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<TITLE>EYETECH PHARMACEUTICALS, INC.</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">As filed with the Securities and Exchange
Commission on September&nbsp;12, 2003</FONT></B>
</DIV>

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

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">500 Seventh Avenue, 18th Floor</FONT></B>

<DIV align="center">
<B><FONT size="2">New York, New York 10018</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;997-9241</FONT></B>
</DIV>

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

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

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

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

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

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

<DIV align="center">
<B><FONT size="2">500 Seventh Avenue, 18th Floor</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New York, New York 10018</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;997-9241</FONT></B>
</DIV>

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

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

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

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

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

<TR>
    <TD width="32%"><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="31%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">David E. Redlick, Esq.<BR>
    Stuart R. Nayman, Esq.<BR>
    Hale and Dorr LLP<BR>
    300 Park Avenue<BR>
    New York, New York 10022<BR>
    (212)&nbsp;937-7200</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Douglas H. Altschuler, Esq.<BR>
    Eyetech Pharmaceuticals, Inc.<BR>
    500 Seventh Avenue, 18th Floor<BR>
    New York, New York 10018<BR>
    (212)&nbsp;997-9241</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Patrick O&#146;Brien, Esq.<BR>
    Ropes &#38; Gray LLP<BR>
    One International Place<BR>
    Boston, Massachusetts 02110<BR>
    (617)&nbsp;951-7000</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

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

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

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

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

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

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<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="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class of</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

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

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock, par value $0.01 per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">$100,000,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">$8,090
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>
<P>

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

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

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of computing the
    registration fee in accordance with Rule&nbsp;457(o) under the
    Securities Act.
    </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">Calculated pursuant to Rule&nbsp;457(o) based on
    an estimate of the proposed maximum aggregate offering price.
    </FONT></TD>
</TR>

</TABLE>

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

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

<P align="left">
<HR size="1" width="100%" align="left" noshade>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

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

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

<P align="left">
<B><FONT size="2">PROSPECTUS <FONT color="#E8112D">(Subject to
Completion)</FONT></FONT></B>

<DIV align="left">
<B><FONT size="2" color="#E8112D">Issued September&nbsp;12,
2003</FONT></B>
</DIV>

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

<P align="center">
<IMG src="y89680y8968005.gif" alt="(EYE TECH PHARMACEUTICALS LOGO)">

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. This is our initial public offering and no
public market currently exists for our shares. We anticipate
that the initial public offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have applied to have our common stock approved
for quotation on the NASDAQ National Market under the symbol
&#147;EYET.&#148;
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;6.</B>

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

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

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

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

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

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

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

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

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

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted the underwriters the right to
purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock to cover over-allotments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Securities and Exchange Commission and state
securities regulators have not approved or disapproved these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
</FONT>

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

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

<P align="center">
<B><I>Joint Book-Running Managers</I></B>

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

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

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

</TABLE>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD align="left"><B><FONT size="4">Bear, Stearns &#38; Co. Inc.</FONT></B></TD>
    <TD align="right"><B><FONT size="4">Credit Suisse First Boston</FONT></B></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PROSPECTUS SUMMARY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">RISK FACTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">USE OF PROCEEDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">DIVIDEND POLICY</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">CAPITALIZATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">DILUTION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">SELECTED FINANCIAL INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">BUSINESS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">MANAGEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">PRINCIPAL STOCKHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">DESCRIPTION OF CAPITAL STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">SHARES ELIGIBLE FOR FUTURE SALE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">UNDERWRITERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">LEGAL MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">EXPERTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">REPORT OF INDEPENDENT AUDITORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; DEFICIT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">CONSOLIDATED STATEMENTS OF CASH FLOWS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv3w1.txt">2ND A/R CERTIFICATE OF INCORPORATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv3w2.txt">FORM OF RESTATED CERTIFICATE OF INCORPORATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv3w3.txt">A/R BYLAWS OF THE REGISTRANT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv3w4.txt">FORM OF 2ND A/R BYLAWS</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv4w2.txt">WARRANT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv4w3.txt">WARRANT AGREEMENT AMENDMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv4w4.txt">SERIES D PREFERRED STOCK PURCHASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv4w5.txt">A/R INVESTORS' RIGHTS AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w1.txt">2001 STOCK PLAN</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w2.txt">2003 STOCK INCENTIVE PLAN</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w3.txt">2003 EMPLOYEE STOCK PURCHASE PLAN</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w4.txt">LICENSE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w5.txt">COLLABORATION AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w6.txt">LICENSE, MANUFACTURING AND SUPPLY AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w7.txt">LICENSING AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w8.txt">LICENSE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w9.txt">CONSULTING AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w10.txt">EXECUTIVE EMPLOYMENT AGREEMENT: GUYER</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w11.txt">AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w12.txt">EMPLOYMENT AGREEMENT: CHANEY</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w13.txt">EMPLOYMENT AGREEMENT: SBLENDORIO</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w15.txt">EMPLOYMENT AGREEMENT: ADAMIS</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w17.txt">EMPLOYMENT AGREEMENT: ALTSCHULER</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w18.txt">RESTRICTED STOCK PURCHASE PROMISSORY NOTE</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w19.txt">STOCK PLEDGE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w20.txt">SUBLEASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w21.txt">LEASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv10w22.txt">COMMERCIAL LEASE</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv21w1.txt">LIST OF SUBSIDIARIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="y89680exv23w1.txt">CONSENT OF ERNST & YOUNG LLP</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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

