the public
market roughly as follows:
</FONT>

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

<TR>
    <TD width="81%"><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="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><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>
</TR>

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

<TR>
    <TD align="center" nowrap><B><FONT size="1">Date of Availability of Sale</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of 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>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As of the date of this prospectus
    </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">90&nbsp;days after the date of the prospectus
    </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">180&nbsp;days after the date of this prospectus,
    although a portion of such shares will be subject to volume
    limitations pursuant to Rule&nbsp;144
    </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>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">Rule&nbsp;144</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144 under the
Securities Act of 1933, as currently in effect, a person who has
beneficially owned shares of our common stock for at least one
year would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">one percent of the number of shares of our common
    stock then outstanding, which will equal
    approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    immediately after 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">the average weekly trading volume of our common
    stock on the Nasdaq National Market during the four calendar
    weeks preceding the filing of a notice on Form&nbsp;144 with
    respect to the sale.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales under Rule&nbsp;144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
</FONT>

<P align="center">
<B><FONT size="2">Rule&nbsp;144(k)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under Rule&nbsp;144(k), a person who is not
deemed to have been one of our affiliates at any time during the
90&nbsp;days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including
the holding period of any prior owner other than an affiliate,
is entitled to sell the shares without complying with the manner
of sale, public information, volume limitation or notice
provisions of Rule&nbsp;144. Shares of our common stock will
qualify as &#147;144(k)&#148; shares within 180&nbsp;days of the
date of this prospectus.
</FONT>

<P align="center"><FONT size="2">85
</FONT>

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<P align="center">
<B><FONT size="2">Rule&nbsp;701</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rule&nbsp;701, as currently in effect, permits
resales of shares in reliance upon Rule&nbsp;144 but without
compliance with some restrictions of Rule&nbsp;144, including
the holding period requirement. Most of our employees, officers,
directors or consultants who purchased shares under a written
compensatory plan or contract may be entitled to rely on the
resale provisions of Rule&nbsp;701, but all holders of
Rule&nbsp;701 shares are required to wait until 90&nbsp;days
after the date of this prospectus before selling their shares.
</FONT>

<P align="center">
<B><FONT size="2">Lock-Up Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of our officers, directors and stockholders
and the holders of substantially all of our outstanding options
have agreed, subject to specified exceptions, that, without the
prior written consent of Goldman, Sachs&nbsp;&#38; Co., they
will not, directly or indirectly, sell, offer, contract to sell,
transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of our capital stock
or any securities convertible into or exchangeable or
exercisable for or any other rights to purchase or acquire our
capital stock for a period of 180&nbsp;days from the date of
this prospectus. Goldman, Sachs&nbsp;&#38; Co. may, in its sole
discretion, permit early release of shares subject to the
lock-up agreements.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, the holders of
1,310,076 shares of our common stock, or their transferees, will
be entitled to rights with respect to the registration of their
shares under the Securities Act. Registration of these shares
under the Securities Act would result in the shares becoming
freely tradable without restriction under the Securities Act,
except for shares purchased by affiliates, immediately upon the
effectiveness of this registration. See &#147;Description of
Capital Stock&nbsp;&#151; Registration Rights.&#148;
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Immediately after this offering, we intend to
file with the SEC a registration statement under the Securities
Act covering the shares of common stock reserved for issuance
under our stock option plans and employee stock purchase plan.
The registration statement is expected to be filed and become
effective as soon as practicable after the closing of this
offering. Accordingly, shares registered under the registration
statement will, subject to Rule&nbsp;144 volume limitations
applicable to affiliates and the lock-up agreements described
above, be available for sale in the open market.
</FONT>

<P align="center"><FONT size="2">86
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">UNDERWRITING</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx and the underwriters named below have entered
into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has
severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs&nbsp;&#38; Co., SG Cowen
Securities Corporation and Lazard Fr&#232;res&nbsp;&#38; Co. LLC
are the underwriters.
</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="81%"><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 colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><FONT size="1">Underwriters</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</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>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goldman, Sachs&nbsp;&#38; Co.&nbsp;</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SG Cowen Securities Corporation
    </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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lazard Fr&#232;res&nbsp;&#38; Co. LLC
    </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 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>

</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">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 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>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters are committed to take and pay
for all of the shares being offered, if any are taken, other
than the shares covered by the option described below unless and
until this option is exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the underwriters sell more shares than the
total number set forth in the table above, the underwriters have
an option to buy up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from GTx to cover such sales. They may exercise that option for
30&nbsp;days. If any shares are purchased pursuant to this
option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table
above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the per share and total
underwriting discounts and commissions to be paid to the
underwriters by GTx. Such amounts are shown assuming both no
exercise and full exercise of the underwriters&#146; option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares.
</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="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="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>
</TR>

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

<TR>
    <TD colspan="9" align="center" nowrap><B><FONT size="1">Paid By GTx</FONT></B></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">No Exercise</FONT></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><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><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>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares sold by the underwriters to the public
will initially be offered at the initial public offering price
set forth on the cover of this prospectus. Any shares sold by
the underwriters to securities dealers may be sold at a discount
of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount
of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx&#146;s stockholders have agreed with the
underwriters not to dispose of or hedge any of their common
stock or securities convertible into or exchangeable for shares
of common stock during the period from the date of this
prospectus continuing through the date 180&nbsp;days after the
date of this prospectus, except with the prior written consent
of the representatives. This agreement does not apply to any
existing employee benefit plans. See &#147;Shares Eligible for
Future Sale&#148; for a discussion of certain transfer
restrictions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the offering, there has been no public
market for the shares. The initial public offering price has
been negotiated among GTx and the representatives. Among the
factors to be considered in determining the initial public
offering price of the shares, in addition to prevailing market
conditions, will be GTx&#146;s historical performance, estimates
of the business potential and earnings prospects of GTx, an
assessment of GTx&#146;s management and the consideration of the
above factors in relation to market valuation of companies in
related businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An application has been made to quote the common
stock on the Nasdaq National Market under the symbol
&#147;GTXI&#148;.
</FONT>

<P align="center"><FONT size="2">87
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the offering, the underwriters
may purchase and sell shares of common stock in the open market.
These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in
the offering. &#147;Covered&#148; short sales are sales made in
an amount not greater than the underwriters&#146; option to
purchase additional shares from GTx in the offering. The
underwriters may close out any covered short position by either
exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source
of shares to close out the covered short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase additional shares pursuant
to the option granted to them. &#147;Naked&#148; short sales are
any sales in excess of such option. 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 the offering. Stabilizing transactions consist of various
bids for or purchases of common stock made by the underwriters
in the open market prior to the completion of the offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters may also impose a penalty bid.
This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by
it because the representatives have repurchased shares sold by
or for the account of such underwriter in stabilizing or short
covering transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Purchases to cover a short position and
stabilizing transactions may have the effect of preventing or
retarding a decline in the market price of our GTx&#146;s stock,
and together with the imposition of a penalty bid, may
stabilize, maintain or otherwise affect the market price of the
common stock. As a result, the price of the common stock may be
higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected on
the Nasdaq National Market, in the over-the-counter market or
otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each underwriter has represented that:
(1)&nbsp;it has not offered or sold and, prior to the expiry of
a period of six months from the closing date, will not offer or
sell any shares to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments, as principal or
agent, for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (2)&nbsp;it
has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or
inducement to engage in investment activity, within the meaning
of section&nbsp;21 Financial Services and Markets Act of 2000,
or the FSMA, received by it in connection with the issue or sale
of any shares in circumstances in which section&nbsp;21(1) of
the FSMA does not apply to GTx; and (3)&nbsp;it has complied and
will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the shares in,
from or otherwise involving the United Kingdom.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters do not expect sales to
discretionary accounts to exceed five percent of the total
number of shares offered.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx estimates that its share of the total
expenses of the offering, excluding underwriting discounts and
commissions, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx has agreed to indemnify the several
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of the underwriters and their respective
affiliates may in the future perform various financial advising
and investment banking services for GTx, for which they may
receive customary fees and expenses.
</FONT>

<P align="center"><FONT size="2">88
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">VALIDITY OF THE COMMON STOCK</FONT>" -->

<P align="center">
<B><FONT size="2">VALIDITY OF THE COMMON STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The validity of the shares of common stock
offered hereby and certain other legal matters will be passed
upon for us by Cooley Godward LLP, Palo Alto, California.
Certain legal matters will also be passed upon for us by Bass,
Berry&nbsp;&#38; Sims PLC, Memphis, Tennessee. Certain legal
matters will be passed upon for the underwriters by Hale and
Dorr LLP, Boston, Massachusetts.
</FONT>

<!-- link1 "<FONT size="2">EXPERTS</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements of GTx, Inc. as of
December&nbsp;31, 2002 and 2001 and for each of the three years
in the period ended December&nbsp;31, 2002 appearing in this
prospectus and registration statement, have been audited by
Ernst&nbsp;&#38; Young LLP, independent auditors, as set forth
in their report thereon appearing elsewhere herein, and are
included in reliance upon such report, given on the authority of
such firm as experts in accounting and auditing.
</FONT>

<!-- link1 "<FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT>" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Securities and Exchange
Commission, or SEC, a registration statement on Form&nbsp;S-1
under the Securities Act of 1933 with respect to the shares of
common stock offered under this prospectus. This prospectus does
not contain all of the information in the registration statement
and the exhibits. For further information with respect to us and
our common stock, we refer you to the registration statement and
to the exhibits. Statements contained in this prospectus as to
the contents of any contract or any other document referred to
are not necessarily complete, and in each instance, we refer you
to the copy of the contract or other document filed as an
exhibit to the registration statement. Each of these statements
is qualified in all respects by this reference.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You can read our SEC filings, including the
registration statement, over the Internet at the SEC&#146;s web
site at www.sec.gov. You may also read and copy any document we
file with the SEC at its public reference facility at
450&nbsp;Fifth Street, N.W., Washington, D.C. 20549. You may
also obtain copies of the document at prescribed rates by
writing to the Public Reference Section of the SEC at
450&nbsp;Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, we will be
subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended, and we will file
reports, proxy statements and other information with the SEC. We
also intend to furnish our stockholders with annual reports
containing our financial statements audited by an independent
public accounting firm and quarterly reports containing our
unaudited financial information.
</FONT>

<P align="center"><FONT size="2">89
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>

<!-- link1 "<FONT size="2">(a development stage company) INDEX TO FINANCIAL STATEMENTS</FONT>" -->

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">INDEX TO FINANCIAL STATEMENTS</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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Ernst &#38; Young&nbsp;LLP, Independent
    Auditors
    </FONT></DIV>
    </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">Balance Sheets at December&nbsp;31, 2001 and 2002
    and at June&nbsp;30, 2003 (unaudited)
    </FONT></DIV>
    </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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statements of Operations for the years ended
    December&nbsp;31, 2000, 2001 and 2002, the six months ended
    June&nbsp;30, 2002 and 2003 (unaudited) and for the cumulative
    period from inception to June&nbsp;30, 2003 (unaudited)
    </FONT></DIV>
    </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">Statements of Cumulative Redeemable Convertible
    Preferred Stock and Stockholders&#146; Equity (Deficit) for the
    period from inception to June&nbsp;30, 2003 (unaudited), for the
    years ended December&nbsp;31, 2000, 2001, 2002 and for the six
    months ended June&nbsp;30, 2003 (unaudited)
    </FONT></DIV>
    </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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statements of Cash Flows for the three years
    ended December&nbsp;31, 2000, 2001 and 2002, for the six months
    ended June&nbsp;30, 2002 and 2003 (unaudited) and for the
    cumulative period from inception to June&nbsp;30, 2003
    (unaudited)
    </FONT></DIV>
    </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">Notes to the Financial Statements
    </FONT></DIV>
    </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>

</TABLE>
</CENTER>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">REPORT OF ERNST &#38; YOUNG LLP, INDEPENDENT
AUDITORS</FONT></B>

<P align="left">
<FONT size="2">Board of Directors and Stockholders
</FONT>

<DIV align="left">
<FONT size="2">GTx, Inc.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying balance sheets
of GTx, Inc. (a development stage company) as of
December&nbsp;31, 2002 and 2001, and the related statements of
operations, cumulative redeemable convertible preferred stock
and stockholders&#146; equity (deficit) and cash flows for each
of the three years in the period ended December&nbsp;31, 2002.
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;&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 audits 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;&nbsp;
<FONT size="2">Since the date of completion of our audit of the
accompanying financial statements and initial issuance of our
report thereon dated May&nbsp;9, 2003, which report contained an
explanatory paragraph regarding the Company&#146;s ability to
continue as a going concern, the Company, as discussed in the
second paragraph of Note&nbsp;2, has completed an issuance of
preferred stock with net proceeds of approximately
$20&nbsp;million and plans, if additional funding efforts are
unsuccessful, to reduce its cash expenditures such that it will
continue its operations beyond December&nbsp;31, 2004.
Therefore, the conditions that raised substantial doubt about
whether the Company will continue as a going concern no longer
exist.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of GTx, Inc. (a development stage company) at
December&nbsp;31, 2002 and 2001, and the results of its
operations and its cash flows for each of the three years in the
period ended December&nbsp;31, 2002, 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">Ernst &#38; Young LLP
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Memphis, Tennessee
</FONT>

<DIV align="left">
<FONT size="2">May&nbsp;9, 2003,
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">Except Note&nbsp;13, as to which the date is
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">October&nbsp;14, 2003.
</FONT>
</DIV>

<P align="left">
<FONT size="2">The foregoing report is in the form that will be
signed upon the completion of the reincorporation of GTx, Inc.
as described in Note&nbsp;13 to the financial statements.
</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 &#38; Young LLP
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Memphis, Tennessee
</FONT>

<DIV align="left">
<FONT size="2">October&nbsp;14, 2003
</FONT>
</DIV>

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

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

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

<DIV align="center">
<B><FONT size="2">(in thousands, except share data)</FONT></B>
</DIV>

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

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <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="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>
    <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"></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="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></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="7" align="center" nowrap><HR size="1" noshade></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">Equity at</FONT></B></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>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30, 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>
    <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>
    <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">
    <B><FONT size="2">ASSETS</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">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>
    <TD><FONT size="2">&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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,925</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">3,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Acapodene inventory
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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 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><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">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">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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>
    <TD><FONT size="2">&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><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">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">9,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">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">1,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,064</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">928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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><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">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,030</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">4,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><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="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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="18" align="left" valign="top">
    <B><FONT size="2">LIABILITIES, CUMULATIVE CONVERTIBLE PREFERRED
    STOCK AND STOCKHOLDERS&#146; EQUITY (DEFICIT)</FONT></B></TD>
</TR>

<TR>
    <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>
    <TD><FONT size="2">&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">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">601</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">136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">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">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">711</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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><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">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">490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">8% Cumulative Redeemable Convertible Preferred
    Stock, at redemption value:
    </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">
    <FONT size="2">Series&nbsp;A, no par value; 200,000 shares
    authorized, issued and outstanding at all periods, no shares
    outstanding pro forma; liquidation value of $1,770 at
    December&nbsp;31, 2001, $1,889 at December&nbsp;31, 2002 and
    $1,952 at June&nbsp;30, 2003 (unaudited)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,847</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">13,855</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">12,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">
    <FONT size="2">Series&nbsp;B, no par value; 277,500 shares
    authorized, issued and outstanding at all periods, no shares
    outstanding pro forma; liquidation value of $5,581 at
    December&nbsp;31, 2001, $5,989 at December&nbsp;31, 2002 and
    $6,204 at June&nbsp;30, 2003 (unaudited)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">
    <FONT size="2">Series&nbsp;C, no par value; 450,000 shares
    authorized, 260,154 issued and outstanding at all periods, no
    shares outstanding pro forma; liquidation value of $15,274 at
    December&nbsp;31, 2001, $16,496 at December&nbsp;31, 2002 and
    $17,144 at June&nbsp;30, 2003 (unaudited)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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><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">
    <FONT size="2">Series&nbsp;D, no par value; 300,000 shares
    authorized, 164,765 issued and outstanding at December&nbsp;31,
    2002 and June&nbsp;30, 2003, no shares outstanding pro forma;
    liquidation value of $0 at December&nbsp;31, 2001, $11,398 at
    December&nbsp;31, 2002 and $11,838 at June&nbsp;30, 2003
    (unaudited)
    </FONT></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">11,398</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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><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">
    <FONT size="2">Total cumulative redeemable convertible preferred
    stock
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Stockholders&#146; equity (deficit):
    </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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, no par value: 10,000,000 shares
    authorized; 910,000 shares issued and outstanding at
    December&nbsp;31, 2001 and 2002 and June&nbsp;30, 2003
    (unaudited); 1,891,681 shares outstanding on a pro forma basis
    (unaudited)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970</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">61,626</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">Deficit accumulated during the development stage
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,045</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">(56,278</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">(59,154</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">(59,154</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>

</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">(34,075</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">(55,308</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">(58,184</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">2,472</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="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">Total liabilities and stockholders&#146; deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,030</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">4,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><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="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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these financial statements.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">STATEMENTS OF OPERATIONS</FONT></B>

<DIV align="center">
<B><FONT size="2">(in thousands, except share and per share
data)</FONT></B>
</DIV>

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

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <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="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>
    <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="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"></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">Cumulative</FONT></B></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="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September 24,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1997 (date of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></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>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception) to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></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">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">June 30, 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>
    <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" 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>
    <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">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>
    <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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,744</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,285</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,298</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">1,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,457</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">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">215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">865</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 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">3,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,146</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">12,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,233</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">6,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,620</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 income:
    </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 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">&#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">225</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">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">150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><FONT size="2">&nbsp;</FONT></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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">543</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 other 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">150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><FONT size="2">&nbsp;</FONT></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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">768</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">(3,812</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">(8,063</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">(11,866</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">(5,178</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">(6,246</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">(30,852</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">Accrued preferred stock dividends
    </FONT></DIV>
    </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</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">(790</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">(2,147</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">(858</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">(1,366</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">(4,684</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">Adjustments to preferred stock redemption value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,077</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">(57</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">(7,220</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">(7,036</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">4,736</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">(23,618</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 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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,186</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,910</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,072</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,876</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,154</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">Net loss per share attributable to common
    stockholders:
    </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">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.16</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"><FONT 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><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">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.34</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><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="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><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">Weighted average shares used in computing net
    loss per share attributable to common stockholders:
    </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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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"><FONT 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><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">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">910,000</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">910,000</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">910,000</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">910,000</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">1,869,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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="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><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">Pro forma net loss per share attributable to
    common stockholders, basic and diluted (unaudited)
    </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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.81</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.34</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><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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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>
    <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>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares used in computing pro forma net loss per
    share attributable to common stockholders, basic and diluted
    (unaudited)
    </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">1,742,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,869,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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>
    <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">The accompanying notes are an integral part of
these financial statements.
</FONT>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND</FONT></B>

<DIV align="center">
<B><FONT size="2">STOCKHOLDERS&#146; EQUITY (DEFICIT)</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">For the Period From September&nbsp;24, 1997
(date of inception) To June&nbsp;30, 2003</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(in thousands, except share and per share
data)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" 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="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>
    <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>
    <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="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>
    <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="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="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Stockholders&#146; Equity (Deficit)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Cumulative</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Redeemable</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</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">Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></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">Total</FONT></B></TD>
</TR>

<TR>
    <TD></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">During the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD></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">Development</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity</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" 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">Stage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Deficit)</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>
    <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">Balances at September&nbsp;24, 1997
    </FONT></DIV>
    </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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">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">&#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">900,000</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">&#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">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">&#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><FONT 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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances at December&nbsp;31, 1997
    </FONT></DIV>
    </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">900,000</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">&#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">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">&#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">100,000</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">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">970</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">&#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">(116</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">(116</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>
    <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">Balances at December&nbsp;31, 1998
    </FONT></DIV>
    </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">1,000,000</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">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(116</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">854</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">Sale of Series&nbsp;A Redeemable Convertible
    Preferred Stock at $7.275
    </FONT></DIV>
    </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">1,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">Preferred stock dividends
    </FONT></DIV>
    </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">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">(83</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">(83</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">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">&#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">(750</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">(750</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>
    <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">Balances at December&nbsp;31, 1999
    </FONT></DIV>
    </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">1,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</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">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</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">21</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">Sale of Series&nbsp;B Redeemable Convertible
    Preferred Stock at $18.018
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">277,500</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><FONT size="2">&nbsp;</FONT></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">Preferred stock dividends
    </FONT></DIV>
    </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">297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">(297</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">(297</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">Preferred stock adjustment to redemption value
    </FONT></DIV>
    </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">21,077</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">&#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">(21,077</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">(21,077</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">Common stock redemption
    </FONT></DIV>
    </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">(90,000</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">&#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">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">&#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">(3,812</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">(3,812</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>
    <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">Balances 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">477,500</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">27,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">910,000</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">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,135</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">(25,165</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">Sale of Series&nbsp;C Redeemable Convertible
    Preferred Stock at $57.658, net of issuance costs of $57
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">260,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">Preferred stock dividends
    </FONT></DIV>
    </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">790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">(790</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">(790</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">Preferred stock adjustment to redemption value
    </FONT></DIV>
    </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">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">(57</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">(57</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
    </FONT></DIV>
    </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">(8,063</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">(8,063</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>
    <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">Balances 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">737,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">910,000</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">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,045</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">(34,075</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">Sale of Series&nbsp;D Redeemable Convertible
    Preferred Stock at $66.762, net of issuance costs of $43
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">Preferred stock dividends
    </FONT></DIV>
    </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">2,147</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="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">(2,147</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">(2,147</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">Preferred stock adjustment to redemption value
    </FONT></DIV>
    </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">7,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">(7,220</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">(7,220</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">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">&#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">(11,866</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">(11,866</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>
    <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">Balances 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">902,419</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">64,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">910,000</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">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(56,278</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">(55,308</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">Preferred stock dividends
    </FONT></DIV>
    </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">1,366</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">(1,366</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">(1,366</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">Preferred stock adjustment to redemption value
    </FONT></DIV>
    </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">(4,736</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">&#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">4,736</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">4,736</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">&#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">(6,246</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">(6,246</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>
    <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">Balances at June&nbsp;30, 2003 (unaudited)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">902,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">910,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,154</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(58,184</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>
    <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">The accompanying notes are an integral part of
these financial statements.
</FONT>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">STATEMENTS OF CASH FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">(in thousands, except share and per share
data)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" 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="25%"><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>
    <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>
    <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>
    <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="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="4"></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>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cumulative</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></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>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;24,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></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">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1997 (date of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></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>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception) to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></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">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">June&nbsp;30, 2003</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>
    <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="4"></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>
    <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">Cash flows from 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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,812</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,063</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,178</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,852</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="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss to net cash
    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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">865</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 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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Acapodene inventory
    </FONT></DIV>
    </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">(154</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">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 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><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 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">(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">(17</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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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 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">Accounts 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">(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">260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(178</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">(465</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</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="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">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">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</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">482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,456</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>
    <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="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash 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">(3,413</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">(7,984</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">(10,553</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">(4,678</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">(5,774</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">(28,419</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>
    <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="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from 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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Purchase 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">(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">(792</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">(313</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</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</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">(1,794</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>
    <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="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">(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">(792</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">(313</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</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</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">(1,794</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>
    <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="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from 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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Proceeds from issuance of notes
    payable&nbsp;&#151; related party
    </FONT></DIV>
    </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">4,250</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">&#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">4,250</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">Payment of notes payable&nbsp;&#151; related party
    </FONT></DIV>
    </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">(4,250</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>
    <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">(4,250</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="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">&#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">970</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">Proceeds from issuance of preferred 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">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 align="right" valign="bottom" nowrap><FONT size="2">14,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">32,355</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>
    <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="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">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 align="right" valign="bottom" nowrap><FONT size="2">14,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">33,325</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>
    <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="4" 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">1,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,823</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">(5,813</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">3,112</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 and cash equivalents, 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">1,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,667</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">8,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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"><FONT 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="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents, end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,112</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>
    <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="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Supplemental schedule of non-cash investing
    and 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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Preferred stock dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,366</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,684</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>
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock adjustment to redemption value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,220</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,736</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,618</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>
    <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">The accompanying notes are an integral part of
these financial statements.
</FONT>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">(in thousands, except share and per share
data)</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Organization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GTx, Inc. (the &#147;Company&#148;) is a
biopharmaceutical company dedicated to the discovery,
development and commercialization of therapeutics primarily
related to the treatment of serious men&#146;s health
conditions. The Company&#146;s drug discovery and development
programs are focused on small molecules that selectively
modulate the effects of estrogens and androgens, two essential
classes of hormones. The Company currently has two product
candidates that are in human clinical trials. The Company is
developing Acapodene, its most advanced product candidate,
through clinical trials for two separate indications: (1)&nbsp;a
Phase&nbsp;IIb clinical trial for the reduction in the incidence
of prostate cancer in men with precancerous prostate lesions and
(2)&nbsp;a planned pivotal Phase&nbsp;III clinical trial for the
treatment of serious side effects of advanced prostate cancer
therapy. The Company is initially developing its second product
candidate, Andarine, for the treatment of cachexia from various
types of cancer. Andarine is the most advanced of its internally
discovered portfolio of compounds designed to modulate the
effects of hormones. The Company plans to build a specialized
sales and marketing capability to market its product candidates
directly to the relatively small and concentrated community of
urologists and medical oncologists in the United States and seek
collaborators to commercialize its product candidates where the
target physician market is broader than urologists and medical
oncologists and outside the United States.
</FONT>

<P align="left">
<B><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
Accounting Policies</FONT></B>

<P align="left">
<B><I><FONT size="2">Basis of Presentation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From September&nbsp;24, 1997
(inception)&nbsp;through December&nbsp;31, 2002, the Company has
been primarily engaged in research and development, clinical
development, and raising capital and is still in a development
stage. The Company operates as one business segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has experienced negative
cash flows from operations since inception and had an
accumulated deficit at December&nbsp;31, 2002 and June&nbsp;30,
2003 (unaudited) of approximately $56,278 and 59,154,
respectively. The Company&#146;s accumulated deficit at
June&nbsp;30, 2003 (unaudited) resulted primarily from funding
its operating losses as well as non-cash dividends and
adjustments to preferred stock redemption value of $28,302. The
Company has funded its activities to date almost exclusively
from debt and equity financings. In August 2003, the Company
issued additional preferred stock (see Note&nbsp;13) for
proceeds of approximately $20,000. The Company will continue to
require substantial funds to continue research and development,
including preclinical studies and clinical trials of its product
candidates, and to commence sales and marketing efforts, if the
FDA or other regulatory approvals are obtained.
Management&#146;s plans in order to meet its operating cash flow
requirements include an initial public offering of its common
stock, as well as entering into research collaborations through
licensing opportunities, which will provide funding for certain
research projects. While the Company believes that it will be
successful in obtaining the necessary financing to fund its
operations, there are no assurances that such additional funding
will be achieved. In that event, the Company has the intent and
ability to reduce its cash expenditures by delaying its
initiation of certain research and development efforts such that
it will continue its operations beyond December&nbsp;31, 2004.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">Unaudited Interim Financial
Information</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The interim financial statements for the six
months ended June&nbsp;30, 2002 and June&nbsp;30, 2003 and the
cumulative period from September&nbsp;24, 1997 to June&nbsp;30,
2003, together with the related notes, are unaudited and have
been prepared on the same basis as the annual financial
statements. In the opinion of management, all adjustments,
consisting of normal recurring adjustments necessary for the
fair presentation of the financial statements, have been
included. The results of operations of any interim period are
not necessarily indicative of the results of operations for the
full year or any other interim period.
</FONT>

<P align="left">
<B><I><FONT size="2">Use of Estimates</FONT></I></B>

<P align="left">&nbsp;&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, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Actual amounts and results could differ from those estimates.
</FONT>

<P align="left">
<B><I><FONT size="2">Preferred Stock Redemption
Value</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the public filing for an
initial registration of its common stock, the Company changed
its accounting policy to recognize changes in the redemption
value of its preferred stock immediately as they occur and
adjust the carrying value of the preferred stock to equal the
redemption value at the end of each reporting period.
Previously, the Company had adjusted the carrying value of its
preferred stock to its liquidation value at the end of each
reporting period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preferred stock is subject to redemption on
or after August&nbsp;31, 2006, at a price per share equal to the
greater of the liquidation value, which includes accrued
dividends, or the fair value calculated on an as-if converted to
common stock basis. The Company determines redemption value
(fair value) considering factors such as the share price of
preferred stock issuances, achievement of significant milestones
in clinical trials and general market conditions. The changes in
redemption value affect the loss attributable to common
stockholders.
</FONT>

<P align="left">
<B><I><FONT size="2">Cash and Cash Equivalents</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company considers highly liquid investments
with initial maturities of three months or less to be cash
equivalents.
</FONT>

<P align="left">
<B><I><FONT size="2">Acapodene Inventory</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acapodene inventory consists of a drug that is
manufactured by a third-party and delivered to the Company as a
finished good. Inventories are stated at the lower of cost
(first-in, first-out method) or market. The inventory is
expensed by the Company at the time it is sent to clinical trial
facilities.
</FONT>

<P align="left">
<B><I><FONT size="2">Property and Equipment</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment is recorded at cost.
Depreciation of equipment and furniture and fixtures is computed
based on the straight-line method over estimated useful lives of
three to five years. Amortization of leasehold improvements is
recognized over the shorter of the lease term or the estimated
useful life of the leasehold improvement.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for long-lived assets in
accordance with Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;144, <I>Accounting for the
Impairment or Disposal of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, </I>which requires that companies
consider whether events or changes in facts and circumstances,
both internally and externally, may indicate that an impairment
of long-lived assets held for use are present. Management
periodically evaluates the carrying value of long-lived assets
and has determined that there was no impairment as of
December&nbsp;31, 2001 and December&nbsp;31, 2002. Should there
be impairment in the future, the Company would recognize the
amount of the impairment based on the expected future cash flows
from the impaired assets. The cash flow estimates would be based
on management&#146;s best estimates, using appropriate and
customary assumptions and projections at the time.
</FONT>

<P align="left">
<B><I><FONT size="2">Fair Value of Financial
Instruments</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Financial instruments consist of cash and cash
equivalents, accounts payable and preferred stock. The carrying
values of cash and cash equivalents and accounts payable
approximate the fair value due to the short-term nature of such
instruments. Preferred stock is carried at redemption value
which approximates fair value.
</FONT>

<P align="left">
<B><I><FONT size="2">Concentration of Risks</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
and cash equivalents. The Company maintains its cash and cash
equivalents in accounts with several major financial
institutions in the United States. Deposits in these
institutions may exceed the amount of insurance provided on such
deposits. The amounts in excess of FDIC insurance amounts are
$8,734 and $8,625 at December&nbsp;31, 2001 and
December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company faces competition from established
pharmaceutical and biotechnology companies, as well as from
academic institutions, government agencies and private and
public research institutions. Various products are currently
marketed or sold and used off-label for some of the diseases and
conditions that the Company is targeting, and a number of
companies are or may be developing new treatments. In addition,
physicians are permitted to prescribe legally available drugs
for uses that are not described in the drug&#146;s labeling and
that differ from those uses tested and approved by the FDA. Such
off-label uses are common across medical specialties. The
occurrence of such off-label uses could significantly reduce the
Company&#146;s ability to market and sell any products that it
may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, the Company relies on Orion
Corporation as a single source supplier for Acapodene, and the
Company is currently purchasing Andarine from ChemSyn
Laboratories, a department of EaglePicher Technologies, LLC, as
a single supplier. Establishing additional or replacement
suppliers for Acapodene or Andarine may take a substantial
amount of time, and in some circumstances the Company&#146;s
agreement with Orion may prevent it from obtaining an alternate
supplier with respect to Acapodene. If the Company has to switch
to a replacement supplier, the Company may face additional
regulatory delays, and the manufacture and delivery of Acapodene
or Andarine could be interrupted for an extended period of time,
which may delay completion of the Company&#146;s clinical trials
or commercialization of Acapodene or Andarine. If the Company is
unable to obtain an adequate supply of Acapodene or Andarine,
its clinical trials will be delayed. As a result, regulatory
approval of Acapodene or Andarine could be delayed, or may not
be received at all.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">Research and Development
Costs</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company expenses research and development
costs in the period in which they are incurred. These costs
consist of direct and indirect costs associated with specific
projects as well as fees paid to various entities that perform
research and clinical trial studies on behalf of the Company.
</FONT>

<P align="left">
<B><I><FONT size="2">Patent Costs</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company expenses patent costs, including
legal expenses, in the period in which they are incurred. Patent
expenses are included in general and administrative expenses in
the Company&#146;s statements of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">Income Taxes</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for deferred taxes by
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
</FONT>

<P align="left">
<B><I><FONT size="2">Research and Development
Income</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Indigo, a Johnson &#38; Johnson subsidiary, and
Johnson&nbsp;&#38; Johnson Development Corporation,
(&#147;JJDC&#148;) entered into an option agreement with the
Company on March&nbsp;9, 1998. The option agreement was
established to allow Indigo and JJDC to determine their level of
interest in establishing an exclusive worldwide license with
respect to the Company&#146;s gene therapy products and related
technology. The agreement required the Company during the period
of the agreement, which ended in June 1998, to not negotiate
with other third parties related to gene therapy products and
related technology. Upon expiration of the option, the Company
recognized research and development income of $225 for the
option proceeds. The Company is no longer pursuing any research
and development related to gene therapy products or technology.
</FONT>

<P align="left">
<B><I><FONT size="2">Stock Compensation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accounting Principles Board Opinion No.&nbsp;25,
<I>Accounting for Stock Issued to Employees</I> (&#147;APB
No.&nbsp;25&#148;), and its related interpretations are applied
to measure compensation expense for stock-based compensation
plans. The Company complies with the disclosure provisions of
Statement of Financial Accounting Standards No.&nbsp;123.,
<I>Accounting for Stock-Based Compensation</I> (&#147;SFAS
No.&nbsp;123&#148;), as amended by SFAS No.&nbsp;148,
<I>Accounting for Stock-Based Compensation, Transition and
Disclosure.</I> Under APB No.&nbsp;25, unearned stock
compensation is based on the difference, if any, on the date of
grant, between the fair value of the Company&#146;s common stock
and the exercise price. No employee compensation cost has been
recognized because all options granted under the plans had an
exercise price not less than the fair value of the common stock
on the date of grant. See Note 11 for a description of the plans
and the assumptions underlying the pro forma calculations below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If compensation cost for stock-based compensation
plans had been determined under SFAS 123, pro forma stock option
compensation expense and net loss attributable to common
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">shareholders, assuming all options were valued
using the minimum value option pricing model, would have been as
follows:
</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="43%"><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>
    <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="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"></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="11"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></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">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">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>
    <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="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="7" 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">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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,186</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,911</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,072</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">(2,876</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">Deduct: Employee stock-based compensation
    determined under fair value method
    </FONT></DIV>
    </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</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">(38</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">(116</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">(93</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">(181</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">Adjusted net loss attributable to common
    stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,949</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,349</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,165</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">(3,057</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>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma SFAS&nbsp;123 disclosure:
    </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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders per
    common 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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">As reported:
    </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">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.16</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>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.34</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>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As adjusted:
    </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">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.83</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.47</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">(3.36</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>

<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">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.83</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.47</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">(3.44</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>
    <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">
<B><I><FONT size="2">Net Loss Per Share</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic net loss per share attributable to common
stockholders is calculated based on the weighted average number
of common shares outstanding during the period. Diluted net loss
per share attributable to common stockholders would give effect
to the dilutive effect of potential common stock consisting of
stock options and convertible preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 90,000 common shares that were redeemed in
2000 were excluded from the weighted average common shares
outstanding because the shares were contingently returnable to
the Company if the holder&#146;s employment terminated prior to
a certain date. These shares were treated as stock options in
the earnings per share calculation.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of shares used in the
calculation is as follows:
</FONT>

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

<TR>
    <TD width="46%"><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="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="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="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="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
</TR>

<TR>
    <TD></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></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">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>
    <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="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="7" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic net loss per share attributable to common
    shareholders:
    </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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Numerator</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 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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,186</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,911</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,072</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">(2,876</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">
    <B><FONT size="2">Denominator</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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares 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">910,000</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">910,000</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">910,000</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">910,000</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">910,000</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">Basic net loss per share attributable to common
    stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.79</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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.36</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">(3.16</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>
    <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">Diluted net loss per share attributable to common
    stockholders:
    </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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Numerator</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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss as reported
    </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">(6,246</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">
    <B><FONT size="2">Denominator</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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding
    </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">910,000</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">Assumed weighted average effect of conversion of
    preferred 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">959,021</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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,869,021</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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Diluted net loss per share 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">(27.68</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">(9.79</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">(23.33</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">(14.36</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">(3.34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="21" align="left" valign="top">
    <FONT size="2">*&nbsp;Data in table not presented for these
    periods because dilutive securities have an antidilutive effect.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Pro Forma</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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss as reported
    </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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,246</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Shares used above
    </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">910,000</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">910,000</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">Pro forma adjustments to reflect assumed weighted
    average effect of conversion of preferred 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 align="right" valign="bottom" nowrap><FONT size="2">832,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">959,021</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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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>
    <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">Shares used in computing pro forma net loss per
    share attributable to common stockholders, basic and diluted
    (unaudited)
    </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">1,742,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,869,021</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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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>
    <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">Pro forma basic and diluted net loss 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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.81</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.34</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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;&nbsp;
<FONT size="2">Pro forma net loss per share for the year ended
December&nbsp;31, 2002, and the six months ended June&nbsp;30,
2003, is computed using the weighted average number of shares of
common stock outstanding, including the pro forma effects of the
automatic conversion of the Company&#146;s preferred stock into
shares of common stock effective upon the closing of the
offering as if such conversion occurred on January&nbsp;1, 2002
and January&nbsp;1, 2003 or at the date of the original
issuance, if later. The resulting pro forma adjustments include
an increase in the weighted average shares used to compute basic
and diluted net loss per share attributable to common
stockholders of 832,563 shares and 959,021 shares for the year
ended December&nbsp;31, 2002 and for the six months ended
June&nbsp;30, 2003, respectively. The calculation of pro forma
net loss per share attributable to common stockholders excludes
incremental common stock issuable upon exercise of options, as
their effect would be antidilutive.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following outstanding stock options and
convertible preferred stock (on an as converted to common stock
basis) were excluded from the computation of diluted net loss
per share attributable to common stockholders as they had an
antidilutive effect:
</FONT>

<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="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="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="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="2%"><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="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended June 30,</FONT></B></TD>
</TR>

<TR>
    <TD></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></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">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>
    <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="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="7" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares issuable upon exercise of 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">15,750</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">38,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,750</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">41,500</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">45,750</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">Shares issuable upon conversion of 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">484,090</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">757,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">959,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">937,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499,840</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">796,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,001,771</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">979,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,750</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">
<B><I><FONT size="2">Comprehensive Loss</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has adopted the provisions of SFAS
No.&nbsp;130, <I>Comprehensive Income</I>. SFAS&nbsp;130
establishes standards for the reporting and display of
comprehensive income and its components for general purpose
financial statements. For all periods presented, there were no
differences between net loss and comprehensive loss.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, the FASB issued SFAS
No.&nbsp;148, which provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS
No.&nbsp;148 also requires that disclosures of the pro forma
effect of using the fair value method of accounting for
stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No.&nbsp;148
requires disclosure of the pro forma effect in interim financial
statements. The transition and annual disclosure requirements of
SFAS No.&nbsp;148 are effective for fiscal years ended after
December&nbsp;15, 2002. The interim disclosure requirements are
effective for interim periods beginning after December&nbsp;15,
2002. The adoption of this standard did not have a material
impact on the Company&#146;s financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued FASB
Interpretation No.&nbsp;46 (&#147;FIN&nbsp;46&#148;),
<I>Consolidation of Variable Interest Entities, an
Interpretation of ARB No.&nbsp;51</I>. FIN&nbsp;46 requires
certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated financial support from other parties. FIN&nbsp;46
is effective immediately for all new variable interest entities
created or acquired after January&nbsp;31, 2003. For variable
interest entities created or acquired prior to February&nbsp;1,
2003, the provisions of FIN&nbsp;46 must be applied for the
first interim or annual period ending after December&nbsp;15,
2003. The Company does not have any ownership in any variable
interest entities as of December&nbsp;31, 2002. The Company will
apply the consolidation requirement of FIN&nbsp;46 in future
periods if it should own any interest in a variable interest
entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued SFAS No.&nbsp;150,
<I>Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity</I>. SFAS
No.&nbsp;150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics
of both liability and equity. SFAS No.&nbsp;150 is effective for
the Company&#146;s financial instruments entered into or
modified after May&nbsp;31, 2003, and otherwise is effective on
July&nbsp;1, 2003. The Company has evaluated the
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">impact of SFAS No.&nbsp;150 and has determined
that its financial instruments (common stock and preferred
stock) will not be affected unless the terms of these financial
instruments are modified.
</FONT>

<P align="left">
<B><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and
Equipment</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment consist of the following:
</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">December 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">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</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">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113</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">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">1,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,494</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">Furniture and fixtures
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114</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">1,408</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">1,721</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: 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">325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">657</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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,064</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;&nbsp;
<FONT size="2">Depreciation expense for the years ended
December&nbsp;31, 2000, 2001, and 2002 was $80, $215, and $332,
respectively.
</FONT>

<P align="left">
<B><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
Expenses</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accrued expenses consist of the following:
</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="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>
</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 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">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</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">Travel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD 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">109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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;</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">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">71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246</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">Clinical trial
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">449</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">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">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711</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">
<B><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cumulative
Redeemable Convertible Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1999, the Company authorized and issued
200,000 shares of 8% Series&nbsp;A Cumulative Redeemable
Convertible Preferred Stock (&#147;Series&nbsp;A&#148;) to a
common stockholder of the Company for $1,455. In 2000, the
Company authorized and issued 277,500 shares of 8% Series&nbsp;B
Cumulative Convertible Redeemable Preferred Stock
(&#147;Series&nbsp;B&#148;) to the same common stockholder of
the Company for $5,000. In 2001, the Company authorized 450,000
shares and issued 260,154 shares (86,718 shares were issued to a
common and preferred stockholder of the Company) of 8%
Series&nbsp;C Cumulative Convertible Redeemable Preferred Stock
(&#147;Series&nbsp;C&#148;) for $14,943. In 2002, the Company
authorized 300,000 and issued 164,765 shares (74,894 shares were
issued to a common and preferred stockholder of the Company) of
8% Series&nbsp;D Cumulative Convertible Redeemable Preferred
Stock (&#147;Series&nbsp;D&#148;) for $10,957.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is authorized to issue 140,000 shares
of a series of preferred stock designated as Series&nbsp;A-2
Convertible Preferred Stock (&#147;Series&nbsp;A-2&#148;). No
shares of the Series&nbsp;A-2 are currently outstanding.
Series&nbsp;A-2 will be issued only in payment of dividends
accrued on Series&nbsp;A.
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is authorized to issue 157,500 shares
of a series of preferred stock designated as Series&nbsp;B-2
Convertible Preferred Stock (&#147;Series&nbsp;B-2&#148;). No
shares of Series&nbsp;B-2 are currently outstanding.
Series&nbsp;B-2 will be issued only in payment of dividends
accrued on Series&nbsp;B.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Significant terms of the Series&nbsp;A,
Series&nbsp;A-2, Series&nbsp;B, Series&nbsp;B-2, Series&nbsp;C
and Series&nbsp;D are as follows:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Shares of Series&nbsp;A, Series&nbsp;A-2,
    Series&nbsp;B, Series&nbsp;B-2, Series&nbsp;C and Series&nbsp;D
    shall be redeemed at the election of the respective holders at
    any time on or after August&nbsp;31, 2006 at a price per share
    equal to the greater of the liquidation value, which includes
    accrued dividends, or the fair value calculated on an if
    converted to common stock basis. The per share liquidation value
    of Series&nbsp;A and Series&nbsp;A-2 is $7.275, Series&nbsp;B
    and Series&nbsp;B-2 is $18.018, Series&nbsp;C is $57.658 and
    Series&nbsp;D is $66.762, in each case, plus accrued dividends.
    If for any reason, the Company defaults on its obligation to pay
    all or any of the redemption price, then the unpaid principal
    portion will bear interest at a rate of 14% per year. The
    default provisions were amended upon the issuance of the
    Series&nbsp;E Cumulative Convertible Redeemable Preferred Stock
    (&#147;Series&nbsp;E&#148;) (see Note&nbsp;13).
    </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">Shares of Series&nbsp;A, Series&nbsp;A-2,
    Series&nbsp;B, Series&nbsp;B-2, Series&nbsp;C and Series&nbsp;D
    shall be converted into shares of common stock at the election
    of the respective holders at any time or automatically upon the
    closing of a Qualified Public Offering (as defined in the
    Company&#146;s certificate of incorporation). The number of
    shares issuable upon conversion will be determined by dividing
    the applicable aggregate liquidation value by the applicable
    conversion price. The per share conversion price for shares of
    Series&nbsp;A, Series&nbsp;B, Series&nbsp;C and Series&nbsp;D is
    equal to their initial per share liquidation value. As a result
    of the issuance of Series&nbsp;E in August 2003, the conversion
    price of the Series&nbsp;D was reduced to $65.894&nbsp;per share
    (see Note&nbsp;13). The per share conversion price for
    Series&nbsp;A-2 and Series&nbsp;B-2 is equal to the per share
    liquidation value of Series&nbsp;C, or $57.658.
    </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">Shares of Series&nbsp;A, Series&nbsp;B,
    Series&nbsp;C and Series&nbsp;D have voting rights equivalent to
    the number of shares of common stock into which they are
    convertible.
    </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">Dividends on shares of Series&nbsp;A,
    Series&nbsp;B, Series&nbsp;C and Series&nbsp;D accrue, compound
    annually after the date of issuance of Series&nbsp;C, which was
    October&nbsp;5, 2001, are cumulative at the annual rate of 8% of
    the respective liquidation value and are payable at such time as
    such shares are converted or redeemed (including liquidation).
    Each such dividend will be payable solely in shares of
    Series&nbsp;A-2 for Series&nbsp;A, Series&nbsp;B-2 for
    Series&nbsp;B, Series&nbsp;C for Series&nbsp;C and Series&nbsp;D
    for Series&nbsp;D at the time of conversion or redemption with
    the number of shares determined by dividing the amount of
    accrued dividends by the per share liquidation value of the
    applicable preferred 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">In the event of a liquidation, dissolution, or
    winding up of the Company, prior to the holders of common stock,
    the holders of Series&nbsp;A, Series&nbsp;A-2, Series&nbsp;B,
    Series&nbsp;B-2, Series&nbsp;C and Series&nbsp;D shall receive
    an amount equal to the aggregate liquidation value including all
    accrued dividends. If the funds available for distribution to
    the holders of Series&nbsp;A, Series&nbsp;A-2, Series&nbsp;B,
    Series&nbsp;B-2, Series&nbsp;C or Series&nbsp;D are
    insufficient, then the assets to be distributed shall be
    distributed ratably among the preferred stockholders based upon
    the aggregate liquidation value.
    </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">In accordance with the Company&#146;s certificate
    of incorporation, on or after the Series&nbsp;C or the
    Series&nbsp;D issuance dates, as applicable, if the Company
    issues or sells, or is deemed to have issued or sold any shares
    of its common stock for a consideration per share less than the
    </FONT></TD>
</TR>