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

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

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

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

<TR 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">6</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">20</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">21</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">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">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">22</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">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selected Financial 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">24</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">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">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">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
    </FONT></DIV>
    </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</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 Party
    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">66</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">69</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">72</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">75</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">Underwriters
    </FONT></DIV>
    </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</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 Matters
    </FONT></DIV>
    </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">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">80</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 Additional 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">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">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="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or any sale of the common stock. In this
prospectus, unless otherwise stated or the context otherwise
requires, references to &#147;Eyetech,&#148; &#147;we,&#148;
&#147;us,&#148; &#147;our&#148; and similar references refer to
Eyetech Pharmaceuticals, Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003 (25&nbsp;days after the commencement of this offering), all
dealers that buy, sell or trade shares of our common stock,
whether or not participating in this offering, may be required
to deliver a prospectus. This delivery requirement is in
addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For investors outside the United States: Neither
we nor any of the underwriters have done anything that would
permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. You are required to
inform yourselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus.
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PROSPECTUS SUMMARY" -->
<DIV align="left"><A NAME="000"></A></DIV>

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

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our most advanced product candidate is
Macugen&#153; (pegaptanib sodium), which we are developing for
the treatment of the wet form of age-related macular
degeneration, known as AMD, and for the treatment of diabetic
macular edema, known as DME. Both AMD and DME are serious
diseases of the retina that can lead to severe vision loss and
blindness. We are in the process of compiling data from our two
Phase 2/3 pivotal clinical trials of Macugen to determine if the
results are satisfactory to proceed with preparing and filing a
new drug application, or NDA, with the United States Food and
Drug Administration, or FDA, for marketing approval of Macugen
as a treatment for wet AMD. The FDA has given &#147;fast
track&#148; designation to Macugen for the treatment of both wet
AMD and DME. We have entered into a collaboration with Pfizer
Inc. to develop and commercialize Macugen for the prevention and
treatment of diseases of the eye.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Macugen.</FONT></I></B><FONT size="2"> We
believe that Macugen may provide considerable benefits over the
existing therapies for wet AMD and DME because it addresses the
abnormal blood vessel growth and blood vessel leakage associated
with wet AMD and the blood vessel leakage associated with DME.
Abnormal blood vessel growth and blood vessel leakage are
associated with elevated levels of a protein known as vascular
endothelial growth factor, or VEGF, in the eye. The active
ingredient in Macugen is a chemically synthesized aptamer, which
is a single strand of nucleic acid that binds with specificity
to a particular target. Macugen binds with high specificity to
VEGF and prevents VEGF from binding to its natural receptor,
thereby inhibiting abnormal blood vessel growth and blood vessel
leakage. To date, Macugen has been administered by injection to
more than 900 individuals, and we have not observed any serious
drug-related adverse events or meaningful immunologic reactions.
In addition, the incidence of injection-related adverse events
has been well within what we believe to be the tolerable limits
for a drug that is administered via injection in the back of the
eye.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clinical
Trials.</FONT></I></B><FONT size="2"> We are conducting one of
our two Phase 2/3 pivotal clinical trials for the use of Macugen
in the treatment of wet AMD in North America with 578 enrolled
patients and one primarily outside North America with 612
enrolled patients. In these trials, which are substantially
identical, we are testing the changes in a patient&#146;s visual
acuity from the beginning of the trial. The primary endpoint in
each trial is the proportion of patients treated with Macugen
losing fewer than 15 letters of visual acuity at 54&nbsp;weeks
</FONT>

<P align="center"><FONT size="2">1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">compared to such proportion in the control group.
On the eye chart used in these clinical trials, 15 letters
equates to three lines. We are treating patients for a second
year in these trials to determine whether prolonged therapy with
Macugen provides additional benefits. All patients have
completed at least one year of participation in these trials. We
are also conducting a Phase 2 clinical trial for the use of
Macugen in the treatment of DME.
</FONT>
</DIV>

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

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

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.</FONT></I><FONT size="2"> We are in the
    process of establishing focused domestic sales and marketing
    capabilities that will primarily target the approximately 1,400
    retinal specialists in the United States who perform most of the
    medical procedures involving back of the eye diseases. Our
    senior management includes well-known ophthalmologists who have
    close relationships with many of the key opinion leaders and
    academic experts in the retinal field, which we believe will
    facilitate our marketing and sales initiatives.
    </FONT></TD>
</TR>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Identify New Ophthalmic
    Products.</FONT></I><FONT size="2"> We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease.
    </FONT></TD>
</TR>

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

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

</TABLE>

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

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

<P align="center">
<B><FONT size="2">Concurrent Private Share Sale to
Pfizer</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our collaboration with Pfizer,
concurrently with the closing of this offering, Pfizer will
purchase from us in a private sale $10&nbsp;million of our
common stock at a price per share equal to the initial public
offering price. Assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, Pfizer will
purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. This purchase is part of the up to
$25&nbsp;million in additional equity investments that Pfizer is
obligated to make under our collaboration.
</FONT>

<P align="center">
<B><FONT size="2">Convertible Preferred Stock Warrants</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our series B preferred stock
financing, we issued warrants to purchase 1,142,902 shares of
our series&nbsp;B convertible preferred stock at an exercise
price of $6.00 per share. As part of our series&nbsp;C preferred
stock financing, we issued warrants to purchase 1,592,846 shares
of our series&nbsp;C-1 convertible preferred stock at an
exercise price of $6.80 per share and 1,504,354 shares of our
series&nbsp;C-2 convertible preferred stock at an exercise price
of $7.20 per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, all of those
warrants will become exercisable for shares of our common stock,
and any of those warrants that are not exercised prior to
completion of this offering will be cancelled. The warrants may
be exercised by paying the exercise price in cash or pursuant to
a cashless exercise feature based on the initial public offering
price. If all of these warrants are exercised on a cashless
basis, assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, we will issue an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and receive no cash proceeds. If all of these
warrants are exercised for cash, we will issue an aggregate of
4,240,102 shares of common stock for cash proceeds of
approximately $28.5&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The warrants to purchase 833,333 shares of our
series&nbsp;B convertible preferred stock at an exercise price
of $6.00 per share that we issued in connection with our license
agreement with Gilead Sciences, Inc. will remain outstanding
after this offering and will be exercisable for 833,333 shares
of common stock at a price of $6.00 per share.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were incorporated under the laws of the State
of Delaware in February 2000. Our principal executive offices
are located at 500 Seventh Avenue, 18th Floor, New York, New
York 10018, and our telephone number is (212)&nbsp;997-9241. Our
website address is <I>www.eyetech.com</I>. The information on
our website is not a part of this prospectus. We have included
our website address in this document as an inactive textual
reference only.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech&#153;, Eyetech Pharmaceuticals&#153; and
Macugen&#153; are our trademarks. Each of the other trademarks,
trade names or service marks appearing in this prospectus
belongs to its respective holder.
</FONT>

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

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

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

<DIV>&nbsp;</DIV>

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

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

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

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

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

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

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We estimate that our net proceeds from this
    offering will be
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us. We intend to
    use these net proceeds to fund our research and development
    activities, to build our sales and marketing capabilities and
    for general corporate purposes, including working capital needs
    and potential acquisitions. See &#147;Use of Proceeds.&#148;
    </FONT></TD>
</TR>

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

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of our common stock to be
outstanding after this offering is based on 28,180,368 shares
outstanding as of August&nbsp;31, 2003, and
includes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that we will issue in our concurrent private sale to Pfizer,
assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The number of shares of common stock to be outstanding
after this offering does not take into account:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">4,477,500 shares of common stock issuable upon
    the exercise of stock options outstanding as of August&nbsp;31,
    2003 at a weighted average exercise price of $1.64 per share;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an aggregate of 4,900,000&nbsp;shares of common
    stock that will be reserved for future issuance under our 2003
    stock incentive plan and our 2003 employee stock purchase plan
    as of the completion of this offering; 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">833,333 shares of common stock issuable upon the
    exercise of warrants that will remain outstanding after this
    offering at an exercise price of $6.00 per share.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of common stock to be
outstanding after this offering also does not include up to
4,240,102 shares of common stock issuable upon exercise of
warrants that will be cancelled if not exercised prior to the
completion of this offering. If all of these warrants are
exercised on a cashless basis, assuming an initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, we will issue 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 and receive no cash proceeds. If all of these
warrants are exercised for cash, we will issue an aggregate of
4,240,102 shares of common stock for cash proceeds of
approximately $28.5&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise noted, the information in this
prospectus assumes that the underwriters do not exercise their
over-allotment option and reflects the automatic conversion of
all outstanding shares of our convertible preferred stock into
an aggregate of 24,140,257 shares of common stock upon the
completion of this offering.
</FONT>