</TABLE>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">conversion price with respect to Series&nbsp;C or
    Series&nbsp;D, then immediately upon such issue or sale, or
    deemed issue or sale, the conversion price shall be reduced to
    the conversion price determined by multiplying the conversion
    price in effect immediately prior to such issuance or sale by a
    price adjustment factor. The price adjustment factor causes the
    holders of the Series&nbsp;C and/or Series&nbsp;D stock to hold
    an adjusted number of shares equal to their total ownership
    before such issuance. If such a transaction occurs, the increase
    in preferred shares for the Series&nbsp;C and/or Series&nbsp;D
    holders will be accounted for as a deemed dividend by the
    Company. As a result of the issuance of Series&nbsp;E in August
    2003, the conversion price of the Series&nbsp;D was reduced to
    $65.894 per share (see Note&nbsp;13).
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s certificate of incorporation
authorizes the Company to issue 10,000,000 shares of common
stock with no par value as of December&nbsp;31, 2002. The
Company&#146;s certificate of incorporation authorizes no other
classes of common stock. The Company is prohibited from
declaring dividends on common stock while any shares of
preferred stock are outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had reserved shares of its authorized
common stock for future issuance as summarized in the table
below:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="60%"><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="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">December&nbsp;31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30, 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>
    <TD></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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">For conversion of 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">207,525</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">208,615</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">For conversion of 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">294,647</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">298,393</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">For conversion of Series&nbsp;C
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">286,116</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">297,349</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">For conversion of 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">164,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">177,324</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">Outstanding employee 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">42,750</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">45,750</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">Possible future issuance under stock option plans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,150</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">1,103,953</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">1,132,581</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">
<B><FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes
Payable-Related Party</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Demand notes of $4,250 were issued in 2001 to a
holder of common stock of the Company to fund working capital
needs. In October&nbsp;2001, a portion of the proceeds from the
issuance of Series&nbsp;C was used to repay all outstanding
principal and accrued interest on the notes payable-related
party. Interest expense incurred on the notes payable-related
party based on an annual interest rate of 9% was $71 in 2001,
which was included in general and administrative expenses in the
Company&#146;s Statement of Operations.
</FONT>

<P align="left">
<B><FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;License,
Research and Development Agreements</FONT></B>

<P align="left">
<B><I><FONT size="2">License Agreements</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August&nbsp;2002, the Company executed an
Amended and Restated Exclusive License Agreement with The
University of Tennessee Research Foundation (&#147;UTRF&#148;)
granting the Company a worldwide exclusive license under its
method of use patents relating to Acapodene to market,
distribute and sell licensed products, licensed processes or
generic products. Under the terms of the agreement, the Company
is required (i)&nbsp;to make annual maintenance fee payments and
(ii)&nbsp;to make future royalty payments.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amended license agreement with UTRF
superseded a 1998 license agreement related to chemoprevention
of prostate cancer between the Company and UTRF. Under the 1998
license agreement, the Company reimbursed UTRF for certain
patent expenses incurred by UTRF and agreed to make sublicense
fee payments and future royalty payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the Company executed two Amended
and Restated Exclusive License Agreements with UTRF granting the
Company worldwide exclusive licenses under its method of use
patents relating to Andarine to market, distribute and sell
licensed products, licensed processes or generic products. Under
the terms of the agreements, the Company is required (i)&nbsp;to
make annual maintenance fee payments and (ii)&nbsp;to make
future royalty payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amended license agreement with UTRF
superseded a 2000 license agreement related to ARTA between the
Company and UTRF. Under the 2000 license agreement, the Company
reimbursed UTRF for certain patent expenses incurred by UTRF and
agreed to make sublicense fee payments and future royalty
payments.
</FONT>

<P align="left">
<B><I><FONT size="2">Sponsored Research Agreement</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company entered into a series of sponsored
research agreements with the research foundation of a major
university for one of the Company&#146;s programs. Under the
terms of the agreements, the Company will reimburse the research
foundation for the cost of research performed on the
Company&#146;s behalf, in accordance with the terms of the
agreements. The estimated cost of the research to be performed
over a four-year period is approximately $4,000. The Company
incurred expenses of $1,638, $956, $682, and 3,276 under these
agreements for the years ended December&nbsp;31, 2000,
December&nbsp;31, 2001, December&nbsp;31, 2002, and from
inception to December&nbsp;31, 2002, respectively, which were
included in research and development costs in the Company&#146;s
Statements of Operations. The Company has the right to terminate
the sponsored research agreement at any time. Upon termination,
the Company will reimburse the research foundation for all
research costs incurred on the Company&#146;s behalf not yet
reimbursed by the Company.
</FONT>

<P align="left">
<B><I><FONT size="2">Contract Research Organization
(&#147;CRO&#148;)</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2000, the Company began a Phase&nbsp;IIb
clinical trial for Acapodene for the reduction in the incidence
of prostate cancer in men with high grade PIN. The last patient
is scheduled to complete the trial in May 2004. The Company
incurred expenses related to the Phase IIb clinical trial for
the years ended December&nbsp;31, 2000, 2001 and 2002 of
approximately $1,290, $2,299 and $2,802, respectively, and
approximately $6,391 from inception to December&nbsp;31, 2002.
The Company has specified rights to terminate the clinical trial
and pay the CROs for fees incurred for the clinical trial not
yet reimbursed by the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, the Company began two additional
Phase&nbsp;II clinical trials for Acapodene. These Phase&nbsp;II
clinical trials are expected to be completed in 2003. The
Company incurred expenses related to the Phase&nbsp;II clinical
trials for the year ended December&nbsp;31, 2002 of
approximately $680, which was included in research and
development costs in the Company&#146;s Statements of
Operations. The Company estimates the total cost of these
clinical trials to be approximately $936.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, the Company completed a Phase&nbsp;I
clinical trial for Andarine. The Company incurred expenses
related to the clinical trial for the year ended
December&nbsp;31, 2002 of approximately $370, which was included
in research and development costs in the Company&#146;s
Statements of Operations.
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">License and Supply Agreement</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2000, the Company entered into a license and
supply agreement with Orion Corporation for one of the
Company&#146;s products. Under the terms of the agreement, the
Company paid an initial license fee of $400 and is required to
make future sublicense fee payments in the event the Company
grants a sublicense under the licensed patents and future
royalty payments in the event the Company sells products
developed from the licensed patents.
</FONT>

<P align="left">
<B><FONT size="2">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The principal components of the Company&#146;s
net deferred income taxes consist of the following:
</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="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><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="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" 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">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</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>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income 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 colspan="2" 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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,906</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">Research 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">783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">390</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">Cash basis method
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">84</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>

</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 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">10,413</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">5,380</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>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income 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 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">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">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">31</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>

</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">Total 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">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">31</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>

</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 deferred income 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">10,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,349</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">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">(10,363</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">(5,349</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>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3"><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>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002, the Company has net
operating loss carryforwards of approximately $23,420, which
expire for federal purposes from 2020 through 2022 and for state
purposes from 2015 to 2017, and research credits, which expire
from 2013 through 2022. Utilization of the net operating loss
carryforwards and credits may be subject to a substantial annual
limitation due to an ownership change as provided by the
Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.
</FONT>

<P align="left">
<B><FONT size="2">10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating
Leases</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases laboratory facilities and
office space pursuant to leases accounted for as operating
leases. Rent expense was approximately $34, $155, $170 and $401
for the years ended December&nbsp;31, 2000, December&nbsp;31,
2001, December&nbsp;31, 2002, and from inception to
December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Option
Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1999, 2000, 2001 and 2002, the Company adopted
the Genotherapeutics, Inc. Stock Option Plan (&#147;1999
Plan&#148;), the GTx, Inc. 2000 Stock Option Plan (&#147;2000
Plan&#148;), the GTx, Inc. 2001 Stock
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">Option Plan (&#147;2001 Plan&#148;) and the GTx,
Inc. 2002 Stock Option Plan (&#147;2002 Plan&#148;),
respectively (collectively, the &#147;Plans&#148;). The Plans
provide for the Company to issue options to directors, officers
and employees of the Company. The options are granted with an
exercise price per share as determined by the Board of
Directors. The exercise price per share will not be less than
the fair market value of the stock on the date of grant. The
Board of Directors cannot issue more than 3,000 options under
the 1999 Plan, 12,750 options under the 2000 Plan, 35,150
options under the 2001 Plan and 100,000 options under the 2002
Plan in the aggregate at any time. The options generally vest
one-third on the third anniversary, one-third on the fourth
anniversary, and one-third on the fifth anniversary of the grant
date. However, 15,000 of the 2001 options vest one-fifth per
year beginning on the first anniversary of the date the options
were granted. All options expire no later than the tenth
anniversary of the grant date. In the event of a change in
control of the Company, all stock options will become fully
vested and be converted to cash, options or stock of equivalent
value. None of the Company&#146;s stock options were exercisable
at December&nbsp;31, 2001 or 2000. At December&nbsp;31, 2002,
4,000 of the Company&#146;s stock options were exercisable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of option transactions:
</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="66%"><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="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="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"></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"></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><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</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">Balances at December&nbsp;31, 1997 and 1998
    </FONT></DIV>
    </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><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">Options 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">3,000</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">8.00</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">Balances at December&nbsp;31, 1999
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.00</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">Options 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">12,750</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">19.00</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">Balances 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">15,750</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">16.90</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">Options 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">28,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.66</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">Options forfeited
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,500</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">22.51</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">Balances 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">38,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46.07</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">Options 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">5,500</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">58.07</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">Options forfeited
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,450</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">31.00</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">Balances 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">42,750</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">48.12</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">Options granted (unaudited)
    </FONT></DIV>
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.00</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">Balances at June&nbsp;30, 2003 (unaudited)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,750</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">48.44</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;&nbsp;
<FONT size="2">The following table summarizes information about
stock options outstanding at December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="100%" 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="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="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="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">Weighted</FONT></B></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" align="center" nowrap><B><FONT size="1">Average</FONT></B></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" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</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">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</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">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" 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>
</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>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$&nbsp;8.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</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">&nbsp;19.00
    </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">6,750</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">7.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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">&nbsp;57.66
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,750</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">8.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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</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;66.76
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">9.58</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">66.76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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><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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,750</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">8.62</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">48.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</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>
    <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-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for its Plans in accordance
with APB Opinion No.&nbsp;25. The Company has not recognized
compensation expense for stock options because the exercise
price of the stock options equals or exceeds the market price of
the underlying stock on the date of grant, which is the
measurement date. If the alternative method of accounting for
stock incentive plans prescribed by SFAS No.&nbsp;123 had been
followed, the Company&#146;s net loss would have increased by
approximately, $5, $38, and $116 for the years ended
December&nbsp;31, 2000, 2001, and 2002, respectively. The pro
forma disclosures may not be representative of that to be
expected in future years. The weighted average fair value of
options granted was determined using the minimum value option
pricing model assuming no expected dividends, a risk-free
interest rate of 6.0% and a weighted average expected life of
10&nbsp;years for the 1999 and 2000 grants, a risk-free interest
rate of 4.24% and a weighted average expected life of
8&nbsp;years for the 2001 grants, and a risk-free interest rate
of 4.99% and a weighted average expected life of 8&nbsp;years
for the 2002 grants. The weighted average grant date fair value
of options granted were $6.95, $13.91, and $14.67 for the years
ended December&nbsp;31, 2000, December&nbsp;31, 2001, and
December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">
<B><FONT size="2">12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee
Benefit Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2000, the Company established a 401(k)
retirement savings plan that is available to all regular
employees who have reached age 21. The plan is intended to
qualify under Section&nbsp;401(k) of the Internal Revenue Code
of 1986, as amended. The plan provides that each participant may
contribute up to 15% of their pre-tax compensation (up to a
statutory limit, which was $11 in calendar year 2002). Employee
contributions are held in the employees&#146; name and invested
by the plan&#146;s trustee. The plan also permits the Company to
make matching contributions, subject to established limits. To
date, the Company has not made any matching contributions to the
plan on behalf of participating employees.
</FONT>

<P align="left">
<B><FONT size="2">13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent
Events</FONT></B>

<P align="left">
<B><I><FONT size="2">Issuance of Series&nbsp;E</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On August&nbsp;7, 2003, the Company authorized
450,000 shares and issued 329,536 shares of Series&nbsp;E at a
purchase price of $60.692 per share resulting in gross cash
proceeds of $20,000. The Company incurred issuance costs of $14
related to this series. Upon the issuance of Series&nbsp;E, the
default provisions of all outstanding preferred stock were
amended. If for any reason the Company defaults on its
obligation to pay all or any portion of the redemption price,
then the unpaid principal portion will bear interest at the
greater of the prime rate plus 4% or 8%. Series&nbsp;E has
similar terms to the other series of preferred stock. As a
result of the issuance of Series&nbsp;E, the conversion price of
the Series&nbsp;D was reduced to $65.894 per share as a result
of the anti-dilution provisions of the Company&#146;s
certificate of incorporation.
</FONT>

<P align="left">
<B><I><FONT size="2">Initial Public Offering</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In October 2003, the Board of Directors
authorized the Company to file a Registration Statement with the
Securities and Exchange Commission (&#147;SEC&#148;) permitting
the Company to sell shares of common stock in an initial public
offering (&#147;IPO&#148;). If the IPO is consummated as
presently anticipated, all shares of the Series&nbsp;A,
Series&nbsp;A-2, Series&nbsp;B, Series&nbsp;B-2, Series&nbsp;C
and Series&nbsp;E preferred stock will automatically convert
into shares of common stock at a 1-for-1 conversion ratio and
all shares of the Series&nbsp;D preferred stock will
automatically convert into shares of common stock at a
1.013-for-1 conversion ratio. The unaudited pro forma
stockholders&#146; equity at June&nbsp;30, 2003 reflects the
conversion of the Series&nbsp;A, Series&nbsp;A-2, Series&nbsp;B,
Series&nbsp;B-2, Series&nbsp;C and Series&nbsp;D
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(a development stage company)</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">preferred stock and accrued dividends into
981,681 shares of the common stock as if conversion had occurred
as of June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the Company&#146;s outstanding shares as
of August&nbsp;31, 2003, if the initial public offering is
closed under the terms presently anticipated, all of the
cumulative redeemable convertible preferred stock outstanding
will automatically convert into approximately 1,322,944 shares
of common stock on August&nbsp;31, 2003.
</FONT>

<P align="left">
<B><I><FONT size="2">Issuance of Stock Options</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;21, 2003, the Company issued 3,000
stock options under the 2001 stock option plan. The shares were
issued at an exercise price of $53.00 a share. The shares vest
one-third on the third anniversary, one-third on the fourth
anniversary and one-third on the fifth anniversary of the grant
date. The weighted average fair value of options granted was
$14.48. The weighted average fair value was determined using the
minimum value option pricing model assuming no expected
dividends, a risk-free interest rate of 3.15% and a weighted
average expected life of 8&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On August&nbsp;1, 2003, the Company issued 22,000
stock options under the 2002 stock option plan. The shares were
issued at an exercise price of $53.00 a share. The shares vest
one-third on the third anniversary, one-third on the fourth
anniversary and one-third on the fifth anniversary of the grant
date. The weighted average fair value of options granted was
$14.91. The weighted average fair value was determined using the
minimum value option pricing model assuming no expected
dividends, a risk-free interest rate of 4.36% and a weighted
average expected life of 8&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;1, 2003, the Company issued
28,000 stock options under the 2002 stock option plan. The
shares were issued at an exercise price of $53.00 a share. The
shares vest one-third on the third anniversary, one-third on the
fourth anniversary and one-third on the fifth anniversary of the
grant date. The weighted average fair value of options granted
was $15.12. The weighted average fair value was determined using
the minimum value option pricing model assuming no expected
dividends, a risk-free interest rate of 4.36% and a weighted
average expected life of 8&nbsp;years.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In September 2003, the Company formed a
wholly-owned subsidiary of the Company in the State of Delaware.
Prior to the completion of the proposed initial public offering,
the Company will merge into the subsidiary to effect a
reincorporation into the State of Delaware.
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No dealer,
salesperson or other person is authorized to give any
information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the
shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
</FONT>

<P align="center">
<HR size="1" width="27%" align="center" noshade>

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

<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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prospectus Summary
    </FONT></DIV>
    </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">Risk Factors
    </FONT></DIV>
    </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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Special Note Regarding Forward-Looking Statements
    </FONT></DIV>
    </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">Use of Proceeds
    </FONT></DIV>
    </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</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">Dividend Policy
    </FONT></DIV>
    </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</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">Capitalization
    </FONT></DIV>
    </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</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">Dilution
    </FONT></DIV>
    </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</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">Selected Financial Data
    </FONT></DIV>
    </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</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">Management&#146;s Discussion and Analysis of
    Financial Condition and Results of 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">34</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">Business
    </FONT></DIV>
    </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>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64</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">Certain Relationships and Related Transactions
    </FONT></DIV>
    </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</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">Principal 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">80</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">Description of Capital 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">82</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">Shares Eligible For Future Sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85</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">Underwriting
    </FONT></DIV>
    </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</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">Validity of the 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">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">Experts
    </FONT></DIV>
    </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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Where You Can Find More Information
    </FONT></DIV>
    </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">Index to Financial Statements
    </FONT></DIV>
    </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>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="27%" align="center" noshade>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer&#146;s obligation to
deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.
</FONT>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="center">
<FONT size="4">&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</FONT>

<DIV align="center">
<B><FONT size="5">GTx, Inc.</FONT></B>
</DIV>

<DIV align="center">
<FONT size="4">Common Stock
</FONT>
</DIV>

<P align="center">
<HR size="1" width="27%" align="center" noshade>

<P align="center">
<IMG src="g85196g8519601.gif" alt="(GTx LOGO)">

<P align="center">
<HR size="1" width="27%" align="center" noshade>

<P align="center">
<B><FONT size="4">Goldman, Sachs &#38; Co.</FONT></B>

<DIV align="center">
<B><FONT size="4">SG Cowen</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">Lazard</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<P align="left">
<B><FONT size="2">Item&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other
Expenses of Issuance and Distribution</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the costs and
expenses to be paid by us in connection with the sale of the
shares of common stock being registered hereby. All amounts are
estimates except for the SEC registration fee, the NASD filing
fee and the Nasdaq National Market filing fee.
</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="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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount to be Paid</FONT></B></TD>
</TR>

<TR>
    <TD></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">SEC registration fee
    </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">6,977</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">NASD filing fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,125</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">Nasdaq National Market filing fee
    </FONT></DIV>
    </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">Printing and engraving 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">*</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 qualification fees and 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">*</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">Accounting fees and 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">*</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">Legal fees and 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">*</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 and registrar 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">*</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">Miscellaneous 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">*</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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>
<P>

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

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be provided by amendment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Item&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indemnification
of Directors and Officers</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation, which will
become effective upon the completion of this offering, contains
provisions permitted under Delaware law relating to the
liability of directors. These provisions eliminate a
director&#146;s personal liability for monetary damages
resulting from a breach of fiduciary duty, except in
circumstances involving wrongful acts, such as:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any breach of the director&#146;s 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">any act or omission not in good faith or that
    involves intentional misconduct or a knowing violation of the
    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">any act related to unlawful stock repurchases,
    redemptions or other distribution or payments of dividends; 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">any transaction from which the director derived
    an improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These provisions do not limit or eliminate our
rights or any stockholder&#146;s rights to seek non-monetary
relief, such as an injunction or rescission, in the event of a
breach of director&#146;s fiduciary duty. These provisions will
not alter a director&#146;s liability under federal securities
laws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As permitted by Section&nbsp;145 of the Delaware
General Corporation Law, our bylaws, which will become effective
upon the closing of this offering, require us to indemnify our
directors and executive officers to the fullest extent not
prohibited by the Delaware law. We may limit the extent of such
indemnification by individual contracts with our directors and
executive officers. Further, we may decline to indemnify any
director or executive officer in connection with any proceeding
initiated by such person or any proceeding by such person
against us or our directors, officers, employees or other
agents, unless such indemnification is expressly required to be
made by law or the proceeding was authorized by our Board of
Directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into indemnity agreements with
each of our current directors and certain of our executive
officers to give such directors and officers additional
contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation
and bylaws and to provide additional procedural protections. At
present, there is no pending litigation or proceeding involving
</FONT>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">any of our directors, officers or employees for
which indemnification is sought, nor are we aware of any
threatened litigation that may result in claims for
indemnification.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have the power to indemnify our other
officers, employees and other agents, as permitted by Delaware
law, but we are not required to do so.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Registrant maintains a directors&#146; and
officers&#146; insurance and registrant reimbursement policy.
The policy insures directors and officers against unindemnified
losses arising from certain wrongful acts in their capacities as
directors and officers and reimburses the registrant for those
losses for which the registrant has lawfully indemnified the
directors and officers. The policy contains various exclusions,
none of which apply to this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reference is made to the following documents
filed as exhibits to this registration statement regarding
relevant indemnification provisions described above and
elsewhere herein:
</FONT>

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

<TR>
    <TD width="87%"><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 align="center" nowrap><B><FONT size="1">Exhibit Document</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</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">Form of Underwriting Agreement
    </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">1.1</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">Amended and Restated Certificate of Incorporation
    </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">3.3</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">Amended and Restated Bylaws
    </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">3.4</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">Registration Rights Agreement with Oracle
    Partners, L.P.&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">4.3</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">Registration Rights Agreement with J.R. Hyde, III
    </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">4.4</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">Registration Rights Agreement with Memphis Biomed
    Ventures I, L.P.&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">4.5</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">Form of Indemnification Agreement
    </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">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Item&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Recent
Sales of Unregistered Securities</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1.&nbsp;In July 2000, we issued and sold an
aggregate of 277,500 shares of our 8% Series&nbsp;B Cumulative
Convertible Preferred Stock to one accredited investor at
$18.018 per share, for an aggregate offering price of $4,999,995.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">2.&nbsp;In October 2001, we issued and sold an
aggregate of 260,154 shares of our 8% Series&nbsp;C Cumulative
Convertible Preferred Stock to three accredited investors at
$57.658 per share, for an aggregate offering price of
$14,999,959.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">3.&nbsp;In July 2002, we issued and sold an
aggregate of 164,765 shares of our 8% Series&nbsp;D Cumulative
Convertible Preferred Stock to four accredited investors at
$66.762 per share for an aggregate offering price of $11,000,041.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">4.&nbsp;In August 2003, we issued and sold an
aggregate of 329,536 shares of our 8% Series&nbsp;E Cumulative
Convertible Preferred Stock to 11 accredited investors at
$60.692 per share for an aggregate offering price of $20,000,199.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We claimed exemption from registration under the
Securities Act for the sales and issuances of securities in the
transactions described in paragraphs&nbsp;(1) through&nbsp;(3)
above by virtue of Section&nbsp;4(2) of the Securities Act in
that such sales and issuances did not involve a public offering.
The recipients of securities in each of these transactions
represented their intention to acquire the securities for
investment only and not with view to or for sale in connection
with any distribution thereof and appropriate legends were
affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their
relationships with us, to information about us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We claimed exemption from registration under the
Securities Act for the sales and issuances of securities in the
transactions described in paragraph&nbsp;(4) by virtue of
Section&nbsp;4(2) of the Securities Act and Rule&nbsp;506 of
Regulation&nbsp;D. Such sales and issuances did not involve any
public offering, were made without general solicitation or
advertising and each purchaser was a sophisticated investor with
access to all relevant information necessary to evaluate the
investment and represented to us that the shares were being
acquired for investment.
</FONT>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<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 and Financial Statement
    Schedules</FONT></I></B></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="3%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Exhibits
    </FONT></TD>
</TR>

</TABLE>

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

<TR>
    <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="80%"><FONT size="2">&nbsp;</FONT></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">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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Certificate of Incorporation of GTx, Inc.
    </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">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Bylaws of GTx, Inc.
    </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*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation of GTx, Inc. to be effective upon completion of
    this offering
    </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">.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws of GTx, Inc.
    to become effective upon completion of this offering
    </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">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Second Amended and Restated Voting and
    Shareholder Agreement dated August&nbsp;7, 2003
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Reference is made to Exhibits&nbsp;3.1, 3.2, 3.3
    and 3.4
    </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*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen of Common Stock Certificate
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Registration Rights
    Agreement between Registrant and Oracle Partners, L.P. dated
    August&nbsp;7, 2003
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Registration Rights
    Agreement between Registrant and J.&nbsp;R.&nbsp;Hyde,&nbsp;III
    dated August&nbsp;7, 2003
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Registration Rights
    Agreement between Registrant and Memphis Biomed Ventures dated
    August&nbsp;7, 2003
    </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 Cooley Godward 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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Genotherapeutics, Inc. 1999 Stock Option 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">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">GTx, Inc. 2000 Stock Option 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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">GTx, Inc. 2001 Stock Option 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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">GTx, Inc. 2002 Stock Option 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">.5*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Equity Incentive Plan and Form of Stock
    Option Agreement
    </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*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Non-Employee Directors&#146; Stock Option
    Plan and Form of Stock Option Agreement
    </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*</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">.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Mitchell&nbsp;S. Steiner,&nbsp;M.D.
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Marc&nbsp;S. Hanover
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Mark&nbsp;E. Mosteller
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Henry&nbsp;P. Doggrell
    </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*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Indemnification Agreement
    </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</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Lease Agreement, dated March&nbsp;7, 2001,
    between The University of Tennessee and TriStar Enterprises, 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">.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sublease Agreement dated October&nbsp;1, 2000, as
    amended, between Registrant and TriStar Enterprises, 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">.15&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated License and Supply Agreement
    dated October&nbsp;22, 2001, between Registrant and Orion
    Corporation
    </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&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1 to the License and Supply
    Agreement dated March&nbsp;5, 2003, between Registrant and Orion
    Corporation
    </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&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Production and Manufacturing Agreement dated
    September&nbsp;9, 2002, between Registrant and ChemSyn
    Laboratories (Department of EaglePicher Technologies, LLC)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<TR>
    <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="80%"><FONT size="2">&nbsp;</FONT></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">.18&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1 to the Production and
    Manufacturing Agreement dated September&nbsp;30, 2003, between
    Registrant and ChemSyn Laboratories (Department of EaglePicher
    Technologies, LLC)
    </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&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Quotation Agreement dated August&nbsp;8, 2003
    between Registrant and EaglePicher Pharmaceutical Services
    </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&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Exclusive License Agreement
    dated June&nbsp;3, 2002, between Registrant and University of
    Tennessee Research Foundation
    </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&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Exclusive License Agreement
    dated June&nbsp;14, 2002, between Registrant and University of
    Tennessee Research Foundation
    </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&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Exclusive License Agreement
    dated August&nbsp;30, 2002, between Registrant and University of
    Tennessee Research Foundation
    </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 Cooley Godward 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">Power of attorney. Reference is made to the
    signature page.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

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

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment requested. The redacted
    portions have been filed separately with the SEC as required by
    Rule&nbsp;406 of Regulation&nbsp;C.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Item&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Undertakings</I></FONT></B>

<P align="left">&nbsp;&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;&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;&nbsp;
<FONT size="2">The undersigned Registrant hereby undertakes that:
</FONT>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&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 a
    form of prospectus filed by the Registrant pursuant to
    Rule&nbsp;424(b)(1) or (4) or 497(h) under the Securities Act
    shall be deemed to be part of this 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;&nbsp;
    <FONT size="2">(2)&nbsp;For the purpose 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 <I>bona fide </I>offering
    thereof.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">SIGNATURES</FONT>" -->

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, GTx, Inc. has duly caused this
Registration Statement on Form&nbsp;S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Memphis, State of Tennessee, on the 14th&nbsp;day of
October, 2003.
</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">
    <B><FONT size="2">GTX, INC.</FONT></B></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/ MITCHELL S. STEINER
    </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">Mitchell S. Steiner, M.D., F.A.C.S.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">Chief Executive Officer</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;&nbsp;
<FONT size="2">KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
Dr.&nbsp;Mitchell S. Steiner and Mr.&nbsp;Marc S. Hanover, and
each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him or her and in his or
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 to sign any registration
statement for the same offering covered by the registration
statement that is to be effective upon filing pursuant to
Rule&nbsp;462(b) promulgated under the Securities Act, and all
post-effective amendments thereto, and to file the same, with
all exhibits thereto and all 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 might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done
or by virtue hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><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="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><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/ MITCHELL S. STEINER<BR>
    <HR size="1" noshade>Mitchell S. Steiner, M.D., F.A.C.S.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Executive Officer, Vice-Chairman and
    Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">October&nbsp;14, 2003
    </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/ MARK E. MOSTELLER<BR>
    <HR size="1" noshade>Mark E. Mosteller
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">October&nbsp;14, 2003
    </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/ J. R. HYDE, III<BR>
    <HR size="1" noshade>J.R. Hyde, III
    </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">October&nbsp;14, 2003
    </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/ MARC S. HANOVER<BR>
    <HR size="1" noshade>Marc S. Hanover
    </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">October&nbsp;14, 2003
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-5
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><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="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><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/ JOHN H. PONTIUS<BR>
    <HR size="1" noshade>John H. Pontius
    </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">October&nbsp;14, 2003
    </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/ ROSEMARY MAZANET<BR>
    <HR size="1" noshade>Rosemary Mazanet, M.D., Ph.D.
    </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">October&nbsp;14, 2003
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-6
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "<FONT size="2">EXHIBIT INDEX</FONT>" -->

<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="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="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD></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></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">1.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Certificate of Incorporation of GTx, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.2</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 align="left" valign="top">
    <FONT size="2">Bylaws of GTx, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation of GTx, Inc. to be effective upon completion of
    this offering
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Form of Amended and Restated Bylaws of GTx, Inc.
    to become effective upon completion of this offering
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Second Amended and Restated Voting and
    Shareholder Agreement dated August&nbsp;7, 2003
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Reference is made to Exhibits&nbsp;3.1, 3.2, 3.3
    and 3.4
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.2*</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 align="left" valign="top">
    <FONT size="2">Specimen of Common Stock Certificate
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Amended and Restated Registration Rights
    Agreement between Registrant and Oracle Partners,&nbsp;L.P.
    dated August&nbsp;7, 2003
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Amended and Restated Registration Rights
    Agreement between Registrant and J.&nbsp;R.&nbsp;Hyde,&nbsp;III
    dated August&nbsp;7, 2003
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Registration Rights
    Agreement between Registrant and Memphis Biomed Ventures dated
    August&nbsp;7, 2003
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Opinion of Cooley Godward&nbsp;LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Genotherapeutics, Inc. 1999 Stock Option Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</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 align="left" valign="top">
    <FONT size="2">GTx, Inc. 2000 Stock Option Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">GTx, Inc. 2001 Stock Option Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">GTx, Inc. 2002 Stock Option Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.5*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Equity Incentive Plan and Form of Stock
    Option Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.6*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Non-Employee Directors&#146; Stock Option
    Plan and Form of Stock Option Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.7*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <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">10.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Mitchell S. Steiner,&nbsp;M.D.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Marc&nbsp;S. Hanover
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Mark&nbsp;E. Mosteller
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Employment Agreement dated October&nbsp;1, 2003,
    between Registrant and Henry&nbsp;P. Doggrell
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.12*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Form of Indemnification Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Lease Agreement, dated March&nbsp;7, 2001,
    between The University of Tennessee and TriStar Enterprises, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Sublease Agreement dated October&nbsp;1, 2000, as
    amended, between Registrant and TriStar Enterprises, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.15&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated License and Supply Agreement
    dated October&nbsp;22, 2001, between Registrant and Orion
    Corporation
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.16&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1 to the License and Supply
    Agreement dated March&nbsp;5, 2003, between Registrant and Orion
    Corporation
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.17&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Production and Manufacturing Agreement dated
    September&nbsp;9, 2002, between Registrant and ChemSyn
    Laboratories (Department of EaglePicher Technologies, LLC)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.18&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1 to the Production and
    Manufacturing Agreement dated September&nbsp;30, 2003, between
    Registrant and ChemSyn Laboratories (Department of EaglePicher
    Technologies, LLC)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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

<TR>
    <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="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD></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></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">10.19&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Quotation Agreement dated August&nbsp;8, 2003
    between Registrant and EaglePicher Pharmaceutical Services
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.20&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Exclusive License Agreement
    dated June&nbsp;3, 2002, between Registrant and University of
    Tennessee Research Foundation
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.21&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Exclusive License Agreement
    dated June&nbsp;14, 2002, between Registrant and University of
    Tennessee Research Foundation
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.22&#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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Exclusive License Agreement
    dated August&nbsp;30, 2002, between Registrant and University of
    Tennessee Research Foundation
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <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">23.2*</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 align="left" valign="top">
    <FONT size="2">Consent of Cooley Godward&nbsp;LLP (included in
    Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <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">
    <FONT size="2">Power of Attorney. Reference is made to the
    signature page.
    </FONT></TD>
</TR>

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    <TD width="98%"></TD>
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    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
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    <TD width="99%"></TD>
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    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment requested. The redacted
    portions have been filed separately with the SEC as required by
    Rule&nbsp;406 of Regulation&nbsp;C.
    </FONT></TD>
</TR>