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

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The pro forma net loss attributable to common
stockholders per share information is computed using the
weighted average number of common shares outstanding, after
giving pro forma effect to the automatic conversion of all
outstanding shares of our convertible preferred stock into
shares of our common stock effective upon the completion of this
offering, as if the conversion had occurred at the date of the
original issuance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The pro forma balance sheet information gives
effect to the automatic conversion of all outstanding shares of
our convertible preferred stock into an aggregate of
24,140,257&nbsp;shares of common stock upon the completion of
this offering. The pro forma as adjusted balance sheet
information gives further effect to:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our sale
    of&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 at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our sale
    of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock to Pfizer for cash proceeds of $10&nbsp;million,
    at a purchase price equal to the assumed initial public offering
    price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">our issuance
    of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock upon exercise of outstanding warrants that will
    be cancelled if not exercised prior to completion of this
    offering, assuming that all warrants are exercised on a cashless
    basis based on an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share.
    </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="35%"><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="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="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="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></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" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
</TR>

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

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Inception) to</FONT></B></TD>
    <TD></TD>
    <TD colspan="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 colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">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="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></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 information)</FONT></B></TD>
</TR>

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

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#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">2,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,550</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">Total collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">18,633</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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,292</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,649</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">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,982</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,815</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,647</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
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,680</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,380</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,369</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,080</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,171</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,518</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">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,551</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">(18,887</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">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.98</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 outstanding&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,654,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,791,401</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">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.68</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">Unaudited pro forma weighted average shares
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,837,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931,658</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>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">As of June 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="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

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

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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 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">162,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Long-term capital lease obligations and
    redeemable convertible preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(174,933</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,355</FONT></TD>
    <TD align="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">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,522</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,522</FONT></TD>
    <TD align="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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; (deficit) 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">(95,814</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

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

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

<!-- link1 "RISK FACTORS" -->
<DIV align="left"><A NAME="001"></A></DIV>

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

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

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

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

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;establishing commercial manufacturing
arrangements with third party manufacturers;
</FONT>

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the data from our ongoing Phase 2/3 pivotal
clinical trials for the use of Macugen in the treatment of wet
AMD are not satisfactory, we may not proceed with our planned
filing of a new drug application for Macugen or we may be forced
to delay the filing or narrow the indication for which we seek
marketing approval. Even if the results of the ongoing pivotal
trials appear satisfactory and we file a new drug application as
planned, the FDA may not accept our filing, may request
additional information from us, including data from additional
clinical trials, and, ultimately, may not grant marketing
approval for Macugen. If we are not successful in
commercializing Macugen, or are significantly delayed in doing
so, our business will be materially harmed and we may need to
curtail or cease operations.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, we entered into our
collaboration with Pfizer to develop and commercialize Macugen
for the prevention and treatment of diseases of the eye. The
collaboration involves a complex sharing of control over
decisions, responsibilities and costs and benefits. In addition,
Pfizer may terminate the collaboration relationship upon six to
twelve months&#146; prior notice, depending on when such notice
is given. Any loss of Pfizer as a collaborator in the
development or commercialization of Macugen, dispute over the
terms of, or decisions regarding, the collaboration or other
adverse development in our relationship with Pfizer would
materially harm our business and might accelerate our need for
additional capital.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We must provide the FDA and similar foreign
regulatory authorities with preclinical and clinical data that
demonstrate that our product candidates are safe and effective
for each target indication before they can be approved for
commercial distribution. The preclinical testing and clinical
trials of any product candidates
</FONT>

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

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

<DIV align="left">
<FONT size="2">that we develop must comply with regulation by
numerous federal, state and local government authorities in the
United States, principally the FDA, and by similar agencies in
other countries. Clinical development is a long, expensive and
uncertain process and is subject to delays. We may encounter
delays or rejections based on our inability to enroll enough
patients to complete our clinical trials. Patient enrollment
depends on many factors, including the size of the patient
population, the nature of the trial protocol, the proximity of
patients to clinical sites and the eligibility criteria for the
study. Delays in planned patient enrollment may result in
increased costs and delays, which could have a harmful effect on
our ability to develop products.
</FONT>
</DIV>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">interim results of preclinical or clinical
    studies do not necessarily predict their final results, and
    acceptable results in early studies might not be seen in later
    studies;
    </FONT></TD>
</TR>

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

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

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

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

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

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

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

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

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

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our clinical trials may not demonstrate the
    safety and efficacy of any products or result in marketable
    products.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are currently conducting two Phase&nbsp;2/3
pivotal clinical trials for the use of Macugen in the treatment
of wet AMD and a Phase&nbsp;2 clinical trial for the use of
Macugen in the treatment of DME. To obtain marketing approval,
we may decide to, or the FDA or other regulatory authorities may
require us to, pursue additional clinical trials or other
studies of Macugen. If we are unable to successfully complete
our clinical trials of Macugen or the results of these trials,
particularly the ongoing Phase&nbsp;2/3 pivotal clinical trials,
are not positive or are only modestly positive, we may not be
able to obtain marketing approval for Macugen or may obtain
approval for indications that are not as broad as intended. If
this occurs, our business will be materially harmed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our product development costs will increase if we
experience delays in testing or approvals. Significant clinical
trial delays could allow our competitors to bring products to
market before we do and impair our ability to commercialize our
products or potential products.
</FONT>

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

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

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

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<DIV align="left">
<FONT size="2">any that we are developing. Our competitors may
also obtain FDA or other regulatory approval for their products
more rapidly than we may obtain approval for ours.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The two therapies currently available for the
treatment of wet AMD are photodynamic therapy, which was
developed by QLT, Inc. and is marketed by Novartis AG, and
thermal laser treatment. The current therapies for the treatment
of DME are thermal laser treatment and steroid treatment
administered by physicians on an off-label basis. Macugen will
compete against these therapies if it is approved for marketing.
Additional treatments for these diseases are in various stages
of preclinical or clinical testing. Potential treatments in late
stage clinical trials include drugs sponsored by Alcon, Inc., a
collaboration of Genentech, Inc. and Novartis, Oculex
Pharmaceuticals, Inc., Miravant Medical Technologies, Eli Lilly
and Co. and Bausch &#38; Lomb Incorporated. Some of the sponsors
of these potential products have recently announced favorable
results from Phase&nbsp;1 or Phase&nbsp;2 clinical trials. The
Genentech/ Novartis collaboration is developing an anti-VEGF
humanized antibody fragment for intravitreal injection. This
product candidate may be viewed as particularly competitive with
Macugen because of the similarity of its mechanism of action.
Other laser, surgical or pharmaceutical treatments for AMD and
DME may also compete against Macugen. These competitive
therapies may result in pricing pressure if we receive marketing
approval for Macugen even if Macugen is otherwise viewed as a
preferable therapy.
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

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

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

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

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

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

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

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

</TABLE>

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

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

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

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

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

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

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

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

</TABLE>

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

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

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<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Market acceptance of Macugen and other
    products we develop in the future that are based on new
    technologies may be limited.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The commercial success of the products for which
we may obtain marketing approval from the FDA or other
regulatory authorities will depend upon the acceptance of these
products by the medical community and third party payors as
clinically useful, cost-effective and safe. We expect that many
of the products that we develop will be based upon new
technologies. For example, Macugen is an aptamer, which is a
type of nucleic acid. To date, no aptamer has been approved as a
pharmaceutical by the FDA. As a result, it may be more difficult
for us to achieve market acceptance of our products,
particularly the first products that we introduce to the market
based on new technologies. Our efforts to educate the medical
community about these potentially unique approaches may require
greater resources than would be typically required for products
based on conventional technologies. The safety, efficacy,
convenience and cost-effectiveness of our products as compared
to competitive products will also affect market acceptance.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have limited experience in marketing or
selling products and are in the process of establishing our
sales and marketing capabilities. To achieve commercial success
for any approved product, we must either develop a sales and
marketing organization or outsource these functions to third
parties. We are beginning to recruit a specialty sales force to
participate in detailing Xalatan and, assuming regulatory
approval, to market and sell Macugen in the United States in
collaboration with Pfizer. If we are not successful in
recruiting sales and marketing personnel or in building a sales
and marketing infrastructure, our business will materially
suffer. Moreover, if the commercial launch of Macugen is delayed
as a result of FDA requirements or other reasons, we may
establish sales and marketing capabilities too early relative to
the launch of Macugen. This may be expensive, and our investment
would be lost if we cannot retain our sales and marketing
personnel.
</FONT>

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

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

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

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

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

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have no manufacturing capabilities and limited manufacturing
personnel. We expect to depend on third parties to manufacture
Macugen and future products. If these manufacturers fail to meet
our requirements or those of the FDA and similar foreign
regulatory bodies, our product development and commercialization
efforts may be materially harmed.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have limited personnel with experience in, and
we do not own facilities for, manufacturing any products. There
are a limited number of manufacturers that operate under the
FDA&#146;s and the European Union&#146;s current good
manufacturing practices regulations and are both capable of
manufacturing Macugen and willing to do so.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For our clinical trials of Macugen, we engaged a
third party manufacturer to produce the active pharmaceutical
ingredient. We are in the process of negotiating an agreement
with an affiliate of this third party for commercial supply. For
our clinical trials of Macugen, we also engaged a separate fill
and finish manufacturer to formulate the active pharmaceutical
ingredient from a powder into a solution and to fill the
solution into syringes. We are negotiating with this
manufacturer to provide the fill and finish services for
commercial supply. We may be unable to conclude agreements for
commercial supply with these third party manufacturers, or may
be unable to do so on acceptable terms. Even if we conclude
these agreements, these manufacturers will be single source
suppliers to us for a significant period of time. We also expect
to continue to rely on a single source of supply for the
pegylation reagent used in the manufacture of Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The manufacturer of the active pharmaceutical
ingredient of Macugen with whom we are currently negotiating an
agreement for commercial supply plans to produce commercial
quantities at a different site than the site used to manufacture
the active pharmaceutical ingredient for clinical trial use.
Because of this change of site, the FDA is requiring us to
perform analytical tests to demonstrate that changing the
manufacturing location has not affected the characteristics of
the product. If we cannot establish that the products are
equivalent to the satisfaction of the FDA, we may not obtain or
may be delayed in obtaining approval to launch Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to obtain approval of our products,
including Macugen, by the FDA and foreign regulatory agencies,
we need to complete testing on both the active pharmaceutical
ingredient and on the finished product in the packaging we
propose for commercial sale. This includes testing of stability,
identification of impurities and testing of other product
specifications. With respect to Macugen, this testing is ongoing
and has not been completed. If this testing is delayed or
produces unfavorable results, we may not obtain or may be
delayed in obtaining approval to launch Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to produce Macugen in the quantities
necessary to meet anticipated market demand if the product is
approved, we and our contract manufacturer will need to increase
the manufacturing capacity for the active pharmaceutical
ingredient. We initially intend to increase manufacturing
capacity for the active pharmaceutical ingredient by installing
additional manufacturing lines at the contract
manufacturer&#146;s facility. We are also exploring alternatives
for increasing manufacturing capacity, including developing
alternative
</FONT>