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</HTML>
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GTX, INC. - FORM S-1
As filed with the Securities and Exchange
Commission on October 15, 2003
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GTx, Inc.
(Exact name of registrant as specified in its
charter)
Delaware
2834
20-0221828
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
GTx, Inc.
3 N. Dunlap Street, 3rd Floor
Van Vleet Building
Memphis, TN 38163
(901) 523-9700
(Address, including zip code, and telephone
number,
including area code, of registrant's
principal executive offices)
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer
GTx, Inc.
3 N. Dunlap Street, 3rd Floor
Van Vleet Building
Memphis, TN 38163
(901) 523-9700
(Name, address, including zip code, and
telephone number,
including area code, of agent for
service)
Copies to:
Robert L. Jones, Esq.
Suzanne Sawochka Hooper, Esq.
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
(650) 843-5000
Leigh Walton, Esq.
Robert J. DelPriore, Esq.
Bass, Berry & Sims PLC
100 Peabody Avenue
Suite 950
Memphis, TN 38103
(901) 543-5904
David E. Redlick, Esq.
Peter N. Handrinos, Esq.
Hale and Dorr LLP
60 State Street
Boston, MA 02109
(617) 526-6000
Approximate date of
commencement of proposed sale to the public:
As soon as
practicable after the effective date of this Registration
Statement.
If any of the securities
being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities
Act of 1933, 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, 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, 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
Amount of
Title of Each Class of
Aggregate Offering
Registration
Securities to be Registered
Price(1)
Fee
Common stock, par value $0.001 per share
$86,250,000
$6,977.63
(1)
Estimated solely for the purpose of computing the
    registration fee 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 the 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 of 1933
or until the Registration Statement shall become effective on
such date as the SEC, acting pursuant to Section 8(a), may
determine.
The information in this
preliminary prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell nor does it
seek an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
Subject to Completion. Dated
October 15, 2003.
Shares
Common Stock
This is an initial public offering of shares of
common stock of GTx, Inc. All of
the                      shares
of common stock are being sold by the company.
Prior to this offering, there has been no public
market for the common stock. It is currently estimated that the
initial public offering price per share will be between
$                    and
$                    .
Application has been made for the quotation of the common stock
on the Nasdaq National Market under the symbol "GTXI".
See "Risk Factors" on page 7 to read
about factors you should consider before buying shares of the
common stock.
Neither the Securities and Exchange Commission
nor any other regulatory body has approved or disapproved of
these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
Per Share
Total
Initial public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to GTx
$
$
To the extent that the underwriters sell more
than                    shares
of common stock, the underwriters have the option to purchase up
to an
additional                    shares
from GTx at the initial public offering price less the
underwriting discount.
The underwriters expect to deliver the shares
against payment in New York, New York
on                     ,
2003.
Goldman, Sachs & Co.
SG
Cowen
Lazard
Prospectus
dated                     ,
2003.
PROSPECTUS SUMMARY
The following summary is qualified in its
entirety by reference to the more detailed information and
financial statements appearing elsewhere in this
prospectus.
Our Business
GTx is a biopharmaceutical company dedicated to
the discovery, development and commercialization of therapeutics
primarily related to the treatment of serious men's health
conditions. Our drug discovery and development programs are
focused on small molecules that selectively modulate the effects
of estrogens and androgens, two essential classes of hormones.
We currently have two product candidates that are in human
clinical trials. We are developing Acapodene, our most advanced
product candidate, through clinical trials for two separate
indications: (1) a Phase IIb clinical trial for the
reduction in the incidence of prostate cancer in men with
precancerous prostate lesions and (2) a planned pivotal
Phase III clinical trial for the treatment of serious side
effects of advanced prostate cancer therapy. We are initially
developing our second product candidate, Andarine, for the
treatment of cachexia from various types of cancer. Cancer
cachexia is a muscle wasting condition that is a potentially
life-threatening complication of many cancers. Andarine is the
most advanced of our internally discovered portfolio of
compounds designed to modulate the effects of hormones. We plan
to build a specialized sales and marketing capability to market
our product candidates directly to the relatively small and
concentrated community of urologists and medical oncologists in
the United States and to seek collaborators to commercialize our
product candidates outside the United States and to broader
target physician markets.
Acapodene for the Reduction in the
Incidence of Prostate Cancer in Men with Precancerous Prostate
Lesions
Prostate cancer is one of the most commonly
diagnosed cancers in men and the second leading cause of
cancer-related deaths in the United States. Scientific evidence
has established that men who have high grade, or advanced,
prostatic intraepithelial neoplasia, a precancerous prostate
lesion referred to as high grade PIN, are at high risk of
developing prostate cancer. In the United States, there are over
115,000 new cases of high grade PIN diagnosed each year, and an
estimated 9.4 million men unknowingly harbor high grade
PIN. Currently, there is no therapy for the treatment of high
grade PIN.
We are conducting a Phase IIb clinical trial in
which we have enrolled 515 patients to determine the efficacy
and safety of Acapodene for the reduction in the incidence of
prostate cancer in men with high grade PIN. In April 2003,
we performed a planned interim analysis of the first 120
patients in this clinical trial. The interim analysis indicated
that patients who received Acapodene had a 10% to 17% incidence
of prostate cancer 12 months after being diagnosed with
high grade PIN, depending on the dose of Acapodene, compared to
a 23% incidence in the placebo group. This represents an
approximately 26% to 57% reduction in prostate cancer incidence
in patients who received Acapodene compared to the placebo
group. The last patient is scheduled to complete this trial in
May 2004, with final results expected in the third quarter
of 2004. We believe that our Phase IIb clinical trial for
the reduction in the incidence of prostate cancer in men with
high grade PIN will support a single pivotal Phase III
clinical trial of Acapodene for this indication. We are
evaluating the protocol and timing of this pivotal
Phase III clinical trial.
Acapodene for the Treatment of Side Effects
of Androgen Deprivation Therapy
The standard medical treatment for men who have
advanced, recurrent or metastatic prostate cancer is androgen
deprivation therapy, which reduces blood levels of testosterone,
the growth factor for prostate cancer. In the United States,
more than 675,000 men are currently being treated by androgen
deprivation therapy for advanced, recurrent or metastatic
prostate cancer, with over
1
120,000 new patients started on this therapy each
year. Androgen deprivation therapy has serious side effects,
including: severe bone loss, or osteoporosis, leading to
skeletal fractures; hot flashes; and breast pain and
enlargement, or gynecomastia. There are no drugs approved by the
FDA for the treatment of these side effects of androgen
deprivation therapy.
We have completed two six-month Phase II
clinical trials of Acapodene for the treatment of osteoporosis
and hot flashes, two serious side effects of androgen
deprivation therapy. The first Phase II clinical trial
evaluated Acapodene in 43 patients shortly after initiation
of androgen deprivation therapy, and the second Phase II
clinical trial evaluated Acapodene in 46 patients who had
been receiving androgen deprivation therapy for more than
12 months. In the second trial, patients who received
Acapodene at the highest tested dose on average experienced a
3.5% increase in lumbar vertebral spine bone mineral density,
which is an indicator of bone strength, while the patients who
received the placebo on average experienced a 0.5% decrease in
lumbar vertebral spine bone mineral density. Only 12.5% of the
patients in this trial who received Acapodene at the highest
tested dose, compared to 50% of the patients who received the
placebo, reported experiencing an increase in the frequency of
hot flashes during the clinical trial. Our planned pivotal
Phase III clinical trial for this indication, which we
expect to commence in November 2003, is principally based
on the results of our Phase II clinical trial that
evaluated patients who had been receiving androgen deprivation
therapy for more than 12 months. The primary endpoint of
the trial will be the incidence of skeletal fractures, and the
secondary endpoints will include the measurement of bone loss
and the incidence of hot flashes and gynecomastia.
Andarine for the Treatment of Cancer
Cachexia
We believe that Andarine has the potential to
treat testosterone deficiency in aging men, or andropause, and
related diseases, including osteoporosis and muscle wasting. Our
strategy is to develop Andarine initially for the treatment of
cachexia from various types of cancer. We selected this
indication because it represents a potentially large market and,
we believe, has a relatively well-defined clinical and
regulatory process. Depending on the results of our initial
development efforts, we may also develop Andarine for other
andropause-related conditions. For cachexia from various types
of cancer, we are developing Andarine for the treatment of both
men and women. There are approximately 1.3 million patients
diagnosed with cancer each year in the United States. Cancer
cachexia afflicts approximately one-third of newly-diagnosed
cancer patients. There are no drugs that have been approved by
the FDA for the treatment of cancer cachexia. Although there are
two commercially available drugs that are being prescribed
off-label for the treatment of some types of cancer cachexia,
chronic use of these drugs may result in bleeding liver cysts
and liver cell tumors.
We have completed three Phase I clinical
trials of Andarine. In these trials, Andarine was well-tolerated
by all participants and there were no serious adverse events. We
observed preliminary indications in a multiple-dose Phase I
clinical trial in men that Andarine promoted growth activity, as
measured by levels of a growth factor in the blood. We plan to
commence a placebo-controlled, dose-finding Phase II
clinical trial of Andarine for the treatment of cachexia from
non-small cell lung cancer in the first half of 2004.
Pipeline
We have a robust preclinical product candidate
pipeline of small molecules that modulate the effects of
hormones. Our current preclinical product candidate pipeline
focuses on the treatment of major indications in men's
health, including:
•
Prostarine for the treatment of benign prostatic
    hyperplasia, or BPH, a benign prostate enlargement that results
    in obstruction of the urinary tract;
•
Ostarine for the treatment of osteoporosis and
    andropause; and
2
•
Andromustine for the treatment of prostate cancer
    that is not responsive to androgen deprivation therapy.
We believe that our drug discovery capabilities
position us well to sustain our clinical pipeline through the
design and development of nonsteroidal small molecule drugs that
modulate the effects of hormones.
Company Information
We were originally incorporated under the name
Genotherapeutics, Inc. in Tennessee in September 1997. We
changed our name to GTx, Inc. in 2001, and we reincorporated in
Delaware in 2003. Our principal executive office is located at
3 N. Dunlap Street, 3rd Floor, Van Vleet Building,
Memphis, Tennessee, and our telephone number is
(901) 523-9700. Our website address is www.gtxinc.com. The
information contained in our website is not a part of this
prospectus.
Service marks, trademarks and trade names
referred to in this prospectus are the property of their
respective owners.
3
The Offering
Common stock offered by GTx
shares
Common stock to be outstanding after the offering
shares
Proposed Nasdaq National Market symbol
GTXI
Use of proceeds
We expect to use the net proceeds from this
    offering to fund our clinical trials and other research and
    development activities and for general corporate purposes.
The number of shares of common stock to be
outstanding after this offering is based on the number of shares
outstanding as of August 31, 2003 and excludes:
•
67,000 shares of common stock issuable upon
    exercise of options issued under our current stock option plans,
    at a weighted average exercise price of $50.28 per share; and
•
83,900 shares of common stock reserved for future
    issuance under our current stock option plans
    and                    shares
    of common stock reserved for future issuance under our 2003
    Equity Incentive Plan, 2003 Non-Employee Directors' Stock
    Option Plan and 2003 Employee Stock Purchase Plan, which we plan
    to adopt before the completion of this offering.
Except as otherwise noted, all information in
this prospectus:
•
assumes no exercise of the underwriters'
    over-allotment option;
•
gives effect to the conversion into common stock
    of all outstanding shares of preferred stock and dividends
    accrued thereon through August 31, 2003; and
•
gives effect to our reincorporation in Delaware,
    which will occur before the closing of this offering.
The terms "GTx," "we,"
"us" and "our" as used in this prospectus
refer to GTx, Inc.
4
Summary Financial Information
The summary financial information below should be
read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and the financial statements, notes thereto and other financial
information included elsewhere in this prospectus. The
information presented for the six-month periods ended
June 30, 2002 and June 30, 2003 are derived from
unaudited financial statements and include, in the opinion of
management, all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the information for such
periods. The results for the six-month period ended
June 30, 2003 are not necessarily indicative of the results
to be expected for the full fiscal year.
Pro forma net loss per share for the year ended
December 31, 2002 and the six months ended June 30,
2003 is computed using the weighted average number of shares of
common stock outstanding, including the pro forma effects of the
automatic conversion of our preferred stock and dividends
accrued thereon into shares of common stock effective upon the
closing of the offering as if such conversion occurred on
January 1, 2002 and January 1, 2003 or at the date of
the original issuance, if later. The calculation of pro forma
net loss per share attributable to common stockholders excludes
incremental common stock issuable upon exercise of options, as
its effect would be antidilutive. For the six months ended
June 30, 2003, diluted net loss per share attributable to
common stockholders and pro forma net loss per share
attributable to common stockholders basic and diluted are
computed using the net loss excluding accrued preferred stock
dividends and the adjustment to preferred stock redemption value.
Six Months Ended
Year Ended December 31,
June 30,
2000
2001
2002
2002
2003
(unaudited)
(in thousands, except share and per share data)
Statement of Operations Data:
Operating expenses:
Research and development
$
2,679
$
5,744
$
9,285
$
3,975
$
4,703
General and administrative
1,203
2,187
2,405
1,105
1,411
Depreciation
80
215
332
153
175
Total operating expenses
3,962
8,146
12,022
5,233
6,289
Interest income
150
83
156
55
43
Net loss
(3,812
)
(8,063
)
(11,866
)
(5,178
)
(6,246
)
Accrued preferred stock dividends
(297
)
(790
)
(2,147
)
(858
)
(1,366
)
Adjustment to preferred stock redemption value
(21,077
)
(57
)
(7,220
)
(7,036
)
4,736
Net loss attributable to common stockholders
$
(25,186
)
$
(8,910
)
$
(21,233
)
$
(13,072
)
$
(2,876
)
Net loss per share attributable to common
    stockholders:
Basic
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.16
)
Diluted
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.34
)
Weighted average shares used in computing net
    loss per share attributable to common stockholders:
Basic
910,000
910,000
910,000
910,000
910,000
Diluted
910,000
910,000
910,000
910,000
1,869,021
Pro forma net loss per share attributable to
    common stockholders — basic and diluted
$
(6.81
)
$
(3.34
)
Shares used in computing pro forma net loss per
    share attributable to common stockholders — basic and
    diluted
1,742,563
1,869,021
5
The following table presents a summary of our
balance sheet as of June 30, 2003:
•
on an actual basis;
•
on a pro forma basis to give effect to the
    issuance of 329,536 shares of Series E cumulative
    redeemable convertible preferred stock on August 7, 2003
    for net proceeds of approximately $20.0 million; and
•
on a pro forma as adjusted basis to reflect the
    issuance of 329,536 shares of Series E cumulative
    redeemable convertible preferred stock on August 7, 2003
    for net proceeds of approximately $20.0 million, the
    conversion into common stock of all outstanding shares of
    preferred stock and dividends accrued thereon through
    August 31, 2003 and the sale in this offering
    of                  shares
    of common stock at an assumed initial offering price of
    $                  per
    share, after deducting the estimated underwriting discounts and
    commissions and estimated offering expenses payable by us.
As of June 30, 2003
Pro Forma
Actual
Pro Forma
As Adjusted
(unaudited)
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
3,112
$
23,098
$
Working capital
1,544
21,530
Total assets
4,064
24,050
Cumulative redeemable convertible preferred stock
60,656
80,656
Deficit accumulated during development stage
(59,154
)
(59,168
)
Total stockholders' (deficit) equity
(58,184
)
(58,198
)
6
RISK FACTORS
Any investment in our stock involves a high
degree of risk. You should consider carefully the risks and
uncertainties described below, and all information contained in
this prospectus, before you decide whether to purchase our
common stock. If any of the following risks or uncertainties
actually occurs, our business, financial condition, results of
operations and prospects would likely suffer, possibly
materially. In addition, the trading price of our common stock
could decline due to any of these risks or uncertainties, and
you may lose part or all of your investment.
Risks Related to Our Business
If preclinical or clinical trials of
Acapodene, Andarine or any other product candidates that we may
develop do not produce successful results, we will be unable to
commercialize these product candidates, which will materially
harm our business.
We need to obtain regulatory approval to
commercially market Acapodene, Andarine or any other product
candidates that we may develop. To receive regulatory approval
for the commercial distribution and sale of Acapodene, Andarine
or any other product candidates that we may develop, we must
conduct, at our own expense, extensive preclinical and clinical
trials to demonstrate the safety and efficacy in humans of the
product candidates. Preclinical and clinical testing is
expensive, can take many years and has an uncertain outcome.
Failure can occur at any stage of the testing. We may experience
numerous unforeseen events during, or as a result of, the
testing process that could delay or prevent commercialization of
Acapodene, Andarine or any other product candidates that we may
develop, including:
•
our preclinical or clinical trials may produce
    negative or inconclusive results, and we may decide, or
    regulators may require us, to conduct additional preclinical or
    clinical testing;
•
registration or enrollment in our
    (1) planned pivotal Phase III clinical trial of Acapodene
    for the reduction in the incidence of prostate cancer in men
    with high grade PIN, (2) planned pivotal Phase III clinical
    trial of Acapodene for the treatment of osteoporosis, hot
    flashes and gynecomastia as side effects of androgen deprivation
    therapy for advanced prostate cancer and (3) planned Phase
    II clinical trial of Andarine for the treatment of cachexia from
    non-small cell lung cancer may be slower than we currently
    anticipate, resulting in significant delays;
•
the Food and Drug Administration, or FDA, may
    require more than a single pivotal Phase III clinical trial
    of Acapodene for the reduction in the incidence of prostate
    cancer in men with high grade PIN in order to grant marketing
    approval of Acapodene for this indication;
•
the safety and efficacy results attained in our
    clinical trials for Acapodene or Andarine may be less positive
    than the results obtained in our earlier clinical trials for
    Acapodene or Andarine;
•
the cost of our clinical trials may be greater
    than we currently anticipate;
•
after reviewing trial results, we may abandon
    projects that we expected to be promising;
•
we, regulators or institutional review boards may
    suspend or terminate our clinical trials if the participating
    patients are being exposed to unacceptable health risks;
•
regulators or institutional review boards may
    suspend or terminate clinical research for various reasons,
    including noncompliance with regulatory requirements; and
•
the effects of Acapodene, Andarine or any other
    product candidates that we may develop may not be the desired
    effects or may include undesirable side effects or other
    characteristics that may delay or preclude regulatory approval
    or limit their commercial use if approved.
7
Success in preclinical testing and early clinical
trials does not ensure that later clinical trials will be
successful, and interim results of a clinical trial do not
necessarily predict final results. For example, the interim
results from our Phase IIb clinical trial of Acapodene for the
reduction in the incidence of prostate cancer in men with high
grade PIN do not necessarily predict favorable final results
from the trial or from our planned pivotal Phase III
clinical trial. Further, bone mineral density changes observed
in our Phase II clinical trials of Acapodene for the
treatment of osteoporosis, hot flashes and gynecomastia as side
effects of androgen deprivation therapy for advanced prostate
cancer are not necessarily indicative of the results that will
be demonstrated in our planned larger pivotal Phase III
clinical trial.
We do not know whether our current or any future
clinical trials will demonstrate safety and efficacy
sufficiently to result in marketable products. Our failure to
adequately demonstrate the safety and efficacy of Acapodene,
Andarine or any other product candidates that we may develop
will prevent receipt of regulatory approval and, ultimately,
commercialization of Acapodene, Andarine or any other product
candidates that we may develop, which will materially harm our
business.
Delays in clinical testing could result in
increased costs to us and delay our ability to generate
revenue.
Significant delays in clinical testing or
termination of clinical testing could materially impact our
product development costs. We do not know whether planned
clinical trials will begin on time, will need to be restructured
or will be completed on schedule, if at all. Clinical trials can
be delayed for a variety of reasons, including delays related to:
•
obtaining regulatory approval to commence a
    clinical trial;
•
clinical holds;
•
negotiating acceptable clinical trial agreement
    terms with prospective trial sites;
•
obtaining institutional review board approval to
    conduct a clinical trial at a prospective site;
•
recruiting patients to participate in a clinical
    trial;
•
competition for clinical investigators or
    clinical trial subjects;
•
shortage or lack of availability of clinical
    trial drugs;
•
the need to repeat clinical trials; and
•
the failure of third parties conducting and
    overseeing the operations of our clinical trials to perform
    their contractual or regulatory obligations in a timely fashion.
In addition, delays in or termination of clinical
trials due to exposure of clinical trial subjects to
unacceptable health risks or noncompliance with regulatory
requirements could also occur. If we have significant delays in
or termination of clinical trials, our financial results and the
commercial prospects for Acapodene, Andarine or any other
products that we may develop will be adversely impacted, our
costs could increase and our ability to generate revenue could
be impaired.
We may not be successful in our efforts to
develop a pipeline of product candidates.
A key element of our strategy is to discover and
develop a pipeline of small molecule product candidates. We are
seeking to do so primarily through our internal research
programs. Research programs to identify product candidates
require substantial technical, financial and human resources,
whether or not we ultimately identify any product 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
•
on further study, potential product candidates
    may be shown to have harmful side effects or other
    characteristics that indicate they are unlikely to be effective
    drugs.
If we are unable to develop suitable product
candidates, our business may suffer.
8
Risks Related to Regulatory Approval of our
Product Candidates
We and our collaborators are subject to
extensive regulation, which can be costly and time-consuming to
comply with and may subject us to unanticipated delays or
prevent us from obtaining the required approvals to
commercialize Acapodene, Andarine or any other product
candidates that we may develop.
Acapodene, Andarine and any other product
candidates that we may develop, and the preclinical and clinical
trials and manufacturing and distribution activities associated
with their development, are subject to comprehensive regulation
by the FDA and other regulatory agencies in the United States
and by comparable authorities in other countries. The process of
obtaining regulatory approvals is expensive, often takes many
years, if approval is obtained at all, and can vary
substantially based upon the type, complexity and novelty of the
product candidates involved.
Applicants for FDA approval must submit extensive
preclinical and clinical data as well as information about
product manufacturing processes and facilities and other
supporting information to the FDA. Varying interpretations of
the data obtained from preclinical and clinical testing could
delay, limit or prevent regulatory approval of a product
candidate. Changes in the FDA approval policy during the
development period, or changes in regulatory review for each
submitted product application, may also cause delays in the
approval or rejection of an application. The FDA has substantial
discretion in the approval process and may disagree with our or
any collaborator's interpretations of such data, which also
could cause delays of an approval or rejection of an
application. Even if the FDA approves a product candidate, the
approval may limit the uses or conditions for which a product
may be marketed, or may require further studies. The FDA also
can withdraw product clearances and approvals for failure to
comply with regulatory requirements or if problems follow
initial marketing.
The FDA's and foreign regulatory
agencies' statutes, regulations or policies may change, and
additional government regulations or statutes may be enacted
that could prevent or delay regulatory approval of our product
candidates. We cannot predict the likelihood, nature or extent
of adverse governmental regulation that might arise from future
legislative or administrative action, either in the United
States or abroad.
We have only limited experience in filing and
prosecuting the applications necessary to gain regulatory
approvals. The FDA may refuse to accept any application or may
decide that our data is insufficient for approval and require
additional preclinical, clinical or other studies. For example,
while we believe that our ongoing Phase IIb clinical trial
of Acapodene for the reduction in the incidence of prostate
cancer in men with high grade PIN will support a single pivotal
Phase III clinical trial of Acapodene for this indication,
we cannot assure you that the FDA will not require more than one
pivotal Phase III clinical trial in order to grant
marketing approval of Acapodene for this indication. We will not
be able to commercialize Acapodene, Andarine or any other
product candidates that we may develop until we obtain FDA
approval in the United States and approval from comparable
authorities in other countries.
The approval procedure varies among countries and
can involve additional testing beyond that required by the FDA.
The time required to obtain approval in other countries may
differ from that required to obtain 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 do not expect to receive regulatory approval
for the commercial sale of Acapodene, Andarine or any other
product candidate for a number of years. The inability to obtain
FDA approval or approval from comparable authorities in other
countries would prevent us from commercializing Acapodene,
Andarine or any other product candidates that we may develop in
the United States or other countries.
9
Even if Acapodene, Andarine or any other
product candidates or products that we may develop receive
regulatory approval, we may still face development and
regulatory difficulties relating to such product candidates or
products.
If we receive regulatory approval to sell
Acapodene, Andarine or any other product candidates that we may
develop, the FDA and foreign regulatory authorities may,
nevertheless, impose significant restrictions on the indicated
uses, conditions for use, labeling, advertising, promotion,
marketing or production of such product, or impose ongoing
requirements for post-approval studies, including additional
research and development and clinical trials. In addition,
regulatory agencies subject a marketed product, its manufacturer
and the manufacturer's facilities to continual review and
periodic inspections. If we discover previously unknown problems
with a product, a regulatory agency may impose restrictions on
that product or on us or any collaborators, including requiring
us or our collaborators to withdraw the product from the market.
We will be subject to ongoing FDA requirements,
including required submissions of safety and other post-market
information, registration requirements, current Good
Manufacturing Practice, or cGMP, regulations, requirements
regarding the distribution of samples to physicians and
recordkeeping requirements. The cGMP regulations include
requirements relating to quality control and quality assurance,
as well as the corresponding maintenance of records and
documentation. The manufacturing process must consistently
produce quality batches of the product, and the manufacturer
must develop methods for testing the quality, purity and potency
of the final drugs. Additionally, we must select and test
appropriate packaging and conduct chemistry stability studies to
demonstrate that the product does not undergo unacceptable
deterioration over its shelf-life.
If we or any collaborators fail to comply with
applicable regulatory requirements, a regulatory agency may:
•
issue warning letters;
•
impose civil or criminal penalties;
•
suspend or withdraw our regulatory approval;
•
suspend or terminate any of our ongoing clinical
    trials;
•
refuse to permit the import or export of our
    products;
•
refuse to approve pending applications or
    supplements to approved applications that we file;
•
impose restrictions on our or our
    collaborators' operations, including closing a
    manufacturing facility; or
•
seize or detain products or require a product
    recall.
The FDA's and foreign regulatory
agencies' statutes, regulations or policies may change, and
additional government regulation or statutes may be enacted,
which could increase post-approval regulatory requirements, or
delay, suspend or prevent marketing of any approved products. We
cannot predict the likelihood, nature or extent of adverse
governmental regulation that might arise from future legislative
or administrative action, either in the United States or abroad.
Risks Related to Our Intellectual
Property
We are dependent upon our licenses from
Orion Corporation and the University of Tennessee Research
Foundation to develop and commercialize Acapodene, Andarine and
two of our preclinical product candidates; if these licenses
terminate, we may be unable to develop and commercialize these
product candidates.
Under a license and supply agreement with Orion
Corporation, we have a license from Orion to develop, use,
market and distribute toremifene, the active pharmaceutical
ingredient in Acapodene,
10
under Orion's patents covering the
composition of matter of toremifene. This license is limited to
the fields of the prevention and treatment of prostate cancer
and the prevention and treatment of osteoporosis, hot flashes
and gynecomastia as side effects of androgen deprivation therapy
in the treatment of prostate cancer. Without this license, we
would not have the right to commercialize Acapodene for any
indication prior to the expiration of Orion's composition
of matter patents. We paid Orion an initial license fee and have
agreed to pay Orion a royalty based on net sales of Acapodene
and a share of any consideration received by us for sublicensing
our rights under the agreement. If we are acquired prior to the
first regulatory approval of a product for use in the licensed
field, we will be obligated to pay Orion a one-time fee of up to
$1.0 million at the time of acquisition. The agreement
requires us to achieve specified minimum sales requirements of
Acapodene in the United States or pay royalties on the shortfall
amount.
The term of our license from Orion continues on a
country-by-country basis until the date of expiration or
invalidation of the last to expire or be invalidated of our
licensed patent rights. Orion has the right to terminate the
license as a result of a material breach of the agreement by us
that is not cured, our bankruptcy or the acquisition of us by a
direct competitor of Orion with respect to toremifene.
Orion may require us to modify our final
Acapodene development plans for specified major markets if such
development plans could adversely affect toremifene outside of
the field that Orion has licensed to us. Any required
modifications may limit our ability to maximize the commercial
potential of Acapodene. In addition, we and our affiliates are
prohibited from selling a product that competes with toremifene
in the licensed field in major countries located outside of the
European Union during the term of the agreement and in major
countries in the European Union through October 2006. This
noncompetition provision may limit our ability to commercialize
any other compounds in the licensed field even if we believe
that other compounds have more commercial potential than
Acapodene. The binding effect of this noncompetition provision
on our affiliates, as well as Orion's right to terminate
the agreement if we are acquired by a direct competitor of Orion
with respect to toremifene, may make it more difficult for us to
be acquired by some potential buyers even if we determine that a
sale of the company would be in the best interests of our
stockholders.
We have exclusive, worldwide licenses from the
University of Tennessee Research Foundation under its method of
use patents relating to toremifene for the reduction in the
incidence of prostate cancer in men with high grade PIN and its
composition of matter and method of use patents and patent
applications relating to Andarine, Ostarine and Prostarine.
Without these licenses, we would not be able to commercialize
Acapodene for the reduction in the incidence of prostate cancer
in men with high grade PIN or Andarine, Ostarine or Prostarine
for any indication prior to the expiration of University of
Tennessee Research Foundation's patents. We have agreed to
pay the University of Tennessee Research Foundation a royalty
based on net sales of these product candidates and sublicense
income. The term of each of the licenses is the longer of
20 years or the term of any licensed patent having a valid
claim covering the licensed technology. The University of
Tennessee Research Foundation has the right to terminate each of
the licenses under specified circumstances, including in the
event that we breach the agreement and do not cure the breach or
in the case of our bankruptcy. We are obligated to use
commercially reasonable efforts to develop and commercialize
products based on the licensed patents and patent applications.
These obligations could require us to take actions related to
the development of Acapodene, Andarine, Ostarine and Prostarine
that we would otherwise not take. These required actions may be
costly and may divert our resources from other activities.
If we are unable to maintain our licenses from
Orion and the University of Tennessee Research Foundation, we
would likely not be able to develop and commercialize Acapodene,
Andarine, Ostarine or Prostarine for any indication. In
addition, the terms of our agreements with Orion and the
University of Tennessee Research Foundation may adversely affect
our operations, financial results or competitive business
position.
11
Because it is difficult and costly to
protect our proprietary rights, we may not be able to ensure
their protection.
Our commercial success will depend in part on
obtaining and maintaining patent and trade secret protection for
Acapodene, Andarine and any other product candidates or products
that we may develop, the methods used to manufacture these
product candidates and products and the methods for treating
patients using these product candidates and products. It will
also depend on our successfully defending these patents and
pending patent applications against third-party challenges and
in other similar proceedings, and enforcing these patents
against third-party infringers. We will be able to protect our
product candidates, any products that we may develop and our
technologies from unauthorized use by third parties only to the
extent that valid and enforceable patents or trade secrets cover
them.
The patent covering the composition of matter of
toremifene, the active pharmaceutical ingredient in Acapodene,
that we have licensed from Orion will expire in the United
States in 2009, in Europe in 2003 or 2008, depending on the
country, and in Japan in 2005. We also have licensed from the
University of Tennessee Research Foundation method of use
patents in the United States and pending patent applications
internationally related to the use of Acapodene for the
reduction in the incidence of prostate cancer in men with high
grade PIN. The method of use patents issued in the United States
related to the use of Acapodene for this indication will expire
in 2019. We also have our own pending method of use patent
applications in the United States and internationally related to
the use of Acapodene for the prevention and treatment of
osteoporosis, hot flashes and gynecomastia as side effects of
androgen deprivation therapy.
The patent covering the composition of matter of
the active pharmaceutical ingredient in Andarine that we have
licensed from the University of Tennessee Research Foundation
will expire in the United States in 2021. We have also licensed
from the University of Tennessee Research Foundation rights to
pending patent applications internationally covering the
composition of matter of the active pharmaceutical ingredient in
Andarine and pending patent applications in the United States
and internationally related to, among other things, methods for
treating cancer cachexia with Andarine. We also have our own
pending patent applications in the United States and
internationally related to methods of using Andarine.
It is possible that patents will not issue in
respect of some or all of our or our licensed patent
applications. If the patent applications do not yield issued
patents, or if they yield patents with narrow claims, we may be
subject to direct competition in countries in which our licensed
composition of matter patents have expired.
The patent positions of biopharmaceutical
companies can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain
unresolved and as to which relevant laws and procedures are
constantly shifting. No consistent policy regarding the breadth
or interpretation of claims allowed in patents has emerged to
date in the United States. Further, the specific content of
patents and patent applications that are necessary to support
and interpret patent claims is highly uncertain due to the
complex nature of the relevant legal, scientific and factual
issues. Furthermore, the policies governing biotechnology
patents outside the United States are even more uncertain.
Changes in either patent laws or in interpretations of patent
laws in the United States and other countries may diminish the
value of our intellectual property or narrow the scope of our
patent protection. Accordingly, we cannot predict the breadth of
claims that may be allowed in a pending patent application, nor
can we predict the interpretation, scope, validity or
enforceability of claims in our own or in any third party's
patents.
12
The degree of future protection for our
proprietary rights, or the proprietary rights that we license
from others, is uncertain because legal means afford only
limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. For example:
•
others might have been the first to make the
    inventions covered by each of our or our licensors' pending
    patent applications and issued patents;
•
others might have been the first to file patent
    applications for these inventions;
•
others may independently develop similar or
    alternative technologies or duplicate any of these technologies;
•
it is possible that none of our or our
    licensors' pending patent applications will result in
    issued patents;
•
our issued patents or pending patent applications
    or the patents or patent applications that we license from
    others may not provide a basis for commercially-viable products,
    may not provide us with any competitive advantages or may be
    challenged by third parties;
•
we may not develop additional proprietary
    technologies that are patentable;
•
the patents of others may have an adverse effect
    on our business; or
•
patents may be successfully challenged by
    competitors filing abbreviated new drug applications, or ANDAs,
    or new drug applications in which the applicant does not own or
    have a legal right of reference to all of the data required for
    approval, or 505(b)(2) NDAs, resulting in approval of
    competitors' products for the same intended use.
We also rely on trade secrets to protect our
technology, especially where we do not believe that patent
protection is appropriate or obtainable. However, trade secrets
are difficult to protect. Our employees, consultants,
contractors, outside scientific collaborators and other advisors
may unintentionally or willfully disclose our confidential
information to competitors, and confidentiality agreements may
not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. Enforcing a claim that a
third party illegally obtained and is using our trade secrets is
expensive and time-consuming, and the outcome is unpredictable.
In addition, courts outside the United States are sometimes less
willing to protect trade secrets than courts in the United
States. Moreover, our competitors may independently develop
equivalent knowledge, methods and know-how. Failure to obtain or
maintain trade secret protection could adversely affect our
competitive business position.
Off-label sale or use of toremifene, the
active pharmaceutical ingredient in Acapodene, may result in
reduced sales of Acapodene and pricing pressure.
In all countries in which we hold or have
licensed rights to patents or patent applications related to
Acapodene, the composition of matter patents will expire before
the method of use patents. Furthermore, with respect to the
method of use of Acapodene for the treatment of side effects of
androgen deprivation therapy worldwide and the method of use of
Acapodene for the reduction in the incidence of prostate cancer
in men with high grade PIN outside the United States, we have
only pending patent applications. Method of use patents are more
difficult to enforce than composition of matter patents because
of the risk of off-label sale or use of the subject compounds.
In the event that patents issue in respect of our
pending method of use patent applications, after the expiration
of the patent covering the composition of matter of toremifene
in a particular country, competitors could market and sell
generic versions of toremifene at doses and in formulations that
are bioequivalent to Acapodene for uses other than the
indications for Acapodene covered by these pending method of use
patent applications, and physicians would be permitted to
prescribe generic versions of toremifene for indications that
are protected by our or our licensors' method of use
patents and pending patent applications. After the expiration of
the patent covering the composition of matter of toremifene in a
particular country, if patents do not issue in respect of our
pending method of use patent applications related to the use of
Acapodene for the treatment of side effects of androgen
deprivation therapy worldwide and the use of Acapodene for the
reduction
13
in the incidence of prostate cancer in men with
high grade PIN outside the United States, competitors could
market and sell generic versions of toremifene at doses and in
formulations bioequivalent to Acapodene for these indications.
Our license from Orion is limited to the use of
toremifene for the prevention and treatment of prostate cancer
and the prevention and treatment of osteoporosis, hot flashes
and gynecomastia as side effects of androgen deprivation therapy
in the treatment of prostate cancer. Orion has licensed Shire
Pharmaceuticals Group in the United States and other parties
elsewhere in the world to market, sell and distribute toremifene
for the treatment of advanced breast cancer and could license
other parties to market, sell and distribute toremifene for
other indications in the United States and elsewhere. This
further increases the risk of off-label competition developing
for Acapodene for the indications for which we are developing
this product candidate.
Off-label sale or use of generic toremifene
products, including products marketed and sold by other
licensees of Orion, for the indications for which we are
developing Acapodene could decrease our sales of Acapodene and
could lead to pricing pressure if such products become available
at competitive prices and in dosages that are appropriate for
the indications for which we are developing Acapodene.
If we are sued for infringing intellectual
property rights of third parties, it will be costly and
time-consuming; an unfavorable outcome in litigation would have
a material adverse effect on our business.
Our ability to commercialize Acapodene, Andarine
and any other product candidates or products that we may develop
depends upon our ability to develop, manufacture, market and
sell such product candidates or products without infringing the
proprietary rights of third parties. Our drug discovery and
development efforts are focused on selective estrogen receptor
modulators, or SERMs, and selective androgen receptor
modulators, or SARMs. Acapodene is a SERM, and Andarine is a
SARM. Numerous United States and foreign issued patents and
pending patent applications, which are owned by third parties,
exist in the general field of SERMs and SARMs. In addition,
because patent applications can take many years to issue, there
may be currently pending applications, unknown to us, which may
later result in issued patents that cover the production,
manufacture, commercialization or use of Acapodene, Andarine or
any other product candidates or products that we may develop. In
addition, the production, manufacture, commercialization or use
of Acapodene, Andarine or any other product candidates or
products that we may develop may infringe existing patents of
which we are not aware.
There is a substantial amount of litigation
involving patent and other intellectual property rights in the
biotechnology and biopharmaceutical industries generally. If a
third party claims that we infringe on its intellectual
property, we could face a number of issues, including:
•
infringement and other intellectual property
    claims which, with or without merit, can be expensive and
    time-consuming to litigate and can divert management's
    attention from our business;
•
substantial damages for past infringement that we
    would have to pay if a court decides that any product that we
    may develop infringes on a third party's patent;
•
a court prohibiting us from selling or licensing
    any product that we may develop unless the patent holder
    licenses the patent to us, which it is not required to do;
•
if a license is available from a patent holder,
    we may have to pay substantial royalties or grant a cross
    license to our patents; and
•
redesigning the formulation of our product
    candidate or any product that we may develop so it does not
    infringe, which may not be possible or could require substantial
    funds and time.
14
Risks Related to Our Dependence on Third
Parties
If we are unable to continue relationships
or contracts with third parties to manufacture Acapodene,
Andarine or any other product candidates or products that we may
develop in sufficient quantities and at an acceptable cost,
clinical development and commercialization of our product
candidates could be delayed, and we may be unable to meet
clinical or commercial demand for these product candidates or
products.
We do not currently own or operate manufacturing
facilities for the production of clinical or commercial
quantities of Acapodene or Andarine. We currently rely and
expect to continue to rely on third parties for the manufacture
of Acapodene, Andarine and any other product candidates or
products that we may develop.
Orion, our only supplier of Acapodene, has agreed
to supply us with, and we have agreed to purchase from Orion,
our worldwide requirements of Acapodene in finished tablet form
at specified transfer prices under a license and supply
agreement. Our agreement with Orion may be terminated for a
variety of reasons. Following such a termination, we would
obtain the right to manufacture Acapodene under specified
circumstances. We would also be able to manufacture Acapodene
after expiration of the agreement as a result of the expiration
of Orion's patents with respect to the composition of
matter of toremifene. However, in the event that Orion
terminates the agreement as a result of a material breach of the
agreement by us that is not cured, our bankruptcy or the
acquisition of us by a direct competitor of Orion with respect
to toremifene, we would not obtain the right to manufacture
Acapodene and could not do so until Orion's patents or
related market exclusivity with respect to the composition of
matter of toremifene expire.
Orion may terminate its obligation to supply us
with toremifene if marketing approval for Acapodene in the
licensed field is not granted in the United States by
December 31, 2007 or upon the expiration or invalidation of
the last valid claim of the licensed Orion patent rights in the
United States, or, subject to a prior notice requirement, if
Orion permanently ceases the manufacture of toremifene. In these
circumstances, we will have the right to manufacture Acapodene,
but we would be required to make arrangements with a qualified
alternative supplier to do so.
We have entered into an agreement with ChemSyn
Laboratories, a department of EaglePicher Technologies, LLC,
under which ChemSyn has agreed to manufacture Andarine for us in
a quantity that we believe is sufficient to supply clinical
trials of Andarine for the treatment of cachexia from various
types of cancer and initial commercialization of Andarine for
this indication. We do not have a contract with ChemSyn for the
supply of Andarine for full-scale commercialization.
We may not be able to maintain or renew these or
any other third-party manufacturing arrangements on acceptable
terms, if at all. If we are unable to continue relationships
with Orion and ChemSyn, or to do so at an acceptable cost, or if
these suppliers fail to meet our requirements for Acapodene or
Andarine for any reason, we would be required to obtain
alternate suppliers, which we may not be permitted to do for
Acapodene under our license agreement with Orion in some
circumstances. Any inability to obtain alternate suppliers,
including an inability to obtain approval of an alternate
supplier from the FDA, would delay or prevent the clinical
development and commercialization of Acapodene or Andarine and
result in our inability to meet clinical or commercial demand
for these product candidates.
Third parties may not manufacture our product
candidates or products in a cost effective or timely manner. If
manufacturing is not performed in a timely manner, the clinical
development of our product candidates or their submission for
regulatory approval could be delayed, and our ability to deliver
Acapodene, Andarine or any product candidates or products that
we may develop on a timely basis could be impaired or precluded.
15
Reliance on third-party manufacturers entails
risks to which we would not be subject if we manufactured
product candidates or 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 possible termination or nonrenewal of the
    agreement by the third party, based on its own business
    priorities, at a time that is costly or inconvenient for us.
Our product candidates and any products that we
may develop may compete with other product candidates and
products for access to manufacturing facilities. For example,
the active pharmaceutical ingredient in Acapodene, toremifene,
is also the active pharmaceutical ingredient in Fareston. Orion
also manufactures Fareston for Shire Pharmaceuticals Group,
which markets it in the United States for the treatment of
advanced breast cancer in post-menopausal women.
We cannot be certain that our present or future
manufacturing partners will be able to comply with cGMP
regulations and other FDA regulatory requirements or similar
regulatory requirements outside the United States. Failure of
our third-party manufacturers or us to comply with applicable
regulations could result in sanctions being imposed on us,
including fines, injunctions, civil penalties, failure of
regulatory authorities to grant marketing approval of our
product candidates, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product
candidates or products, operating restrictions and criminal
prosecutions, any of which could significantly and adversely
affect our business. Changing manufacturers may require
revalidation of the manufacturing process and procedures in
accordance with FDA mandated cGMP regulations. This revalidation
may be costly and time-consuming.
Our current and anticipated future dependence
upon others for the manufacture of Acapodene and Andarine and
our anticipated dependence upon others for the manufacture of
any other product candidates or products that we may develop may
adversely affect our future profit margins and our ability to
develop product candidates, to commercialize any product
candidates or products that we may develop on a timely and
competitive basis and to meet the demand for any approved
products.
We currently depend on a single source
supplier for Acapodene, and we are currently purchasing Andarine
from a single supplier. The loss of either of these suppliers
could delay our clinical trials or prevent or delay
commercialization of Acapodene or Andarine.
Currently, we rely on Orion as a single source
supplier for Acapodene, and we are currently purchasing Andarine
from ChemSyn as a single supplier. Establishing additional or
replacement suppliers for Acapodene or Andarine may take a
substantial amount of time, and in some circumstances our
agreement with Orion may prevent us from obtaining an alternate
supplier with respect to Acapodene. If we have to switch to a
replacement supplier, we may face additional regulatory delays,
and the manufacture and delivery of Acapodene or Andarine could
be interrupted for an extended period of time, which may delay
completion of our clinical trials or commercialization of
Acapodene or Andarine. If we are unable to obtain an adequate
supply of Acapodene or Andarine, our clinical trials will be
delayed. As a result, regulatory approval of Acapodene or
Andarine could be delayed, or may not be received at all.
We rely on third parties to help conduct
our preclinical development activities and clinical trials. If
these third parties do not successfully carry out their
contractual duties or regulatory obligations or meet expected
deadlines, we may not be able to obtain regulatory approval for
or commercialize Acapodene, Andarine or any other product
candidates that we may develop.
We do not have the ability to independently
conduct clinical trials for Acapodene, Andarine or any other
product candidates that we may develop, and we must rely on
third parties, such as contract research organizations, medical
institutions, clinical investigators and contract laboratories to
16
conduct our clinical trials. In addition, we rely
on third parties to assist with our preclinical development of
product candidates. If these third parties do not successfully
carry out their contractual duties or regulatory obligations or
meet expected deadlines, if the third parties need to be
replaced, or if the quality or accuracy of the data they obtain
is compromised due to the failure to adhere to our clinical
protocols or regulatory requirements or for other reasons, our
preclinical development activities or clinical trials may be
extended, delayed, suspended or terminated, and we may not be
able to obtain regulatory approval for or successfully
commercialize Acapodene, Andarine or any other product
candidates that we may develop.
We expect to be dependent upon
collaborative arrangements to complete the development and
commercialization of some of our product candidates. These
collaborative arrangements may place the development of our
product candidates outside of our control, may require us to
relinquish important rights or may otherwise be on terms
unfavorable to us.
We expect to enter into collaborative
arrangements with third parties for clinical trials,
development, manufacturing, regulatory approvals and
commercialization of some of our product candidates. We may not
be successful in entering into these collaborative arrangements.
If we fail to enter into additional collaborative agreements on
favorable terms, our business, financial condition and results
of operations could be materially adversely affected. Dependence
on collaborative arrangements will subject us to a number of
risks, including:
•
we may not be able to control the amount and
    timing of resources that our collaborators may devote to the
    product candidates;
•
our collaborators may experience financial
    difficulties;
•
should a collaborator fail to develop or
    commercialize one of our compounds or product candidates, we may
    not receive any future milestone payments and will not receive
    any royalties for this compound or product candidate;
•
business combinations or significant changes in a
    collaborator's business strategy may also adversely affect
    a collaborator's willingness or ability to complete its
    obligations under any arrangement; and
•
a collaborator could independently move forward
    with a competing product candidate developed either
    independently or in collaboration with others, including our
    competitors.
Collaborative arrangements with third parties are
often terminated or allowed to expire. Such terminations or
expirations could adversely affect us financially as well as
harm our business reputation.
Risks Related to Commercialization
The commercial success of any products that
we may develop will depend upon the degree of market acceptance
among physicians, patients, health care payors and the medical
community.
Any products that we may develop may not gain
market acceptance among physicians, patients, health care payors
and the medical community. The degree of market acceptance of
Acapodene, Andarine or any other products that we may develop,
if approved for commercial sale, will depend on a number of
factors, including:
•
market acceptance of SERMs and SARMs;
•
the prevalence and severity of any side effects;
•
potential advantages over alternative treatments;
17
•
the ability to offer Acapodene and Andarine for
    sale at competitive prices;
•
relative convenience and ease of administration;
•
the strength of marketing and distribution
    support; and
•
sufficient third-party coverage or reimbursement.
If Acapodene, Andarine or any other product
candidates that we may develop are approved by the FDA or a
similar foreign authority but do not achieve an adequate level
of acceptance by physicians, health care payors and patients, we
may not generate material product revenue and we may not become
profitable.
If we are unable to establish sales and
marketing capabilities or enter into agreements with third
parties to market and sell Acapodene and Andarine, we may be
unable to generate product revenue.
We do not have a sales organization and have no
experience as a company in the sales, marketing and distribution
of pharmaceutical products. In order to commercialize any
products that we may develop, we must develop our sales,
marketing and distribution capabilities or make arrangements
with a third party to perform these services. If we are unable
to establish adequate sales, marketing and distribution
capabilities, independently or with others, we will not be able
to generate material product revenue and will not become
profitable.
If Acapodene or Andarine is approved for
commercial sale, we currently plan to establish our own
specialized sales force to market Acapodene and, for selected
indications, Andarine to urologists and medical oncologists in
the United States. Developing a sales force is expensive and
time-consuming and could delay any product launch. We might not
be able to develop our sales and marketing and distribution
capability. If we are unable to establish this capability, we
will need to contract with third parties to market and sell
Acapodene and Andarine in the United States. We will also need
to establish sales, marketing and distribution capabilities in
the United States for potential indications of Andarine that
cannot be addressed by our planned specialized sales force and
outside of the United States for both Acapodene and Andarine,
which is likely to require contracting with third parties. To
the extent that we enter into arrangements with third parties to
perform sales, marketing and distribution services, our product
revenues are likely to be lower than if we market and sell
Acapodene, Andarine or any other product we may develop
ourselves.
If we are unable to obtain acceptable
prices or adequate coverage and reimbursement from third-party
payors for any products that we may develop, our revenues and
prospects for profitability will suffer.
Our ability to commercialize any products that we
may develop is highly dependent on the extent to which coverage
and reimbursement for such products will be available from:
•
governmental payors, such as Medicare and
    Medicaid;
•
private health insurers, including managed care
    organizations; and
•
other third-party payors.
Many patients will not be capable of paying for
any products that we may develop themselves and will rely on
third-party payors to pay for their medical needs. Currently,
Medicare does not have a broad-based outpatient prescription
drug benefit that covers products self-administered by patients.
State Medicaid programs generally have outpatient prescription
drug coverage, subject to state regulatory restrictions, for the
population eligible for Medicaid. The availability of coverage
or reimbursement for prescription drugs under private health
insurance and managed care plans varies based on the type of
contract or plan purchased.
18
A primary trend in the United States health care
industry is toward cost containment. In addition, in some
foreign countries, particularly 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 product candidates or
products to other available therapies.
Large governmental and private payors, managed
care organizations, prescription benefit managers and similar
organizations are exerting increasing influence on decisions
regarding the use of, and reimbursement levels for, particular
treatments. Such third-party payors are challenging the prices
charged for medical products and services, and many third-party
payors limit reimbursement for newly-approved health care
products. In particular, third-party payors may limit the
indications for which they will reimburse patients who use any
products that we may develop. Cost-control initiatives could
decrease the price we might establish for products that we may
develop, which would result in lower product revenues to us. If
the reimbursement for any products that we may develop decreases
or if governmental and other third-party payors do not provide
coverage or reimbursement for any products that we may develop,
our revenues and prospects for profitability will suffer.
Another development that may affect the pricing
of drugs is proposed Congressional action regarding drug
reimportation into the United States. Proposed legislation would
allow the reimportation of approved drugs originally
manufactured in the United States back into the United States
from other countries where the drugs are sold at a lower price.
If legislation or regulations were passed allowing the
reimportation of drugs, they could decrease the price we receive
for any products that we may develop, negatively affecting our
revenues and prospects for profitability.
Legislative or regulatory reform of health
care systems may affect our ability to sell any products
profitably.
In the United States, there have been a number of
legislative and regulatory proposals to change the public
financing of health care in ways that could adversely affect our
ability to sell any products that we may develop profitably.
Federal and state proposals and health care reforms are likely.
Our results of operations could be materially adversely affected
depending on the type of health care reforms that are adopted,
if any.
If product liability lawsuits are brought
against us, we will incur substantial liabilities and may be
required to limit commercialization of any products that we may
develop.
We face an inherent risk of product liability
exposure related to the testing of Acapodene, Andarine or any
other product candidates that we may develop in human clinical
trials and will face an even greater risk if we commercially
sell any products that we may develop. In the future, an
individual may bring a liability claim against us if any product
candidates or products that we may develop cause, or merely
appear to have caused, an injury. If we cannot successfully
defend ourselves against the product liability claim, we will
incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
•
decreased demand for any product candidates or
    products that we may develop;
•
injury to our reputation;
•
withdrawal of clinical trial participants;
•
costs to defend the related litigation;
•
substantial monetary awards to trial participants
    or patients;
19
•
loss of revenue; and
•
the inability to commercialize any products that
    we may develop.
We have product liability insurance that covers
our clinical trials up to a $5 million annual aggregate
limit. We intend to expand our insurance coverage to include the
sale of commercial products if marketing approval is obtained
for any products that we may develop. Insurance coverage is
increasingly expensive. We may not be able to maintain insurance
coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any
liability that may arise.
If our competitors are better able to
develop and market products that are more effective than any
products that we may develop, our commercial opportunity will be
reduced or eliminated.
We face competition from established
pharmaceutical and biotechnology companies, as well as from
academic institutions, government agencies and private and
public research institutions. Various products are currently
marketed or sold and used off-label for some of the diseases and
conditions that we are targeting, and a number of companies are
or may be developing new treatments. In addition, physicians are
permitted to prescribe legally available drugs for uses that are
not described in the drug's labeling and that differ from
those uses tested and approved by the FDA. Such off-label uses
are common across medical specialties. The occurrence of such
off-label uses could significantly reduce our ability to market
and sell any products that we may develop.
Many of our competitors have significantly
greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing
approved products than we do. Smaller or early-stage companies
may also prove to be significant competitors, particularly
through collaborative arrangements with large and established
companies. Our commercial opportunity will be reduced or
eliminated if our competitors develop and commercialize products
that are safer, more effective, have fewer side effects or are
less expensive than any products that we may develop. These
third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing
clinical trial sites and patient registration for clinical
trials, as well as in acquiring technologies and technology
licenses complementary to our programs or advantageous to our
business.
We expect that our ability to compete effectively
will depend upon our ability to:
•
successfully and rapidly complete clinical trials
    and obtain requisite regulatory approvals in a cost-effective
    manner;
•
obtain and maintain proprietary rights to any
    products that we may develop;
•
build an adequate specialized sales and marketing
    infrastructure;
•
enter into collaborative arrangements for
    marketing and sales; and
•
attract and retain key personnel.
Risks Related to Employees and
Growth
If we fail to attract and keep senior
management and key scientific personnel, we may be unable to
successfully develop or commercialize Acapodene, Andarine or any
other product candidates or products that we may
develop.
Our success depends on our continued ability to
attract, retain and motivate highly qualified management,
clinical and scientific personnel and on our ability to develop
and maintain important relationships with leading academic
institutions, clinicians and scientists. We are highly dependent
upon our senior management and scientific staff, particularly
Dr. Mitchell S. Steiner. All of our employees are at-will
employees and can terminate their employment at any time. We do
not carry
20
"key person" insurance covering members
of senior management, other than $15 million of insurance
covering Dr. Steiner. If we are not able to attract and keep
senior management and key scientific personnel, we may not be
able to successfully develop or commercialize Acapodene,
Andarine or any other product candidates that we may develop.
We will need to increase the number of our
managerial, operational, financial and other employees, and we
may experience difficulties in managing growth.
In order to continue our clinical trials and
commercialize Acapodene, Andarine or any other product
candidates that we may develop, we will need to expand the
number of our managerial, operational, financial and other
employees. We currently anticipate that we will need between 150
and 250 additional employees by the time that Acapodene or
Andarine is initially commercialized, including 50 to 80 sales
representatives. While to date we have not experienced
difficulties in recruiting and hiring qualified individuals, the
competition for qualified personnel in the biotechnology field
is intense.
Future growth will impose significant added
responsibilities on members of management, including the need to
identify, recruit, maintain and integrate additional employees.
Our future financial performance and our ability to
commercialize Acapodene, Andarine or any other product
candidates that we may develop and to compete effectively will
depend, in part, on our ability to manage any future growth
effectively. To that end, we must be able to:
•
manage our research and development efforts
    effectively;
•
manage our clinical trials effectively;
•
integrate additional management, administrative
    and sales and marketing personnel;
•
develop our administrative, accounting and
    management information systems and controls; and
•
hire and train additional qualified personnel.
We may not be able to accomplish these tasks, and
our failure to accomplish any of them could harm our business
and financial results.
Risks Related to Our Financial Results and
Need for Additional Financing
We have incurred losses since inception and
anticipate that we will incur continued losses for the
foreseeable future.
We are a development stage company with a limited
operating history. Currently, we have no products approved for
commercial sale, and, to date, we have not generated any product
revenue. We have financed our operations and internal growth
almost exclusively through private placements of preferred
stock. We have devoted substantially all of our efforts to
research and development, including clinical trials. We have
incurred losses in each year since our inception in 1997. Net
losses were $11.9 million in 2002, $8.1 million in
2001 and $3.8 million in 2000. For the six months ended
June 30, 2003, net losses were $6.2 million. As of
June 30, 2003, we had a deficit accumulated during the
development stage of $59.2 million. We expect our research
and development expenses to increase in connection with the
following:
•
our ongoing Phase IIb clinical trial and planned
    pivotal Phase III clinical trial of Acapodene for the
    reduction in the incidence of prostate cancer in men with high
    grade PIN;
•
our planned pivotal Phase III clinical trial
    of Acapodene for the treatment of side effects of androgen
    deprivation therapy for advanced prostate cancer;
21
•
our planned Phase II clinical trial of
    Andarine for the treatment of cachexia from non-small cell lung
    cancer; and
•
any other clinical trials that we may initiate.
In addition, subject to regulatory approval of
Acapodene or Andarine, we expect to incur sales and marketing
and increased manufacturing expenses. As a result, we expect to
continue to incur significant and increasing operating losses
for the foreseeable future. These losses have had and will
continue to have an adverse effect on our stockholders'
equity and working capital. Because of the numerous risks and
uncertainties associated with developing small molecule drugs,
such as Acapodene and Andarine, we are unable to predict the
extent of any future losses or when we will become profitable,
if at all.
We currently have no source of revenue and
may never become profitable.
Our ability to become profitable depends upon our
ability to generate revenue. Our ability to generate product
revenue depends heavily on our success in completing our
clinical trials and commercializing Acapodene or Andarine. To
date, neither Acapodene nor Andarine has generated any revenue,
and we do not know when or if Acapodene or Andarine will
generate revenue. Our ability to generate revenue depends on a
number of factors, including the other risk factors described in
this section of this prospectus. We do not anticipate that we
will generate product revenue for a number of years or achieve
profitability for at least several years after generating
material revenue. If we are unable to generate revenue, we will
not become profitable, and we may be unable to continue our
operations.
We will need substantial additional funding
and may be unable to raise capital when needed, which would
force us to delay, reduce or eliminate our product development
programs or commercialization efforts.
Developing small molecule drugs, conducting
clinical trials and marketing any products that we may
successfully develop is expensive. We will need to raise
additional capital to:
•
fund our operations and clinical trials;
•
continue our research and development; and
•
commercialize Acapodene, Andarine or any other
    product candidates that we may develop, if any such product
    candidates receive regulatory approval for commercial sale.
We believe that the net proceeds from this
offering, our existing cash resources and interest on these
funds will be sufficient to meet our projected operating
requirements through the end of 2005. Our future funding
requirements will depend on many factors, including:
•
the scope, rate of progress and cost of our
    clinical trials and other research and development activities;
•
future clinical trial results;
•
the terms and timing of any collaborative,
    licensing and other arrangements that we may establish;
•
the cost and timing of regulatory approvals;
•
the cost and timing of establishing sales,
    marketing and distribution capabilities;
•
the cost of establishing clinical and commercial
    supplies of our product candidates and any products that we may
    develop;
•
the effect of competing technological and market
    developments;
22
•
the cost of filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights; and
•
the extent to which we acquire or invest in
    businesses, products and technologies, although we currently
    have no commitments or agreements relating to any of these types
    of transactions.
Until we can generate a sufficient amount of
product revenue, if ever, we expect to finance future cash needs
through public or private equity offerings, debt financings or
corporate collaboration and licensing arrangements, as well as
through interest income earned on cash balances. We cannot be
certain that additional funding will be available on acceptable
terms, or at all. If adequate funds are not available, we may be
required to delay, reduce the scope of or eliminate one or more
of our research and development programs or our
commercialization efforts.
Raising additional funds by issuing
securities or through collaboration and licensing arrangements
with third parties may cause dilution to existing stockholders
or require us to relinquish rights to our technologies,
Acapodene, Andarine or any other product candidates that we may
develop.
We may raise additional funds through public or
private equity offerings, debt financings or corporate
collaboration and licensing arrangements. We cannot be certain
that additional funding will be available on acceptable terms,
or at all. If we raise additional funds by issuing equity
securities, our stockholders may experience dilution. Debt
financing, if available, may involve restrictive covenants. Any
debt financing or additional equity that we raise may contain
terms that are not favorable to us or our stockholders. If we
raise additional funds through collaboration and licensing
arrangements with third parties, it will be necessary to
relinquish some rights to our technologies, Acapodene, Andarine
or any other product candidates that we may develop, or grant
licenses on terms that are not favorable to us.
Risks Related to the Offering
Market volatility may affect our stock
price and the value of your investment.
Our stock price is likely to be volatile. The
market prices for securities of biopharmaceutical companies in
general have been highly volatile and may continue to be highly
volatile in the future. The following factors, in addition to
other risk factors described in this section, may have a
significant impact on the market price of our common stock:
•
adverse results or delays in our clinical trials;
•
the timing of achievement of our clinical,
    regulatory and other milestones, such as the commencement of
    clinical development, the completion of a clinical trial or the
    receipt of regulatory approval;
•
announcement of FDA approval or non-approval of
    Acapodene, Andarine or any other product candidates that we may
    develop or delays in the FDA review process;
•
actions taken by regulatory agencies with respect
    to Acapodene, Andarine or any other product candidates that we
    may develop, our clinical trials or our sales and marketing
    activities;
•
the commercial success of any product approved by
    the FDA or foreign counterpart;
•
regulatory developments in the United States and
    foreign countries;
•
changes in the structure of health care payment
    systems;
•
any intellectual property infringement lawsuit
    involving us;
23
•
announcements of technological innovations or new
    products by us or our competitors;
•
market conditions for the biotechnology or
    pharmaceutical industries in general;
•
actual or anticipated fluctuations in our results
    of operation;
•
changes in financial estimates or recommendations
    by securities analysts;
•
sales of large blocks of our common stock;
•
sales of our common stock by our executive
    officers, directors and significant stockholders;
•
changes in accounting principles; and
•
the loss of any of our key scientific or
    management personnel.
In particular, investors purchasing common stock
in this offering may not be able to resell their shares at or
above the initial public offering price. The stock markets in
general, and the markets for biotechnology stocks in particular,
have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies.
These broad market fluctuations may adversely affect the trading
price of our common stock. In the past, class action litigation
has often been instituted against companies whose securities
have experienced periods of volatility in market price. Any such
litigation brought against us could result in substantial costs
and divert management's attention and resources, which
would hurt our business, financial condition and results of
operations.
The ownership interests of our officers,
directors and largest stockholders could conflict with the
interests of our other stockholders.
Based on our outstanding shares as of
August 31, 2003, after this offering, our officers,
directors and holders of 5% or more of our outstanding common
stock will beneficially own
approximately           %
of our common stock, after giving effect to the conversion into
common stock of all outstanding shares of our preferred stock
and dividends accrued thereon through August 31, 2003, but
assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. As a result,
these stockholders, acting together, will be able to control all
matters requiring approval by our stockholders, including the
election of directors and the approval of mergers or other
business combination transactions. The interests of this group
of stockholders may not always coincide with our interests or
the interests of other stockholders.
Anti-takeover provisions in our charter
documents and under Delaware law could make an acquisition of
us, which may be beneficial to our stockholders, more difficult
and may prevent attempts by our stockholders to replace or
remove our current management.
Provisions in our certificate of incorporation
and our bylaws that will become effective upon the completion of
this offering may delay or prevent an acquisition of us or a
change in our management. In addition, these provisions may
frustrate or prevent any attempts by our stockholders to replace
or remove our current management by making it more difficult for
stockholders to replace members of our Board of Directors.
Because our Board of Directors is responsible for appointing the
members of our management team, these provisions could in turn
affect any attempt by our stockholders to replace current
members of our management team. These provisions include:
•
a classified Board of Directors;
•
a prohibition on actions by our stockholders by
    written consent;
•
the ability of our Board of Directors to issue
    preferred stock without stockholder approval, which could be
    used to institute a "poison pill" that would work to
    dilute the stock ownership
24
of a potential hostile acquirer, effectively
    preventing acquisitions that have not been approved by our Board
    of Directors; and
•
limitations on the removal of directors.
Moreover, because we are incorporated in
Delaware, we are governed by the provisions of Section 203
of the Delaware General Corporation Law, which prohibits a
person who owns in excess of 15% of our outstanding voting stock
from merging or combining with us for a period of three years
after the date of the transaction in which the person acquired
in excess of 15% of our outstanding voting stock, unless the
merger or combination is approved in a prescribed manner.
Finally, these provisions establish advance notice requirements
for nominations for election to our Board of Directors or for
proposing matters that can be acted upon at stockholder
meetings. These provisions would apply even if the offer may be
considered beneficial by some stockholders.
We may allocate the net proceeds from this
offering in ways that you and other stockholders may not
approve.
We expect to use the net proceeds from this
offering to fund our clinical trials and other research and
development capabilities and for general corporate purposes. Our
management will, however, have broad discretion in the
application of the net proceeds from this offering and could
spend the proceeds in ways that do not necessarily improve our
results of operations or enhance the value of our common stock.
Future sales of our common or preferred
stock could lower the market price of our common
stock.
Based on our outstanding shares as of
August 31, 2003, after this offering, we will have
outstanding                      shares
of common stock, after giving effect to the conversion of all
outstanding shares of our preferred stock and dividends accrued
thereon through August 31, 2003, but assuming no exercise
of the underwriters' over-allotment option and no exercise
of outstanding options. Of these shares, the shares being
offered in this offering will be freely tradable under federal
and state securities laws. Each of our officers, directors and
stockholders and the holders of substantially all of our
outstanding options have agreed, subject to specified
exceptions, that, without the prior written consent of Goldman,
Sachs & Co., they will not, directly or indirectly, sell,
offer, contract to sell, transfer the economic risk of ownership
in, make any short sale, pledge or otherwise dispose of any
shares of our capital stock or any securities convertible into
or exchangeable or exercisable for or any other rights to
purchase or acquire our capital stock for a period of
180 days from the date of this prospectus. Goldman, Sachs
& Co. may, in its sole discretion, permit early release of
shares subject to the lock-up agreements.
Assuming that all of our preferred stock and
accrued dividends had been converted into common stock on
August 31, 2003, all but 331,218 of the 2,232,944 shares of
our common stock that are not being sold in this offering, but
which would have been outstanding as of August 31, 2003,
will be eligible for sale in the public market 180 days
after the effective date of the registration statement of which
this prospectus is a part under Rules 144, 144(k) and 701
under the Securities Act of 1933, subject in some cases to
volume and other limitations. In addition, of the 67,000 shares
issuable upon exercise of options to purchase our common stock
outstanding as of August 31, 2003, approximately 10,247
shares will be vested and eligible for sale 180 days after
the date of this prospectus. Promptly following this offering,
we intend to register the shares of common stock that are
authorized for issuance under our employee and non-employee
director equity incentive plans. Once we register these shares,
they can be freely sold in the public market upon issuance,
subject to the lock-up agreements referred to above and the
restrictions imposed on our affiliates under Rule 144.
In addition, if we propose to register any of our
securities under the Securities Act either for our own account
or for the accounts of other security holders after this
offering, the holders of
25
registration rights generally will be entitled to
include their shares of common stock. In addition, two holders
of demand registration rights may require us on not more than
two occasions each to effect a registration under the Securities
Act with respect to shares of common stock owned by these
stockholders or their affiliates or transferees. In the future,
we may also issue additional shares to our employees, directors
or consultants, in connection with collaborations or
acquisitions and in follow-on offerings to raise additional
capital.
Due to these factors, sales of a substantial
number of shares of our common stock in the public market could
occur at any time. Such sales could reduce the market price of
our common stock.
If you purchase our common stock in this
offering, you will incur immediate and substantial dilution in
the book value of your shares.
The assumed initial public offering price is
substantially higher than the book value per share of our common
stock. Investors purchasing common stock in this offering will
pay a price per share that substantially exceeds the book value
of our assets after subtracting our liabilities. Further,
investors purchasing common stock in this offering will
contribute
approximately           %
of the total amount invested by stockholders since our
inception, but will own only
approximately           %
of the shares of common stock outstanding.
This dilution is due to our investors who
purchased shares prior to this offering having paid
substantially less than the price offered to the public in this
offering when they purchased their shares and the exercise of
stock options granted to our employees. As a result of this
dilution, investors purchasing stock in this offering may
receive significantly less than the purchase price paid in this
offering in the event of a liquidation.
26
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking
statements. The forward-looking statements are contained
principally in the sections entitled "Prospectus
Summary," "Risk Factors," "Use of
Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and
"Business." These statements involve known and unknown
risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially
different from any future results, performances or achievements
expressed or implied by the forward-looking statements.
Forward-looking statements include statements about:
•
the anticipated progress of our research,
    development and clinical programs;
•
our ability to market, commercialize and achieve
    market acceptance for Acapodene, Andarine or any other product
    candidates or products that we may develop;
•
our ability to generate additional product
    candidates for clinical testing;
•
our ability to protect our intellectual property
    and operate our business without infringing upon the
    intellectual property rights of others; and
•
our estimates regarding the sufficiency of our
    cash resources.
In some cases, you can identify forward-looking
statements by terms such as "anticipates,"
"believes," "could," "estimates,"
"expects," "intends," "may,"
"plans," "potential," "predicts,"
"projects," "should," "will,"
"would," and similar expressions intended to identify
forward-looking statements. Forward-looking statements reflect
our current views with respect to future events, are based on
assumptions and subject to risks and uncertainties. We discuss
many of these risks in this prospectus in greater detail under
the heading "Risk Factors." Given these uncertainties,
you should not place undue reliance on these forward-looking
statements. Also, forward-looking statements represent our
estimates and assumptions only as of the date of this
prospectus. You should read this prospectus and the documents
that we reference in this prospectus and have filed as exhibits
to the registration statement, of which this prospectus is a
part, completely and with the understanding that our actual
future results may be materially different from what we expect.
Except as required by law, we assume no
obligation to update any forward-looking statements publicly, or
to update the reasons actual results could differ materially
from those anticipated in any forward-looking statements, even
if new information becomes available in the future.
27
USE OF PROCEEDS
We estimate that our net proceeds from the sale
of                     shares
of common stock in this offering will be approximately
$                     million
and
$                     million
if the underwriters exercise their over-allotment option in
full, based upon an assumed initial public offering price of
$          per
share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. The
principal purposes of this offering are to obtain additional
capital and to create a public market for our common stock.
We expect to use approximately
$                    million
of the net proceeds from this offering to fund our clinical
trials and other research and development activities and
approximately
$                    million
for general corporate purposes. In addition, we may use a
portion of the net proceeds from this offering to acquire
equipment, products, technologies or businesses, although we
currently have no commitments or agreements relating to any of
these types of transactions. We believe that the net proceeds
from this offering, our existing cash resources and interest on
these funds will be sufficient to meet our projected operating
requirements through the end of 2005.
While we have estimated the particular uses for
the net proceeds to be received upon the completion of this
offering, we cannot specify these uses with certainty.
Accordingly, our management will have broad discretion in the
application of the net proceeds, and investors will be relying
on the judgment of our management regarding the application of
the proceeds of this offering. Pending these uses, we plan to
invest the net proceeds in short-term, interest bearing
obligations, investment grade instruments, certificates of
deposit or direct or guaranteed obligations of the United
States. The goal with respect to the investment of these net
proceeds is capital preservation and liquidity so that such
funds are readily available to fund our research and development
operations.
DIVIDEND POLICY
Dividends on outstanding shares of our preferred
stock accrue and are payable at the time these shares are
converted into shares of common stock, which will occur upon
completion of this offering. These dividends are payable solely
in shares at the time of conversion.
We have never declared or paid any cash dividends
on our capital stock. We currently intend to retain any future
earnings to fund the development and expansion of our business,
and therefore we do not anticipate paying cash dividends on our
common stock in the foreseeable future. Any future determination
to pay dividends will be at the discretion of our Board of
Directors.
28
CAPITALIZATION
The following table sets forth our capitalization
as of June 30, 2003:
•
on an actual basis;
•
on a pro forma basis to give effect to the
    issuance of 329,536 shares of Series E cumulative
    redeemable convertible preferred stock on August 7, 2003
    for net proceeds of approximately $20.0 million; and
•
on a pro forma as adjusted basis to reflect the
    issuance of 329,536 shares of Series E cumulative
    redeemable convertible preferred stock on August 7, 2003
    for net proceeds of approximately $20.0 million, the
    conversion into common stock of all outstanding shares of
    preferred stock and dividends accrued thereon through
    August 31, 2003 and the sale in this offering
    of                      shares
    of common stock at an assumed initial public offering price of
    $                per
    share, after deducting the estimated underwriting discounts and
    commissions and estimated offering expenses payable by us.
The information in this table is based on shares
outstanding as of June 30, 2003 and excludes:
•
45,750 shares of common stock issuable upon
    exercise of options issued under our current stock option plans,
    at a weighted average exercise price of $48.79 per share;
    and
•
105,150 shares of common stock reserved for
    future issuance under our current stock option plans
    and                    shares
    of common stock reserved for future issuance under our 2003
    Equity Incentive Plan, 2003 Non-Employee Directors' Stock
    Option Plan and 2003 Employee Stock Purchase Plan, which we plan
    to adopt before the completion of this offering.
You should read the information below in
conjunction with the financial statements and the related notes
thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included
elsewhere in this prospectus.
As of June 30, 2003
Pro Forma
Actual
Pro Forma
As Adjusted
(unaudited)
(in thousands, except share data)
Cash and cash equivalents
$
3,112
$
23,098
$
Cumulative redeemable convertible preferred
    stock, no par value:
1,227,500 shares authorized and 902,419 shares
    issued and outstanding, actual; 1,677,500 authorized and
    1,231,955 shares issued and outstanding, pro forma; and no
    shares authorized, issued or outstanding, pro forma as adjusted
60,656
80,656
Stockholders' (deficit) equity:
Common stock, $0.001 par value:
10,000,000 shares authorized, actual and pro
    forma;        shares
    authorized pro forma as adjusted; 910,000 shares issued and
    outstanding, actual; 910,000 shares issued and outstanding,
    pro forma;
    and         shares
    issued and outstanding, pro forma as adjusted
970
970
Deficit accumulated during the development stage
(59,154
)
(59,168
)
Total stockholders' (deficit) equity
(58,184
)
(58,198
)
Total capitalization
$
2,472
$
22,458
$
29
DILUTION
The historical net tangible book value of our
common stock as of June 30, 2003 was $(58.2) million,
or $(63.94) per share, based on the number of shares of common
stock outstanding as of June 30, 2003. Historical net
tangible book value per share is determined by dividing our
total tangible assets less total liabilities by the actual
number of outstanding shares of our common stock. The pro forma
net tangible book value of our common stock as of June 30,
2003 was $22.5 million, or $10.20 per share. Pro forma net
tangible book value per share is determined by dividing our
total tangible assets less total liabilities after giving effect
to the issuance of 329,536 shares of Series E cumulative
redeemable convertible preferred stock in August 2003 and the
conversion of all of our outstanding shares of preferred stock
and dividends accrued thereon through June 30, 2003 into
common stock by the actual number of shares of our common stock
plus the number of shares issuable upon conversion of all of our
outstanding shares of preferred stock and dividends accrued
thereon through June 30, 2003 into common stock after
giving effect to the issuance of 329,536 shares of Series E
cumulative redeemable convertible preferred stock in August 2003
as if such conversion had occurred on June 30, 2003.
After giving effect to the sale of common stock
offered in this offering at the assumed public offering price of
$          per
share, and after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us,
our pro forma as adjusted net tangible book value as of
June 30, 2003 would have been approximately
$                    million,
or
$          per
share of common stock. This represents an immediate increase in
pro forma net tangible book value of
$          per
share to existing stockholders and an immediate dilution of
$          per
share to new investors purchasing our common stock in this
offering. The following table illustrates this per share
dilution to the new investors:
Assumed initial public offering price
$
Historical net tangible book value per share as
    of June 30, 2003
$
(63.94
)
Pro forma net tangible book value per share as of
    June 30, 2003
$
10.20
Increase in pro forma net tangible book value per
    share attributable to this offering
Pro forma as adjusted net tangible book value per
    share after offering
Dilution per share to new investors in this
    offering
$
The following table summarizes, on a pro forma as
adjusted basis as of June 30, 2003, the differences between
the number of shares of common stock purchased from us, the
total consideration and the average price per share paid by
existing stockholders and by the new investors, before deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us, at an assumed initial public
offering price of
$          per
share:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
%
$
%
$
New investors
Total
100.0
%
$
100.0
%
If the underwriters exercise their option to
purchase additional shares of our common stock in full in this
offering, the pro forma as adjusted net tangible book value per
share after the offering would be
$                     per
share, the increase in pro forma net tangible book value per
share to existing stockholders would be
$                     per
share and the dilution to new investors purchasing shares in
this offering would be
$                     per
share.
If the underwriters exercise their over-allotment
option in full, the number of shares held by new investors will
increase
to                     ,
or
approximately           %
of the total number of shares of our common stock outstanding
after this offering.
30
The existing stockholders amounts in the table
above have been calculated on a pro forma basis, which includes
shares outstanding as of June 30, 2003 and excludes:
•
45,750 shares of common stock issuable upon
    exercise of options issued under our current stock option plans,
    at a weighted average exercise price of $48.79 per share; and
•
105,150 shares of common stock reserved for
    future issuance under our current stock option plans
    and                    shares
    of common stock reserved for future issuance under our 2003
    Equity Incentive Plan, 2003 Non-Employee Directors' Stock
    Option Plan and 2003 Employee Stock Purchase Plan, which we plan
    to adopt before the completion of this offering.
After this offering and assuming the exercise in
full of all of the foregoing options, our pro forma as adjusted
net tangible book value per share as of June 30, 2003 would
be
$          per
share, representing an immediate increase in net tangible book
value of
$          per
share to existing stockholders and an immediate dilution in net
tangible book value of
$          per
share to new investors.
31
SELECTED FINANCIAL DATA
The selected financial data below should be read
in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and the financial statements, notes thereto and other financial
information included elsewhere in this prospectus. The selected
financial data for each of the five fiscal years in the period
ended December 31, 2002 are derived from our financial
statements which have been examined and reported upon by Ernst
& Young LLP, independent public accountants. See
"Experts." The data presented for the six-month
periods ended June 30, 2002 and June 30, 2003 are
derived from unaudited financial statements and include, in the
opinion of management, all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the data
for such periods. The results for the six-month period ended
June 30, 2003 are not necessarily indicative of the results
to be expected for the full fiscal year.
Pro forma net loss per share for the year ended
December 31, 2002 and the six months ended
June 30, 2003 is computed using the weighted average number
of shares of common stock outstanding, including the pro forma
effects of the automatic conversion of our preferred stock and
dividends accrued thereon into shares of common stock effective
upon the closing of the offering as if such conversion occurred
on January 1, 2002 and January 1, 2003 or at the date
of the original issuance, if later. The calculation of pro forma
net loss per share attributable to common stockholders excludes
incremental common stock issuable upon exercise of options, as
its effect would be antidilutive.
Cumulative
Period from
September
Six Months Ended
24, 1997
Year Ended December 31,
June 30,
(date of
inception) to
1998
1999
2000
2001
2002
2002
2003
June 30, 2003
(unaudited)
(unaudited)
(in thousands, except share and per share data)
Statement of Operations Data:
Operating expenses:
Research and development
$
185
$
518
$
2,679
$
5,744
$
9,285
$
3,975
$
4,703
$
22,298
General and administrative
179
256
1,203
2,187
2,405
1,105
1,411
8,457
Depreciation
19
45
80
215
332
153
175
865
Total operating expenses
383
819
3,962
8,146
12,022
5,233
6,289
31,620
Other income:
Research and development income
225
—
—
—
—
—
—
225
Interest income
42
69
150
83
156
55
43
543
Total other income
267
69
150
83
156
55
43
768
Net loss
(116
)
(750
)
(3,812
)
(8,063
)
(11,866
)
(5,178
)
(6,246
)
(30,852
)
Accrued preferred stock dividends
—
(82
)
(297
)
(790
)
(2,147
)
(858
)
(1,366
)
(4,684
)
Adjustment to preferred stock redemption value
—
—
(21,077
)
(57
)
(7,220
)
(7,036
)
4,736
(23,618
)
Net loss attributable to common stockholders
$
(116
)
$
(832
)
$
(25,186
)
$
(8,910
)
$
(21,233
)
$
(13,072
)
$
(2,876
)
$
(59,154
)
Net loss per share attributable to common
    stockholders:
Basic
$
(.13
)
$
(.91
)
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.16
)
Diluted
$
(.13
)
$
(.91
)
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.34
)
Weighted average shares used in computing net
    loss per share attributable to common stockholders:
Basic
910,000
910,000
910,000
910,000
910,000
910,000
910,000
Diluted
910,000
910,000
910,000
910,000
910,000
910,000
1,869,021
Pro forma net loss per share attributable to
    common stockholders — basic and diluted
$
(6.81
)
$
(3.34
)
Shares used in computing pro forma net loss per
    share attributable to common stockholders — basic and
    diluted
1,742,563
1,869,021
32
With respect to June 30, 2003, the following
table presents a summary of our balance sheet:
•
on an actual basis; and
•
on a pro forma basis to give effect to the
    issuance of 329,536 shares of Series E cumulative
    redeemable convertible preferred stock on August 7, 2003
    for net proceeds of approximately $20.0 million.
As of December 31,
As of June 30, 2003
1998
1999
2000
2001
2002
Actual
Pro Forma
(unaudited)
(in thousands)
Balance Sheet Data (at period end):
Cash and cash equivalents
$
748
$
1,542
$
2,667
$
8,834
$
8,925
$
3,112
$
23,098
Working capital
742
1,434
2,241
8,544
7,654
1,544
21,530
Total assets
871
1,677
3,201
10,117
10,030
4,064
24,050
Cumulative redeemable convertible preferred stock
—
1,537
27,912
43,702
64,026
60,656
80,656
Deficit accumulated during development stage
(116
)
(866
)
(26,135
)
(35,045
)
(56,278
)
(59,154
)
(59,168
)
Total stockholders'
(deficit) equity
854
21
(25,165
)
(34,075
)
(55,308
)
(58,184
)
(58,198
)
33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should
be read in conjunction with our financial statements and related
notes included elsewhere in this prospectus. This discussion may
contain forward-looking statements based upon current
expectations that involve risks and uncertainties. Our actual
results and the timing of selected events could differ
materially from those anticipated in these forward-looking
statements as a result of several factors, including those set
forth under "Risk Factors" and elsewhere in this
prospectus.
GTx is a biopharmaceutical company dedicated to
the discovery, development and commercialization of therapeutics
primarily related to the treatment of serious men's health
conditions. Our drug discovery and development programs are
focused on small molecules that selectively modulate the effects
of estrogens and androgens, two essential classes of hormones.
We currently have two product candidates that are in human
clinical trials. We are developing Acapodene, our most advanced
product candidate, through clinical trials for two separate
indications: (1) a Phase IIb clinical trial for the
reduction in the incidence of prostate cancer in men with
precancerous prostate lesions and (2) a planned pivotal
Phase III clinical trial for the treatment of serious side
effects of advanced prostate cancer therapy. We are initially
developing our second product candidate, Andarine, for the
treatment of cachexia from various types of cancer. Andarine is
the most advanced of our internally discovered portfolio of
compounds designed to modulate the effects of hormones. We plan
to build a specialized sales and marketing capability to market
our product candidates directly to the relatively small and
concentrated community of urologists and medical oncologists in
the United States and seek collaborators to commercialize our
product candidates where the target physician market is broader
than urologists and medical oncologists and outside the United
States.
To date, we have not generated any product
revenue, and we have financed our operations and internal growth
almost exclusively through private placements of preferred
stock. We are a development stage company and have incurred
significant losses since our inception in 1997 as we have
devoted substantially all of our resources to research and
development, including our clinical trials. As of June 30,
2003, we had a deficit accumulated during the development stage
of $59.2 million. Our accumulated deficit resulted primarily
from:
•
our research and development activities
    associated with Acapodene for the reduction in the incidence of
    prostate cancer in men with high grade PIN, including our Phase
    IIb clinical trial; Acapodene for the treatment of side effects
    of androgen deprivation therapy, including two Phase II clinical
    trials; Andarine for the treatment of cachexia from various
    forms of cancer, including three Phase I clinical trials; and
    other product candidates;
•
general and administrative expenses; and
•
non-cash dividends and adjustments to the
    preferred stock redemption value of $28.3 million related
    to our cumulative redeemable convertible preferred stock. See
    "Critical Accounting Policies — Adjustment to
    Preferred Stock Redemption Value."
We expect to continue to incur net losses over
the next several years as we continue our clinical development
and research and development activities, apply for regulatory
approvals, establish sales and marketing capabilities and expand
our operations.
Research and Development
Since our inception, we have been focused on drug
discovery and development programs. Research and development
expenses represented approximately 75% of our total operating
34
expenses for the six-month period ended
June 30, 2003. Research and development expenses include
our expenses for:
•
personnel associated with our research activities;
•
screening and identification of product
    candidates;
•
formulation and synthesis activities;
•
manufacturing;
•
preclinical studies, including toxicology studies;
•
clinical trials;
•
regulatory affairs; and
•
quality assurance activities.
The following table identifies for each of our
major drug discovery and development programs our lead product
candidates, the development phase of each lead product
candidate, the status of each lead product candidate and
research and development spending for each lead product
candidate for each of the periods presented. Research and
development spending for past periods is not indicative of
spending in future periods.
Research & Development Spending
(in thousands)
Six Months
Program/
Year Ended
Ended
Inception
Product
December 31,
June 30,
Through
Candidate/
Development
June 30,
Indication
Phase
Status
2000
2001
2002
2002
2003
2003
SERM Program
Acapodene
• Reduction in the incidence of
    prostate cancer in men with high grade PIN
Phase IIb clinical trial
Enrollment complete; last patient scheduled to
    complete trial in May 2004; final results expected in the third
    quarter of 2004
$
1,984
$
2,436
$
3,168
$
1,221
$
1,643
$
9,934
• Side effects of androgen deprivation
    therapy
Pivotal Phase III clinical trial planned
Pivotal Phase III clinical trial expected to
    commence in November 2003
$
—
$
—
$
807
$
421
$
364
$
1,171
SARM Program
Andarine
• Cachexia from various types of cancer
Three Phase I clinical trials completed
Phase II clinical trials for treatment of
    cachexia from non-small cell lung cancer scheduled to begin in
    the first half of 2004
$
141
$
2,430
$
4,134
$
1,654
$
2,213
$
8,918
35
There is a risk that any drug discovery and
development program may not produce revenue. Moreover, because
of uncertainties inherent in drug discovery and development,
including those factors described in the "Risk
Factors" section of this prospectus, we may not be able to
successfully develop and commercialize any of the product
candidates included in the table above.
Drug development in the United States is a
process that includes several steps defined by the FDA. The FDA
approval process for a new drug involves completion of
preclinical studies and the submission of the results of these
studies to the FDA, together with proposed clinical protocols,
manufacturing information, analytical data and other information
in an Investigational New Drug application, or IND, which must
become effective before human clinical trials may begin.
Clinical development typically involves three phases of study:
Phase I, II and III. The most significant costs associated
with clinical development are the Phase III clinical trials
as they tend to be the longest and largest studies conducted
during the drug development process. After completion of
clinical trials, a New Drug application, or NDA, may be
submitted to the FDA. In responding to an NDA, the FDA may
refuse to file the application, or if accepted for filing, the
FDA may grant marketing approval, request additional information
or deny the application if it determines that the application
does not provide an adequate basis for approval.
The successful development of our product
candidates is highly uncertain. We cannot reasonably estimate or
know the nature, timing and estimated costs of the efforts
necessary to complete the development of, or the period in which
material net cash inflows are expected to commence from, any of
our product candidates due to the numerous risks and
uncertainties associated with developing drugs, including the
uncertainty of:
•
the scope, rate of progress and cost of our
    clinical trials and other research and development activities;
•
future clinical trial results;
•
the terms and timing of any collaborative,
    licensing and other arrangements that we may establish;
•
the cost and timing of regulatory approvals;
•
the cost and timing of establishing sales,
    marketing and distribution capabilities;
•
the cost of establishing clinical and commercial
    supplies of our product candidates and any products that we may
    develop;
•
the effect of competing technological and market
    developments; and
•
the cost of filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights.
Any failure to complete the development of our
product candidates in a timely manner could have a material
adverse effect on our operations, financial position and
liquidity. A discussion of the risks and uncertainties
associated with completing our projects on schedule, or at all,
and some consequences of failing to do so, are set forth in the
"Risk Factors" section of this prospectus.
Results of Operations
Comparison of Six Months Ended
June 30, 2003 and June 30, 2002
Research and
Development.
Research and
development expenses increased 17.5% to $4.7 million for
the six months ended June 30, 2003 from $4.0 million
for the six months ended June 30, 2002. This increase was
primarily due to an increase in clinical trial expenses for the
Phase IIb clinical trial of Acapodene for the reduction in
the incidence of prostate cancer in men with high grade PIN of
approximately $422,000, as enrollment in the clinical trial was
completed in May
36
2003 and Phase I clinical trial expenses for
Andarine of approximately $559,000. These increases were offset
in part by a reduction in research and development spending on
other product candidates by approximately $195,000.
We expect that research and development
expenditures will continue to increase substantially during 2003
and subsequent years due to (1) the planned commencement in
November 2003 of a pivotal Phase III clinical trial of
Acapodene for the treatment of side effects of androgen
deprivation therapy, (2) the completion of the current
Phase IIb clinical trial in 2004 and planned commencement of a
pivotal Phase III clinical trial of Acapodene for the
reduction in the incidence of prostate cancer in men with high
grade PIN and (3) the continued development of Andarine,
including a Phase II clinical trial scheduled to begin in
the first half of 2004. We expect to expand the scope of our
drug discovery and development programs in future periods, which
may result in substantial increases in research and development
expenses.
General and
Administrative.
General and
administrative expenses consist primarily of the costs of
administrative personnel and related facilities and legal,
accounting, human resources, information technology, public
relations and other professional services. In the future,
general and administrative expenses will also include the costs
of sales and marketing. General and administrative costs
increased 27% to $1.4 million for the six months ended
June 30, 2003 from $1.1 million for the six months
ended June 30, 2002. The increase was primarily due to an
increase in salary and benefits expense of approximately
$111,000 resulting from increases in staffing levels, annual
salary increases and increased health insurance costs and an
approximate $69,000 increase in legal fees.
We expect that general and administrative
expenditures will increase during 2003 and subsequent years due
to increasing payroll, public company expenses, our initial
commercialization expenses, business development costs and
expanded operational infrastructure.
Interest
Income.
Interest income for the
six months ended June 30, 2003 was $43,000 and decreased
from the corresponding period in 2002 as a result of a decrease
in the average cash and cash equivalents balance and overall
interest rates.
Adjustment to Preferred Stock Redemption
Value.
The adjustment to preferred
stock redemption value consists of the amount of the change in
the redemption value, which is the greater of the liquidation
value and fair value, of the preferred stock. For the
six months ended June 30, 2003, the amount of the
adjustment was a decrease of $4.7 million. For the
six months ended June 30, 2002, the amount of the
adjustment was an increase of $7.0 million. See
"Critical Accounting Policies — Adjustment to
Preferred Stock Redemption Value."
Comparison of Years Ended December 31,
2002 and December 31, 2001
Research and
Development.
Research and
development expenses increased 62% to $9.3 million for the
year ended December 31, 2002 from $5.7 million for the
year ended December 31, 2001. This increase was primarily
due to an increase in clinical trial expenses for the Phase IIb
clinical trial of Acapodene for the reduction in the incidence
of prostate cancer in men with high grade PIN of approximately
$732,000 and an increase in clinical trial expenses for two
Phase II clinical trials of Acapodene for the treatment of
side effects of androgen deprivation therapy of approximately
$807,000. In addition, preclinical toxicology studies,
formulation and synthesis activities, manufacturing activities
and clinical development activities for Andarine increased
research and development expenses by approximately
$1.7 million. Research and development expenses related to
other product candidates increased by approximately $297,000 for
the year ended December 31, 2002 as compared to the prior
year.
General and
Administrative.
General and
administrative expenses increased 10% to $2.4 million for
the year ended December 31, 2002 from $2.2 million for
the year ended December 31, 2001. This increase was
primarily due to an increase in salary and benefits expense
37
by approximately $419,000 associated with
increases in staffing levels, offset by a reduction in legal
fees of approximately $72,000 and travel expenses of
approximately $40,000. In addition, general and administrative
expenses for the year ended December 31, 2001 included
interest expense on notes payable of approximately $71,000.
There were no notes outstanding in the year ended
December 31, 2002.
Interest
Income.
Interest income increased
87% to approximately $156,000 for the year ended
December 31, 2002 from approximately $83,000 for the year
ended December 31, 2001. The increase was principally
attributable to higher average cash and cash equivalents
balances during the year ended December 31, 2002 as
compared to the prior year.
Adjustment to Preferred Stock Redemption
Value.
For the year ended
December 31, 2002, the adjustment to preferred stock
redemption value was an increase of $7.2 million compared
to an increase of $57,000 for the year ended December 31,
2001. The adjustments were due to a change in the redemption
value of the preferred stock.
Comparison of Years Ended December 31,
2001 and December 31, 2000
Research and
Development.
Research and
development expenses increased 114% to $5.7 million for the
year ended December 31, 2001 from $2.7 million for the
year ended December 31, 2000. This increase was primarily
due to an increase in research and development expenses for
Andarine of approximately $2.3 million, which included
preclinical toxicology studies, formulation and synthesis
activities, manufacturing activities and clinical development
activities, and an increase in clinical trial expenses for the
Phase IIb clinical trial of Acapodene for the reduction in
the incidence of prostate cancer in men with high grade PIN of
approximately $450,000. Research and development expenses on
other product candidates increased by approximately $325,000 for
the year ended December 31, 2001 compared to the prior year.
General and
Administrative.
General and
administrative expenses increased 83% to $2.2 million for
the year ended December 31, 2001 from $1.2 million for
the year ended December 31, 2000. This increase was
primarily due to an increase in salary and benefits expense by
approximately $460,000 associated with increases in staffing
levels, an increase of occupancy expense of approximately