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

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<DIV align="left">
<FONT size="2">manufacturing methods for the active
pharmaceutical ingredient. If we are unable to increase our
manufacturing capacity, or if the cost of this increased
capacity is uneconomic to us, we may not be able to produce
Macugen in a sufficient quantity to meet the requirements for
the launch of the product or to meet future demand. In addition,
our revenues and gross margins could be adversely affected.
</FONT>
</DIV>

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

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

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

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the possibility of termination or 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;
<FONT size="2">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 products, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product,
operating restrictions and criminal prosecutions, any of which
could significantly and adversely affect our business. Changing
manufacturers may require revalidation of the manufacturing
process and procedures in accordance with FDA mandated current
good manufacturing practices. This revalidation may be costly
and time consuming.
</FONT>

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

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also will need to obtain approvals for payment
for Macugen from private insurers, including managed care
organizations. This can be a time consuming and expensive
process. Our business would be materially
</FONT>

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

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<DIV align="left">
<FONT size="2">adversely affected if we do not receive approval
for reimbursement of Macugen from private insurers on a
satisfactory basis.
</FONT>
</DIV>

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

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

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legislative
or regulatory reform of the healthcare system may affect our
ability to sell our products profitably.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In both the United States and some foreign
jurisdictions, there have been a number of legislative and
regulatory proposals to change the healthcare system in ways
that could affect our ability to sell our products profitably.
In the United States, new legislation has been proposed at the
federal and state levels that would result in significant
changes to the healthcare system, either nationally or at the
state level. For example, in the United States, both the House
of Representatives and the Senate have passed bills that, in
different ways, would reduce Medicare payments for drugs. In
addition, the Centers for Medicare and Medicaid Services, the
agency within the Department of Health and Human Services that
administers Medicare and will be responsible for reimbursement
of the cost of Macugen, has asserted the authority of Medicare
not to cover particular drugs if it determines that they are not
&#147;reasonable and necessary&#148; for Medicare beneficiaries.
Further federal and state proposals and healthcare reforms are
likely. Our results of operations could be materially adversely
affected if these or other healthcare reforms are adopted.
</FONT>

<DIV>&nbsp;</DIV>

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

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD></TD>
    <TD>
    <B><I><FONT size="2">We face the risk of product liability
    claims and may not be able to obtain insurance.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business exposes us to the risk of product
liability claims that is inherent in the manufacturing, testing
and marketing of drugs and related products. If the use of one
or more of our products harms people, we may be subject to
costly and damaging product liability claims. Although we have
product liability and clinical trial liability insurance that we
believe is appropriate, this insurance is subject to deductibles
and coverage limitations. We may not be able to obtain or
maintain adequate protection against potential liabilities. If
we are unable to obtain insurance at acceptable cost or
otherwise protect against potential product liability claims, we
will be exposed to significant liabilities, which may materially
and adversely affect our business and financial position. These
liabilities could prevent or interfere with our product
development and commercialization efforts.
</FONT>

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

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

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

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

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We depend on third parties in the conduct
    of our clinical trials for Macugen and any failure of those
    parties to fulfill their obligations could adversely affect our
    development and commercialization plans.</FONT></I></B></TD>
</TR>