$105,000, an increase in legal fees of approximately $112,000,
as well as increases in other general and administrative
expenses. In addition, general and administrative expenses for
the year ended December 31, 2001 included interest expense
on notes payable of approximately $71,000. There were no notes
outstanding in the year ended December 31, 2000.
Interest
Income.
Interest income decreased
45% to $83,000 for the year ended December 31, 2001 from
$150,000 for the year ended December 31, 2000. The decrease
was principally attributable to lower average cash and cash
equivalents balances during the year ended December 31,
2001 as compared to the prior year.
Adjustment to Preferred Stock Redemption
Value.
For the year ended
December 31, 2001, the adjustment to preferred stock
redemption value was an increase of $57,000 compared to an
increase of $21.1 million for the year ended
December 31, 2000. The adjustments were due to a change in
the redemption value of the preferred stock.
Liquidity and Capital Resources
We have not generated any product revenue, and we
have financed our operations and internal growth almost
exclusively through private placements of preferred stock. We
have incurred significant losses since our inception in 1997. As
of June 30, 2003, we had a deficit accumulated during the
development stage of $59.2 million.
38
The following table summarizes our issuances of
preferred stock through August 31, 2003.
Series
Date
Number of Shares
Approximate Gross Proceeds
(in thousands)
A
May 1999
200,000
$
1,455
B
July 2000
277,500
5,000
C
October 2001
260,154
15,000
D
July 2002
164,765
11,000
E
August 2003
329,536
20,000
At August 31, 2003, we had cash and cash
equivalents of $21.4 million. At June 30, 2003, we had
cash and cash equivalents of $3.1 million, compared to
$8.9 million at December 31, 2002, $8.8 million
at December 31, 2001 and $2.7 million at
December 31, 2000.
Net cash used in operating activities was
$10.6 million and $5.8 million for the year ended
December 31, 2002 and the six months ended June 30,
2003. The use of cash in both periods resulted primarily from
funding our net losses.
Net cash used in investing activities was
$313,000 and $39,000 for the year ended December 31, 2002
and the six months ended June 30, 2003. This was primarily
for the purchase of research and development equipment.
Net cash provided by financing activities, which
resulted from the sale of preferred stock, was
$11.0 million for the year ended December 31, 2002.
There were no financing activities during the six months ended
June 30, 2003. On August 7, 2003, we sold
329,536 shares of Series E preferred stock and
received gross proceeds of $20.0 million.
We believe that the net proceeds from this
offering, our current cash resources and interest on these funds
will be sufficient to meet our projected operating requirements
through the end of 2005. In addition to the net proceeds of this
offering, we estimate that we will need to raise additional
funds in the amount of approximately $70 million, assuming
that we do not enter into collaborative arrangements for any of
our product candidates, in order to commercialize Acapodene and
Andarine for the indications currently being tested.
Our forecast of the period of time through which
our financial resources will be adequate to support our
projected operating requirements is a forward-looking statement
and involves risks and uncertainties, and actual results could
vary as a result of a number of factors, including the factors
discussed in the "Risk Factors" section of this
prospectus. We have based this estimate on assumptions that may
prove to be wrong, and we could utilize our available capital
resources sooner than we currently expect. Because of the
numerous risks and uncertainties associated with the development
of our product candidates and other research and development
activities, including risks and uncertainties that could impact
the rate of progress of our development activities, we are
unable to estimate with certainty the amounts of increased
capital outlays and operating expenditures associated with our
current and anticipated clinical trials and other research and
development activities. Our future funding requirements will
depend on many factors, including:
•
the scope, rate of progress and cost of our
    clinical trials and other research and development activities;
•
future clinical trial results;
•
the terms and timing of any collaborative,
    licensing and other arrangements that we may establish;
•
the cost and timing of regulatory approvals;
•
the cost and timing of establishing sales,
    marketing and distribution capabilities;
39
•
the cost of establishing clinical and commercial
    supplies of our product candidates and any products that we may
    develop;
•
the effect of competing technological and market
    developments;
•
the cost of filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights; and
•
the extent to which we acquire or invest in
    businesses, products and technologies, although we currently
    have no commitments or agreements relating to any of these types
    of transactions.
We do not anticipate that we will generate
product revenue for a number of years. Until we can generate a
sufficient amount of product revenue, if ever, we expect to
finance future cash needs through public or private equity
offerings, debt financings or corporate collaboration and
licensing arrangements, as well as through interest income
earned on cash balances. We do not currently have any
commitments for future external funding. We cannot be certain
that additional funding will be available on acceptable terms,
or at all. To the extent that we raise additional funds by
issuing equity securities, our stockholders may experience
dilution, and debt financing, if available, may involve
restrictive covenants. To the extent that we raise additional
funds through collaboration and licensing arrangements, it may
be necessary to relinquish some rights to our technologies or
product candidates, or grant licenses on terms that are not
favorable to us. If adequate funds are not available, we may be
required to delay, reduce the scope of or eliminate one or more
of our research or development programs or to obtain funds
through collaborations with others that are on unfavorable terms
or that may require us to relinquish rights to some of our
technologies or product candidates that we would otherwise seek
to develop on our own.
We have no long-term debt, and, as of
June 30, 2003, we had contractual obligations related to a
facilities lease as follows:
Payments Due by Period
(in thousands)
Less than
After 5
Total
1 year
1-3 years
4-5 years
years
Contractual obligations
$
422
$
94
$
328
$
—
$
—
Our long-term commitments under the operating
lease shown above consist of payments relating to a lease for
laboratory and office space at 3 North Dunlap Street,
Memphis, Tennessee. This lease expires on September 30,
2005. This lease is terminable by either party on
90 days' notice. The table above excludes contingent
payments under the license agreements to which we are a party.
Critical Accounting Policies
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,
liabilities, revenues, expenses and related disclosures. Actual
results could differ from those estimates. We believe that the
following critical accounting policies affect the more
significant judgments and estimates used in the preparation of
our financial statements.
Accounting for Income Taxes
Our income tax policy records the estimated
future tax effects of temporary differences between the tax
basis of assets and liabilities and amounts reported in the
accompanying balance sheets, as well as operating loss and tax
credit carryforwards. We have recorded a full valuation
allowance to reduce our deferred tax assets as, based on
available objective evidence, it is more likely than not that
the deferred tax asset will not be realized. In the event that
we determine that we will be able to
40
realize our deferred tax assets in the future, an
adjustment to the valuation allowance would increase net income
in the period such determination is made.
Stock-Based Compensation
In accordance with Accounting Principles Board
Opinion No. 25 and related interpretations, we do not
recognize compensation expense when we issue stock options to
employees and non-employee directors, unless the exercise price
is below the fair market value of the stock on the date of
grant. Our compensation expense would have been approximately
$111,000 higher and our diluted net loss per share would
have been approximately $0.13 higher in 2002 had we
recognized an expense equal to the estimated fair market value
of employee stock options granted through December 31, 2002
amortized over the vesting period of the options. For more
information on this subject, you should refer to Note 11 to
our financial statements included elsewhere in this prospectus.
Adjustment to Preferred Stock Redemption
Value
We recognize changes in the redemption value of
our preferred stock immediately as they occur and adjust the
carrying value of the preferred stock to equal the redemption
value at the end of each reporting period. The preferred stock
is subject to redemption on or after August 31, 2006 at a
price per share equal to the greater of (1) the liquidation
value, which includes accrued dividends or (2) the fair
value calculated on an as-if converted to common stock basis. We
determine fair value considering factors such as the share price
of preferred stock issuances, achievement of significant
milestones in the clinical trials and general market conditions.
Although we consider these factors in determining fair value,
this determination is, by its nature, subjective and subject to
change in the future based upon a number of factors. The changes
in redemption value affect the loss attributable to common
stockholders, the preferred stock carrying values and the
deficit accumulated during the development stage.
Quantitative and Qualitative Disclosures about
Market Risk
Our exposure to market risk for changes in
interest rates relates to our cash equivalents on deposit in
highly liquid money market funds. The primary objective of our
cash investment activities is to preserve principal while at the
same time maximizing the income we receive from our invested
cash without significantly increasing risk of loss. We do not
use derivative financial instruments in our investment
portfolio. Our cash and investments policy emphasizes liquidity
and preservation of principal over other portfolio
considerations.
We have operated primarily in the United States.
Accordingly, we do not have any material exposure to foreign
currency rate fluctuations. However, if we are successful in our
efforts to commercialize Acapodene, our exposure to foreign
currency rate fluctuations may increase because we are obligated
to pay Orion in Euros.
Recent Accounting Pronouncements
In December 2002, the Financial Accounting
Standards Board, or FASB, issued SFAS No. 148
"Accounting for Stock-Based
Compensation — Transition and Disclosure,"
which provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based employee compensation. SFAS No. 148 also
requires that disclosures of the pro forma effect of using the
fair value method of accounting for stock-based employee
compensation be displayed more prominently and in a tabular
format. Additionally, SFAS No. 148 requires disclosure of
the pro forma effect in interim financial statements. The
transition and annual disclosure requirements of SFAS
No. 148 are effective for fiscal years ended after
December 15, 2002. The interim disclosure
41
requirements are effective for interim periods
beginning after December 15, 2002. The adoption of this
standard did not have a material impact on our financial
statements.
In January 2003, the FASB issued FASB
Interpretation No. 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics
of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties.
FIN 46 is effective immediately for all new variable interest
entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be
applied for the first interim or annual period ending after
December 15, 2003. We did not have any ownership in any
variable interest entities as of December 31, 2002. We will
apply the consolidation requirement of FIN 46 in future
periods if we own any interest in any variable interest entity.
In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity." SFAS
No. 150 requires that certain financial instruments, which
under previous guidance could be accounted for as equity, be
classified as liabilities in the statement of financial
position. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003. We
do not expect the adoption of SFAS No. 150 to have a
significant impact on our financial statements.
42
BUSINESS
Overview
GTx is a biopharmaceutical company dedicated to
the discovery, development and commercialization of therapeutics
primarily related to the treatment of serious men's health
conditions. Our drug discovery and development programs are
focused on small molecules that selectively modulate the effects
of estrogens and androgens, two essential classes of hormones.
We currently have two product candidates that are in human
clinical trials. We are developing Acapodene, our most advanced
product candidate, through clinical trials for two separate
indications: (1) a Phase IIb clinical trial for the
reduction in the incidence of prostate cancer in men with
precancerous prostate lesions and (2) a planned pivotal
Phase III clinical trial for the treatment of serious side
effects of advanced prostate cancer therapy. We are initially
developing our second product candidate, Andarine, for the
treatment of cachexia from various types of cancer. Andarine is
the most advanced of our internally discovered portfolio of
compounds designed to modulate the effects of hormones.
Our most advanced product candidate is Acapodene,
which we are developing to reduce the incidence of prostate
cancer in men with precancerous prostate lesions. We have
licensed from Orion Corporation the right to develop, market and
distribute toremifene, the active pharmaceutical ingredient in
Acapodene, worldwide in the field of the prevention and
treatment of prostate cancer and the treatment of the principal
side effects of prostate cancer therapies. Scientific evidence
has established that men who have high grade, or advanced,
prostatic intraepithelial neoplasia, a precancerous prostate
lesion referred to as high grade PIN, are at high risk of
developing prostate cancer. Currently, there is no therapy for
the treatment of high grade PIN. We are conducting a
Phase IIb clinical trial in which we have enrolled
515 patients to determine the efficacy and safety of
Acapodene in reducing the incidence of prostate cancer in men
with high grade PIN. The last patient is scheduled to complete
this trial in May 2004, with final results expected in the
third quarter of 2004.
We are also developing Acapodene for the
treatment of side effects of androgen deprivation therapy, which
reduces blood levels of testosterone and is the only medical
treatment for men who have advanced, recurrent or metastatic
prostate cancer. Androgen deprivation therapy has serious side
effects, including: severe bone loss, or osteoporosis, leading
to skeletal fractures; hot flashes; and breast pain and
enlargement, or gynecomastia. There are no drugs approved by the
FDA for the treatment of these side effects of androgen
deprivation therapy. We have completed two Phase II
clinical trials of Acapodene for this indication and expect to
commence a pivotal Phase III clinical trial in November
2003.
Our second product candidate is Andarine, which
we are initially developing for the treatment of cachexia from
various types of cancer, a potentially life-threatening
complication of many cancers. There are no drugs that have been
approved by the FDA for the treatment of cancer cachexia.
Although there are two commercially available drugs that are
being prescribed off-label for the treatment of some types of
cancer cachexia, chronic use of these drugs may result in
bleeding liver cysts and liver cell tumors. We discovered
Andarine internally through our drug discovery program. We have
completed three Phase I clinical trials of Andarine, and we
plan to commence a placebo-controlled, dose-finding
Phase II clinical trial for the treatment of cachexia from
non-small cell lung cancer in the first half of 2004.
We have a robust preclinical product candidate
pipeline of small molecules that modulate the effects of
hormones. Our current preclinical product candidate pipeline
focuses on the treatment of major indications in men's
health, including:
•
Prostarine for the treatment of benign prostatic
    hyperplasia, or BPH, a benign prostate enlargement that results
    in obstruction of the urinary tract;
•
Ostarine for the treatment of osteoporosis and
    andropause; and
•
Andromustine for the treatment of prostate cancer
    that is not responsive to androgen deprivation therapy.
43
We believe that our drug discovery capabilities
position us well to sustain our clinical pipeline through the
design and development of nonsteroidal small molecule drugs that
modulate the effects of hormones.
Scientific Background on Estrogens and
Androgens
Both estrogens and androgens are hormones that
play critical roles in men's health, regulating not only
the reproductive system, but also having important effects on
the muscular, skeletal, cardiovascular and central nervous
systems. In order for the body to function properly, a balance
must exist between estrogens and androgens.
Estrogens prevent bone loss and osteoporosis and
reduce the risk of skeletal fractures. In aging men, there is a
gradual increase in estrogen levels in the blood, which may
promote BPH, initiate prostate cancer and cause gynecomastia.
Testosterone is the predominant androgen in men.
Testosterone is important for mental well-being and for
masculine physical characteristics, such as muscle size and
strength, bone strength and male pattern hair growth and loss.
Testosterone also stimulates sebaceous glands, which can cause
acne. Male reproductive health is also dependent on testosterone
to maintain sexual interest, fertility, erectile function and
normal prostate growth. In aging men, there is a gradual
decrease in testosterone levels, leading to loss of muscle mass
and strength, reduced bone mineralization resulting in
osteoporosis and bone fractures, erectile dysfunction, decreased
sexual interest, depression and mood changes.
In order for estrogens and androgens to perform
their physiologic functions, they must interact with and
activate their hormone receptors. Hormone receptors are sites
located in tissues where hormones bind. Once a hormone binds
with its receptor, a series of cellular events is activated,
resulting in estrogenic or androgenic tissue effects.
Pharmaceuticals that target hormone receptors for
estrogens or androgens have been prescribed for over
50 years. The drugs that have been used to stimulate
androgen receptors are natural or synthetic hormones, known as
steroids. Steroids activate hormone receptors in all tissue
types in a non-selective manner. The absence of selectivity may
result in unwanted side effects, such as the potential
stimulation of latent prostate cancer, aggravation of existing
BPH, acne, hair growth and gynecomastia. Testosterone products
also have many pharmacologic limitations, such as an inability
to administer them orally. Instead, they must be given by
intramuscular injections, patches or gels. The delivery methods
of testosterone products are inconvenient for patients and in
some cases result in inconsistent levels of testosterone in the
blood.
There are also classes of small molecules that
are not steroids, but which bind to hormone receptors. These
small molecules may either stimulate or block hormone receptors
depending on the type of tissue in which the receptor is found.
A drug that can either block or stimulate the same hormone
receptor is called a receptor modulator. A drug that can either
block or stimulate a receptor in a tissue-selective manner may
be able to mimic the beneficial, and at the same time minimize
the unwanted, effects of natural or synthetic hormones.
A selective estrogen receptor modulator, or SERM,
is a small molecule that binds to and selectively modulates
estrogen receptors. SERMs have the ability to either stimulate
or block estrogen's activity in different tissue types.
SERMs have been shown to stimulate estrogen's beneficial
action in bone and block estrogen's harmful activity in the
breast. In addition, we believe that SERMs have the potential to
block estrogen's harmful activity in the prostate. Examples
of SERMs currently on the market include tamoxifen, which has
been prescribed to treat female and male breast cancer, and
raloxifene, which is used to prevent and treat female
post-menopausal osteoporosis.
Similarly, a selective androgen receptor
modulator, or SARM, is a small molecule that binds to and
selectively modulates androgen receptors. In men, we believe
that SARMs will be able to
44
stimulate testosterone's beneficial action
in bone, muscle and brain, while blocking testosterone's
harmful action in the prostate and skin. We further believe that
SARMs will have the ability to either cross or not cross into
the central nervous system and to selectively modulate receptors
depending on tissue type. As a result, although no SARMs have
been commercialized to date, we believe that SARMs could be
developed to treat a range of medical conditions and
physiological functions, including: (1) low testosterone
conditions, such as hypogonadism and andropause; (2) muscle
wasting conditions of chronic diseases, such as cancer, AIDS,
end stage renal disease, or ESRD, and neurodegenerative
disorders, as well as muscle wasting from trauma and burns;
(3) disorders of the central nervous system, such as low
libido, depression and other mood disorders; (4) male
reproductive functions, such as infertility, male contraception
and erectile dysfunction; (5) prostate disorders, such as
high grade PIN, BPH and prostate cancer; and (6) other
conditions, such as anemia, hair loss and male osteoporosis.
Product Candidates
The following table summarizes key information
about our product candidates:
Development
Program
Product Candidate/Indication
Phase
Status
SERM
Acapodene
- Reduction in the incidence of
    prostate cancer in men with high grade PIN
Phase IIb clinical trial
Enrollment complete; last patient scheduled to
    complete trial in May 2004; final results expected in the
    third quarter of 2004
- Side effects of androgen deprivation
    therapy
Pivotal Phase  III clinical trial planned
Pivotal Phase III clinical trial expected to
    commence in November 2003
SARM
Andarine
- Cachexia from various types of
    cancer
Three Phase I clinical trials completed
Phase II clinical trials for treatment of
    cachexia from non- small cell lung cancer scheduled to begin in
    the first half of 2004
Prostarine
- BPH
Preclinical
Preclinical studies to support IND in progress
Ostarine
- Male osteoporosis and andropause
Preclinical
Preclinical studies to support IND in progress
Anticancer
Andromustine
- Prostate cancer that is not
    responsive to androgen deprivation therapy
Preclinical
Preclinical studies to support IND in progress
Acapodene
Our most advanced product candidate, Acapodene,
is a SERM. Acapodene is taken orally and is being developed for
a once-a-day dosing schedule. We have licensed from Orion the
right to develop, market and distribute toremifene, the active
pharmaceutical ingredient in Acapodene, worldwide in the field
of the prevention and treatment of prostate cancer and the
prevention and treatment of osteoporosis, hot flashes and
gynecomastia as side effects of androgen deprivation therapy for
prostate cancer. Toremifene is an FDA-approved SERM product for
the treatment of
45
advanced breast cancer in post-menopausal women
that has been marketed in the United States as Fareston by Shire
Pharmaceuticals Group since 1999 and by other companies in other
countries for over 10 years. We licensed rights to
toremifene based on our belief that a SERM potentially could
reduce the incidence of prostate cancer in men with high grade
PIN and the established safety and efficacy record of toremifene
in the treatment of post-menopausal women with advanced breast
cancer. Orion manufactures commercial quantities of toremifene
for Shire and is supplying us with Acapodene under a supply
agreement.
The two indications for which we are developing
Acapodene target different patient populations:
(1) patients who have been diagnosed with high grade PIN,
but do not yet have prostate cancer; and (2) patients who
have been diagnosed with advanced, recurrent or metastatic
prostate cancer and are being treated with androgen deprivation
therapy.
Acapodene for the Reduction in the
Incidence of Prostate Cancer in Men with High Grade
PIN
Scientific Overview.
Patients who have an abnormal
result from a serum PSA test, a prostate cancer blood test that
is commonly administered to men as part of physical
examinations, or an abnormal digital rectal examination undergo
a prostate biopsy to determine whether they have prostate
cancer. High grade PIN, rather than prostate cancer, is detected
in approximately 10% of the patients who undergo prostate
biopsies. Over the last 17 years, scientific evidence has
established that men who have high grade PIN are at high risk of
developing prostate cancer. Scientific studies have shown that
prostate cancer is found in approximately 30% to 71% of high
grade PIN patients within one year of a high grade PIN diagnosis
and in 45% to 80% of high grade PIN patients within five years
of a high grade PIN diagnosis. Because of this correlation
between high grade PIN and prostate cancer, we believe that
treating high grade PIN may reduce the incidence of prostate
cancer.
Estrogens play an important role in the
initiation of prostate cancer. One way estrogens may influence
the initiation of prostate cancer is by stimulating high grade
PIN and causing it to progress into prostate cancer. Estrogen
receptors are found in the prostate and in high grade PIN
lesions. In animal models of prostate cancer, blocking
estrogens' action has been shown to regress high grade PIN
and reduce the incidence of prostate cancer. Because Acapodene
is designed to directly block estrogen receptors, we believe
that it has the potential to reduce the incidence of prostate
cancer in men with high grade PIN.
Potential Market.
Prostate cancer is one of the most
commonly diagnosed cancers in men and the second leading cause
of cancer-related deaths in the United States. There are 400,000
new cases of prostate cancer diagnosed and 239,000 prostate
cancer deaths annually worldwide. In the United States, there
are over 115,000 new cases of high grade PIN diagnosed each
year, and an estimated 9.4 million men unknowingly harbor
high grade PIN.
Because there is currently no therapy for the
treatment of high grade PIN, patients who are diagnosed with
high grade PIN are subjected to repeat biopsies immediately
after diagnosis and then every three to six months in order to
detect the progression of high grade PIN into prostate cancer.
Prostate biopsies are performed through an ultrasound probe
placed in the rectum. Hollow needles are then inserted into the
prostate to obtain a core of tissue. Complications from this
procedure include bleeding, pain, prostate infection and
life-threatening blood infection. Because the prostate biopsy
technique randomly samples the prostate gland with a relatively
thin needle, both prostate cancer and high grade PIN may be
missed by the biopsy. Patients with high grade PIN are exposed
to the potential complications and the discomfort of invasive,
repeat prostate biopsies and suffer the mental anguish of
fearing that a diagnosis of prostate cancer may be imminent.
Clinical Trials.
In 2000, we completed a Phase IIa
clinical trial of Acapodene in 21 patients with high grade PIN.
The trial was conducted at the University of Tennessee. The
primary endpoint of the trial was the presence of high grade
PIN. Each participant in the trial received a daily oral dose of
Acapodene for four months. The trial was open label and not
placebo-controlled, and we did
46
not perform long-term follow-up on the patients
in the trial. Each patient underwent a prostate biopsy to detect
high grade PIN at the beginning and end of the four-month trial
period. Results showed that 72% of the trial participants had no
detectable high grade PIN in the prostate biopsy performed at
the end of the trial period. Based on studies reported in
scientific literature, only approximately 18% of patients with
untreated high grade PIN would be expected to have no high grade
PIN detected in their repeat biopsy. There were no serious
adverse events attributable to Acapodene in this trial.
Based on the results from our Phase IIa clinical
trial, in 2001, we began a placebo-controlled, randomized Phase
IIb clinical trial in men with recently diagnosed high grade PIN
to determine the efficacy and safety of a daily dose of
Acapodene at three dose levels for 12 months. The primary
endpoint of the trial is the incidence of prostate cancer, and
the secondary endpoint of the trial is the presence of high
grade PIN. Study patients undergo a series of eight core
prostate biopsies at six months and again at 12 months. In
order to minimize the inclusion of patients who have, at the
time of their enrollment in the trial, prostate cancer that was
missed in their initial biopsy, patients in whom prostate cancer
is detected six months after enrollment are removed from the
trial. Therefore, the prostate cancer incidence will be
determined based only on patients who receive Acapodene or the
placebo for the entire 12 months. The trial is being
conducted at 64 clinical sites across the United States and
is fully enrolled with approximately 515 patients.
A planned interim analysis of the first 120
patients in this clinical trial who underwent prostate biopsies
at six and again at 12 months was conducted in April 2003.
Results of the interim analysis showed that patients who
received Acapodene had a 10% to 17% incidence of prostate cancer
12 months after being diagnosed with high grade PIN,
depending on the dose of Acapodene, compared to a 23% incidence
in the placebo group. This represents an approximately 26% to
57% reduction in prostate cancer incidence in those patients who
received Acapodene compared to the placebo group.
To date, three serious adverse events have been
reported in the 515 patients participating in this
Phase IIb clinical trial. Because the safety results are
blinded, we do not know whether these events were experienced by
participants receiving Acapodene or the placebo. However, we
have not observed any trend relating these three serious adverse
events to Acapodene.
The last patient is scheduled to complete this
Phase IIb clinical trial in May 2004, with final results
expected in the third quarter of 2004. We believe that our
Phase IIb clinical trial for the reduction in the incidence
of prostate cancer in men with high grade PIN will support a
single pivotal Phase III clinical trial of Acapodene for
this indication. We are evaluating the protocol and timing of
this pivotal Phase III trial.
Acapodene for the Treatment of Side Effects
of Androgen Deprivation Therapy
Scientific
Overview.
The standard medical
treatment for patients who have advanced, recurrent or
metastatic prostate cancer is androgen deprivation, which is
accomplished either surgically by removal of the testes, or
chemically by treatment with luteinizing hormone releasing
hormone agonists, known as LHRH agonists. LHRH agonists work by
shutting off luteinizing hormone secretion by the pituitary
gland, which stops testosterone production by the testes.
Examples of commercially marketed LHRH agonists are Lupron and
Zoladex.
Side effects associated with LHRH agonists
include bone loss leading to osteoporosis and skeletal
fractures, muscle weakness, hot flashes, gynecomastia,
depression, loss of libido and erectile dysfunction. In
particular, of the patients treated with LHRH agonists,
approximately 60% experience osteoporosis, 22% develop bone
fractures, 55% to 80% experience hot flashes and 25% experience
gynecomastia. Bone loss leading to osteoporosis and skeletal
fractures is a significant clinical problem because prostate
cancer patients who develop skeletal fractures have shorter
survival rates compared to patients who do not develop skeletal
fractures, with the median survival time shortened by
39 months. Hot flashes occur because of the lack of
testosterone in the brain. Hot
47
flashes experienced by prostate cancer patients
taking LHRH agonists tend to be severe, frequent and protracted.
Based on the results of our Phase II
clinical trials and our preclinical testing of Acapodene, as
well as known information about toremifene, we believe that
Acapodene has estrogenic activity both in bone, which may
prevent osteoporosis, and in the brain, which may reduce hot
flashes. In addition, based on the same data and information, we
believe that Acapodene can block estrogen's action in the
male breast, which may prevent and treat gynecomastia. As a
consequence, we believe that Acapodene has the potential to
treat three serious side effects of LHRH agonists: osteoporosis,
hot flashes and gynecomastia.
Potential
Market.
In the United States, more
than 675,000 men are currently being treated with androgen
deprivation therapy for advanced, recurrent or metastatic
prostate cancer, with over 120,000 new patients started on this
therapy each year. An increasing number of prostate cancer
patients are being treated by androgen deprivation with LHRH
agonists earlier than in the past because of two main factors.
First, medical studies have shown that early androgen
deprivation therapy prolongs the survival of prostate cancer
patients. Second, the serum PSA test is detecting disease
earlier than in the past. However, the effect of this trend is
that the side effects of androgen deprivation therapy now
contribute significantly to the morbidity, and in some cases the
mortality, of men with prostate cancer. Physicians are
prescribing some drugs on an off-label basis to help ameliorate
some of the individual side effects of androgen deprivation
therapy. These drugs include bisphosphonates for osteoporosis,
Megace and antidepressants for hot flashes and tamoxifen for
gynecomastia. Radiation is also used to treat gynecomastia.
However, no single therapy is available to treat multiple side
effects of androgen deprivation therapy.
Clinical
Trials.
We have completed two
Phase II clinical trials of Acapodene for the treatment of
osteoporosis and hot flashes in patients with advanced,
recurrent or metastatic prostate cancer. The first Phase II
trial was conducted at five clinical sites across the United
States and treated 43 patients with advanced, recurrent or
metastatic prostate cancer shortly after initiation of treatment
with LHRH agonists. The second of these trials was conducted at
three clinical sites across the United States and treated
46 patients with advanced, recurrent or metastatic prostate
cancer who had been receiving LHRH agonists for more than
12 months. In each trial, participants were randomized to
either a daily oral dose of Acapodene or a placebo for six
months. The primary endpoint of both trials was bone mineral
density. The secondary endpoint of both trials was the incidence
of hot flashes. We measured bone mineral density and hot flash
symptoms at entry into each of the clinical trials and at six
months. We did not evaluate the effects of Acapodene on
gynecomastia in either of these trials. There were no serious
adverse events attributable to Acapodene in either of our
Phase II clinical trials.
In our first Phase II clinical trial, which
evaluated 43 patients shortly after initiation of treatment with
LHRH agonists, patients who received Acapodene at the highest
tested dose on average experienced an approximately 2% decrease
in lumbar vertebral spine bone mineral density at six months,
while the patients who received the placebo on average
experienced an approximately 4% decrease in lumbar vertebral
spine bone mineral density at six months. At the lower tested
doses, Acapodene, as compared to the placebo, did not have a
meaningfully different effect on lumbar vertebral spine bone
mineral density. There was no significant difference between
Acapodene and the placebo in the incidence of hot flashes at any
tested dose.
In our second Phase II clinical trial, which
evaluated 46 patients who had been receiving LHRH agonists for
more than 12 months, patients who received Acapodene at the
highest tested dose on average experienced a 3.5% increase in
lumbar vertebral spine bone mineral density, while the patients
who received the placebo on average experienced a 0.5% decrease
in lumbar vertebral spine bone mineral density. Only 12.5% of
the patients in this trial who received Acapodene at the highest
tested dose, compared to 50% of the patients who received the
placebo, reported experiencing an increase in the frequency of
hot flashes during the clinical trial. The magnitude of
48
the bone changes seen in treated patients in this
Phase II clinical trial were similar to those reported for
each of raloxifene and bisphosphonates in post-menopausal women
with osteoporosis and bisphosphonates being prescribed off-label
to men with prostate cancer. However, bisphosphonates have not
been shown to have any effect on hot flashes. At the lower
tested doses, Acapodene, as compared to the placebo, did not
have a meaningfully different effect on lumbar vertebral spine
bone mineral density or frequency of hot flashes.
We expect to commence in November 2003 a pivotal
Phase III clinical trial of Acapodene in patients
undergoing androgen deprivation therapy for advanced, recurrent
or metastatic prostate cancer. We are designing this pivotal
Phase III clinical trial principally based on the results
of our Phase II clinical trial that evaluated patients who
had been receiving LHRH agonists for more than 12 months.
The primary endpoint of the trial will be the incidence of
skeletal fractures. The secondary endpoints of the trial will
include the measurement of bone loss and the incidence of hot
flashes and gynecomastia. We expect that over 60 clinical
sites across the United States will participate in this study.
Approximately 1,200 patients with advanced, recurrent or
metastatic prostate cancer who have been receiving androgen
deprivation therapy for at least 24 months and who have
significant existing bone loss, or osteopenia, will be
randomized to receive either a placebo or a daily dose of
Acapodene for 24 months.
Andarine
Our second product candidate, Andarine, a SARM,
is the most advanced of our internally discovered portfolio of
compounds designed to target hormone receptors. Andarine is
taken orally and is being developed for a once-a-day dosing
schedule. We believe that Andarine has the potential to treat
andropause and related diseases, including male osteoporosis and
muscle wasting. Our strategy is to develop Andarine initially
for the treatment of a cachexia from various types of cancer. We
selected this indication because it represents a potentially
large market and, we believe, has a relatively well-defined
clinical and regulatory process. Depending on the results of our
initial development efforts, we may also develop Andarine for
other andropause-related conditions. For cachexia from various
types of cancer, we are developing Andarine for the treatment of
both men and women.
Andarine for the Treatment of Cancer
Cachexia
Scientific
Overview.
Cachexia is defined as
the loss of over 5% of a patient's original body weight.
Most of the weight loss attributable to cachexia comes from the
loss of lean body weight, resulting from muscle wasting. Cancer
causes the body to go into a starvation-like state that causes
cachexia. Cancer cachexia is diagnosed in approximately
one-third of newly-diagnosed cancer patients and accounts for
approximately 20% of cancer deaths. Weight loss is one of the
most important indicators of how long a cancer patient will live
since the survival of a patient with cancer is greatly impacted
by the degree and rate of muscle wasting. A cancer
patient's response to cancer chemotherapy is diminished by
weight loss. Cachexia results in weakness, fatigue and
immobility. A greater lean body weight may increase activity
levels, quality of life, response to chemotherapy and,
ultimately, survival time.
Testosterone increases lean body weight in both
men and women. One of the causes of cancer cachexia may be
reduced levels of testosterone. Testosterone therapy, however,
is not used for the treatment of cancer cachexia for two
reasons. First, the delivery methods for testosterone are
inconvenient for patients and in some cases result in
inconsistent levels of testosterone in the blood. Testosterone
cannot be given orally, but rather is given only by
intramuscular injections, patches or gels. Second, testosterone
has a number of undesirable side effects, such as the potential
stimulation of latent prostate cancer, aggravation of existing
BPH and gynecomastia in men and masculinizing effects in women
such as acne and facial hair.
49
We believe that Andarine is similar to
testosterone in activating androgen receptors in muscle, thereby
promoting lean body weight, but that it does not stimulate
sebaceous glands, the cause of hair growth and acne, or the
prostate, which exacerbates BPH. In addition, Andarine is taken
orally, which makes it convenient to administer.
Potential
Market.
There are approximately
1.3 million patients diagnosed with cancer each year in the
United States. Cancer cachexia afflicts approximately one-third
of newly-diagnosed cancer patients. Over 30 clinical trials of
supplemental nutritional support alone have reported little or
no benefit in counteracting cachexia in cancer patients
receiving chemotherapy or radiation. There are no drugs that
have been approved by the FDA for the treatment of cancer
cachexia. Although there are two commercially available drugs,
both steroids, that are being prescribed off-label for the
treatment of some types of cancer cachexia, chronic use of these
drugs may result in bleeding liver cysts and liver cell tumors.
Clinical
Trials.
We have completed three
Phase I clinical trials of Andarine in a total of
86 healthy male and female volunteers. We tested Andarine
for safety and tolerance in single and multiple doses. Results
from our Phase I trials support once-a-day oral dosing, and
no serious adverse events were observed at any single or
multiple dose tested. We observed preliminary indications in the
multiple-dose Phase I clinical trial in men that Andarine
promoted growth activity, as measured by levels of a growth
factor in the blood known as IGF-1, without affecting the
sebaceous glands. We believe that these observations support the
potential ability of Andarine to selectively modulate androgen
receptors in a tissue-specific manner.
We plan to commence a placebo-controlled
dose-finding Phase II clinical trial of Andarine in the
first half of 2004 for the treatment of cachexia from non-small
cell lung cancer. Cancer cachexia occurs frequently with lung
cancer, and the ensuing loss of lean body weight cannot be
attributed solely to reduced dietary intake. There are a large
number of patients, both male and female, with advanced lung
cancer and cancer cachexia, and lung cancer is representative of
several other types of cancer. As a result, we selected this
patient population to determine the safety and efficacy of
Andarine in the treatment of cachexia from non-small cell lung
cancer. In our planned Phase II clinical trial, we
anticipate that approximately 150 patients who have
non-small cell lung cancer and cancer cachexia will be
randomized to receive either a daily oral dose of Andarine or a
placebo for 12 weeks. The primary endpoint of the trial
will be muscle performance, and the secondary endpoints will be
lean body weight and other body composition measurements.
Prostarine and Ostarine
We are also developing other SARM product
candidates, including:
•
Prostarine for the treatment of BPH; and
•
Ostarine for the treatment of osteoporosis and
    andropause.
In animal models, Prostarine shrinks the prostate
gland, and Ostarine prevents bone loss and builds bone and
muscle. We are conducting preclinical and toxicology studies to
support the commencement of clinical trials.
Andromustine
Patients who have advanced, recurrent or
metastatic prostate cancer are initially treated with androgen
deprivation therapy. Since prostate cancer is dependent on
androgens, including testosterone, to grow, the reduction in
testosterone forces prostate cancer into remission.
Unfortunately, with time, prostate cancer circumvents the need
for testosterone and comes out of remission. Once prostate
cancer no longer responds to androgen deprivation, it is
referred to as hormone refractory.
50
Building on the technology of our SARM discovery
program, we have designed and are developing a small molecule,
Andromustine, that is designed to specifically target androgen
receptors and kill cancer cells. The Andromustine molecule has
two components: (1) the SARM part of the molecule, which is
designed to bind to the androgen receptor located on prostate
cancer cells; and (2) the chemotherapeutic part of the
molecule, which is designed to damage the DNA of prostate cancer
cells. In cell culture, Andromustine selectively kills human
metastatic prostate cancer cells. Because advanced prostate
cancers, including hormone refractory prostate cancer, have more
androgen receptors than the normal prostate, Andromustine is
designed to bind to and selectively kill advanced prostate
cancer cells.
There are over 675,000 men in the United States
being treated with LHRH agonists and other hormonal therapies
for prostate cancer. Hormone refractory prostate cancer will
eventually occur in a majority of these patients. There is
currently no effective chemotherapy for hormone refractory
prostate cancer. Once a patient develops hormone refractory
prostate cancer, his prognosis is poor.
We are in the process of conducting preclinical
and animal toxicology studies to support the commencement of
clinical trials of Andromustine.
Drug Discovery
Steroid hormone therapies, which include estrogen
and testosterone therapies, have been used to treat humans for
many years. Steroid hormones cannot, by their nature, have
selective effects in various tissues. As a result, they have
unintended side effects, which limit their clinical value.
SERM drugs, such as tamoxifen and raloxifene,
have achieved commercial success in treating women as
nonsteroidal small molecules that modulate hormone receptors in
a tissue selective way and minimize some of the side effects of
natural hormones. We believe that the success of SERMs indicates
that it is possible to design and develop classes of
nonsteroidal small molecule drugs to modulate hormone receptors
in addition to estrogen receptors.
We believe that our drug discovery expertise
positions us well to sustain our clinical pipeline through the
design and development of nonsteroidal small molecule drugs that
modulate hormone receptors. Our 19 in-house medicinal
chemists and scientists provide us with significant discovery
and development expertise. Using our capabilities in hormone
receptor biology and medicinal chemistry, we are able to target
many hormone receptors and generate compounds that are designed
to address the shortcomings of natural hormone therapies. We
augment our internal drug discovery capabilities through
agreements with two universities that provide for our close
collaboration with an additional 15 scientists, whose research
is largely dedicated to our drug discovery program.
We design and synthesize new compounds based on
computer, or
in silico,
models of a hormone
receptor's binding sites. We continually modify and improve
these
in silico
models to reflect our study of the
activity of new compounds in the laboratory, in which we
determine the link between chemical structures and biological
activity, or structure-activity relationships.
We also have significant medicinal scale-up
capabilities, which facilitate our rapid synthesis and
evaluation of new compounds. Throughout our discovery process,
we build diversity into our chemistry structures in order to
improve our likelihood of success in developing novel compounds
that have the potential to treat multiple indications. Through
this approach, we have generated a clinical product candidate
for the androgen receptor, Andarine, as well as additional
preclinical compounds of the SARM class and other structurally
diverse classes.
51
Our Strategy
Our objective is to develop and commercialize
small molecule drugs to target serious men's health
conditions. Key elements of our strategy to achieve this
objective are to:
Maximize Commercial Potential of
Acapodene
Obtain Regulatory Approval of
Acapodene.
We are focused on
completing clinical trials, obtaining regulatory approval and
preparing for the potential commercial launch of Acapodene.
Retain Commercial Rights to Acapodene and
Establish Sales and Marketing
Infrastructure.
We intend to
retain all commercial rights to Acapodene in the United States.
We believe that we can effectively market Acapodene to the
target physician audience of urologists and medical oncologists,
principally urological oncologists, in the United States through
a small, specialty sales force that we plan to build. We plan to
collaborate with pharmaceutical companies to commercialize,
market and sell Acapodene in Europe and Asia.
Extend Life Cycle of
Acapodene.
We intend to
reformulate Acapodene with the goals of seeking longer
intellectual property protection in the European and Asian
markets and extending its life cycle in the United States.
Develop Noninvasive Diagnostic Test for
High Grade PIN.
We plan to
collaborate with a large diagnostics company to develop a
noninvasive, accurate blood test to detect high grade PIN. We
believe that men would be more willing to be tested for high
grade PIN if the diagnostic test were less invasive than a
prostate biopsy. Given the large number of patients with
undiagnosed high grade PIN, we believe that the development of a
noninvasive test will increase the detection of high grade PIN
and thereby expand the already large potential market for
Acapodene.
Maximize Commercial Potential of
Andarine
Pursue Clinical Development of
Andarine.
We intend to continue to
aggressively pursue the clinical development of Andarine for the
treatment of cachexia from various types of cancer. In addition,
we may develop Andarine for the treatment of other causes of
cachexia, including ESRD, which represents a large potential
market with unmet medical needs. Andarine could also potentially
be developed and commercialized for other men's health
indications.
Strategically Seek
Collaborators.
Because it would
require a large sales force to address the cancer cachexia
market and because of the risks and costs of developing Andarine
for cachexia from various types of cancer, we plan to seek one
or more collaborators for the development and commercialization
of Andarine for cancer cachexia resulting from all types of
cancer other than urological cancers. We also plan to seek a
collaborator for potential Andarine indications requiring a
large sales force. For Andarine indications for which the target
physician market is likely to overlap with that of Acapodene,
including cancer cachexia resulting from urological cancers and
indications related to andropause, our plan is to market and
sell Andarine ourselves or to co-promote it with a collaborator
in the United States, and, in the rest of the world, to seek a
collaborator.
Build upon Our SARM and other Drug
Discovery Capabilities to Sustain Our Small Molecule Product
Candidate Pipeline
We intend to develop additional SARMs and other
small molecule products to treat diseases that affect large
numbers of patients and that are underserved by available
alternatives. While our drug discovery efforts to date have
focused on SERM and SARM technologies, we believe that we have
the capability to discover additional drug candidates that
target other hormone receptors. We plan to further strengthen
our drug discovery, medicinal chemistry and preclinical
pharmacology groups to sustain our pipeline of nonsteroidal
small molecules designed to modulate a range of hormone
receptors.
52
Licenses and Collaborative
Relationships
We have established and intend to continue to
pursue licenses from and collaborative relationships with
pharmaceutical companies and academic institutions.
Orion Corporation
Under a license and supply agreement with Orion,
we have a license from Orion to develop, use, market and
distribute toremifene, the active pharmaceutical ingredient of
Acapodene, under Orion's patents covering the composition
of matter of toremifene. This license is limited to the fields
of the prevention and treatment of prostate cancer and the
prevention and treatment of osteoporosis, hot flashes and
gynecomastia as side effects of androgen deprivation therapy in
the treatment of prostate cancer. We have a right of first
negotiation on a country-by-country basis to negotiate further
agreements with Orion for the development, sale and distribution
of specified products containing toremifene that are therapeutic
equivalents of Acapodene for other indications excluding breast
cancer.
Under the terms of the agreement, we paid Orion
an initial license fee and have agreed to pay Orion a royalty
based on net sales of Acapodene and a share of any consideration
we receive for sublicensing our rights under the agreement. We
also are required to pay Orion up to $1.0 million if we are
acquired before we receive marketing approval for the use of
Acapodene in the licensed field.
The agreement requires us to achieve specified
minimum sales requirements of Acapodene in the United States or
pay Orion royalties on the shortfall amount. Orion may require
us to modify our final Acapodene development plans for specified
major markets if such plans could adversely affect Fareston or
toremifene outside of the licensed field. We have granted Orion
a right of first negotiation for Scandinavian marketing rights
to Acapodene and to European rights if we do not have a
sublicensee in the United States to whom we have granted
European marketing rights. We have also agreed to negotiate with
Orion for a limited period of time the terms of an agreement
granting Orion the exclusive right to distribute Acapodene in
Japan, South Korea, China and Taiwan for use in the licensed
field. We and our affiliates are prohibited from selling a
product that competes with toremifene in the licensed field in
major countries located outside the European Union during the
term of the agreement and in major countries in the European
Union through October 2006.
The term of our license from Orion continues on a
country-by-country basis until the date of expiration or
invalidation of the last to expire or be invalidated of our
licensed patent rights. Each party has the right to terminate
the license under specified circumstances, including in the
event of a material breach by the other party that is not cured,
bankruptcy of the other party or if the other party is acquired
by a direct competitor with respect to toremifene. We also have
the right to terminate the agreement in any country if we decide
to discontinue the applications or withdraw the applications for
regulatory approval of Acapodene due to adverse reactions or
safety issues.
The license includes a right for us to use
toremifene for research required to obtain regulatory approval.
The results of such research are jointly owned by us and Orion,
and may be exploited by Orion outside our licensed field.
University of Tennessee Research
Foundation
We have exclusive, worldwide licenses from the
University of Tennessee Research Foundation under its method of
use patents relating to toremifene for the reduction in the
incidence of prostate cancer in men with high grade PIN and its
composition of matter and method of use patents and patent
applications relating to Andarine to market, distribute and sell
licensed products. We also have exclusive, worldwide licenses
from the University of Tennessee Research Foundation under its
composition of matter and method of use patent applications
relating to Prostarine and Ostarine to market, distribute and
sell licensed products.
53
Under the terms of these license agreements, we
have agreed to pay the University of Tennessee Research
Foundation a royalty based on net sales of licensed products and
sublicense income. We are also obligated to pay the University
of Tennessee Research Foundation an annual license maintenance
fee under each license agreement. The term of each of the
license agreements is the longer of 20 years or the term of
any licensed patent having a valid claim covering the licensed
technology. After the term of each license agreement expires, we
will have a perpetual, royalty-free license to the technology
licensed under that agreement. The University of Tennessee
Research Foundation has the right to terminate each of the
agreements under specified circumstances, including in the event
that we breach the agreement and do not cure the breach or in
the case of our bankruptcy. We are obligated to use commercially
reasonable efforts to develop and commercialize products based
on the licensed patents and patent applications.
Pursuant to the license agreements, we assign to
the University of Tennessee Research Foundation specified
patentable inventions arising out of or related to the licensed
patents. Upon our request, the University of Tennessee Research
Foundation will amend the license agreements to confirm our
exclusive licenses to such inventions assigned by us to the
University of Tennessee Research Foundation.
National Cancer Institute
We are providing the National Cancer Institute
with Acapodene for their use in an independent Phase II clinical
trial of Acapodene at the University of Pittsburgh. The
objective of the trial is to assess the biological effects of
Acapodene on the prostate gland. In this trial, 80 patients who
have been diagnosed with prostate cancer will be given a single
oral daily dose of Acapodene for 12 weeks prior to surgical
removal of their cancerous prostate.
Manufacturing
We do not currently own or operate manufacturing
facilities for the production of clinical or commercial
quantities of Acapodene or Andarine. We currently rely and
expect to continue to rely on third parties for the manufacture
of Acapodene, Andarine and any other product candidates or
products that we may develop.
We purchase Acapodene from Orion under a license
and supply agreement providing for clinical and commercial
supply of Acapodene. Orion has agreed to supply us with, and we
have agreed to purchase from Orion, our worldwide requirements
of Acapodene in finished tablet form at specified transfer
prices. Orion's manufacturing facility also produces
commercial quantities of toremifene tablets for Fareston and
complies with cGMP regulations. The methods used to manufacture
Acapodene are similar to those used to produce the 60 mg
toremifene tablet that has been approved by the FDA for the
treatment of advanced breast cancer and is marketed in the
United States as Fareston. The raw materials necessary to
manufacture toremifene are readily available, but Orion is our
only supplier of toremifene tablets.
Orion may terminate its obligation to supply us
with toremifene if:
•
marketing approval for Acapodene for use in the
    licensed field is not granted in the United States by
    December 31, 2007 or upon the expiration or invalidation of
    the last valid claim of the licensed Orion patent rights in the
    United States; or
•
subject to a prior notice requirement, if Orion
    permanently ceases the manufacture of toremifene.
Our license and supply agreement with Orion does
not provide us with the current right to manufacture toremifene.
However, there are a number of circumstances in which Orion is
required to grant manufacturing rights to us, including
following termination of its supply obligation as set forth
above, failure by Orion to supply product for 90 days or to
supply product in dosages or formulations
54
other than the dosages and formulations specified
in the agreement or termination of the agreement by us following
a breach by Orion. We would also be able to manufacture
Acapodene after expiration of the license agreement as a result
of the expiration of Orion's patents with respect to the
composition of matter of toremifene. However, in the event that
Orion terminates the license agreement as a result of a material
breach of the agreement by us that is not cured, our bankruptcy
or the acquisition of us by a direct competitor of Orion with
respect to toremifene, we would not obtain the right to
manufacture Acapodene and could not do so until Orion's
patents or related market exclusivity with respect to the
composition of matter of toremifene expire.
We have entered into an agreement with ChemSyn
Laboratories, a department of EaglePicher Technologies, LLC,
under which ChemSyn has agreed to manufacture Andarine for us in
a quantity that we believe is sufficient to supply clinical
trials of Andarine for the treatment of cachexia from various
types of cancer and initial commercialization of Andarine for
this indication. We do not have a contract with ChemSyn for the
supply of Andarine for full-scale commercialization. The active
ingredient in Andarine is manufactured using a four-step
synthetic process that uses commercially available starting
materials and raw materials for each step. There are no
complicated chemistries or unusual equipment required in the
manufacturing process.
Competition
The biotechnology and biopharmaceutical
industries are characterized by rapidly advancing technologies,
intense competition and a strong emphasis on proprietary
products. We face competition from many different sources,
including commercial pharmaceutical and biotechnology
enterprises, academic institutions, government agencies and
private and public research institutions.
Many of our competitors have significantly
greater financial resources and expertise in research and
development, manufacturing, preclinical testing, clinical
trials, regulatory approvals and marketing approved products
than we do. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative
arrangements with large and established companies. Our
commercial opportunity will be reduced or eliminated if our
competitors develop and commercialize products that are safer,
more effective, have fewer side effects or are less expensive
than Acapodene, Andarine or any other products that we may
develop. These third parties compete with us in recruiting and
retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for
clinical trials, as well as in acquiring technologies and
technology licenses complementary to our programs or
advantageous to our business.
Acapodene for the Reduction in the
Incidence of Prostate Cancer in Men with High Grade
PIN
Currently, there are no products that would
compete with Acapodene for the treatment of high grade PIN to
reduce the incidence of prostate cancer.
Acapodene for the Treatment of Side Effects
of Androgen Deprivation Therapy
Currently, there are no products that have been
approved by the FDA to treat multiple side effects of androgen
deprivation therapy. We are aware of a number of marketed drugs
that are prescribed off-label for the treatment of single side
effects. For example, Evista, Eli Lilly's trade name for
raloxifene, Fosamax, a bisphosphonate marketed by Merck, and
Actonel, a bisphosphonate marketed by Aventis and Proctor &
Gamble, are each prescribed off-label for the treatment of
osteoporosis. Effexor, marketed by Wyeth Pharmaceuticals,
Catapres, marketed by Boehringer Ingelheim, and Megace, marketed
by Bristol Myers Squibb, are prescribed off-label to treat hot
flashes caused by androgen deprivation therapy. External beam
radiation is used to treat male gynecomastia. There are
significant side effects associated with the off-label use of
these drugs and radiation treatment. Most patients would need to
take several different drugs and potentially receive radiation
treatments to treat multiple side effects of androgen
deprivation therapy. In contrast, we
55
believe that Acapodene, as a single product
candidate, has the potential to treat multiple side effects.
Andarine for the Treatment of Cancer
Cachexia
There are no drugs that have been approved by the
FDA for the treatment of cancer cachexia. Although there are two
commercially available drugs, Nandrolone and Oxandrin, that are
being prescribed off-label for the treatment of some types of
cancer cachexia, chronic use of these drugs may result in
bleeding liver cysts and liver cell tumors. Nandrolone is an
oral steroid that is available from Steris Laboratories, a
subsidiary of Watson Pharmaceuticals. Oxandrin, marketed by
Savient Pharmaceuticals, is prescribed for the treatment of
involuntary weight loss associated with severe trauma, chronic
infection or intensive surgery, as well as off-label for cancer
cachexia. Oxandrin is a tissue non-selective steroid that has
the potential to stimulate latent prostate cancer and breast
cancer and cause virilization in women. Both Nandrolone and
Oxandrin, as steroid drugs, have the potential to cause severe
liver toxicities. Andarine is not a steroid, and we believe that
it will be tissue-selective.
In addition, as to both Acapodene and Andarine,
there may be product candidates of which we are not aware at an
earlier stage of development. If any are successfully developed
and approved, they could compete directly with our product
candidates, if approved for commercial sale.
Sales and Marketing
We do not currently have any sales and marketing
capabilities. In order to commercialize any products that are
approved for commercial sale, we must either develop a sales and
marketing infrastructure or collaborate with third parties with
sales and marketing experience. We plan to build a small,
highly-focused, specialty sales and marketing infrastructure,
which we expect to include 50 to 80 sales representatives, to
market Acapodene to the relatively small and concentrated
community of urologists and medical oncologists, principally
urological oncologists, in the United States. We believe that
the urology and medical oncology market in the United States is
readily accessible by a limited sales and marketing presence due
to the concentration of prescribing physicians. We plan to
establish collaborations with pharmaceutical companies to
commercialize Acapodene in Europe and Asia for prostate
cancer-related conditions.
Because it would require a large sales force to
address the cancer cachexia market and because of the risks and
costs of developing Andarine for cachexia from various types of
cancer, we plan to seek one or more collaborators for the
development and commercialization of Andarine for cancer
cachexia resulting from all types of cancer other than
urological cancers. We also plan to seek a collaborator for
potential Andarine indications requiring a large sales force.
For Andarine indications for which the target physician market
is likely to overlap with that of Acapodene, including cancer
cachexia resulting from urological cancers and indications
related to andropause, our plan is to market and sell Andarine
ourselves or to co-promote it with a collaborator in the United
States, and, in the rest of the world, to seek a collaborator.
Intellectual Property
We will be able to protect our technology from
unauthorized use by third parties only to the extent it is
covered by valid and enforceable patents or is effectively
maintained as trade secrets. Accordingly, patents and other
proprietary rights are an essential element of our business.
For Acapodene, in the United States and
internationally we have a license from Orion under its patent
covering the composition of matter of toremifene, the active
pharmaceutical ingredient in Acapodene. The patent will expire
in the United States in 2009 in Europe in 2003 or 2008,
depending on the country, and in Japan in 2005. Market
exclusivity will continue to be available for toremifene in the
European Union until 2006 based on marketing approval that has
been granted to
56
Fareston. Under current European Union law, a
period of exclusivity is provided to marketing authorization
holders whose products meet the criteria for exclusivity and
whose product applications go through the central approval
procedure administered by the European Agency for the Evaluation
of Medicinal Products, or EMEA. Current European Union law does
not provide for an additional period of exclusivity where the
holder of a marketing authorization obtains approval by the EMEA
or a member state regulatory body of a new indication. This
European Union exclusivity protection period operates
independently of any patent protection that a product might
enjoy and bars anyone from applying for approval, within the
European Union, of a medicinal product that is "essentially
similar" to toremifene.
We have licensed from the University of Tennessee
Research Foundation method of use patents in the United States
and pending patent applications internationally related to the
use of Acapodene for the reduction in the incidence of prostate
cancer in men with high grade PIN. The method of use patents
issued in the United States related to the use of Acapodene for
this indication will expire in 2019.
We have our own pending method of use patent
applications in the United States and internationally related to
the use of Acapodene for the treatment of osteoporosis,
gynecomastia and hot flashes as side effects of androgen
deprivation therapy.
In all countries in which we hold or have
licensed rights to patents or patent applications related to
Acapodene, the composition of matter patents will expire before
the method of use patents. Furthermore, with respect to the
method of use of Acapodene for the treatment of osteoporosis,
hot flashes and gynecomastia as side effects of androgen
deprivation therapy worldwide and the method of use of Acapodene
for the reduction in the incidence of prostate cancer in men
with high grade PIN outside the United States, we have only
pending patent applications. Method of use patents are more
difficult to enforce than composition of matter patents because
of the risk of off-label sale or use of the subject compounds.
In the event that patents issue in respect of our
pending method of use patent applications, after the expiration
of the patent covering the composition of matter of toremifene
in a particular country, competitors could market and sell
generic versions of toremifene at doses and in formulations that
are bioequivalent to Acapodene for uses other than the
indications for Acapodene covered by these pending method of use
patent applications, and physicians would be permitted to
prescribe generic versions of toremifene for indications that
are protected by our or our licensors' method of use
patents and pending patent applications. After the expiration of
the patent covering the composition of matter of toremifene in a
particular country, if patents do not issue in respect of our
pending method of use patent applications related to the use of
Acapodene for the treatment of osteoporosis, hot flashes and
gynecomastia as side effects of androgen deprivation therapy
worldwide and the method of use of Acapodene for the reduction
in the incidence of prostate cancer in men with high grade PIN
outside the United States, competitors could market and sell
generic versions of toremifene at doses and in formulations that
are bioequivalent to Acapodene for these indications.
Our license from Orion is limited to the use of
toremifene for the prevention and treatment of prostate cancer
and the prevention and treatment of osteoporosis, hot flashes
and gynecomastia as side effects of androgen deprivation therapy
in the treatment of prostate cancer. Orion has licensed Shire
Pharmaceuticals Group in the United States and other parties
elsewhere in the world to market, sell and distribute toremifene
for the treatment of advanced breast cancer and could license
other parties to market, sell and distribute toremifene for
other indications in the United States and elsewhere.
Shire's product is marketed as Fareston and is currently
available only in a 60 mg dose. While we believe that the doses
of Acapodene for the indications for which we are developing
Acapodene will be different from the dose currently approved by
the FDA for Fareston, there may be off-label use of Fareston in
place of Acapodene for the indications for which we intend to
seek regulatory approval of Acapodene. Additionally, after the
expiration of the patent covering the
57
composition of matter of toremifene in some
countries and the expiration of market exclusivity rights that
have been granted for toremifene in Europe, competitors could
market and sell generic versions of Fareston in a 60 mg dose.
Therefore, if Fareston becomes available at competitive prices
and in doses that are appropriate for the indications for which
we are developing Acapodene, off-label sales of Fareston or
generic versions of Fareston could reduce sales of Acapodene.
For Andarine, in the United States we have a
license from the University of Tennessee Research Foundation
under its patents related to the composition of matter and
formulations of, and methods of using, the active pharmaceutical
ingredient in Andarine. In the United States, the patents
covering the composition of matter and formulations of the
active pharmaceutical ingredient in Andarine will expire in
2021. We also have a license from the University of Tennessee
Research Foundation to its pending patent applications in the
United States related to methods of synthesizing the active
pharmaceutical ingredient in Andarine and methods for treating
cancer cachexia with Andarine. We also have a license from the
University of Tennessee Research Foundation to pending patent
applications internationally covering the composition of matter
of the active pharmaceutical ingredient of Andarine,
pharmaceutical compositions of Andarine, formulations of the
active pharmaceutical ingredient in Andarine, methods of
synthesis of the active pharmaceutical ingredient in Andarine,
methods for treating cancer cachexia with Andarine and some
other methods of using Andarine. We also have our own pending
patent applications in the United States and internationally
related to methods of using Andarine.
For Prostarine, we have a license from the
University of Tennessee Research Foundation under its pending
patent applications in the United States and internationally
covering the composition of matter of the active pharmaceutical
ingredient in Prostarine, pharmaceutical compositions and
formulations of Prostarine and methods of synthesizing the
active pharmaceutical ingredient in Prostarine. We also have our
own pending patent applications in the United States and
internationally related to methods for treating BPH using
Prostarine.
For Ostarine, we have a license from the
University of Tennessee Research Foundation under its pending
patent applications in the United States and internationally
covering the composition of matter of the active pharmaceutical
ingredient in Ostarine, pharmaceutical compositions and
formulations of Ostarine and methods of synthesizing the active
pharmaceutical ingredient in Ostarine. We also have our own
pending patent applications in the United States and
internationally related to methods for treating male
osteoporosis and andropause using Ostarine.
For Andromustine, we have pending patent
applications of our own in the United States and internationally
covering the composition of matter of the active pharmaceutical
ingredient in Andromustine, pharmaceutical compositions of
Andromustine, methods of synthesizing the active pharmaceutical
ingredient in Andromustine and methods for treating prostate
cancer that is not responsive to androgen deprivation therapy
using Andromustine.
We also rely on trade secrets, technical know-how
and continuing innovation to develop and maintain our
competitive position. We seek to protect our proprietary
information by requiring our employees, consultants,
contractors, outside scientific collaborators and other advisors
to execute non-disclosure and assignment of invention agreements
on commencement of their employment or engagement, through which
we seek to protect our intellectual property. Agreements with
our employees also prevent them from bringing the proprietary
rights of third parties to us. We also require confidentiality
or material transfer agreements from third parties that receive
our confidential data or materials.
58
Government Regulation
New Drug Development and Approval
Process
Numerous governmental authorities in the United
States and other countries extensively regulate the testing,
clinical development, manufacturing and marketing of
pharmaceutical products and ongoing research and development
activities. In the United States, the FDA rigorously reviews
pharmaceutical products under the Federal Food, Drug, and
Cosmetic Act and regulations. Non-compliance with applicable
requirements can result in administrative and judicial
sanctions, including warning letters, clinical holds, fines,
recall or seizure of products, injunctions, total or partial
suspension of production, refusal of the government to approve
marketing applications or allow entry into supply contracts,
refusal to permit import or export of products, civil penalties,
criminal prosecution and other actions affecting a company and
its products. The FDA also has the authority to revoke
previously granted marketing authorizations.
To secure FDA approval, an applicant must submit
extensive preclinical and clinical data, as well as information
about product manufacturing processes and facilities and other
supporting information to the FDA for each indication to
establish a product candidate's safety and effectiveness.
The development and approval process takes many years, requires
the expenditure of substantial resources and may be subject to
delays or limitations of approval or rejection of the
application. Even if the FDA approves a product, the approval is
subject to post-marketing surveillance, adverse drug experience
and other recordkeeping and reporting obligations, and may
involve ongoing requirements for post-marketing studies. The FDA
also may place conditions on any approvals that could restrict
the commercial applications, advertising, promotion or
distribution of these products. Product approvals may be
withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing.
Preclinical and Clinical
Testing
Preclinical studies involve laboratory evaluation
of product characteristics and animal studies to assess the
biological activity and safety of the product. In some cases,
long-term preclinical studies are conducted while clinical
studies are ongoing. The FDA, under its Good Laboratory
Practices regulations, regulates preclinical studies. Violations
of these regulations can, in some cases, lead to invalidation of
the studies, requiring these studies to be replicated. When the
preclinical testing is considered adequate by the sponsor to
demonstrate the safety and scientific rationale for initial
human studies, the results of the preclinical tests, together
with manufacturing information and analytical data, are
submitted to the FDA as part of an Investigational New Drug
application, or IND. The IND becomes effective, if not rejected
by the FDA, within 30 days after FDA receives the IND. The
FDA may, at any time during the 30-day period after filing of an
IND or at any future time, impose a clinical hold on proposed or
ongoing clinical trials, on various grounds, including that the
study subjects are or would be exposed to an unreasonable and
significant health risk. If the FDA imposes a clinical hold,
clinical trials cannot commence or recommence without FDA
authorization and then only under terms authorized by the FDA.
Clinical trials involve the administration of the
investigational product candidates to humans under the
supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical
Practice, or GCP, under protocols submitted to the FDA as part
of the IND. In addition, each clinical trial must be approved
and conducted under the auspices of an Investigational Review
Board, or IRB, and with patient informed consent. The IRB will
consider, among other things, ethical factors and the safety of
human subjects.
Clinical trials are conducted in three sequential
phases, but the phases may overlap. Phase I clinical trials
usually involve between 20 and 80 healthy human subjects or
more, depending on the disease. The goal of the Phase I
clinical trial is to establish initial data about the safety and
tolerance of the product candidates in humans. In Phase II
clinical trials, controlled studies are
59
conducted on an expanded population of patients
with the targeted disease. The primary purpose of these tests is
to evaluate the effectiveness of the drug candidate on the
volunteer patients as well as to determine if there are any side
effects or other risks associated with the drug. Phase III
trials involve even larger patient populations, often with
several hundred or even several thousand patients depending on
the use for which the drug is being studied. Phase III
trials are intended to establish the overall risk-benefit ratio
of the drug and provide, if appropriate, an adequate basis for
product labeling. During all clinical trials, physicians monitor
the patients to determine effectiveness and to observe and
report any reactions or other safety risks that may result from
use of the drug candidate.
Product Formulation and
Manufacture
Concurrent with clinical trials and preclinical
studies, companies must develop information about the chemistry
and physical characteristics of the drug and finalize a process
for manufacturing the product. In addition, manufacturers,
including contract manufacturers, are required to comply with
the applicable FDA cGMP regulations. The cGMP regulations
include requirements relating to quality control and quality
assurance, as well as the corresponding maintenance of records
and documentation. The manufacturing process must be capable of
consistently producing quality batches of the product and the
manufacturer must develop methods for testing the quality,
purity and potency of the final drugs. Additionally, appropriate
packaging must be selected and tested and chemistry stability
studies must be conducted to demonstrate that the product does
not undergo unacceptable deterioration over its shelf-life.
Compliance with cGMP regulations also is a
condition of new drug application approval. The FDA must approve
manufacturing facilities before they can be used in the
commercial manufacture of drug products. In addition,
manufacturing establishments are subject to preapproval
inspections and unannounced periodic inspections.
New Drug Application Process
After the completion of the clinical trial phases
of development, if the sponsor concludes that there is
substantial evidence that the drug candidate is safe and
effective for its intended use, the sponsor may submit a new
drug application, or NDA, to the FDA. The application must
contain all of the information on the drug candidate gathered to
that date, including data from the clinical trials, and be
accompanied by a user fee.
The FDA determines whether an NDA as submitted is
acceptable for filing. The FDA may refuse to file an
application, in which case the FDA retains one-half of the user
fee. If the submission is accepted for filing, the FDA begins an
in-depth review of the application. As part of this review, the
FDA may refer the application to an appropriate advisory
committee, typically a panel of clinicians, for review,
evaluation and a recommendation. The FDA is not bound by the
recommendation of an advisory committee. Under the Prescription
Drug User Fee Act, or PDUFA, submission of an NDA with clinical
data requires payment of a fee, with some exceptions. In return,
FDA assigns a goal of six or 12 months from filing of the
application to return of a first "complete response,"
in which the FDA may approve the product or request additional
information. There can be no assurance that an application will
be approved within the performance goal timeframe established
under PDUFA.
If the FDA evaluations of the NDA and the
manufacturing facilities are favorable, the FDA may issue an
approval letter authorizing commercial marketing of the drug
candidate for specified indications. The FDA could also issue an
approvable letter, which usually contains a number of conditions
that must be met in order to secure final approval of the new
drug application. When and if those conditions have been met to
the FDA's satisfaction, the FDA will issue an approval
letter. On the other hand, if the FDA's evaluation of the
NDA submission or manufacturing facilities is not favorable, the
FDA may refuse to approve the NDA or issue a non-approvable
letter.
60
Marketing Approval and Post-marketing
Obligations
If the FDA approves an application, the drug
becomes available for physicians to prescribe. Periodic reports
must be submitted to the FDA, including descriptions of any
adverse reactions reported. The FDA may require post-marketing
studies, also known as Phase IV studies, as a condition of
approval. In addition to studies required by the FDA after
approval, trials and studies are often conducted to explore new
indications. The purpose of these trials and studies and related
publications is to develop data to support additional
indications for the drug, which must be approved by the FDA, and
to increase its acceptance in the medical community. In
addition, some post-marketing studies are done at the request of
the FDA to develop additional information regarding the safety
of a product.
Any products manufactured or distributed pursuant
to FDA approvals are subject to continuing regulation by the
FDA, including recordkeeping requirements, reporting of adverse
experiences with the drug, drug sampling and distribution
requirements, notifying the FDA and gaining its approval of
certain manufacturing or labeling changes, complying with
certain electronic records and signature requirements, and
complying with FDA promotion and advertising requirements. Drug
manufacturers and their subcontractors are required to register
their establishments and are subject to periodic unannounced
inspections for compliance with good manufacturing practice
requirements. Also, newly discovered or developed safety or
effectiveness data may require changes to a product's
approved labeling, including the addition of new warnings and
contraindications, or even in some instances revocation or
withdrawal of the approval.
Drug Price Competition and Patent Term
Restoration Act of 1984
Under the Drug Price Competition and Patent Term
Restoration Act of 1984, known as the Hatch-Waxman Act, a
portion of a product's patent term that was lost during
clinical development and application review by the FDA may be
restored. The Hatch-Waxman Act also provides for a statutory
protection, known as exclusivity, against the FDA's
acceptance or approval of certain competitor applications. The
Hatch-Waxman Act also provides the legal basis for the approval
of abbreviated new drug applications, or ANDAs.
Patent term restoration can compensate for time
lost during product development and the regulatory review
process by returning up to five years of patent life for a
patent that covers a new product or its use. This period is
generally one-half the time between the effective date of an IND
and the submission date of an NDA, plus the time between the
submission date of an NDA and the approval of that application.
Patent term restorations, however, are subject to a maximum
extension of five years, and the patent term restoration cannot
extend the remaining term of a patent beyond a total of
14 years. The application for patent term extension is
subject to approval by the United States Patent and Trademark
Office in conjunction with the FDA. It takes at least six months
to obtain approval of the application for patent term extension.
The Hatch-Waxman Act also provides for a period
of statutory protection for new drugs that receive NDA approval
from the FDA. If a new drug receives NDA approval as a new
chemical entity, meaning that the FDA has not previously
approved any other new drug containing the same active entity,
then the Hatch-Waxman Act prohibits an ANDA or a 505(b)(2) NDA,
an NDA where the applicant does not own or have a legal right of
reference to all of the data required for approval, to be
submitted by another company for a generic version of such drug,
with some exceptions, for a period of five years from the date
of approval of the NDA. The statutory protection provided
pursuant to the Hatch-Waxman Act will not prevent the filing or
approval of an NDA, as opposed to an ANDA or 505(b)(2) NDA, for
any drug, including, for example, a drug with the same active
ingredient, dosage form, route of administration, strength and
conditions of use. In order to obtain an NDA, however, a
competitor would be required to conduct its own clinical trials.
If NDA approval is received for a new drug containing an active
ingredient that was previously approved by the FDA but the NDA
is for a drug that includes an innovation over the previously
approved drug, for example, an
61
NDA approval for a new indication or formulation
of the drug with the same active ingredient, and if such NDA
approval was dependent upon the submission to the FDA of new
clinical investigations, other than bioavailability studies,
then the Hatch-Waxman Act prohibits the FDA from making
effective the approval of an ANDA or 505(b)(2) NDA for a generic
version of such drug for a period of three years from the date
of the NDA approval. This three year exclusivity, however, only
covers the innovation associated with the NDA to which it
attaches. Thus, the three year exclusivity does not prohibit the
FDA, with limited exceptions, from approving ANDAs or 505(b)(2)
NDAs for drugs containing the same active ingredient but without
the new innovation.
While the Hatch-Waxman Act provides certain
patent restoration and exclusivity protections to innovator drug
manufacturers, it also permits the FDA to approve ANDAs for
generic versions of their drugs. The ANDA process permits
competitor companies to obtain marketing approval for a drug
with the same active ingredient for the same uses but does not
require the conduct and submission of clinical studies
demonstrating safety and effectiveness for that product. Instead
of safety and effectiveness data, an ANDA applicant needs only
to submit data demonstrating that its product is bioequivalent
to the innovator product as well as relevant chemistry,
manufacturing and product data.
Finally, the Hatch-Waxman Act requires, in some
circumstances, an ANDA or 505(b)(2) NDA applicant to notify the
patent owner and the holder of the approved NDA of the factual
and legal basis of the applicant's opinion that the patent
is not valid or will not be infringed. Upon receipt of this
notice, the patent owner and the NDA holder have 45 days to
bring a patent infringement suit in federal district court and
obtain a 30 month stay against the company seeking to
reference the NDA the NDA holder could still file a patent suit
after the 45 days, but if they did, they would not have the
benefit of the 30 month stay. The discovery, trial and appeals
process in such suits can take several years. If such a suit is
commenced, the Hatch-Waxman Act provides a 30-month stay on the
approval of the competitor's ANDA or 505(b)(2) NDA. If the
litigation is resolved in favor of the competitor or the
challenged patent expires during the 30-month period, unless
otherwise extended by court order, the stay is lifted and the
FDA may approve the application. Under regulations recently
issued by the FDA, the patent owner and the NDA holder have the
opportunity to trigger only a single 30-month stay per ANDA or
505(b)(2) NDA. Once the ANDA or 505(b)(2) NDA applicant has
notified the patent owner and the NDA holder of the
infringement, the applicant cannot be subjected to another
30-month stay, even if the applicant becomes aware of additional
patents that may be infringed by its product.
Pharmaceutical Pricing and
Reimbursement
In both domestic and foreign markets, sales of
any products for which we receive regulatory approval for
commercial sale will depend in part on the availability of
reimbursement from third-party payors. Third-party payors
include government health administrative authorities, managed
care providers, private health insurers and other organizations.
These third-party payors are increasingly challenging the price
and examining the cost-effectiveness of medical products and
services. In addition, significant uncertainty exists as to the
reimbursement status of newly approved healthcare product
candidates. We may need to conduct expensive pharmacoeconomic
studies in order to demonstrate the cost-effectiveness of our
products. Our product candidates may not be considered
cost-effective. Adequate third-party reimbursement may not be
available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product
development. The United States and state governments continue to
propose and pass legislation designed to reduce the cost of
healthcare. Adoption of new legislation could further limit
reimbursement for pharmaceuticals.
The marketability of any products for which we
receive regulatory approval for commercial sale may suffer if
the government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, an increasing emphasis
on managed care in the United States has and will continue to
increase the pressure on pharmaceutical pricing.
62
Facilities
We sublease approximately 18,500 square feet
of laboratory and office space in Memphis, Tennessee, under an
operating lease through September 2005. This lease is terminable
by either party on 90 days' notice. We believe that
our existing facilities will be sufficient to meet our
requirements through 2005.
Employees
As of September 30, 2003, we had
43 employees, of whom 13 were Ph.D.s and 4 were M.D.s.
None of our employees is subject to a collective bargaining
agreement. We believe that we have good relations with our
employees.
Legal Proceedings
We are not currently involved in any material
legal proceedings.
63
MANAGEMENT
Directors, Executive Officers and Other Key
Employees
The following table sets forth information about
our directors, executive officers and other key employees as of
August 31, 2003.
Name
Age
Position(s)
Directors and Executive Officers
J.R. Hyde, III(1)(2)(3)
60
Chairman of the Board of Directors
Mitchell S. Steiner, M.D., F.A.C.S.
42
Chief Executive Officer and Vice-Chairman of the
    Board of Directors
Marc S. Hanover
40
President, Chief Operating Officer and Director
Henry P. Doggrell
55
General Counsel and Secretary
Mark E. Mosteller
40
Chief Financial Officer
Rosemary Mazanet, M.D., Ph.D.(1)(2)(3)
47
Director
John H. Pontius(1)(2)(3)
48
Director
Other Key Employees
K. Gary Barnette, Ph.D.
36
Director of Regulatory Affairs
Robert S. Boger, M.D.
56
Director of Clinical Development
Karen A. Veverka Ph.D.
35
Director of Preclinical Development
Michael A. Whitt, Ph.D.
44
Director of Molecular Biology
(1)
Member of the Compensation Committee
(2)
Member of the Audit Committee
(3)
Member of the Nominating and Corporate Governance
    Committee
J.R. Hyde, III
has served as the Chairman of our
Board of Directors since November 2000. Since 1989,
Mr. Hyde has been the sole stockholder and President of
Pittco Holdings, Inc., a private, institutional investment
company. Since 1996, when Mr. Hyde made a substantial
contribution to support Dr. Steiner's research,
Mr. Hyde has been instrumental in forming and financing GTx
and is our largest stockholder. Mr. Hyde was the Chairman
of the Board of Directors of AutoZone, Inc. from 1986 to 1997
and the Chief Executive Officer of AutoZone from 1986 to 1996.
He was also Chairman and Chief Executive Officer of
Malone & Hyde, AutoZone's former parent company,
from 1972 until 1988. Mr. Hyde is a director of AutoZone,
Inc. and FedEx Corporation.
Mitchell S. Steiner, M.D., F.A.C.S.,
a co-founder of GTx, has served as
our Chief Executive Officer and Vice-Chairman of our Board of
Directors since our inception in September 1997. Prior to
founding GTx, Dr. Steiner held numerous academic
appointments, including Chairman and Professor of Urology,
Director of Urologic Oncology and Research and the Chair of
Excellence in Urologic Oncology at the University of Tennessee.
Dr. Steiner holds a B.A. in Molecular Biology from
Vanderbilt University and an M.D. from the University of
Tennessee, and performed his surgery and urologic training at
The Johns Hopkins Hospital.
Marc S.
Hanover,
a co-founder of GTx, has
served as our President and Chief Operating Officer and a
director since our inception in September 1997. Prior to joining
GTx, Mr. Hanover was a founder of Equity Partners
International, Inc., a private equity firm in Memphis,
Tennessee, and participated as a founder and investor in three
healthcare companies. From 1985 to 1997, Mr. Hanover was a
Senior Vice President and a member of the Executive Management
Committee of National Bank of Commerce, now National Commerce
Financial Corporation, in Memphis, Tennessee. Mr. Hanover
holds a B.S. in Biology from the University of Memphis and an
M.B.A. in Finance from the University of Memphis.
64
Henry P. Doggrell
has served as our General Counsel
and Secretary since October 2001. From April 1998 to August
2001, Mr. Doggrell was Senior Vice President, Corporate
Affairs at Buckeye Technologies, Inc., a specialty cellulose
company, where he was responsible for matters including
corporate finance, investor relations, mergers and acquisitions,
intellectual property and licensing and strategic development.
From 1996 to 1998, Mr. Doggrell served as General Counsel
and Secretary of Buckeye Technologies. Prior to joining Buckeye
Technologies, Mr. Doggrell was a partner of the Baker,
Donelson, Bearman, Caldwell and Berkowitz law firm from 1988 to
1996, where he served as a member of the law firm management
committee and Chair of the firm's Corporate Securities
department. Mr. Doggrell holds a B.S. in Commerce from the
University of Virginia and a J.D. from Vanderbilt University.
Mark E. Mosteller
has served as our Chief Financial
Officer since August 2001. From April 1997 to August 2001,
Mr. Mosteller was an Executive Vice President of Union
Planters Bank National Association, a subsidiary of Union
Planters Corporation, a bank holding company, and Chief
Operating Officer of Union Planters Mortgage, the mortgage
division of Union Planters Bank National Association. From 1994
to 1997, Mr. Mosteller was the Chief Financial Officer of
Boatmen's National Mortgage, Inc., the mortgage subsidiary
of Boatmen's Bancshares, Inc. From 1984 to 1994,
Mr. Mosteller was employed as an audit senior manager with
Ernst & Young LLP. Mr. Mosteller is a certified
public accountant and holds a B.S. in Accounting from the
University of Tennessee.
Rosemary Mazanet, M.D., Ph.D.
has served as a director since
October 2001. Dr. Mazanet has served as Chief Scientific
Officer and a General Partner of Oracle Partners, L.P., a
private equity fund, since 1998. Prior to joining Oracle
Partners, Dr. Mazanet served as the Director of Clinical
Research at Amgen, Inc., a pharmaceutical company.
Dr. Mazanet is a member of the Board of Directors of the
University of Pennsylvania School of Medicine. She trained in
internal medicine at the Brigham and Women's Hospital and
in oncology at the Dana Farber Cancer Institute, both part of
the Harvard Medical system, where she was a staff physician
prior to joining Amgen. Dr. Mazanet holds a B.A. in Biology
from the University of Virginia and an M.D. and a Ph.D. in
Anatomy from the University of Pennsylvania.
John H. Pontius
has served as a director since
April 1999. Mr. Pontius has been the President of Pittco
Management, LLC, since 1991. From 1986 to 1991,
Mr. Pontius served as the chief financial officer of the
City of Memphis, Tennessee. Mr. Pontius is a certified
public accountant and holds a B.S. in Accounting from the
University of Tennessee. Mr. Pontius has served as a member
of the Board of Trustees of the University of Tennessee since
2002.
K. Gary Barnette, Ph.D.
has served as our Director of
Regulatory Affairs since December 2001. From May 1998 to
December 2001, Dr. Barnette was Assistant Director and then
Director, Regulatory Affairs at Solvay Pharmaceuticals, Inc., a
specialty pharmaceutical company. From March 1995 to May 1998,
Dr. Barnette was a Clinical Pharmacology and
Biopharmaceutics Reviewer at the FDA, where he reviewed in the
Divisions of Reproductive and Urologic Drug Products, Metabolic
and Endocrine Drug Products and Gastrointestinal and Coagulation
Drug Products. Dr. Barnette holds a B.S. in Biology from
Salem College, and a Ph.D. in Basic Pharmaceutical Sciences from
West Virginia University.
Robert S. Boger, M.D.
has served as our Director of
Clinical Development since May 2003. From January 2002 until he
joined GTx, Dr. Boger was a private consultant specializing
in medicine, pharmacology and clinical research. From 1997 to
January 2002, Dr. Boger was Director of Clinical Research
for Transplantation and Immunology for Novartis Pharmaceuticals.
From 1996 to 1997, Dr. Boger served as Director of Medical
Research and Clinical Science Leader of Roche's
CellCeptTransplant program. Prior to joining Roche, Dr. Boger
served as both Associate Director, Clinical Research and Medical
Director, Renin Inhibitor Venture for Abbott Laboratories.
Dr. Boger holds a B.A. in Biophysics from Amherst College
and an M.D. from Harvard Medical School. Dr. Boger is board
certified in internal medicine, nephrology and clinical
pharmacology.
65
Karen A. Veverka, Ph.D.
has served as our Director of
Preclinical Development since August 2000. Dr. Veverka is a
co-inventor of several patents held by GTx in the area of
medical applications of SARMs. From 1996 to September 2000,
Dr. Veverka was a post-doctoral research fellow at
St. Jude Children's Research Hospital.
Dr. Veverka holds a B.S. in Biochemistry from Kansas State
University and a Ph.D. from Mayo Graduate School/The Mayo
Foundation.
Michael A. Whitt, Ph.D.
has served as our Director of
Molecular Biology since April 2001. Dr. Whitt is the
co-inventor of several patents licensed to GTx. Dr. Whitt
has been on the faculty in the Department of Molecular Sciences
at the University of Tennessee Health Sciences since 1991.
Dr. Whitt holds a B.A. in Microbiology from the University
of Kansas and a Ph.D. in Microbiology from the University of
California, Davis. Dr. Whitt received his post-doctoral
training at the Yale University School of Medicine.
Board Composition
Upon the completion of this offering, we will
have an authorized Board of Directors consisting of five
members. In accordance with the terms of our certificate of
incorporation and bylaws, which will become effective upon
completion of this offering, the Board of Directors will be
divided into three classes, Class I, Class II and
Class III, with each class serving staggered three-year
terms. Upon the completion of this offering, the members of the
classes will be divided as follows:
•
the class I director will be
    Dr. Mazanet, and her term will expire at the annual meeting
    of stockholders to be held in 2004;
•
the class II directors will be
    Mr. Hanover and Mr. Pontius, and their term will
    expire at the annual meeting of stockholders to be held in 2005;
    and
•
the class III directors will be
    Dr. Steiner and Mr. Hyde, and their term will expire
    at the annual meeting of stockholders to be held in 2006.
Our certificate of incorporation that will become
effective upon the completion of this offering provides that the
authorized number of directors may be changed only by resolution
of the Board of Directors. Any additional directorships
resulting from an increase in the number of directors will be
distributed between the three classes so that, as nearly as
possible, each class will consist of one-third of the directors.
This classification of the Board of Directors may have the
effect of delaying or preventing changes in the control or
management of GTx.
Our directors may be removed only for cause by
the affirmative vote of the holders of a majority of our voting
stock.
Board Committees
Our Board of Directors has an audit committee, a
compensation committee and a nominating and corporate governance
committee.
Audit Committee
Our audit committee consists of Mr. Hyde,
Dr. Mazanet and Mr. Pontius. The functions of the
audit committee include:
•
meeting with our management periodically to
    consider the adequacy of our internal controls, the objectivity
    of our financial reporting and our accounting policies and
    practices;
•
meeting with our independent auditors and with
    internal financial personnel regarding these matters;
•
selecting and engaging our independent auditors;
66
•
reviewing our financial statements and reports
    and discussing the statements and reports with our management,
    including any significant adjustments, management judgments and
    estimates, new accounting policies and disagreements with
    management; and
•
reviewing our financial plans and reporting
    recommendations to our full board for approval and to authorize
    action.
Both our independent auditors and internal
financial personnel will regularly meet privately with our audit
committee and have unrestricted access to this committee.
Compensation Committee
Our compensation committee consists of
Mr. Hyde, Dr. Mazanet and Mr. Pontius. The functions
of the compensation committee include:
•
reviewing and, as it deems appropriate,
    recommending to our Board of Directors, policies, practices and
    procedures relating to the compensation of our directors and
    executive officers and the establishment and administration of
    our employee benefit plans;
•
exercising administrative authority under our
    stock plans and employee benefit plans; and
•
advising and consulting with our officers
    regarding managerial personnel and development.
Nominating and Corporate Governance
Committee
Our nominating and corporate governance committee
consists of Mr. Hyde, Dr. Mazanet and
Mr. Pontius. The functions of the nominating and corporate
governance committee include:
•
reviewing and recommending nominees for election
    as directors;
•
assessing the performance of the Board of
    Directors;
•
developing guidelines for board composition; and
•
reviewing and administering our corporate
    governance guidelines and considering other issues relating to
    corporate governance.
Compensation Committee Interlocks and Insider
Participation
During 2002, Mr. Pontius, Dr. Steiner,
our Chief Executive Officer, and Mr. Hanover, our President
and Chief Operating Officer, served as the members of our
Compensation Committee. In October 2003, Mr. Hyde and
Dr. Mazanet replaced Dr. Steiner and Mr. Hanover
as members of our Compensation Committee. None of our executive
officers currently serves, or in the past year has served, as a
member of the Board of Directors or compensation committee of
any entity that has one or more executive officers serving on
our Board of Directors or compensation committee.
Director Compensation
We have not provided cash compensation to any
director for his or her service as a director. However,
following the completion of this offering, we intend to provide
cash compensation at a rate of
$          per
regular meeting of the Board of Directors and
$          per
committee meeting to all non-employee directors. In addition, we
will reimburse directors for their reasonable expenses incurred
in attending meetings of the Board of Directors.
Following the completion of this offering, all
employee directors will be eligible to participate in our 2003
Employee Stock Purchase Plan, as more fully described in the
section entitled "Benefit Plans — 2003 Employee
Stock Purchase Plan."
Our 2003 Non-Employee Directors' Stock
Option Plan, which will become effective upon completion of this
offering, provides for the automatic grant of options to
purchase shares of
67
common stock to our non-employee directors. Prior
to adoption of our 2003 Non-Employee Directors' Stock
Option Plan, we did not make option grants to our non-employee
directors. Upon completion of this offering, each of our
non-employee directors will receive an initial option to
purchase                      shares
of common stock and annual option grants to
purchase                     shares
of common stock starting at the annual stockholders meeting to
be held in 2004. Please refer to the section entitled
"Benefit Plans — 2003 Non-Employee
Directors' Stock Option Plan" for a more detailed
explanation of the terms of these stock options.
Executive Compensation
The following table shows the compensation
awarded or paid to, or earned by, our chief executive officer
and our three other most highly compensated executive officers
for the fiscal year ended December 31, 2002 whose total
annual salary and bonus exceeded $100,000. We refer to these
executive officers in this prospectus as our "named
executive officers."
Summary Compensation Table
Annual Compensation
Name and Principal Position
Salary
Mitchell S. Steiner, M.D., F.A.C.S.
$
175,000
Chief Executive Officer
Marc S. Hanover
$
180,000
President and Chief Operating Officer
Henry P. Doggrell
$
178,750
General Counsel and Secretary
Mark E. Mosteller
$
135,417
Chief Financial Officer
Stock Option Grants in Last Fiscal
Year
We have granted and will continue to grant
options to our executive officers and employees under our
benefit plans. In 2002, we granted options to purchase a total
of 4,500 shares of our common stock to our employees; none of
these grants was made to our named executive officers.
Fiscal Year End Option Values
The following table sets forth the number of
shares of common stock subject to vested and unvested stock
options held as of December 31, 2002 by each of our named
executive officers. Because there was no public market for our
common stock as of December 31, 2002, amounts described in
the following table under the heading "Value of Unexercised
In-the-Money Options at December 31, 2002" are
determined by multiplying the number of shares underlying the
options by
68
the difference between an assumed initial public
offering price of
$          per
share and the per share option exercise price. None of our named
executive officers exercised any stock options during 2002.
Number of
Securities Underlying
Value of Unexercised
Unexercised Options at
In-the-Money Options at
December 31, 2002 (#)
December 31, 2002 ($)
Name
Exercisable
Unexercisable
Exercisable
Unexercisable
Mitchell S. Steiner, M.D., F.A.C.S.
—
—
—
—
Marc S. Hanover
—
—
—
—
Henry P. Doggrell
3,000
12,000
$
$
Mark E. Mosteller
—
5,000
Change in Control Arrangements
Our 1999 Stock Option Plan, 2000 Stock Option
Plan, 2001 Stock Option Plan and 2002 Stock Option Plan provide
that in the event of a change in control of us, all shares
subject to option awards under the plans will immediately vest
and be converted into cash, options or stock of equivalent value
in the surviving organization under terms and conditions that
substantially preserve the economic status of plan participants.
For this purpose, a change in control includes (1) a sale
or disposition of more than 50% of our issued and outstanding
voting stock; (2) a merger or consolidation in which our
stockholders immediately before the transaction own less than
50% of the outstanding voting securities of the surviving entity
immediately after the transaction; or (3) a sale or
disposition of all or substantially all of our assets.
Our employment agreements with our executive
officers and other key employees contain provisions triggered by
a change of control. See "Employment Agreements."
Our 2003 Equity Incentive Plan provides that in
the event of specified corporate transactions, all outstanding
options and stock appreciation rights under the incentive plan
will be assumed, continued or substituted for by any surviving
or acquiring entity. If the surviving or acquiring entity elects
not to assume, continue or substitute for such awards, the
vesting provisions of such equity awards will be accelerated and
such equity awards will be terminated if not exercised prior to
the effective date of the corporate transaction. Other forms of
equity awards, such as restricted stock awards, may have their
repurchase or forfeiture rights assigned to the surviving or
acquiring entity. If such repurchase or forfeiture rights are
not assigned, then such equity awards will become fully vested.
Following specified change in control transactions, the vesting
and exercisability of specified equity awards generally will be
accelerated only if the awardee's award agreement so
specifies.
Our 2003 Non-Employee Directors' Stock
Option Plan provides that in the event of specified corporate
transactions, all outstanding options under the plan will be
either assumed, continued or substituted for by any surviving
entity. If the surviving or acquiring entity elects not to
assume, continue or substitute for such options, the vesting and
exercisability of such options will be accelerated in full and
such options will be terminated if not exercised prior to the
effective date of such corporate transaction. In the event of
specified changes of control, the vesting and exercisability of
outstanding options under the Plan granted to non-employee
directors whose service has not terminated prior to such change
in control, other than as a condition of such change in control,
shall be accelerated in full.
Our 2003 Employee Stock Purchase Plan provides
that in the event of specified corporate transactions, any then
outstanding rights to purchase our stock under the
2003 Employee Stock Purchase Plan will be assumed,
continued or substituted for by the surviving or acquiring
entity. If the surviving or acquiring entity elects not to
assume, continue or substitute rights, then the
participants' accumulated contributions will be used to
purchase shares of our common stock within
69
ten days prior to such corporate transaction and
such purchase rights will terminate immediately thereafter.
Employment Agreements
Each of our named executive officers has entered
into an employment agreement with us. These employment
agreements provide for salary as well as other customary
benefits and terms. Pursuant to their employment agreements,
Dr. Steiner, Mr. Hanover, Mr. Doggrell and
Mr. Mosteller are entitled to receive an annual salary of
$240,000, $180,000, $190,000 and $160,000. In addition, our
Board of Directors has the discretion to award bonus
compensation to our named executive officers. Each employment
agreement is terminable by either us or the named executive
officer at any time. If we experience a change of control and
the named executive officer's employment is terminated
without cause, or if the named executive officer terminates his
employment for good reason, at any time within six months after
the change of control, then such named executive officer will
receive continued payment of his then base salary for a period
of one year after the termination date. Dr. Steiner and
Mr. Hanover have each agreed not to compete with us during
the term of their employment and for a period of two years after
their employment ends. If we undergo a change of control, the
two year period will be shortened to one year.
Benefit Plans
1999 Stock Option Plan and 2000 Stock
Option Plan
We adopted the 1999 Stock Option Plan in August
1999 and the 2000 Stock Option Plan in November 2000. Neither
the 1999 Stock Option Plan nor the 2000 Stock Option Plan has a
stated termination date. However, the committee of the Board of
Directors that administers the 1999 Stock Option Plan and 2000
Stock Option Plan may terminate or suspend the 1999 Stock Option
Plan and 2000 Stock Option Plan at any time. The 1999 Stock
Option Plan and 2000 Stock Option Plan provide for the grant of
nonstatutory stock options to directors, officers and employees.
Share Reserve.
An aggregate of 3,000 shares of
common stock are reserved for issuance under the 1999 Stock
Option Plan. Options to purchase an aggregate of 3,000 shares of
common stock were outstanding under the 1999 Stock Option Plan
as of August 31, 2003. An aggregate of 12,750 shares of
common stock are reserved for issuance under the 2000 Stock
Option Plan. Options to purchase an aggregate of 9,750 shares of
common stock were outstanding under the 2000 Stock Option Plan
as of August 31, 2003.
Shares subject to stock options that have expired
or otherwise terminated under the 1999 Stock Option Plan or 2000
Stock Option Plan without having been exercised in full and
grants that are settled in cash rather than stock again become
available for the grant of awards under the 1999 Stock Option
Plan or 2000 Stock Option Plan. Shares issued under the 1999
Stock Option Plan or 2000 Stock Option Plan may be previously
unissued shares or reacquired shares bought on the market or
otherwise.
Administration.
The 1999 Stock Option Plan and
2000 Stock Option Plan are administered by a committee of our
Board of Directors. Subject to the terms of the 1999 Stock
Option Plan and 2000 Stock Option Plan, the committee determines
recipients, the number of stock options to be granted and the
terms and conditions of the stock options. Subject to the
limitations set forth below, the committee also determines the
exercise price of options granted.
Stock Options.
Stock options under the 1999 Stock
Option Plan and 2000 Stock Option Plan are granted pursuant to
stock option agreements. The exercise price for a stock option
cannot be less than the fair market value of the common stock on
the date of grant. Options granted under the 1999 Stock Option
Plan and 2000 Stock Option Plan vest one-third on the third
anniversary of the date of grant, one-third on the fourth
anniversary of the date of grant, and one-third on the fifth
70
anniversary of the date of grant. If the 1999
Stock Option Plan or the 2000 Stock Option Plan is terminated,
all outstanding options will become fully vested and exercisable.
The term of stock options granted under the 1999
Stock Option Plan and 2000 Stock Option Plan may not exceed
10 years. If an optionee's service relationship with
us ceases due to voluntary retirement, at or after age 65 or
after age 55 with no fewer than 10 years of service, death,
disability or involuntary termination, other than a termination
for cause, but including any involuntary termination as a result
of a change of control, any vested shares may be exercised at
any time within 10 years following the date of grant of the
option. If an optionee's relationship with us ceases for
any other reason, any unvested option shall be forfeited
immediately and the date of such termination will be the last
date on which a vested option can be exercised. Any vested but
unexercised options will terminate upon the optionee competing
with us.
Acceptable consideration for the purchase of
common stock issued under the 1999 Stock Option Plan and 2000
Stock Option Plan include cash or, at the discretion of the
committee, common stock, a deferred payment arrangement or other
legal consideration approved by the committee. Generally, an
optionee may not transfer a stock option other than by will or
the laws of descent and distribution unless the optionee holds a
nonstatutory stock option that provides otherwise.
Changes in
Control.
The 1999 Stock
Option Plan and 2000 Stock Option Plan provide that in the event
of a change in control of us, all shares subject to option
awards under the plans shall immediately vest and be converted
into cash, options or stock of equivalent value in the surviving
organization under terms and conditions that substantially
preserve the economic status of plan participants. For this
purpose, a change in control includes (1) a sale or
disposition of more than 50% of our issued and outstanding
voting stock; (2) a merger or consolidation in which our
stockholders immediately before the transaction own less than
50% of the outstanding voting securities of the surviving entity
immediately after the transaction; or (3) a sale or
disposition of all or substantially all of our assets.
2001 Stock Option Plan and 2002 Stock
Option Plan
In October 2001, we adopted the 2001 Stock Option
Plan. Our Board of Directors amended the 2001 Stock Option Plan
in November 2001. The 2001 Stock Option Plan will terminate in
October 2011 unless the Board of Directors terminates it
earlier. In August 2002, we adopted the 2002 Stock Option Plan.
The 2002 Stock Option Plan will terminate in August 2012 unless
the Board of Directors terminates it earlier. The 2001 Stock
Option Plan and the 2002 Stock Option Plan provide for the grant
of options that are:
•
incentive stock options, as defined under the
    Internal Revenue Code of 1986, as amended, or the Code, which
    may be granted solely to employees, including officers; and
•
nonstatutory stock options, which may be granted
    to directors, employees, including officers, or consultants.
Share
Reserve.
An aggregate of
35,150 shares of common stock are reserved for issuance under
the 2001 Stock Option Plan. Options to purchase an aggregate of
32,250 shares of common stock were outstanding under the 2001
Stock Option Plan as of August 31, 2003. An aggregate of
100,000 shares of common stock are reserved for issuance under
the 2002 Stock Option Plan. Options to purchase an aggregate of
22,000 shares of common stock were outstanding under the 2002
Stock Option Plan as of August 31, 2003.
Shares subject to stock options that have expired
or otherwise terminated under the 2001 Stock Option Plan or 2002
Stock Option Plan without having been exercised in full again
become available for the grant of awards under the 2001 Stock
Option Plan or 2002 Stock Option Plan. Shares issued under the
2001 Stock Option Plan or 2002 Stock Option Plan may be
previously unissued shares or reacquired shares bought on the
market or otherwise.
71
Administration.
The 2001 Stock Option Plan and 2002 Stock Option Plan are
administered by a committee of our Board of Directors. Subject
to the terms of the 2001 Stock Option Plan and 2002 Stock Option
Plan, the committee determines the recipients, the number and
type of stock options to be granted and the terms and conditions
of the stock options. Subject to the limitations set forth
below, the committee also determines the exercise price of
options granted.
Stock
Options.
Stock options are
granted under the 2001 Stock Option Plan and 2002 Stock Option
Plan pursuant to stock option agreements. The exercise price for
an incentive stock option cannot be less than the fair market
value of the common stock on the date of grant. There is no
restriction on the exercise price for a nonstatutory stock
option. Unless otherwise specified in an option agreement,
options granted under the 2001 Stock Option Plan or 2002 Stock
Option Plan vest one-third on the third anniversary of the date
of grant, one-third on the fourth anniversary of the date of
grant, and one-third on the fifth anniversary of the date of
grant.
The term of stock options granted under the 2001
Stock Option Plan or 2002 Stock Option Plan may not exceed
10 years. Unless otherwise provided for in the stock option