</TABLE>

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

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

<DIV>&nbsp;</DIV>

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the products that we are developing or may
develop in the future will require additional research and
development. The research and development work that we must
perform will include extensive preclinical studies and clinical
trials. We will be required to obtain an effective
investigational new drug application, or IND, prior to
initiating human clinical trials and must obtain regulatory
approval prior to any commercial distribution. This process is
expensive, uncertain and lengthy, often taking a number of years
until a product is approved for commercial distribution. We have
only one product, Macugen, that has advanced to the point that
it is undergoing clinical trials. We have not received
regulatory approval to market Macugen in any jurisdiction.
Failure to obtain required regulatory approvals could materially
harm our business.
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any product for which we obtain marketing
approval, along with the manufacturing processes, post-approval
clinical data, advertising and promotional activities for such
product, will be subject to continual requirements, review and
periodic inspections by the FDA and other regulatory bodies.
Even if regulatory approval of a product is granted, the
approval may be subject to limitations on the indicated uses for
which the product may be marketed or to the conditions of
approval, or contain requirements for costly post-marketing
testing and surveillance to monitor the safety or efficacy of
the product. Later discovery of previously unknown problems with
our products, manufacturer or manufacturing processes, or
failure to comply with regulatory requirements, may result in:
</FONT>
<P>

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    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on such products or manufacturing
    processes;
    </FONT></TD>
</TR>

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

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

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

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

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

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

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

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we are unable to obtain protection for
    the intellectual property incorporated into our products, the
    value of our technology and products will be adversely
    affected.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success will depend in large part on our
ability or the ability of our licensors to obtain protection in
the United States and other countries for the intellectual
property incorporated into our products. The patent situation in
the field of biotechnology and pharmaceuticals generally is
highly uncertain and involves complex legal and scientific
questions. Neither we nor our licensors may be able to obtain
issued patents relating to our technology. Even if issued,
patents may be challenged, invalidated, or circumvented, which
could limit our ability to stop competitors from marketing
similar products or the length of term of patent protection we
may have for our products. In addition, our patents and our
licensors&#146; patents also may not afford us protection
against competitors with similar technology. Because patent
applications in the United States and many foreign jurisdictions
are typically not published until 18&nbsp;months after filing,
or in some cases not at all, and because publications of
discoveries in the scientific literature often lag behind actual
discoveries, neither we nor our licensors can be certain that we
or they were the first to make the inventions claimed in issued
patents or pending patent applications, or that we or they were
the first to file for protection of the inventions set forth in
these patent applications.
</FONT>

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

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

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third
parties may own or control patents or patent applications and
require us to seek licenses, which could increase our
development and commercialization costs, or prevent us from
developing or marketing our products or services.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not have rights under some patents or
patent applications related to our proposed products. Third
parties may own or control these patents and patent applications
in the United States and abroad. Therefore, in some cases, in
order to develop, manufacture, sell or import certain of our
proposed products, including Macugen, we or our collaborators
may choose to seek, or be required to seek, licenses under third
party patents issued in the United States and abroad or under
patents that might issue from United States and foreign patent
applications. In such event, we would most likely be required to
pay license fees or royalties or both to the licensor. If
licenses are not available to us on acceptable terms, we or our
collaborators may not be able to develop, manufacture, sell or
import the affected products.
</FONT>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

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

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

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Third parties may own or control patents or
    patent applications that would be infringed by our technologies,
    drug targets or potential products. This could cause us to
    become involved in expensive patent litigation or other
    proceedings, which could result in our incurring substantial
    costs and expenses and liability for damages and could require
    us to stop some of our development and commercialization
    efforts.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not have rights under some patents or
patent applications that would be infringed by technologies that
we use in our research, drug targets that we select or product
candidates that we seek to develop and commercialize. Third
parties may own or control these patents and patent applications
in the United States and abroad. These third parties could bring
claims against us or our collaborators that would cause us to
incur substantial expenses and, if successful against us, could
cause us to pay substantial damages. Further, if a patent
infringement suit were brought against us or our collaborators,
we or they could be forced to stop or delay research,
development, manufacturing or sales of the product or product
candidate that is the subject of the suit. As a result, we or
our collaborators may choose to seek, or be required to seek, a
license from the third party and would most likely be required
to pay license fees or royalties or both. These licenses may not
be available on acceptable terms, or at all. Even if we or our
collaborators were able to obtain a license, the rights may be
nonexclusive, which would give our competitors access to the
same intellectual property. Ultimately, we could be prevented
from commercializing a product, or be forced to cease some
aspect of our business operations, as a result of patent
infringement claims, which could harm our business significantly.
</FONT>

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have no current source of product revenue. We
have a limited operating history and have focused primarily on
clinical trials of Macugen. We began operations in 2000, and we
have not been profitable in any quarter since inception. As of
June&nbsp;30, 2003, we had an accumulated deficit of
approximately $106.5&nbsp;million. We expect to increase our
spending significantly as we continue to expand our
infrastructure, development programs and commercialization
activities. As a result, we will need to generate significant
revenues to pay these costs and achieve profitability. We do not
know whether or when we will become profitable because of the
significant uncertainties with respect to our ability to
generate revenues from the sale of our products and from our
existing and potential future collaborations.
</FONT>