agreement, options granted under the 2001 Stock Option Plan or
2002 Stock Option Plan terminate three months after termination
of the optionee's employment or service as a director of
GTx or an affiliate unless (1) the termination is due to
the optionee's disability, in which case the option may
provide that it may be exercised at any time within one year
following termination of employment or relationship;
(2) the termination is due to the death of optionee or
death occurs within three months after the termination of the
optionee, in which case the option may provide that it may be
exercised at any time within 18 months following the death
of optionee; or (3) the termination is due to voluntary
retirement, subject to some conditions, in which case the option
may be exercised at any time within five years of the date of
retirement subject to the express term of the option. Any vested
but unexercised options will terminate upon the optionee
competing with us.
Acceptable consideration for the purchase of
common stock issued under the 2001 Stock Option Plan or 2002
Stock Option Plan include cash or, at the discretion of the
committee, common stock, a deferred payment arrangement or other
legal consideration approved by the committee.
Generally, an optionee may not transfer a stock
option other than by will or the laws of descent and
distribution unless the optionee holds a nonstatutory stock
option that provides otherwise.
Tax Limitations on Stock Option
Grants.
Incentive stock options
may be granted only to our employees. The aggregate fair market
value, determined at the time of grant, of shares of our common
stock with respect to incentive stock options that are
exercisable for the first time by an optionee during any
calendar year under all of our stock plans may not exceed
$100,000. The options or portions of options that exceed this
limit are treated as nonstatutory stock options. No incentive
stock option, and before our stock is publicly traded, no
nonstatutory stock option, may be granted to any person who, at
the time of the grant, owns or is deemed to own stock possessing
more than 10% of our total combined voting power or any
affiliate unless the following conditions are satisfied:
•
the option exercise price must be at least 110%
    of the fair market value of the stock subject to the option on
    the date of grant; and
•
the term of any incentive stock option award must
    not exceed five years from the date of grant.
Changes in
Control.
The 2001 Stock
Option and 2002 Stock Option Plan provide that in the event of a
change in control of us, all shares subject to option awards
under the plans shall immediately vest and be converted into
cash, options or stock of equivalent value in the surviving
organization under terms and conditions that substantially
preserve the economic status of plan participants. For this
purpose, a change in control includes (1) a sale or
disposition of more than 50% of our issued and outstanding
voting stock; (2) a merger or consolidation in which our
stockholders immediately before the transaction own less than
50% of the outstanding voting
72
securities of the surviving entity immediately
after the transaction; or (3) a sale or disposition of all
or substantially all of our assets.
2003 Equity Incentive Plan
We adopted and our stockholders approved our 2003
Equity Incentive Plan
in                     2003
to become effective upon the closing of this offering. The 2003
Equity Incentive Plan will terminate when the Board of Directors
terminates the plan. The 2003 Equity Incentive Plan provides for
the grant of nonstatutory stock options, restricted stock
awards, stock appreciation rights, phantom stock rights and
other forms of equity compensation, which may be granted to
employees, including officers, non-employee directors and
consultants.
Share
Reserve.
An aggregate
of                      shares
of common stock will be reserved for issuance under the 2003
Equity Incentive Plan, which amount will be increased annually
on January 1st of each year, from 2004 until 2013, by five
percent of the number of shares of common stock outstanding on
such date. However, the Board of Directors has the authority to
designate a smaller number of shares by which the authorized
number of shares of common stock will be increased on such date.
As of the date hereof, no shares of common stock have been
issued under the 2003 Equity Incentive Plan.
The following types of shares issued under the
2003 Equity Incentive Plan may again become available for the
grant of new awards under the 2003 Equity Incentive Plan:
restricted stock that is repurchased prior to it becoming fully
vested; shares withheld for taxes; shares used to pay the
exercise price of an option in a net exercise; and shares
tendered to the company to pay the exercise price of an option.
In addition, shares subject to stock options that have expired
or otherwise terminated without having been exercised in full
may again become available for the grant of new awards under the
2003 Equity Incentive Plan. Shares issued under the 2003 Equity
Incentive Plan may be previously unissued shares or reacquired
shares bought on the market or otherwise.
Administration.
Our Board of Directors will
administer the 2003 Equity Incentive Plan. The Board of
Directors may delegate authority to administer the 2003 Equity
Incentive Plan to a committee. Subject to the terms of the 2003
Equity Incentive Plan, our Board of Directors or its authorized
committee, the plan administrator determines recipients, grant
dates, the numbers and types of equity awards to be granted and
the terms and conditions of the equity awards, including the
period of their exercisability and vesting. Subject to the
limitations set forth below, the plan administrator will also
determine the exercise price of options granted, the purchase
price for rights to purchase restricted stock and, if
applicable, phantom stock and the strike price for stock
appreciation rights.
Nonstatutory Stock Options.
Nonstatutory stock options will be
granted pursuant to nonstatutory stock option agreements. The
2003 Equity Incentive Plan administrator determines the exercise
price for a nonstatutory stock option. Options granted under the
incentive plan vest at the rate specified in the option
agreement.
Generally, the plan administrator determines the
term of nonstatutory stock options granted under the 2003 Equity
Incentive Plan. Unless the terms of an optionee's
nonstatutory stock option agreement provide otherwise, if an
optionee's service relationship with us, or any affiliate
or ours, ceases due to disability or death, the optionee, or his
or her beneficiary, may exercise any vested options up to
12 months in the event of disability, or 18 months in
the event of death, after the date such service relationship
ends. If an optionee's relationship with us, or any
affiliate of ours, ceases for any reason other than disability
or death, the optionee may exercise any vested options up to
three months from cessation of service, unless the terms of the
stock option agreement provide for earlier or later termination.
Acceptable consideration for the purchase of
common stock issued upon the exercise of a nonstatutory stock
option will be determined by the Board of Directors and may
include cash,
73
common stock previously owned by the optionee, a
deferred payment arrangement, a broker assisted exercise, the
net exercise of the option and other legal consideration
approved by the plan administrator.
Generally, an optionee may not transfer a
nonstatutory stock option other than by will or the laws of
descent and distribution unless the nonstatutory stock option
agreement provides otherwise. However, an optionee may designate
a beneficiary who may exercise the option following the
optionee's death.
Restricted Stock Awards.
Restricted stock awards are
purchased through a restricted stock award agreement. The
purchase price for restricted stock awards must be at least the
par value of the stock. The purchase price for a restricted
stock award may be payable in cash, the recipient's past
services performed for us, or any other form of legal
consideration. Rights to acquire shares under a restricted stock
award may not be transferred other than by will or by the laws
of descent and distribution.
Stock Appreciation Rights.
Stock appreciation rights are
granted pursuant to stock appreciation rights agreements. The
plan administrator determines the strike price for a stock
appreciation right. A stock appreciation right granted under the
incentive plan vests at the rate specified in the stock
appreciation right agreement.
The plan administrator determines the term of
stock appreciation rights granted under the incentive plan.
Unless the terms of an optionee's stock appreciation right
agreement provide otherwise, if an awardee's service
relationship with us, or any affiliate or ours, ceases due to
disability or death, the awardee, or his or her beneficiary, may
exercise any vested stock appreciation right up to
12 months in the event of disability, and 18 months in
the event of death, after the date such service relationship
ends. If an awardee's relationship with us, or any
affiliate of ours, ceases for any reason other than disability
or death, the awardee may exercise any vested stock appreciation
rights up to three months from cessation of service, unless the
terms of the stock appreciation right agreement provide for
earlier or later termination.
Phantom Stock
Awards.
Phantom stock
awards are granted pursuant to phantom stock award agreements. A
phantom stock award may require the payment of at least par
value. Payment of any purchase price may be made in cash, the
recipient's past services performed for us or any other
form of legal consideration acceptable to the plan
administrator. Rights to acquire shares under a phantom stock
agreement may not be transferred other than by will or by the
laws of descent and distribution.
Other Equity Awards.
The plan administrator may grant
other awards based in whole or in part by reference to our
common stock. The plan administrator will set the number of
shares under the award, the purchase price, if any, the timing
of exercise and vesting and any repurchase rights associated
with such awards. Unless otherwise specifically provided for in
the award agreement, such awards may not be transferred other
than by will or by the laws of descent and distribution.
Changes in Control.
In the event of specified
corporate transactions, all outstanding options and stock
appreciation rights under the incentive plan either will be
assumed, continued or substituted for by any surviving or
acquiring entity. If the surviving or acquiring entity elects
not to assume, continue or substitute for such awards, the
vesting provisions of such equity awards will be accelerated and
such equity awards will be terminated if not exercised prior to
the effective date of the corporate transaction. Other forms of
equity awards such as restricted stock awards may have their
repurchase or forfeiture rights assigned to the surviving or
acquiring entity. If such repurchase or forfeiture rights are
not assigned, then such equity awards will become fully vested.
Following specified change in control transactions, the vesting
and exercisability of specified equity awards generally will be
accelerated only if the awardee's award agreement so
specifies.
74
2003 Non-Employee Directors' Stock
Option Plan
We adopted and our stockholders approved our 2003
Non-Employee Directors' Stock Option Plan
in                      2003
to become effective upon the closing of this offering. The
Non-Employee Directors' Plan provides for the automatic
grant of nonstatutory stock options to purchase shares of common
stock to our non-employee directors.
Share Reserve.
The aggregate number of shares of
common stock that may be issued pursuant to options granted
under the Non-Employee Directors' Plan
is                      shares,
which amount will be increased annually on January 1st of each
year, from 2004 and until 2013, by the number of shares of
common stock subject to options granted during the prior
calendar year. However, the Board of Directors has the authority
to designate a smaller number of shares by which the authorized
number of shares of common stock will be increased. As of the
date hereof, no shares of common stock have been issued under
the Non-Employee Directors' Plan.
Administration.
Our Board of Directors will
administer the Non-Employee Directors' Plan. The exercise
price of the options granted under the Non-Employee
Directors' Plan will be equal to the fair market value of
the common stock on the date of grant. No option granted under
the Non-Employee Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. Options
granted under the Non-Employee Directors' Plan are not
transferable other than by will or by the laws of descent and
distribution and are exercisable during the life of the optionee
only by the optionee. However, an optionee may designate a
beneficiary who may exercise the option following the
optionee's death. An optionee whose service relationship
with the us or any of our affiliates, whether as a non-employee
director of the company or subsequently as an employee, director
or consultant of either the company or an affiliate, ceases for
any reason may exercise vested options for the term provided in
the option agreement, three months generally, 12 months in
the event of disability and 18 months in the event of death.
Automatic Grants.
Pursuant to the terms of the
Non-Employee Directors' Plan, upon the completion of this
offering, each non-employee director will automatically be
granted an option to
purchase                      shares
of common stock, the initial grant. Any individual who becomes a
non-employee director after this offering will automatically be
granted the initial grant upon election to the Board of
Directors. Any person who is a non-employee director on the date
of an annual meeting of our stockholders automatically will be
granted an option to
purchase            shares
of common stock, the annual grant, on such date;
provided,
however,
that each non-employee director who has been a
non-employee director for less than 12 months at the time
of the annual meeting of our stockholders will receive an annual
grant that has been reduced
pro rata
for each full
quarter prior to the date of grant during which such person did
not serve as a non-employee director. On the date of each annual
meeting of our stockholders, each non-employee director will
receive an option to
purchase                      shares
for each membership on a committee of the Board of Directors
such non-employee director will be on for the upcoming year, the
committee grant. Committee grants vest and become exercisable
in      equal monthly installments.
Initial grants and annual grants vest
in      equal monthly installments.
Changes in
Control.
In the event of specified
corporate transactions, all outstanding options under the
Non-Employee Directors' Plan will be either assumed,
continued or substituted for by any surviving entity. If the
surviving or acquiring entity elects not to assume, continue or
substitute for such options, the vesting and exercisability of
such options will be accelerated in full and such options will
be terminated if not exercised prior to the effective date of
such corporate transaction. In the event of specified changes of
control, the vesting and exercisability of outstanding options
under the Non-Employee Directors' Plan granted to
non-employee directors whose service has not terminated prior to
such change in control, other than as a condition of such change
in control, shall be accelerated in full.
75
2003 Employee Stock Purchase
Plan
We adopted and our stockholders approved our 2003
Employee Stock Purchase Plan
in                          2003
to become effective upon the closing of this offering.
Share Reserve.
The purchase plan authorizes the
issuance
of                      shares
of common stock pursuant to purchase rights granted to our
employees or to employees of any of our affiliates, which amount
will be increased on January 1st of each year, from 2004 until
2023, by the lesser
of                      shares
or           %
of the number of shares of common stock outstanding on that
date. However, the Board of Directors has the authority to
designate a smaller number of shares by which the authorized
number of shares of common stock will be increased on each date.
The 2003 Employee Stock Purchase Plan is intended to qualify as
an "employee stock purchase plan" within the meaning
of Section 423 of the Code. As of the date hereof, no
shares of common stock have been purchased under the 2003
Employee Stock Purchase Plan.
Administration.
Our Board of Directors will
administer the 2003 Employee Stock Purchase Plan, but such
administration may be delegated to a committee of the Board of
Directors. The 2003 Employee Stock Purchase Plan provides a
means by which employees may purchase our common stock. The 2003
Employee Stock Purchase Plan is implemented by offerings of
rights to eligible employees. Under the 2003 Employee Stock
Purchase Plan, we may specify offerings with a duration of not
more than 27 months, and may specify shorter purchase
periods within each offering. The first offering under the 2003
Employee Stock Purchase Plan will begin on the effective date of
this offering and will be
approximately      months in duration
with purchases occurring every six months. Unless otherwise
determined by the Board of Directors, common stock is purchased
for accounts of employees participating in the Employee Stock
Purchase Plan at a price per share equal to 85% of the fair
market value of a share of our common stock on the date of
purchase. Generally, all regular employees, including executive
officers, who customarily work more than 20 hours per week and
are customarily employed by us or by any of our affiliates for
more than five months per calendar year may participate in the
2003 Employee Stock Purchase Plan and may contribute, normally
through payroll deductions, up
to           %
of their earnings for the purchase of common stock under the
2003 Employee Stock Purchase Plan.
Limitations.
Eligible employees may be granted
rights only if the rights, together with any other rights
granted under the 2003 Employee Stock Purchase Plan, do not
permit such employee's rights to purchase our stock to
accrue at a rate which exceeds $25,000 of the fair market value
of such stock for each calendar year in which such rights are
outstanding. No employee shall be eligible for the grant of any
rights under the 2003 Employee Stock Purchase Plan if
immediately after such rights are granted, such employee has
voting power over five percent or more of our outstanding
capital stock measured by vote or value.
Changes in
Control.
In the event of specified
corporate transactions, any then outstanding rights to purchase
our stock under the 2003 Employee Stock Purchase Plan will be
assumed, continued or substituted for by the surviving or
acquiring entity. If the surviving or acquiring entity elects
not to assume, continue or substitute rights, then the
participants' accumulated contributions will be used to
purchase shares of our common stock within ten days prior to
such corporate transaction and such purchase rights will
terminate immediately thereafter.
401(k) Plan
We maintain a retirement and deferred savings
plan for our employees. The retirement and deferred savings plan
is intended to qualify as a tax-qualified plan under
Section 401 of the Code. The retirement and deferred
savings plan provides that each participant may contribute up to
15% of his or her pre-tax compensation, up to a statutory limit,
which is $12,000 in 2003. Under the plan, each employee is fully
vested in his or her deferred salary contributions. Employee
contributions are held and invested by the plan's trustee.
The retirement and deferred savings plan also permits us to make
discretionary contributions and matching contributions, subject
to established limits and a vesting schedule. To date, we have
not made any discretionary contributions to the retirement and
deferred savings plan on behalf of participating employees.
76
Limitations on Directors' Liability and
Indemnification Agreements
As permitted by Delaware law, we have adopted
provisions in our certificate of incorporation and bylaws, both
of which will become effective upon the completion of this
offering, that limit or eliminate the personal liability of
directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the corporation, a director exercise an informed
business judgment based on all material information reasonably
available to him or her. Consequently, a director will not be
personally liable to us or our stockholders for monetary damages
or breach of fiduciary duty as a director, except for liability
for:
•
any breach of the director's duty of loyalty
    to us or our stockholders;
•
any act or omission not in good faith or that
    involves intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases,
    redemptions or other distributions or payments of dividends; or
•
any transaction from which the director derived
    an improper personal benefit.
These limitations of liability do not limit or
eliminate our rights or any stockholder's rights to seek
non-monetary relief, such as injunctive relief or rescission.
These provisions will not alter a director's liability
under federal securities laws. Our certificate of incorporation
that will become effective upon the completion of this offering
also authorizes us to indemnify our officers, directors and
other agents to the fullest extent permitted under Delaware law.
As permitted by Delaware law, our bylaws also
provide that:
•
we will indemnify our directors, officers,
    employees and other agents to the fullest extent permitted by
    law;
•
we may advance expenses to our directors,
    officers, employees and other agents in connection with a legal
    proceeding to the fullest extent permitted by law; and
•
the rights provided in our bylaws are not
    exclusive.
We believe that indemnification under our bylaws
covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in
connection with their services to us, regardless of whether our
bylaws permit such indemnification. We have obtained such
insurance.
In addition to the indemnification provided for
in our certificate of incorporation and bylaws, we have entered,
and intend to continue to enter, into separate indemnification
agreements with each of our directors and executive officers
which may be broader than the specific indemnification
provisions contained in the Delaware General Corporation Law.
These indemnification agreements may require us, among other
things, to indemnify our directors and executive officers for
some expenses, including attorneys' fees, judgments, fines
and settlement amounts incurred by a director or executive
officer in any action or proceeding arising out of his service
as one of our directors or executive officers, or any of our
subsidiaries or any other company or enterprise to which the
person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain
qualified individuals to serve as directors and executive
officers. There is no pending litigation or proceeding involving
any of our directors or executive officers to which
indemnification is required or permitted, and we are not aware
of any threatened litigation or proceeding that may result in a
claim for indemnification.
77
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The following is a description of transactions
since May 1999 to which we have been a party, in which the
amount involved in the transaction exceeds $60,000, and in which
any of our directors, executive officers or holders of more than
5% of our capital stock had or will have a direct or indirect
material interest, other than the employment agreements, which
are described elsewhere.
Preferred Stock Issuances
We sold shares of our preferred stock in private
financings as follows:
•
200,000 shares of our Series A preferred
    stock at a price of $7.275 per share in May 1999;
•
277,500 shares of our Series B preferred
    stock at a price of $18.018 per share in July 2000;
•
260,154 shares of our Series C preferred
    stock at a price of $57.658 per share in October 2001;
•
164,765 shares of our Series D preferred
    stock at a price of $66.762 per share in July 2002; and
•
329,536 shares of our Series E preferred
    stock at a price of $60.692 per share in August 2003.
The investors in these financings included the
following executive officers, directors, holders of more than 5%
of our securities and the immediate family members and
affiliated entities of each:
Series A
Series B
Series C
Series D
Series E
Preferred
Preferred
Preferred
Preferred
Preferred
Investors
Stock
Stock
Stock
Stock
Stock
Directors
J.R. Hyde, III
200,000
277,500
77,718
74,894
283,777
John H. Pontius
—
—
—
—
1,648
Executive Officers
Mark E. Mosteller
—
—
—
—
824
Henry P. Doggrell
—
—
—
—
1,236
Immediate Family Members
Patricia B. Pontius
—
—
—
—
1,648
Kathryn K. Mosteller
—
—
—
—
824
Beverly R. Doggrell
—
—
—
—
412
5% Stockholders
Entities affiliated with Oracle Partners,
    L.P.
—
—
173,436
74,894
16,478
Affiliated Entities
Pittco Associates, L.P.(1)
—
—
9,000
—
—
Memphis Biomed Ventures I, L.P.(2)
—
—
—
14,977
16,477
Equity Partners XII, LLC(3)
—
—
—
—
6,212
(1)
Pittco Associates, L.P. is affiliated with both
    Mr. Hyde and Mr. Pontius.
(2)
Memphis Biomed Ventures I, L.P. is
    affiliated with Mr. Hyde.
(3)
Mr. Hanover is the sole managing member of
    Equity Partners XII, LLC.
78
Registration Rights Agreements
We have entered into registration rights
agreements with three of our preferred stockholders and their
affiliates and transferees. Pursuant to the registration rights
agreements, if we propose to register any of our securities
under the Securities Act either for our own account or for the
account of other security holders after this offering, the
holders of registration rights will be entitled to include their
1,310,076 shares of common stock. In addition, holders of
approximately 1,276,970 shares of common stock may require us,
on not more than two occasions at any time beginning
approximately six months from the date of the closing of this
offering, to file a registration statement under the Securities
Act with respect to their shares of common stock. For more
information concerning the registration rights agreements,
please see "Description of Capital Stock —
Registration Rights Agreements."
Indemnification Agreements
We have entered into separate indemnification
agreements with our directors and executive officers, in
addition to the indemnification provided for in our bylaws. See
"Management — Limitations on Directors'
Liability and Indemnification Agreements."
Transactions with Mr. Hyde
In July 2001, we borrowed $4.25 million from
Mr. Hyde pursuant to the terms of a promissory note that
bore interest at a rate of 9% per annum. All amounts due under
the note were paid in full in October 2001. We paid
Mr. Hyde $71,000 of interest in 2001.
79
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of
August 31, 2003 regarding the beneficial ownership of our
common stock by:
•
each person, or group of affiliated persons, who
    is known by us to own beneficially five percent or more of our
    common stock;
•
each of our directors;
•
each of our named executive officers; and
•
all our directors and executive officers as a
    group.
The number of shares owned and percentage
ownership in the following table is based on 910,000 shares of
common stock outstanding on August 31, 2003, the conversion
of all outstanding shares of our preferred stock and the
dividends accrued thereon through August 31, 2003 into
1,322,944 shares of common stock and the issuance
of                 shares
in this offering. The information assumes no exercise of the
underwriters' over-allotment option.
Each individual or entity shown on the table has
furnished information with respect to beneficial ownership.
Except as otherwise indicated below, the address of each
officer, director and five percent stockholder listed below is
c/o GTx, Inc., 3 N. Dunlap Street, 3rd Floor, Van
Vleet Building, Memphis, Tennessee 38163.
We have determined beneficial ownership in
accordance with the rules of the Securities and Exchange
Commission. These rules generally attribute beneficial ownership
of securities to persons who possess sole or shared voting power
or investment power with respect to those securities. In
addition, the rules include shares of common stock issuable
pursuant to the exercise of stock options that are either
immediately exercisable or exercisable within 60 days of
August 31, 2003. These shares are deemed to be outstanding
and beneficially owned by the person holding those options for
the purpose of computing the percentage ownership of that
person, but they are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.
Unless otherwise indicated, the persons or entities identified
in this table have sole voting and investment power with respect
to all shares shown as beneficially owned by them.
Percentage of Shares
Outstanding
Number of Shares
Beneficial Owner (Name and Address)
Owned
Before Offering
After Offering
5% Stockholders
Entities affiliated with Oracle Partners, L.P.(1)
299,971
13.4
%
%
200 Greenwich Avenue
Greenwich, CT 06830
Directors and Named Executive
    Officers
J.R. Hyde, III(2)
1,010,986
45.3
Mitchell S. Steiner, M.D., F.A.C.S.(3)
618,975
27.7
Marc S. Hanover(4)
197,269
8.8
Mark E. Mosteller(5)
828
*
Henry P. Doggrell(6)
18,342
*
John H. Pontius(7)
72,561
3.3
Rosemary Mazanet, M.D., Ph.D.
—
—
All executive officers and directors as a group
    (7 persons)(8)
1,901,861
85.2
*
Represents beneficial ownership of less than 1%
    of our outstanding common stock.
(1)
Includes 79,436 shares held by Oracle Partners,
    L.P., 200,674 shares held by Oracle Investment Management, Inc.
    and 19,860 shares held by Oracle Institutional Partners, L.P.
    Larry N. Feinberg is the managing member of the general partner
    of Oracle Partners, L.P. and Oracle Institutional Partners, L.P.
    and
80
the President of Oracle Investment Management,
    Inc. Mr. Feinberg disclaims beneficial ownership of these
    shares except to the extent of his pecuniary interest in the
    named entities.
(2)
Includes 10,422 shares held by Pittco Associates,
    L.P., an entity controlled by Mr. Hyde, 22,200 shares held
    by trusts of which Mr. Hyde is the trustee or co-trustee
    and 33,106 shares held by Memphis Biomed Ventures I, L.P.,
    an entity controlled by Mr. Hyde. Does not include 21,420
    shares beneficially owned by Mr. Hyde's wife of which
    Mr. Hyde disclaims beneficial ownership.
(3)
Consists of shares held by LD, Jr., LLC, an
    entity owned by Dr. Steiner.
(4)
Includes 96,244 shares held by Equity
    Partners XII, LLC, an entity controlled by
    Mr. Hanover, and 59,540 shares held by trusts of which
    Mr. Hanover is the trustee.
(5)
Does not include 828 shares beneficially owned by
    Mr. Mosteller's wife of which Mr. Mosteller
    disclaims beneficial ownership.
(6)
Includes 11,100 shares held by a trust of which
    Mr. Doggrell is the co-trustee with Mr. Hyde and 6,000
    shares that Mr. Doggrell has the right to acquire within
    60 days of August 31, 2003 through the exercise of
    stock options. Does not include 414 shares beneficially
    owned by Mr. Doggrell's wife of which
    Mr. Doggrell disclaims beneficial ownership.
(7)
Includes 66,600 shares held by trusts of which
    Mr. Pontius is the trustee. Does not include 7,341 shares
    beneficially owned by Mr. Pontius' wife of which
    Mr. Pontius disclaims beneficial ownership.
(8)
For purposes of determining the number of shares
    beneficially owned by directors and executive officers as a
    group, any shares held in trusts to which both Mr. Doggrell
    and Mr. Hyde are co-trustees are counted only once.
81
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock
gives effect to the amendment and restatement of our certificate
of incorporation and bylaws, which will occur before the closing
of this offering, and the conversion of our preferred stock and
dividends accrued thereon through August 31, 2003 into
1,322,944 shares of common stock, which will occur upon the
closing of this offering, as if such conversion had occurred on
August 31, 2003.
Upon completion of this offering, our authorized
capital stock will consist
of                    shares
of common stock, par value $0.001 per share, and 5,000,000
shares of preferred stock, par value $0.001 per share.
Common Stock
Outstanding Shares
As of August 31, 2003, we had 910,000 shares
of common stock issued and outstanding and 1,231,955 shares of
preferred stock issued and outstanding that, together with
dividends accrued thereon through August 31, 2003, are
convertible into 1,322,944 shares of common stock held by
30 stockholders. In addition, as of August 31, 2003,
options to purchase 67,000 shares of common stock were issued
and outstanding. Based on our outstanding capital stock as of
August 31, 2003, upon completion of this offering, there
will
be                     shares
of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option or exercise of
outstanding stock options.
Voting Rights
Each holder of our common stock is entitled to
one vote for each share on all matters submitted to a vote of
the stockholders, including the election of directors. Under our
certificate of incorporation and bylaws, our stockholders will
not have cumulative voting rights. Because of this, the holders
of a majority of the shares of common stock entitled to vote in
any election of directors can elect all of the directors
standing for election, if they should so choose.
Dividends
Subject to preferences that may be applicable to
any then outstanding preferred stock, holders of common stock
are entitled to receive ratably those dividends, if any, as may
be declared from time to time by the Board of Directors out of
legally available funds.
Liquidation
In the event of our liquidation, dissolution or
winding up, holders of common stock will be entitled to share
ratably in the net assets legally available for distribution to
stockholders after the payment of all of our debts and other
liabilities and the satisfaction of any liquidation preference
granted to the holders of any outstanding shares of preferred
stock.
Rights and Preferences
Holders of common stock have no preemptive,
conversion or subscription rights, and there are no redemption
or sinking fund provisions applicable to the common stock. The
rights, preferences and privileges of the 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 in the future.
82
Fully Paid and Nonassessable
All of our outstanding shares of common stock
are, and the shares of common stock to be issued pursuant to
this offering will be, fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, the Board of
Directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock
in one or more series, to establish from time to time the number
of shares to be included in each such series, to fix the rights,
preferences and privileges of the shares of each wholly unissued
series and any qualifications, limitations or restrictions
thereon, and to increase or decrease the number of shares of any
such series, but not below the number of shares of such series
then outstanding. The Board of Directors may authorize the
issuance of preferred stock with voting or conversion rights
that could adversely affect the voting power or other rights of
the holders of the common stock. The issuance of preferred
stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other
things, have the effect of delaying, deferring or preventing a
change in control of GTx and may adversely affect the market
price of the common stock and the voting and other rights of the
holders of common stock.
Registration Rights
Demand Registration Rights
As of August 31, 2003, at any time after the
closing of this offering, the holders of 1,276,970 shares of our
common stock and their transferees may require us, on not more
than two occasions from each holder of demand rights, to file a
registration statement under the Securities Act with respect to
their shares of common stock, and we will be required to use our
best efforts to effect the registration.
Piggyback Registration Rights
As of August 31, 2003, at any time after the
closing of this offering, if we propose to register any of our
securities under the Securities Act either for our own account
or for the account of other stockholders, the holders of
approximately 1,310,076 shares of common stock will be entitled
to notice of the registration and will be entitled to include
their shares of common stock in the registration statement.
These registration rights are subject to specified conditions
and limitations, including the right of the underwriters to
limit the number of shares included in any such registration
under some circumstances.
Expenses of Registration
We will pay all expenses relating to any demand
or piggyback registration, other than underwriting discounts and
commissions.
Expiration
These registration rights expire only upon the
sale of all shares of common stock that have registration
rights. However, we are not required to maintain the
effectiveness of a registration statement if the shares of
common stock included in such registration statement may be sold
without restriction pursuant to Rule 144(k) under the
Securities Act.
83
Delaware Anti-Takeover Law and Certain
Provisions of
our Certificate of
Incorporation and Bylaws
Delaware Law
We are governed by Section 203 of the
Delaware General Corporation Law. In general, Section 203
prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested
stockholder" 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. A "business combination" includes
mergers, asset sales or other transactions resulting in a
financial benefit to the stockholder. An "interested
stockholder" is a person who, together with affiliates and
associates, owns, or within three years, did own, 15% or more of
the corporation's outstanding voting stock. These
provisions may have the effect of delaying, deferring or
preventing a change in our control.
Certificate of Incorporation and Bylaw
Provisions
Our certificate of incorporation that will become
effective upon the completion of this offering provides that our
Board of Directors will be divided into three classes of
directors, with each class serving a staggered three-year term.
The classification system of electing directors may tend to
discourage a third party from making a tender offer or otherwise
attempting to obtain control of us and may maintain the
composition of our current Board of Directors, as the
classification of the Board of Directors generally increases the
difficulty of replacing a majority of directors. In addition,
our certificate of incorporation will:
•
provide that any action required or permitted to
    be taken by our stockholders must be effected at a duly called
    annual or special meeting of stockholders and may not be
    effected by any consent in writing;
•
provide that the authorized number of directors
    may be changed only by resolution of the Board of Directors; and
•
eliminate cumulative voting for directors.
In addition, our bylaws that will become
effective upon completion of this offering will provide that
special meetings of our stockholders may be called only by the
chairman of the Board of Directors, our chief executive officer
or by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors. Without
cumulative voting, holders of a majority of our common stock may
be able to elect all of the members of our Board of Directors if
they so chose.
These and other provisions contained in our
certificate of incorporation and bylaws could delay or
discourage some types of transactions involving an actual or
potential change in our control or change in our management,
including transactions in which stockholders might otherwise
receive a premium for their shares over then current prices, and
may limit the ability of stockholders to remove current
management or approve transactions that stockholders may deem to
be in their best interests and, therefore, could adversely
affect the price of our common stock.
Nasdaq National Market Listing
We have applied to quote our common stock on the
Nasdaq National Market under the proposed trading symbol
"GTXI."
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common
stock is expected to
be                    .
The transfer agent's address
is                    .
84
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public
market for our common stock. Market sales of shares or the
availability of shares for sale may decrease the market price of
our common stock prevailing from time to time. As described
below, only a portion of our outstanding shares of common stock
will be available for sale shortly after this offering due to
contractual and legal restrictions to resale. Nevertheless,
sales of substantial amounts of common stock in the public
market after these restrictions lapse, or the perception that
such sales could occur, could adversely affect the market price
of the common stock and could impair our future ability to raise
capital through the sale of our equity securities.
Future sales of our common stock and the
availability of our common stock for sale may depress the market
price for our common stock. Upon completion of this offering,
shares of common stock will be outstanding, assuming no exercise
of the underwriters' over-allotment option and no exercise
of options. All of the shares sold in this offering will be
freely tradable. Except as set forth below, the remaining shares
of common stock outstanding after this offering will be
restricted as a result of securities laws or lock-up agreements.
These remaining shares will be available for sale in the public
market roughly as follows:
Approximate
Number
Date of Availability of Sale
of Shares
As of the date of this prospectus
90 days after the date of the prospectus
180 days after the date of this prospectus,
    although a portion of such shares will be subject to volume
    limitations pursuant to Rule 144
Rule 144
In general, under Rule 144 under the
Securities Act of 1933, as currently in effect, a person who has
beneficially owned shares of our common stock for at least one
year would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
•
one percent of the number of shares of our common
    stock then outstanding, which will equal
    approximately                    shares
    immediately after this offering; or
•
the average weekly trading volume of our common
    stock on the Nasdaq National Market during the four calendar
    weeks preceding the filing of a notice on Form 144 with
    respect to the sale.
Sales under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not
deemed to have been one of our affiliates at any time during the
90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including
the holding period of any prior owner other than an affiliate,
is entitled to sell the shares without complying with the manner
of sale, public information, volume limitation or notice
provisions of Rule 144. Shares of our common stock will
qualify as "144(k)" shares within 180 days of the
date of this prospectus.
85
Rule 701
Rule 701, as currently in effect, permits
resales of shares in reliance upon Rule 144 but without
compliance with some restrictions of Rule 144, including
the holding period requirement. Most of our employees, officers,
directors or consultants who purchased shares under a written
compensatory plan or contract may be entitled to rely on the
resale provisions of Rule 701, but all holders of
Rule 701 shares are required to wait until 90 days
after the date of this prospectus before selling their shares.
Lock-Up Agreements
Each of our officers, directors and stockholders
and the holders of substantially all of our outstanding options
have agreed, subject to specified exceptions, that, without the
prior written consent of Goldman, Sachs & Co., they
will not, directly or indirectly, sell, offer, contract to sell,
transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of our capital stock
or any securities convertible into or exchangeable or
exercisable for or any other rights to purchase or acquire our
capital stock for a period of 180 days from the date of
this prospectus. Goldman, Sachs & Co. may, in its sole
discretion, permit early release of shares subject to the
lock-up agreements.
Registration Rights
Upon completion of this offering, the holders of
1,310,076 shares of our common stock, or their transferees, will
be entitled to rights with respect to the registration of their
shares under the Securities Act. Registration of these shares
under the Securities Act would result in the shares becoming
freely tradable without restriction under the Securities Act,
except for shares purchased by affiliates, immediately upon the
effectiveness of this registration. See "Description of
Capital Stock — Registration Rights."
Stock Options
Immediately after this offering, we intend to
file with the SEC a registration statement under the Securities
Act covering the shares of common stock reserved for issuance
under our stock option plans and employee stock purchase plan.
The registration statement is expected to be filed and become
effective as soon as practicable after the closing of this
offering. Accordingly, shares registered under the registration
statement will, subject to Rule 144 volume limitations
applicable to affiliates and the lock-up agreements described
above, be available for sale in the open market.
86
UNDERWRITING
GTx and the underwriters named below have entered
into an underwriting agreement with respect to the shares being
offered. Subject to certain conditions, each underwriter has
severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs & Co., SG Cowen
Securities Corporation and Lazard Frères & Co. LLC
are the underwriters.
Number of
Underwriters
Shares
Goldman, Sachs & Co.
SG Cowen Securities Corporation
Lazard Frères & Co. LLC
Total
The underwriters are committed to take and pay
for all of the shares being offered, if any are taken, other
than the shares covered by the option described below unless and
until this option is exercised.
If the underwriters sell more shares than the
total number set forth in the table above, the underwriters have
an option to buy up to an
additional                     shares
from GTx to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this
option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table
above.
The following table shows the per share and total
underwriting discounts and commissions to be paid to the
underwriters by GTx. Such amounts are shown assuming both no
exercise and full exercise of the underwriters' option to
purchase                     additional
shares.
Paid By GTx
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Shares sold by the underwriters to the public
will initially be offered at the initial public offering price
set forth on the cover of this prospectus. Any shares sold by
the underwriters to securities dealers may be sold at a discount
of up to
$          per
share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount
of up to
$          per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms.
GTx's stockholders have agreed with the
underwriters not to dispose of or hedge any of their common
stock or securities convertible into or exchangeable for shares
of common stock during the period from the date of this
prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent
of the representatives. This agreement does not apply to any
existing employee benefit plans. See "Shares Eligible for
Future Sale" for a discussion of certain transfer
restrictions.
Prior to the offering, there has been no public
market for the shares. The initial public offering price has
been negotiated among GTx and the representatives. Among the
factors to be considered in determining the initial public
offering price of the shares, in addition to prevailing market
conditions, will be GTx's historical performance, estimates
of the business potential and earnings prospects of GTx, an
assessment of GTx's management and the consideration of the
above factors in relation to market valuation of companies in
related businesses.
An application has been made to quote the common
stock on the Nasdaq National Market under the symbol
"GTXI".
87
In connection with the offering, the underwriters
may purchase and sell shares of common stock in the open market.
These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in
the offering. "Covered" short sales are sales made in
an amount not greater than the underwriters' option to
purchase additional shares from GTx in the offering. The
underwriters may close out any covered short position by either
exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source
of shares to close out the covered short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase additional shares pursuant
to the option granted to them. "Naked" short sales are
any sales in excess of such option. 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 the offering. Stabilizing transactions consist of various
bids for or purchases of common stock made by the underwriters
in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid.
This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by
it because the representatives have repurchased shares sold by
or for the account of such underwriter in stabilizing or short
covering transactions.
Purchases to cover a short position and
stabilizing transactions may have the effect of preventing or
retarding a decline in the market price of our GTx's stock,
and together with the imposition of a penalty bid, may
stabilize, maintain or otherwise affect the market price of the
common stock. As a result, the price of the common stock may be
higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be
discontinued at any time. These transactions may be effected on
the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that:
(1) it has not offered or sold and, prior to the expiry of
a period of six months from the closing date, will not offer or
sell any shares to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments, as principal or
agent, for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (2) it
has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or
inducement to engage in investment activity, within the meaning
of section 21 Financial Services and Markets Act of 2000,
or the FSMA, received by it in connection with the issue or sale
of any shares in circumstances in which section 21(1) of
the FSMA does not apply to GTx; and (3) it has complied and
will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the shares in,
from or otherwise involving the United Kingdom.
The underwriters do not expect sales to
discretionary accounts to exceed five percent of the total
number of shares offered.
GTx estimates that its share of the total
expenses of the offering, excluding underwriting discounts and
commissions, will be approximately
$                    .
GTx has agreed to indemnify the several
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933.
Certain of the underwriters and their respective
affiliates may in the future perform various financial advising
and investment banking services for GTx, for which they may
receive customary fees and expenses.
88
VALIDITY OF THE COMMON STOCK
The validity of the shares of common stock
offered hereby and certain other legal matters will be passed
upon for us by Cooley Godward LLP, Palo Alto, California.
Certain legal matters will also be passed upon for us by Bass,
Berry & Sims PLC, Memphis, Tennessee. Certain legal
matters will be passed upon for the underwriters by Hale and
Dorr LLP, Boston, Massachusetts.
EXPERTS
The financial statements of GTx, Inc. as of
December 31, 2002 and 2001 and for each of the three years
in the period ended December 31, 2002 appearing in this
prospectus and registration statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth
in their report thereon appearing elsewhere herein, and are
included in reliance upon such report, given on the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange
Commission, or SEC, a registration statement on Form S-1
under the Securities Act of 1933 with respect to the shares of
common stock offered under this prospectus. This prospectus does
not contain all of the information in the registration statement
and the exhibits. For further information with respect to us and
our common stock, we refer you to the registration statement and
to the exhibits. Statements contained in this prospectus as to
the contents of any contract or any other document referred to
are not necessarily complete, and in each instance, we refer you
to the copy of the contract or other document filed as an
exhibit to the registration statement. Each of these statements
is qualified in all respects by this reference.
You can read our SEC filings, including the
registration statement, over the Internet at the SEC's web
site at www.sec.gov. You may also read and copy any document we
file with the SEC at its public reference facility at
450 Fifth Street, N.W., Washington, D.C. 20549. You may
also obtain copies of the document at prescribed rates by
writing to the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facility.
Upon completion of this offering, we will be
subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended, and we will file
reports, proxy statements and other information with the SEC. We
also intend to furnish our stockholders with annual reports
containing our financial statements audited by an independent
public accounting firm and quarterly reports containing our
unaudited financial information.
89
GTx, Inc.
(a development stage company)
INDEX TO FINANCIAL STATEMENTS
Page
Report of Ernst & Young LLP, Independent
    Auditors
F-2
Balance Sheets at December 31, 2001 and 2002
    and at June 30, 2003 (unaudited)
F-3
Statements of Operations for the years ended
    December 31, 2000, 2001 and 2002, the six months ended
    June 30, 2002 and 2003 (unaudited) and for the cumulative
    period from inception to June 30, 2003 (unaudited)
F-4
Statements of Cumulative Redeemable Convertible
    Preferred Stock and Stockholders' Equity (Deficit) for the
    period from inception to June 30, 2003 (unaudited), for the
    years ended December 31, 2000, 2001, 2002 and for the six
    months ended June 30, 2003 (unaudited)
F-5
Statements of Cash Flows for the three years
    ended December 31, 2000, 2001 and 2002, for the six months
    ended June 30, 2002 and 2003 (unaudited) and for the
    cumulative period from inception to June 30, 2003
    (unaudited)
F-6
Notes to the Financial Statements
F-7
F-1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS
Board of Directors and Stockholders
GTx, Inc.
We have audited the accompanying balance sheets
of GTx, Inc. (a development stage company) as of
December 31, 2002 and 2001, and the related statements of
operations, cumulative redeemable convertible preferred stock
and stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 2002.
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 audits 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.
Since the date of completion of our audit of the
accompanying financial statements and initial issuance of our
report thereon dated May 9, 2003, which report contained an
explanatory paragraph regarding the Company's ability to
continue as a going concern, the Company, as discussed in the
second paragraph of Note 2, has completed an issuance of
preferred stock with net proceeds of approximately
$20 million and plans, if additional funding efforts are
unsuccessful, to reduce its cash expenditures such that it will
continue its operations beyond December 31, 2004.
Therefore, the conditions that raised substantial doubt about
whether the Company will continue as a going concern no longer
exist.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of GTx, Inc. (a development stage company) at
December 31, 2002 and 2001, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States.
Ernst & Young LLP
Memphis, Tennessee
May 9, 2003,
Except Note 13, as to which the date is
October 14, 2003.
The foregoing report is in the form that will be
signed upon the completion of the reincorporation of GTx, Inc.
as described in Note 13 to the financial statements.
/s/ Ernst & Young LLP
Memphis, Tennessee
October 14, 2003
F-2
GTx, Inc.
(a development stage company)
BALANCE SHEETS
(in thousands, except share data)
Pro Forma
December 31,
Stockholders'
June 30,
Equity at
2001
2002
2003
June 30, 2003
(unaudited)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
8,834
$
8,925
$
3,112
Acapodene inventory
154
—
—
Prepaid expenses and other current assets
46
41
24
Total current assets
9,034
8,966
3,136
Property and equipment, net
1,083
1,064
928
Total assets
$
10,117
$
10,030
$
4,064
LIABILITIES, CUMULATIVE CONVERTIBLE PREFERRED
    STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$
261
$
601
$
136
Accrued expenses
229
711
1,456
Total current liabilities
490
1,312
1,592
8% Cumulative Redeemable Convertible Preferred
    Stock, at redemption value:
Series A, no par value; 200,000 shares
    authorized, issued and outstanding at all periods, no shares
    outstanding pro forma; liquidation value of $1,770 at
    December 31, 2001, $1,889 at December 31, 2002 and
    $1,952 at June 30, 2003 (unaudited)
11,847
13,855
12,661
Series B, no par value; 277,500 shares
    authorized, issued and outstanding at all periods, no shares
    outstanding pro forma; liquidation value of $5,581 at
    December 31, 2001, $5,989 at December 31, 2002 and
    $6,204 at June 30, 2003 (unaudited)
16,581
19,671
18,110
Series C, no par value; 450,000 shares
    authorized, 260,154 issued and outstanding at all periods, no
    shares outstanding pro forma; liquidation value of $15,274 at
    December 31, 2001, $16,496 at December 31, 2002 and
    $17,144 at June 30, 2003 (unaudited)
15,274
19,102
18,047
Series D, no par value; 300,000 shares
    authorized, 164,765 issued and outstanding at December 31,
    2002 and June 30, 2003, no shares outstanding pro forma;
    liquidation value of $0 at December 31, 2001, $11,398 at
    December 31, 2002 and $11,838 at June 30, 2003
    (unaudited)
—
11,398
11,838
Total cumulative redeemable convertible preferred
    stock
43,702
64,026
60,656
Stockholders' equity (deficit):
Common stock, no par value: 10,000,000 shares
    authorized; 910,000 shares issued and outstanding at
    December 31, 2001 and 2002 and June 30, 2003
    (unaudited); 1,891,681 shares outstanding on a pro forma basis
    (unaudited)
970
970
970
$
61,626
Deficit accumulated during the development stage
(35,045
)
(56,278
)
(59,154
)
(59,154
)
Total stockholders' (deficit) equity
(34,075
)
(55,308
)
(58,184
)
$
2,472
Total liabilities and stockholders' deficit
$
10,117
$
10,030
$
4,064
The accompanying notes are an integral part of
these financial statements.
F-3
GTx, Inc.
(a development stage company)
STATEMENTS OF OPERATIONS
(in thousands, except share and per share
data)
Cumulative
Period from
September 24,
Year Ended December 31,
Six Months Ended June 30,
1997 (date of
inception) to
2000
2001
2002
2002
2003
June 30, 2003
(unaudited)
(unaudited)
(unaudited)
Operating expenses:
Research and development
$
2,679
$
5,744
$
9,285
$
3,975
$
4,703
$
22,298
General and administrative
1,203
2,187
2,405
1,105
1,411
8,457
Depreciation
80
215
332
153
175
865
Total operating expenses
3,962
8,146
12,022
5,233
6,289
31,620
Other income:
Research and development income
—
—
—
—
—
225
Interest income
150
83
156
55
43
543
Total other income
150
83
156
55
43
768
Net loss
(3,812
)
(8,063
)
(11,866
)
(5,178
)
(6,246
)
(30,852
)
Accrued preferred stock dividends
(297
)
(790
)
(2,147
)
(858
)
(1,366
)
(4,684
)
Adjustments to preferred stock redemption value
(21,077
)
(57
)
(7,220
)
(7,036
)
4,736
(23,618
)
Net loss attributable to common stockholders
$
(25,186
)
$
(8,910
)
$
(21,233
)
$
(13,072
)
$
(2,876
)
$
(59,154
)
Net loss per share attributable to common
    stockholders:
Basic
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.16
)
Diluted
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.34
)
Weighted average shares used in computing net
    loss per share attributable to common stockholders:
Basic
910,000
910,000
910,000
910,000
910,000
Diluted
910,000
910,000
910,000
910,000
1,869,021
Pro forma net loss per share attributable to
    common stockholders, basic and diluted (unaudited)
$
(6.81
)
$
(3.34
)
Shares used in computing pro forma net loss per
    share attributable to common stockholders, basic and diluted
    (unaudited)
1,742,563
1,869,021
The accompanying notes are an integral part of
these financial statements.
F-4
GTx, Inc.
(a development stage company)
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
For the Period From September 24, 1997
(date of inception) To June 30, 2003
(in thousands, except share and per share
data)
Stockholders' Equity (Deficit)
Cumulative
Redeemable
Deficit
Convertible
Accumulated
Total
Preferred Stock
Common Stock
During the
Stockholders'
Development
Equity
Shares
Amount
Shares
Amount
Stage
(Deficit)
Balances at September 24, 1997
—
$
—
—
$
—
$
—
$
—
Issuance of common stock
—
—
900,000
—
—
—
Net loss
—
—
—
—
—
—
Balances at December 31, 1997
—
—
900,000
—
—
—
Issuance of common stock
—
—
100,000
970
—
970
Net loss
—
—
—
—
(116
)
(116
)
Balances at December 31, 1998
—
—
1,000,000
970
(116
)
854
Sale of Series A Redeemable Convertible
    Preferred Stock at $7.275
200,000
1,455
—
—
—
—
Preferred stock dividends
—
83
—
—
(83
)
(83
)
Net loss
—
—
—
—
(750
)
(750
)
Balances at December 31, 1999
200,000
1,538
1,000,000
970
(949
)
21
Sale of Series B Redeemable Convertible
    Preferred Stock at $18.018
277,500
5,000
—
—
—
—
Preferred stock dividends
—
297
—
—
(297
)
(297
)
Preferred stock adjustment to redemption value
—
21,077
—
—
(21,077
)
(21,077
)
Common stock redemption
—
—
(90,000
)
—
—
—
Net loss
—
—
—
—
(3,812
)
(3,812
)
Balances at December 31, 2000
477,500
27,912
910,000
970
(26,135
)
(25,165
)
Sale of Series C Redeemable Convertible
    Preferred Stock at $57.658, net of issuance costs of $57
260,154
14,943
—
—
—
—
Preferred stock dividends
—
790
—
—
(790
)
(790
)
Preferred stock adjustment to redemption value
—
57
—
—
(57
)
(57
)
Net loss
—
—
—
—
(8,063
)
(8,063
)
Balances at December 31, 2001
737,654
43,702
910,000
970
(35,045
)
(34,075
)
Sale of Series D Redeemable Convertible
    Preferred Stock at $66.762, net of issuance costs of $43
164,765
10,957
—
—
—
—
Preferred stock dividends
—
2,147
—
—
(2,147
)
(2,147
)
Preferred stock adjustment to redemption value
—
7,220
—
—
(7,220
)
(7,220
)
Net loss
—
—
—
—
(11,866
)
(11,866
)
Balances at December 31, 2002
902,419
64,026
910,000
970
(56,278
)
(55,308
)
Preferred stock dividends
—
1,366
—
—
(1,366
)
(1,366
)
Preferred stock adjustment to redemption value
—
(4,736
)
—
—
4,736
4,736
Net loss
—
—
—
—
(6,246
)
(6,246
)
Balances at June 30, 2003 (unaudited)
902,419
$
60,656
910,000
$
970
$
(59,154
)
$
(58,184
)
The accompanying notes are an integral part of
these financial statements.
F-5
GTx, Inc.
(a development stage company)
STATEMENTS OF CASH FLOWS
(in thousands, except share and per share
data)
Cumulative
Period from
Six Months Ended
September 24,
Year Ended December 31,
June 30,
1997 (date of
inception) to
2000
2001
2002
2002
2003
June 30, 2003
(unaudited)
(unaudited)
(unaudited)
Cash flows from operating
    activities:
Net loss
$
(3,812
)
$
(8,063
)
$
(11,866
)
$
(5,178
)
$
(6,246
)
$
(30,852
)
Adjustments to reconcile net loss to net cash
    used in operating activities:
Depreciation
80
215
332
153
175
865
Changes in assets and liabilities:
Acapodene inventory
—
(154
)
154
—
—
—
Prepaid expenses and other assets
(18
)
(17
)
5
20
17
(24
)
Accounts payable
(5
)
260
340
(178
)
(465
)
136
Accrued expenses
342
(225
)
482
505
745
1,456
Net cash used in operating activities
(3,413
)
(7,984
)
(10,553
)
(4,678
)
(5,774
)
(28,419
)
Cash flows from investing
    activities:
Purchase of property and equipment
(462
)
(792
)
(313
)
(145
)
(39
)
(1,794
)
Net cash used in investing activities
(462
)
(792
)
(313
)
(145
)
(39
)
(1,794
)
Cash flows from financing
    activities:
Proceeds from issuance of notes
    payable — related party
—
4,250
—
—
—
4,250
Payment of notes payable — related party
—
(4,250
)
—
—
—
(4,250
)
Proceeds from issuance of common stock
—
—
—
—
—
970
Proceeds from issuance of preferred stock, net
5,000
14,943
10,957
—
—
32,355
Net cash provided by financing activities
5,000
14,943
10,957
—
—
33,325
Net increase (decrease) in cash and cash
    equivalents
1,125
6,167
91
(4,823
)
(5,813
)
3,112
Cash and cash equivalents, beginning of period
1,542
2,667
8,834
8,834
8,925
—
Cash and cash equivalents, end of period
$
2,667
$
8,834
$
8,925
$
4,011
$
3,112
$
3,112
Supplemental schedule of non-cash investing
    and financing activities:
Preferred stock dividends
$
297
$
790
$
2,147
$
858
$
1,366
$
4,684
Preferred stock adjustment to redemption value
$
21,077
$
57
$
7,220
$
7,036
$
(4,736
)
$
23,618
The accompanying notes are an integral part of
these financial statements.
F-6
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share
data)
1.     Organization
GTx, Inc. (the "Company") is a
biopharmaceutical company dedicated to the discovery,
development and commercialization of therapeutics primarily
related to the treatment of serious men's health
conditions. The Company's drug discovery and development
programs are focused on small molecules that selectively
modulate the effects of estrogens and androgens, two essential
classes of hormones. The Company currently has two product
candidates that are in human clinical trials. The Company is
developing Acapodene, its most advanced product candidate,
through clinical trials for two separate indications: (1) a
Phase IIb clinical trial for the reduction in the incidence
of prostate cancer in men with precancerous prostate lesions and
(2) a planned pivotal Phase III clinical trial for the
treatment of serious side effects of advanced prostate cancer
therapy. The Company is initially developing its second product
candidate, Andarine, for the treatment of cachexia from various
types of cancer. Andarine is the most advanced of its internally
discovered portfolio of compounds designed to modulate the
effects of hormones. The Company plans to build a specialized
sales and marketing capability to market its product candidates
directly to the relatively small and concentrated community of
urologists and medical oncologists in the United States and seek
collaborators to commercialize its product candidates where the
target physician market is broader than urologists and medical
oncologists and outside the United States.
2.     Significant
Accounting Policies
Basis of Presentation
From September 24, 1997
(inception) through December 31, 2002, the Company has
been primarily engaged in research and development, clinical
development, and raising capital and is still in a development
stage. The Company operates as one business segment.
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has experienced negative
cash flows from operations since inception and had an
accumulated deficit at December 31, 2002 and June 30,
2003 (unaudited) of approximately $56,278 and 59,154,
respectively. The Company's accumulated deficit at
June 30, 2003 (unaudited) resulted primarily from funding
its operating losses as well as non-cash dividends and
adjustments to preferred stock redemption value of $28,302. The
Company has funded its activities to date almost exclusively
from debt and equity financings. In August 2003, the Company
issued additional preferred stock (see Note 13) for
proceeds of approximately $20,000. The Company will continue to
require substantial funds to continue research and development,
including preclinical studies and clinical trials of its product
candidates, and to commence sales and marketing efforts, if the
FDA or other regulatory approvals are obtained.
Management's plans in order to meet its operating cash flow
requirements include an initial public offering of its common
stock, as well as entering into research collaborations through
licensing opportunities, which will provide funding for certain
research projects. While the Company believes that it will be
successful in obtaining the necessary financing to fund its
operations, there are no assurances that such additional funding
will be achieved. In that event, the Company has the intent and
ability to reduce its cash expenditures by delaying its
initiation of certain research and development efforts such that
it will continue its operations beyond December 31, 2004.
F-7
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
Unaudited Interim Financial
Information
The interim financial statements for the six
months ended June 30, 2002 and June 30, 2003 and the
cumulative period from September 24, 1997 to June 30,
2003, together with the related notes, are unaudited and have
been prepared on the same basis as the annual financial
statements. In the opinion of management, all adjustments,
consisting of normal recurring adjustments necessary for the
fair presentation of the financial statements, have been
included. The results of operations of any interim period are
not necessarily indicative of the results of operations for the
full year or any other interim period.
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, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Actual amounts and results could differ from those estimates.
Preferred Stock Redemption
Value
In connection with the public filing for an
initial registration of its common stock, the Company changed
its accounting policy to recognize changes in the redemption
value of its preferred stock immediately as they occur and
adjust the carrying value of the preferred stock to equal the
redemption value at the end of each reporting period.
Previously, the Company had adjusted the carrying value of its
preferred stock to its liquidation value at the end of each
reporting period.
The preferred stock is subject to redemption on
or after August 31, 2006, at a price per share equal to the
greater of the liquidation value, which includes accrued
dividends, or the fair value calculated on an as-if converted to
common stock basis. The Company determines redemption value
(fair value) considering factors such as the share price of
preferred stock issuances, achievement of significant milestones
in clinical trials and general market conditions. The changes in
redemption value affect the loss attributable to common
stockholders.
Cash and Cash Equivalents
The Company considers highly liquid investments
with initial maturities of three months or less to be cash
equivalents.
Acapodene Inventory
Acapodene inventory consists of a drug that is
manufactured by a third-party and delivered to the Company as a
finished good. Inventories are stated at the lower of cost
(first-in, first-out method) or market. The inventory is
expensed by the Company at the time it is sent to clinical trial
facilities.
Property and Equipment
Property and equipment is recorded at cost.
Depreciation of equipment and furniture and fixtures is computed
based on the straight-line method over estimated useful lives of
three to five years. Amortization of leasehold improvements is
recognized over the shorter of the lease term or the estimated
useful life of the leasehold improvement.
F-8
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
Impairment
The Company accounts for long-lived assets in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 144,
Accounting for the
Impairment or Disposal of Long-Lived Assets and for Long-Lived
Assets to be Disposed of,
which requires that companies
consider whether events or changes in facts and circumstances,
both internally and externally, may indicate that an impairment
of long-lived assets held for use are present. Management
periodically evaluates the carrying value of long-lived assets
and has determined that there was no impairment as of
December 31, 2001 and December 31, 2002. Should there
be impairment in the future, the Company would recognize the
amount of the impairment based on the expected future cash flows
from the impaired assets. The cash flow estimates would be based
on management's best estimates, using appropriate and
customary assumptions and projections at the time.
Fair Value of Financial
Instruments
Financial instruments consist of cash and cash
equivalents, accounts payable and preferred stock. The carrying
values of cash and cash equivalents and accounts payable
approximate the fair value due to the short-term nature of such
instruments. Preferred stock is carried at redemption value
which approximates fair value.
Concentration of Risks
Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
and cash equivalents. The Company maintains its cash and cash
equivalents in accounts with several major financial
institutions in the United States. Deposits in these
institutions may exceed the amount of insurance provided on such
deposits. The amounts in excess of FDIC insurance amounts are
$8,734 and $8,625 at December 31, 2001 and
December 31, 2002, respectively.
The Company faces competition from established
pharmaceutical and biotechnology companies, as well as from
academic institutions, government agencies and private and
public research institutions. Various products are currently
marketed or sold and used off-label for some of the diseases and
conditions that the Company is targeting, and a number of
companies are or may be developing new treatments. In addition,
physicians are permitted to prescribe legally available drugs
for uses that are not described in the drug's labeling and
that differ from those uses tested and approved by the FDA. Such
off-label uses are common across medical specialties. The
occurrence of such off-label uses could significantly reduce the
Company's ability to market and sell any products that it
may develop.
Currently, the Company relies on Orion
Corporation as a single source supplier for Acapodene, and the
Company is currently purchasing Andarine from ChemSyn
Laboratories, a department of EaglePicher Technologies, LLC, as
a single supplier. Establishing additional or replacement
suppliers for Acapodene or Andarine may take a substantial
amount of time, and in some circumstances the Company's
agreement with Orion may prevent it from obtaining an alternate
supplier with respect to Acapodene. If the Company has to switch
to a replacement supplier, the Company may face additional
regulatory delays, and the manufacture and delivery of Acapodene
or Andarine could be interrupted for an extended period of time,
which may delay completion of the Company's clinical trials
or commercialization of Acapodene or Andarine. If the Company is
unable to obtain an adequate supply of Acapodene or Andarine,
its clinical trials will be delayed. As a result, regulatory
approval of Acapodene or Andarine could be delayed, or may not
be received at all.
F-9
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
Research and Development
Costs
The Company expenses research and development
costs in the period in which they are incurred. These costs
consist of direct and indirect costs associated with specific
projects as well as fees paid to various entities that perform
research and clinical trial studies on behalf of the Company.
Patent Costs
The Company expenses patent costs, including
legal expenses, in the period in which they are incurred. Patent
expenses are included in general and administrative expenses in
the Company's statements of operations.
Income Taxes
The Company accounts for deferred taxes by
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Research and Development
Income
Indigo, a Johnson & Johnson subsidiary, and
Johnson & Johnson Development Corporation,
("JJDC") entered into an option agreement with the
Company on March 9, 1998. The option agreement was
established to allow Indigo and JJDC to determine their level of
interest in establishing an exclusive worldwide license with
respect to the Company's gene therapy products and related
technology. The agreement required the Company during the period
of the agreement, which ended in June 1998, to not negotiate
with other third parties related to gene therapy products and
related technology. Upon expiration of the option, the Company
recognized research and development income of $225 for the
option proceeds. The Company is no longer pursuing any research
and development related to gene therapy products or technology.
Stock Compensation
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees
("APB
No. 25"), and its related interpretations are applied
to measure compensation expense for stock-based compensation
plans. The Company complies with the disclosure provisions of
Statement of Financial Accounting Standards No. 123.,
Accounting for Stock-Based Compensation
("SFAS
No. 123"), as amended by SFAS No. 148,
Accounting for Stock-Based Compensation, Transition and
Disclosure.
Under APB No. 25, unearned stock
compensation is based on the difference, if any, on the date of
grant, between the fair value of the Company's common stock
and the exercise price. No employee compensation cost has been
recognized because all options granted under the plans had an
exercise price not less than the fair value of the common stock
on the date of grant. See Note 11 for a description of the plans
and the assumptions underlying the pro forma calculations below.
If compensation cost for stock-based compensation
plans had been determined under SFAS 123, pro forma stock option
compensation expense and net loss attributable to common
F-10
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
shareholders, assuming all options were valued
using the minimum value option pricing model, would have been as
follows:
Six Months Ended
Years Ended December 31,
June 30,
2000
2001
2002
2002
2003
(unaudited)
Net loss attributable to common stockholders, as
    reported
$
(25,186
)
$
(8,911
)
$
(21,233
)
$
(13,072
)
$
(2,876
)
Deduct: Employee stock-based compensation
    determined under fair value method
(5
)
(38
)
(116
)
(93
)
(181
)
Adjusted net loss attributable to common
    stockholders
$
(25,191
)
$
(8,949
)
$
(21,349
)
$
(13,165
)
$
(3,057
)
Pro forma SFAS 123 disclosure:
Net loss attributable to common stockholders per
    common share:
As reported:
Basic
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.16
)
Diluted
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.34
)
As adjusted:
Basic
$
(27.68
)
$
(9.83
)
$
(23.46
)
$
(14.47
)
$
(3.36
)
Diluted
$
(27.68
)
$
(9.83
)
$
(23.46
)
$
(14.47
)
$
(3.44
)
Net Loss Per Share
Basic net loss per share attributable to common
stockholders is calculated based on the weighted average number
of common shares outstanding during the period. Diluted net loss
per share attributable to common stockholders would give effect
to the dilutive effect of potential common stock consisting of
stock options and convertible preferred stock.
The 90,000 common shares that were redeemed in
2000 were excluded from the weighted average common shares
outstanding because the shares were contingently returnable to
the Company if the holder's employment terminated prior to
a certain date. These shares were treated as stock options in
the earnings per share calculation.
F-11
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
A reconciliation of shares used in the
calculation is as follows:
Six Months Ended
Years Ended December 31,
June 30,
2000
2001
2002
2002
2003
(unaudited)
Basic net loss per share attributable to common
    shareholders:
Numerator
Net loss attributable to common stockholders
$
(25,186
)
$
(8,911
)
$
(21,233
)
$
(13,072
)
$
(2,876
)
Denominator
Weighted average common shares outstanding
910,000
910,000
910,000
910,000
910,000
Basic net loss per share attributable to common
    stockholders
$
(27.68
)
$
(9.79
)
$
(23.33
)
$
(14.36
)
$
(3.16
)
Diluted net loss per share attributable to common
    stockholders:
Numerator
Net loss as reported
(6,246
)
Denominator
Weighted average common shares outstanding
910,000
Assumed weighted average effect of conversion of
    preferred stock
959,021
1,869,021
Diluted net loss per share attributable to common
    stockholders
(27.68
)*
(9.79
)*
(23.33
)*
(14.36
)*
(3.34
)
* Data in table not presented for these
    periods because dilutive securities have an antidilutive effect.
Pro Forma
Net loss as reported
$
(11,866
)
$
(6,246
)
Shares used above
910,000
910,000
Pro forma adjustments to reflect assumed weighted
    average effect of conversion of preferred stock
832,563
959,021
Shares used in computing pro forma net loss per
    share attributable to common stockholders, basic and diluted
    (unaudited)
1,742,563
1,869,021
Pro forma basic and diluted net loss per share
$
(6.81
)
$
(3.34
)
Pro forma net loss per share for the year ended
December 31, 2002, and the six months ended June 30,
2003, is computed using the weighted average number of shares of
common stock outstanding, including the pro forma effects of the
automatic conversion of the Company's preferred stock into
shares of common stock effective upon the closing of the
offering as if such conversion occurred on January 1, 2002
and January 1, 2003 or at the date of the original
issuance, if later. The resulting pro forma adjustments include
an increase in the weighted average shares used to compute basic
and diluted net loss per share attributable to common
stockholders of 832,563 shares and 959,021 shares for the year
ended December 31, 2002 and for the six months ended
June 30, 2003, respectively. The calculation of pro forma
net loss per share attributable to common stockholders excludes
incremental common stock issuable upon exercise of options, as
their effect would be antidilutive.
F-12
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
The following outstanding stock options and
convertible preferred stock (on an as converted to common stock
basis) were excluded from the computation of diluted net loss
per share attributable to common stockholders as they had an
antidilutive effect:
Six Months
Years Ended December 31,
Ended June 30,
2000
2001
2002
2002
2003
(unaudited)
Shares issuable upon exercise of stock options
15,750
38,700
42,750
41,500
45,750
Shares issuable upon conversion of convertible
    preferred stock
484,090
757,960
959,021
937,609
—
499,840
796,660
1,001,771
979,109
45,750
Comprehensive Loss
The Company has adopted the provisions of SFAS
No. 130,
Comprehensive Income
. SFAS 130
establishes standards for the reporting and display of
comprehensive income and its components for general purpose
financial statements. For all periods presented, there were no
differences between net loss and comprehensive loss.
Recent Accounting
Pronouncements
In December 2002, the FASB issued SFAS
No. 148, which provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS
No. 148 also requires that disclosures of the pro forma
effect of using the fair value method of accounting for
stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148
requires disclosure of the pro forma effect in interim financial
statements. The transition and annual disclosure requirements of
SFAS No. 148 are effective for fiscal years ended after
December 15, 2002. The interim disclosure requirements are
effective for interim periods beginning after December 15,
2002. The adoption of this standard did not have a material
impact on the Company's financial statements.
In January 2003, the FASB issued FASB
Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51
. FIN 46 requires
certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46
is effective immediately for all new variable interest entities
created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1,
2003, the provisions of FIN 46 must be applied for the
first interim or annual period ending after December 15,
2003. The Company does not have any ownership in any variable
interest entities as of December 31, 2002. The Company will
apply the consolidation requirement of FIN 46 in future
periods if it should own any interest in a variable interest
entity.
In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
. SFAS
No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics
of both liability and equity. SFAS No. 150 is effective for
the Company's financial instruments entered into or
modified after May 31, 2003, and otherwise is effective on
July 1, 2003. The Company has evaluated the
F-13
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
impact of SFAS No. 150 and has determined
that its financial instruments (common stock and preferred
stock) will not be affected unless the terms of these financial
instruments are modified.
3.     Property and
Equipment
Property and equipment consist of the following:
December 31,
2001
2002
Leasehold improvements
$
108
$
113
Equipment
1,198
1,494
Furniture and fixtures
102
114
1,408
1,721
Less: accumulated depreciation and amortization
325
657
$
1,083
$
1,064
Depreciation expense for the years ended
December 31, 2000, 2001, and 2002 was $80, $215, and $332,
respectively.
4.     Accrued
Expenses
Accrued expenses consist of the following:
December 31,
2001
2002
Travel
$
27
$
–
Professional fees
109
–
Research and development
71
246
Clinical trial
14
449
Other
8
16
$
229
$
711
5.     Cumulative
Redeemable Convertible Preferred Stock
In 1999, the Company authorized and issued
200,000 shares of 8% Series A Cumulative Redeemable
Convertible Preferred Stock ("Series A") to a
common stockholder of the Company for $1,455. In 2000, the
Company authorized and issued 277,500 shares of 8% Series B
Cumulative Convertible Redeemable Preferred Stock
("Series B") to the same common stockholder of
the Company for $5,000. In 2001, the Company authorized 450,000
shares and issued 260,154 shares (86,718 shares were issued to a
common and preferred stockholder of the Company) of 8%
Series C Cumulative Convertible Redeemable Preferred Stock
("Series C") for $14,943. In 2002, the Company
authorized 300,000 and issued 164,765 shares (74,894 shares were
issued to a common and preferred stockholder of the Company) of
8% Series D Cumulative Convertible Redeemable Preferred
Stock ("Series D") for $10,957.
The Company is authorized to issue 140,000 shares
of a series of preferred stock designated as Series A-2
Convertible Preferred Stock ("Series A-2"). No
shares of the Series A-2 are currently outstanding.
Series A-2 will be issued only in payment of dividends
accrued on Series A.
F-14
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
The Company is authorized to issue 157,500 shares
of a series of preferred stock designated as Series B-2
Convertible Preferred Stock ("Series B-2"). No
shares of Series B-2 are currently outstanding.
Series B-2 will be issued only in payment of dividends
accrued on Series B.
Significant terms of the Series A,
Series A-2, Series B, Series B-2, Series C
and Series D are as follows:
•
Shares of Series A, Series A-2,
    Series B, Series B-2, Series C and Series D
    shall be redeemed at the election of the respective holders at
    any time on or after August 31, 2006 at a price per share
    equal to the greater of the liquidation value, which includes
    accrued dividends, or the fair value calculated on an if
    converted to common stock basis. The per share liquidation value
    of Series A and Series A-2 is $7.275, Series B
    and Series B-2 is $18.018, Series C is $57.658 and
    Series D is $66.762, in each case, plus accrued dividends.
    If for any reason, the Company defaults on its obligation to pay
    all or any of the redemption price, then the unpaid principal
    portion will bear interest at a rate of 14% per year. The
    default provisions were amended upon the issuance of the
    Series E Cumulative Convertible Redeemable Preferred Stock
    ("Series E") (see Note 13).
•
Shares of Series A, Series A-2,
    Series B, Series B-2, Series C and Series D
    shall be converted into shares of common stock at the election
    of the respective holders at any time or automatically upon the
    closing of a Qualified Public Offering (as defined in the
    Company's certificate of incorporation). The number of
    shares issuable upon conversion will be determined by dividing
    the applicable aggregate liquidation value by the applicable
    conversion price. The per share conversion price for shares of
    Series A, Series B, Series C and Series D is
    equal to their initial per share liquidation value. As a result
    of the issuance of Series E in August 2003, the conversion
    price of the Series D was reduced to $65.894 per share
    (see Note 13). The per share conversion price for
    Series A-2 and Series B-2 is equal to the per share
    liquidation value of Series C, or $57.658.
•
Shares of Series A, Series B,
    Series C and Series D have voting rights equivalent to
    the number of shares of common stock into which they are
    convertible.
•
Dividends on shares of Series A,
    Series B, Series C and Series D accrue, compound
    annually after the date of issuance of Series C, which was
    October 5, 2001, are cumulative at the annual rate of 8% of
    the respective liquidation value and are payable at such time as
    such shares are converted or redeemed (including liquidation).
    Each such dividend will be payable solely in shares of
    Series A-2 for Series A, Series B-2 for
    Series B, Series C for Series C and Series D
    for Series D at the time of conversion or redemption with
    the number of shares determined by dividing the amount of
    accrued dividends by the per share liquidation value of the
    applicable preferred stock.
•
In the event of a liquidation, dissolution, or
    winding up of the Company, prior to the holders of common stock,
    the holders of Series A, Series A-2, Series B,
    Series B-2, Series C and Series D shall receive
    an amount equal to the aggregate liquidation value including all
    accrued dividends. If the funds available for distribution to
    the holders of Series A, Series A-2, Series B,
    Series B-2, Series C or Series D are
    insufficient, then the assets to be distributed shall be
    distributed ratably among the preferred stockholders based upon
    the aggregate liquidation value.
•
In accordance with the Company's certificate
    of incorporation, on or after the Series C or the
    Series D issuance dates, as applicable, if the Company
    issues or sells, or is deemed to have issued or sold any shares
    of its common stock for a consideration per share less than the
F-15
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
conversion price with respect to Series C or
    Series D, then immediately upon such issue or sale, or
    deemed issue or sale, the conversion price shall be reduced to
    the conversion price determined by multiplying the conversion
    price in effect immediately prior to such issuance or sale by a
    price adjustment factor. The price adjustment factor causes the
    holders of the Series C and/or Series D stock to hold
    an adjusted number of shares equal to their total ownership
    before such issuance. If such a transaction occurs, the increase
    in preferred shares for the Series C and/or Series D
    holders will be accounted for as a deemed dividend by the
    Company. As a result of the issuance of Series E in August
    2003, the conversion price of the Series D was reduced to
    $65.894 per share (see Note 13).
6.     Common
Stock
The Company's certificate of incorporation
authorizes the Company to issue 10,000,000 shares of common
stock with no par value as of December 31, 2002. The
Company's certificate of incorporation authorizes no other
classes of common stock. The Company is prohibited from
declaring dividends on common stock while any shares of
preferred stock are outstanding.
The Company had reserved shares of its authorized
common stock for future issuance as summarized in the table
below:
December 31, 2002
June 30, 2003
(Unaudited)
For conversion of Series A
207,525
208,615
For conversion of Series B
294,647
298,393
For conversion of Series C
286,116
297,349
For conversion of Series D
164,765
177,324
Outstanding employee stock options
42,750
45,750
Possible future issuance under stock option plans
108,150
105,150
1,103,953
1,132,581
7.     Notes
Payable-Related Party
Demand notes of $4,250 were issued in 2001 to a
holder of common stock of the Company to fund working capital
needs. In October 2001, a portion of the proceeds from the
issuance of Series C was used to repay all outstanding
principal and accrued interest on the notes payable-related
party. Interest expense incurred on the notes payable-related
party based on an annual interest rate of 9% was $71 in 2001,
which was included in general and administrative expenses in the
Company's Statement of Operations.
8.     License,
Research and Development Agreements
License Agreements
In August 2002, the Company executed an
Amended and Restated Exclusive License Agreement with The
University of Tennessee Research Foundation ("UTRF")
granting the Company a worldwide exclusive license under its
method of use patents relating to Acapodene to market,
distribute and sell licensed products, licensed processes or
generic products. Under the terms of the agreement, the Company
is required (i) to make annual maintenance fee payments and
(ii) to make future royalty payments.
F-16
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
The amended license agreement with UTRF
superseded a 1998 license agreement related to chemoprevention
of prostate cancer between the Company and UTRF. Under the 1998
license agreement, the Company reimbursed UTRF for certain
patent expenses incurred by UTRF and agreed to make sublicense
fee payments and future royalty payments.
In June 2002, the Company executed two Amended
and Restated Exclusive License Agreements with UTRF granting the
Company worldwide exclusive licenses under its method of use
patents relating to Andarine to market, distribute and sell
licensed products, licensed processes or generic products. Under
the terms of the agreements, the Company is required (i) to
make annual maintenance fee payments and (ii) to make
future royalty payments.
The amended license agreement with UTRF
superseded a 2000 license agreement related to ARTA between the
Company and UTRF. Under the 2000 license agreement, the Company
reimbursed UTRF for certain patent expenses incurred by UTRF and
agreed to make sublicense fee payments and future royalty
payments.
Sponsored Research Agreement
The Company entered into a series of sponsored
research agreements with the research foundation of a major
university for one of the Company's programs. Under the
terms of the agreements, the Company will reimburse the research
foundation for the cost of research performed on the
Company's behalf, in accordance with the terms of the
agreements. The estimated cost of the research to be performed
over a four-year period is approximately $4,000. The Company
incurred expenses of $1,638, $956, $682, and 3,276 under these
agreements for the years ended December 31, 2000,
December 31, 2001, December 31, 2002, and from
inception to December 31, 2002, respectively, which were
included in research and development costs in the Company's
Statements of Operations. The Company has the right to terminate
the sponsored research agreement at any time. Upon termination,
the Company will reimburse the research foundation for all
research costs incurred on the Company's behalf not yet
reimbursed by the Company.
Contract Research Organization
("CRO")
In 2000, the Company began a Phase IIb
clinical trial for Acapodene for the reduction in the incidence
of prostate cancer in men with high grade PIN. The last patient
is scheduled to complete the trial in May 2004. The Company
incurred expenses related to the Phase IIb clinical trial for
the years ended December 31, 2000, 2001 and 2002 of
approximately $1,290, $2,299 and $2,802, respectively, and
approximately $6,391 from inception to December 31, 2002.
The Company has specified rights to terminate the clinical trial
and pay the CROs for fees incurred for the clinical trial not
yet reimbursed by the Company.
In 2002, the Company began two additional
Phase II clinical trials for Acapodene. These Phase II
clinical trials are expected to be completed in 2003. The
Company incurred expenses related to the Phase II clinical
trials for the year ended December 31, 2002 of
approximately $680, which was included in research and
development costs in the Company's Statements of
Operations. The Company estimates the total cost of these
clinical trials to be approximately $936.
In 2002, the Company completed a Phase I
clinical trial for Andarine. The Company incurred expenses
related to the clinical trial for the year ended
December 31, 2002 of approximately $370, which was included
in research and development costs in the Company's
Statements of Operations.
F-17
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
License and Supply Agreement
In 2000, the Company entered into a license and
supply agreement with Orion Corporation for one of the
Company's products. Under the terms of the agreement, the
Company paid an initial license fee of $400 and is required to
make future sublicense fee payments in the event the Company
grants a sublicense under the licensed patents and future
royalty payments in the event the Company sells products
developed from the licensed patents.
9.     Income
Taxes
Deferred income taxes reflect the net tax 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 principal components of the Company's
net deferred income taxes consist of the following:
December 31,
2002
2001
Deferred income tax assets:
Net operating loss carryforwards
$
9,134
$
4,906
Research credits
783
390
Cash basis method
496
84
Total deferred tax assets
10,413
5,380
Deferred income tax liabilities:
Depreciation
50
31
Total deferred tax liabilities
50
31
Net deferred income tax assets
10,363
5,349
Valuation allowance
(10,363
)
(5,349
)
$
—
$
—
At December 31, 2002, the Company has net
operating loss carryforwards of approximately $23,420, which
expire for federal purposes from 2020 through 2022 and for state
purposes from 2015 to 2017, and research credits, which expire
from 2013 through 2022. Utilization of the net operating loss
carryforwards and credits may be subject to a substantial annual
limitation due to an ownership change as provided by the
Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.
10.     Operating
Leases
The Company leases laboratory facilities and
office space pursuant to leases accounted for as operating
leases. Rent expense was approximately $34, $155, $170 and $401
for the years ended December 31, 2000, December 31,
2001, December 31, 2002, and from inception to
December 31, 2002, respectively.
11.     Stock Option
Plans
In 1999, 2000, 2001 and 2002, the Company adopted
the Genotherapeutics, Inc. Stock Option Plan ("1999
Plan"), the GTx, Inc. 2000 Stock Option Plan ("2000
Plan"), the GTx, Inc. 2001 Stock
F-18
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
Option Plan ("2001 Plan") and the GTx,
Inc. 2002 Stock Option Plan ("2002 Plan"),
respectively (collectively, the "Plans"). The Plans
provide for the Company to issue options to directors, officers
and employees of the Company. The options are granted with an
exercise price per share as determined by the Board of
Directors. The exercise price per share will not be less than
the fair market value of the stock on the date of grant. The
Board of Directors cannot issue more than 3,000 options under
the 1999 Plan, 12,750 options under the 2000 Plan, 35,150
options under the 2001 Plan and 100,000 options under the 2002
Plan in the aggregate at any time. The options generally vest
one-third on the third anniversary, one-third on the fourth
anniversary, and one-third on the fifth anniversary of the grant
date. However, 15,000 of the 2001 options vest one-fifth per
year beginning on the first anniversary of the date the options
were granted. All options expire no later than the tenth
anniversary of the grant date. In the event of a change in
control of the Company, all stock options will become fully
vested and be converted to cash, options or stock of equivalent
value. None of the Company's stock options were exercisable
at December 31, 2001 or 2000. At December 31, 2002,
4,000 of the Company's stock options were exercisable.
The following is a summary of option transactions:
Weighted
Average
Exercise Price
Options
Per Share
Balances at December 31, 1997 and 1998
—
Options granted
3,000
$
8.00
Balances at December 31, 1999
3,000
8.00
Options granted
12,750
19.00
Balances at December 31, 2000
15,750
16.90
Options granted
28,450
57.66
Options forfeited
(5,500
)
22.51
Balances at December 31, 2001
38,700
46.07
Options granted
5,500
58.07
Options forfeited
(1,450
)
31.00
Balances at December 31, 2002
42,750
48.12
Options granted (unaudited)
3,000
53.00
Balances at June 30, 2003 (unaudited)
45,750
$
48.44
The following table summarizes information about
stock options outstanding at December 31, 2002:
Weighted
Average
Remaining
Weighted
Options
Contractual Life
Average
Options
Exercise Price
Outstanding
(years)
Exercise Price
Exercisable
$ 8.00
3,000
6.92
$
8.00
1,000
19.00
6,750
7.92
19.00
—
57.66
32,750
8.91
57.66
3,000
66.76
250
9.58
66.76
—
42,750
8.62
$
48.12
4,000
F-19
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
The Company accounts for its Plans in accordance
with APB Opinion No. 25. The Company has not recognized
compensation expense for stock options because the exercise
price of the stock options equals or exceeds the market price of
the underlying stock on the date of grant, which is the
measurement date. If the alternative method of accounting for
stock incentive plans prescribed by SFAS No. 123 had been
followed, the Company's net loss would have increased by
approximately, $5, $38, and $116 for the years ended
December 31, 2000, 2001, and 2002, respectively. The pro
forma disclosures may not be representative of that to be
expected in future years. The weighted average fair value of
options granted was determined using the minimum value option
pricing model assuming no expected dividends, a risk-free
interest rate of 6.0% and a weighted average expected life of
10 years for the 1999 and 2000 grants, a risk-free interest
rate of 4.24% and a weighted average expected life of
8 years for the 2001 grants, and a risk-free interest rate
of 4.99% and a weighted average expected life of 8 years
for the 2002 grants. The weighted average grant date fair value
of options granted were $6.95, $13.91, and $14.67 for the years
ended December 31, 2000, December 31, 2001, and
December 31, 2002, respectively.
12.     Employee
Benefit Plan
In 2000, the Company established a 401(k)
retirement savings plan that is available to all regular
employees who have reached age 21. The plan is intended to
qualify under Section 401(k) of the Internal Revenue Code
of 1986, as amended. The plan provides that each participant may
contribute up to 15% of their pre-tax compensation (up to a
statutory limit, which was $11 in calendar year 2002). Employee
contributions are held in the employees' name and invested
by the plan's trustee. The plan also permits the Company to
make matching contributions, subject to established limits. To
date, the Company has not made any matching contributions to the
plan on behalf of participating employees.
13.     Subsequent
Events
Issuance of Series E
On August 7, 2003, the Company authorized
450,000 shares and issued 329,536 shares of Series E at a
purchase price of $60.692 per share resulting in gross cash
proceeds of $20,000. The Company incurred issuance costs of $14
related to this series. Upon the issuance of Series E, the
default provisions of all outstanding preferred stock were
amended. If for any reason the Company defaults on its
obligation to pay all or any portion of the redemption price,
then the unpaid principal portion will bear interest at the
greater of the prime rate plus 4% or 8%. Series E has
similar terms to the other series of preferred stock. As a
result of the issuance of Series E, the conversion price of
the Series D was reduced to $65.894 per share as a result
of the anti-dilution provisions of the Company's
certificate of incorporation.
Initial Public Offering
In October 2003, the Board of Directors
authorized the Company to file a Registration Statement with the
Securities and Exchange Commission ("SEC") permitting
the Company to sell shares of common stock in an initial public
offering ("IPO"). If the IPO is consummated as
presently anticipated, all shares of the Series A,
Series A-2, Series B, Series B-2, Series C
and Series E preferred stock will automatically convert
into shares of common stock at a 1-for-1 conversion ratio and
all shares of the Series D preferred stock will
automatically convert into shares of common stock at a
1.013-for-1 conversion ratio. The unaudited pro forma
stockholders' equity at June 30, 2003 reflects the
conversion of the Series A, Series A-2, Series B,
Series B-2, Series C and Series D
F-20
GTx, Inc.
(a development stage company)
NOTES TO FINANCIAL
STATEMENTS — (Continued)
preferred stock and accrued dividends into
981,681 shares of the common stock as if conversion had occurred
as of June 30, 2003.
Based on the Company's outstanding shares as
of August 31, 2003, if the initial public offering is
closed under the terms presently anticipated, all of the
cumulative redeemable convertible preferred stock outstanding
will automatically convert into approximately 1,322,944 shares
of common stock on August 31, 2003.
Issuance of Stock Options
On May 21, 2003, the Company issued 3,000
stock options under the 2001 stock option plan. The shares were
issued at an exercise price of $53.00 a share. The shares vest
one-third on the third anniversary, one-third on the fourth
anniversary and one-third on the fifth anniversary of the grant
date. The weighted average fair value of options granted was
$14.48. The weighted average fair value was determined using the
minimum value option pricing model assuming no expected
dividends, a risk-free interest rate of 3.15% and a weighted
average expected life of 8 years.
On August 1, 2003, the Company issued 22,000
stock options under the 2002 stock option plan. The shares were
issued at an exercise price of $53.00 a share. The shares vest
one-third on the third anniversary, one-third on the fourth
anniversary and one-third on the fifth anniversary of the grant
date. The weighted average fair value of options granted was
$14.91. The weighted average fair value was determined using the
minimum value option pricing model assuming no expected
dividends, a risk-free interest rate of 4.36% and a weighted
average expected life of 8 years.
On September 1, 2003, the Company issued
28,000 stock options under the 2002 stock option plan. The
shares were issued at an exercise price of $53.00 a share. The
shares vest one-third on the third anniversary, one-third on the
fourth anniversary and one-third on the fifth anniversary of the
grant date. The weighted average fair value of options granted
was $15.12. The weighted average fair value was determined using
the minimum value option pricing model assuming no expected
dividends, a risk-free interest rate of 4.36% and a weighted
average expected life of 8 years.
Reincorporation
In September 2003, the Company formed a
wholly-owned subsidiary of the Company in the State of Delaware.
Prior to the completion of the proposed initial public offering,
the Company will merge into the subsidiary to effect a
reincorporation into the State of Delaware.
F-21
No dealer,
salesperson or other person is authorized to give any
information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the
shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
7
Special Note Regarding Forward-Looking Statements
27
Use of Proceeds
28
Dividend Policy
28
Capitalization
29
Dilution
30
Selected Financial Data
32
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
34
Business
43
Management
64
Certain Relationships and Related Transactions
78
Principal Stockholders
80
Description of Capital Stock
82
Shares Eligible For Future Sale
85
Underwriting
87
Validity of the Common Stock
89
Experts
89
Where You Can Find More Information
89
Index to Financial Statements
F-1
Through and
including                     ,
2003 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to
deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.
Shares
GTx, Inc.
Common Stock
Goldman, Sachs & Co.
SG Cowen
Lazard
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13.
Other
Expenses of Issuance and Distribution
The following table sets forth the costs and
expenses to be paid by us in connection with the sale of the
shares of common stock being registered hereby. All amounts are
estimates except for the SEC registration fee, the NASD filing
fee and the Nasdaq National Market filing fee.
Amount to be Paid
SEC registration fee
$
6,977
NASD filing fee
9,125
Nasdaq National Market filing fee
*
Printing and engraving expenses
*
Blue sky qualification fees and expenses
*
Accounting fees and expenses
*
Legal fees and expenses
*
Transfer agent and registrar fees
*
Miscellaneous expenses
*
Total
$
*
*
To be provided by amendment.
Item 14.
Indemnification
of Directors and Officers
Our certificate of incorporation, which will
become effective upon the completion of this offering, contains
provisions permitted under Delaware law relating to the
liability of directors. These provisions eliminate a
director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in
circumstances involving wrongful acts, such as:
•
any breach of the director's duty of loyalty
    to us or our stockholders;
•
any act or omission not in good faith or that
    involves intentional misconduct or a knowing violation of the
    law;
•
any act related to unlawful stock repurchases,
    redemptions or other distribution or payments of dividends; or
•
any transaction from which the director derived
    an improper personal benefit.
These provisions do not limit or eliminate our
rights or any stockholder's rights to seek non-monetary
relief, such as an injunction or rescission, in the event of a
breach of director's fiduciary duty. These provisions will
not alter a director's liability under federal securities
laws.
As permitted by Section 145 of the Delaware
General Corporation Law, our bylaws, which will become effective
upon the closing of this offering, require us to indemnify our
directors and executive officers to the fullest extent not
prohibited by the Delaware law. We may limit the extent of such
indemnification by individual contracts with our directors and
executive officers. Further, we may decline to indemnify any
director or executive officer in connection with any proceeding
initiated by such person or any proceeding by such person
against us or our directors, officers, employees or other
agents, unless such indemnification is expressly required to be
made by law or the proceeding was authorized by our Board of
Directors.
We have entered into indemnity agreements with
each of our current directors and certain of our executive
officers to give such directors and officers additional
contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation
and bylaws and to provide additional procedural protections. At
present, there is no pending litigation or proceeding involving
II-1
any of our directors, officers or employees for
which indemnification is sought, nor are we aware of any
threatened litigation that may result in claims for
indemnification.
We have the power to indemnify our other
officers, employees and other agents, as permitted by Delaware
law, but we are not required to do so.
The Registrant maintains a directors' and
officers' insurance and registrant reimbursement policy.
The policy insures directors and officers against unindemnified
losses arising from certain wrongful acts in their capacities as
directors and officers and reimburses the registrant for those
losses for which the registrant has lawfully indemnified the
directors and officers. The policy contains various exclusions,
none of which apply to this offering.
Reference is made to the following documents
filed as exhibits to this registration statement regarding
relevant indemnification provisions described above and
elsewhere herein:
Exhibit Document
Number
Form of Underwriting Agreement
1.1
Amended and Restated Certificate of Incorporation
3.3
Amended and Restated Bylaws
3.4
Registration Rights Agreement with Oracle
    Partners, L.P.
4.3
Registration Rights Agreement with J.R. Hyde, III
4.4
Registration Rights Agreement with Memphis Biomed
    Ventures I, L.P.
4.5
Form of Indemnification Agreement
10.12
Item 15.
Recent
Sales of Unregistered Securities
1. In July 2000, we issued and sold an
aggregate of 277,500 shares of our 8% Series B Cumulative
Convertible Preferred Stock to one accredited investor at
$18.018 per share, for an aggregate offering price of $4,999,995.
2. In October 2001, we issued and sold an
aggregate of 260,154 shares of our 8% Series C Cumulative
Convertible Preferred Stock to three accredited investors at
$57.658 per share, for an aggregate offering price of
$14,999,959.
3. In July 2002, we issued and sold an
aggregate of 164,765 shares of our 8% Series D Cumulative
Convertible Preferred Stock to four accredited investors at
$66.762 per share for an aggregate offering price of $11,000,041.
4. In August 2003, we issued and sold an
aggregate of 329,536 shares of our 8% Series E Cumulative
Convertible Preferred Stock to 11 accredited investors at
$60.692 per share for an aggregate offering price of $20,000,199.
We claimed exemption from registration under the
Securities Act for the sales and issuances of securities in the
transactions described in paragraphs (1) through (3)
above by virtue of Section 4(2) of the Securities Act in
that such sales and issuances did not involve a public offering.
The recipients of securities in each of these transactions
represented their intention to acquire the securities for
investment only and not with view to or for sale in connection
with any distribution thereof and appropriate legends were
affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their
relationships with us, to information about us.
We claimed exemption from registration under the
Securities Act for the sales and issuances of securities in the
transactions described in paragraph (4) by virtue of
Section 4(2) of the Securities Act and Rule 506 of
Regulation D. Such sales and issuances did not involve any
public offering, were made without general solicitation or
advertising and each purchaser was a sophisticated investor with
access to all relevant information necessary to evaluate the
investment and represented to us that the shares were being
acquired for investment.
II-2
Item 16.
Exhibits and Financial Statement
    Schedules
(a)
Exhibits
Number
Description
1
.1*
Underwriting Agreement
3
.1
Certificate of Incorporation of GTx, Inc.
3
.2
Bylaws of GTx, Inc.
3
.3*
Form of Amended and Restated Certificate of
    Incorporation of GTx, Inc. to be effective upon completion of
    this offering
3
.4*
Form of Amended and Restated Bylaws of GTx, Inc.
    to become effective upon completion of this offering
3
.5
Second Amended and Restated Voting and
    Shareholder Agreement dated August 7, 2003
4
.1
Reference is made to Exhibits 3.1, 3.2, 3.3
    and 3.4
4
.2*
Specimen of Common Stock Certificate
4
.3
Amended and Restated Registration Rights
    Agreement between Registrant and Oracle Partners, L.P. dated
    August 7, 2003
4
.4
Amended and Restated Registration Rights
    Agreement between Registrant and J. R. Hyde, III
    dated August 7, 2003
4
.5
Amended and Restated Registration Rights
    Agreement between Registrant and Memphis Biomed Ventures dated
    August 7, 2003
5
.1*
Opinion of Cooley Godward LLP
10
.1
Genotherapeutics, Inc. 1999 Stock Option Plan
10
.2
GTx, Inc. 2000 Stock Option Plan
10
.3
GTx, Inc. 2001 Stock Option Plan
10
.4
GTx, Inc. 2002 Stock Option Plan
10
.5*
2003 Equity Incentive Plan and Form of Stock
    Option Agreement
10
.6*
2003 Non-Employee Directors' Stock Option
    Plan and Form of Stock Option Agreement
10
.7*
2003 Employee Stock Purchase Plan
10
.8
Employment Agreement dated October 1, 2003,
    between Registrant and Mitchell S. Steiner, M.D.
10
.9
Employment Agreement dated October 1, 2003,
    between Registrant and Marc S. Hanover
10
.10
Employment Agreement dated October 1, 2003,
    between Registrant and Mark E. Mosteller
10
.11
Employment Agreement dated October 1, 2003,
    between Registrant and Henry P. Doggrell
10
.12*
Form of Indemnification Agreement
10
.13
Lease Agreement, dated March 7, 2001,
    between The University of Tennessee and TriStar Enterprises, Inc.
10
.14
Sublease Agreement dated October 1, 2000, as
    amended, between Registrant and TriStar Enterprises, Inc.
10
.15†
Amended and Restated License and Supply Agreement
    dated October 22, 2001, between Registrant and Orion
    Corporation
10
.16†
Amendment No. 1 to the License and Supply
    Agreement dated March 5, 2003, between Registrant and Orion
    Corporation
10
.17†
Production and Manufacturing Agreement dated
    September 9, 2002, between Registrant and ChemSyn
    Laboratories (Department of EaglePicher Technologies, LLC)
II-3
Number
Description
10
.18†
Amendment No. 1 to the Production and
    Manufacturing Agreement dated September 30, 2003, between
    Registrant and ChemSyn Laboratories (Department of EaglePicher
    Technologies, LLC)
10
.19†
Quotation Agreement dated August 8, 2003
    between Registrant and EaglePicher Pharmaceutical Services
10
.20†
Amended and Restated Exclusive License Agreement
    dated June 3, 2002, between Registrant and University of
    Tennessee Research Foundation
10
.21†
Amended and Restated Exclusive License Agreement
    dated June 14, 2002, between Registrant and University of
    Tennessee Research Foundation
10
.22†
Amended and Restated Exclusive License Agreement
    dated August 30, 2002, between Registrant and University of
    Tennessee Research Foundation
23
.1
Consent of Ernst & Young LLP
23
.2*
Consent of Cooley Godward LLP (included in
    Exhibit 5.1)
24
.1
Power of attorney. Reference is made to the
    signature page.
*
To be filed by amendment.
†
Confidential treatment requested. The redacted
    portions have been filed separately with the SEC as required by
    Rule 406 of Regulation C.
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 a
    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 this registration statement as of
    the time it was declared effective.
(2) For the purpose 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-4
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, GTx, Inc. has duly caused this
Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Memphis, State of Tennessee, on the 14th day of
October, 2003.
GTX, INC.
By:
/s/ MITCHELL S. STEINER
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
Dr. Mitchell S. Steiner and Mr. Marc S. Hanover, and
each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him or her and in his or
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 to sign any registration
statement for the same offering covered by the registration
statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act, and all
post-effective amendments thereto, and to file the same, with
all exhibits thereto and all 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 might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done
or by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ MITCHELL S. STEINER
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer, Vice-Chairman and
    Director
October 14, 2003
/s/ MARK E. MOSTELLER
Mark E. Mosteller
Chief Financial Officer
October 14, 2003
/s/ J. R. HYDE, III
J.R. Hyde, III
Chairman of the Board of Directors
October 14, 2003
/s/ MARC S. HANOVER
Marc S. Hanover
Director
October 14, 2003
II-5
Signature
Title
Date
/s/ JOHN H. PONTIUS
John H. Pontius
Director
October 14, 2003
/s/ ROSEMARY MAZANET
Rosemary Mazanet, M.D., Ph.D.
Director
October 14, 2003
II-6
EXHIBIT INDEX
Number
Description
1.1*
Underwriting Agreement
3.1
Certificate of Incorporation of GTx, Inc.
3.2
Bylaws of GTx, Inc.
3.3*
Form of Amended and Restated Certificate of
    Incorporation of GTx, Inc. to be effective upon completion of
    this offering
3.4*
Form of Amended and Restated Bylaws of GTx, Inc.
    to become effective upon completion of this offering
3.5
Second Amended and Restated Voting and
    Shareholder Agreement dated August 7, 2003
4.1
Reference is made to Exhibits 3.1, 3.2, 3.3
    and 3.4
4.2*
Specimen of Common Stock Certificate
4.3
Amended and Restated Registration Rights
    Agreement between Registrant and Oracle Partners, L.P.
    dated August 7, 2003
4.4
Amended and Restated Registration Rights
    Agreement between Registrant and J. R. Hyde, III
    dated August 7, 2003
4.5
Amended and Restated Registration Rights
    Agreement between Registrant and Memphis Biomed Ventures dated
    August 7, 2003
5.1*
Opinion of Cooley Godward LLP
10.1
Genotherapeutics, Inc. 1999 Stock Option Plan
10.2
GTx, Inc. 2000 Stock Option Plan
10.3
GTx, Inc. 2001 Stock Option Plan
10.4
GTx, Inc. 2002 Stock Option Plan
10.5*
2003 Equity Incentive Plan and Form of Stock
    Option Agreement
10.6*
2003 Non-Employee Directors' Stock Option
    Plan and Form of Stock Option Agreement
10.7*
2003 Employee Stock Purchase Plan
10.8
Employment Agreement dated October 1, 2003,
    between Registrant and Mitchell S. Steiner, M.D.
10.9
Employment Agreement dated October 1, 2003,
    between Registrant and Marc S. Hanover
10.10
Employment Agreement dated October 1, 2003,
    between Registrant and Mark E. Mosteller
10.11
Employment Agreement dated October 1, 2003,
    between Registrant and Henry P. Doggrell
10.12*
Form of Indemnification Agreement
10.13
Lease Agreement, dated March 7, 2001,
    between The University of Tennessee and TriStar Enterprises, Inc.
10.14
Sublease Agreement dated October 1, 2000, as
    amended, between Registrant and TriStar Enterprises, Inc.
10.15†
Amended and Restated License and Supply Agreement
    dated October 22, 2001, between Registrant and Orion
    Corporation
10.16†
Amendment No. 1 to the License and Supply
    Agreement dated March 5, 2003, between Registrant and Orion
    Corporation
10.17†
Production and Manufacturing Agreement dated
    September 9, 2002, between Registrant and ChemSyn
    Laboratories (Department of EaglePicher Technologies, LLC)
10.18†
Amendment No. 1 to the Production and
    Manufacturing Agreement dated September 30, 2003, between
    Registrant and ChemSyn Laboratories (Department of EaglePicher
    Technologies, LLC)
Number
Description
10.19†
Quotation Agreement dated August 8, 2003
    between Registrant and EaglePicher Pharmaceutical Services
10.20†
Amended and Restated Exclusive License Agreement
    dated June 3, 2002, between Registrant and University of
    Tennessee Research Foundation
10.21†
Amended and Restated Exclusive License Agreement
    dated June 14, 2002, between Registrant and University of
    Tennessee Research Foundation
10.22†
Amended and Restated Exclusive License Agreement
    dated August 30, 2002, between Registrant and University of
    Tennessee Research Foundation
23.1
Consent of Ernst & Young LLP
23.2*
Consent of Cooley Godward LLP (included in
    Exhibit 5.1)
24.1
Power of Attorney. Reference is made to the
    signature page.
*
To be filed by amendment.
†
Confidential treatment requested. The redacted
    portions have been filed separately with the SEC as required by
    Rule 406 of Regulation C.