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

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

<P align="center"><FONT size="2">16
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our future capital requirements will depend on
many factors, including:
</FONT>
<P>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

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

<P align="left">
<B><FONT size="2">Risks Related to This Offering</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot specify with certainty the particular
uses of the net proceeds that we will receive from this
offering. Our management will have broad discretion in the
application of the net proceeds, including for any of the
purposes described in &#147;Use of Proceeds.&#148; Our
stockholders may not agree with the manner in which our
management chooses to allocate and spend the net proceeds. The
failure by our management to apply these funds effectively could
have a material adverse effect on our business. Pending their
use, we may invest the net proceeds from this offering in a
manner that does not produce income or that loses value.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
this offering, our executive officers, directors and major
stockholders will maintain the ability to control all matters
submitted to stockholders for approval.</FONT></I></B>

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

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

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<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Antitakeover
defenses that we have in place could delay or prevent an
acquisition and could adversely affect the price of our common
stock because purchasers cannot acquire a controlling
interest.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provisions of our corporate charter and bylaws
and applicable provisions of the General Corporation Law of the
State of Delaware may make it more difficult for or prevent a
third party from acquiring control of us without the approval of
our board of directors. These provisions include:
</FONT>
<P>

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

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

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

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

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

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

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

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

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

</TABLE>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These provisions may have the effect of
entrenching our management team and may deprive you of the
opportunity to sell your shares to potential acquirors at a
premium over prevailing prices. This potential inability to
obtain a control premium could reduce the market price of our
common stock.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If you purchase shares of common stock in
    this offering, you will suffer immediate and substantial
    dilution of your investment.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Purchasers of common stock in this offering will
pay a price per share that substantially exceeds the per share
value of our tangible assets after subtracting our liabilities
and the per share price paid by our existing stockholders and by
persons who exercise currently outstanding options to acquire
our common stock. Accordingly, assuming an initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, you will experience immediate and substantial dilution of
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, representing the difference between our pro forma net
tangible book value per share after giving effect to this
offering and the assumed initial public offering price. In
addition, purchasers of common stock in this offering will have
contributed
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the aggregate price paid by all purchasers of our stock but
will own only
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock outstanding after this offering.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">An active trading market for our common
    stock may not develop.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. Although we have applied to have
our common stock quoted on the NASDAQ National Market, an active
trading market for our shares may never develop or be sustained
following this offering. The initial public offering price for
our common stock will be determined through negotiations with
the underwriters. This initial public offering price may vary
from the market price of our common stock after the offering.
Investors may not be able to sell their common stock at or above
the initial public offering price.
</FONT>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our stock price is likely to be volatile. The
stock market in general and the market for biotechnology
companies in particular have experienced extreme volatility that
has often been unrelated to the operating performance of
particular companies. As a result of this volatility, investors
may not be able to sell their common stock at or above the
initial public offering price. The market price for our common
stock may be influenced by many factors, including:
</FONT>
<P>

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

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

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

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

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

</TABLE>

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

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<P>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our existing stockholders sell a large number
of shares of our common stock or the public market perceives
that existing stockholders might sell shares of common stock,
the market price of our common stock could decline
significantly. All of the shares being sold in this offering
will be freely tradable without restriction or further
registration under the federal securities laws, unless purchased
by our &#147;affiliates&#148; as that term is defined in
Rule&nbsp;144 under the Securities Act. Of the
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
outstanding upon completion of this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;may
be sold pursuant to Rule&nbsp;144 upon the expiration of 180-day
lock-up agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Existing stockholders holding 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, including shares of common stock underlying
options and warrants, have rights with respect to the
registration of these shares of common stock with the Securities
and Exchange Commission. If we register their shares of common
stock following the expiration of the lock-up agreements, they
can sell those shares in the public market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Promptly following this offering, we intend to
register
approximately &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 that are authorized for issuance under our stock
plans. As of August&nbsp;31, 2003, 4,477,500&nbsp;shares were
subject to outstanding options, all of which were immediately
exercisable and of which our right to repurchase
1,457,239&nbsp;shares underlying the options had lapsed. 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="center"><FONT size="2">19
</FONT>

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<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->
<DIV align="left"><A NAME="002"></A></DIV>

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

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

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

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<!-- link1 "USE OF PROCEEDS" -->
<DIV align="left"><A NAME="003"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the net proceeds from our sale
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 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,
or approximately
$&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. This estimate is based upon an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, less estimated underwriting discounts and commissions and
offering expenses payable by us. We will also receive
$10&nbsp;million from our concurrent private sale of common
stock to Pfizer, and we may receive up to an additional
$28.5&nbsp;million if holders of our outstanding warrants elect
to exercise those warrants for cash prior to the completion of
this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to use all of these net proceeds
approximately as follows:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% to
    fund our 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% to
    build our sales and marketing capabilities; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% for
    general corporate purposes, including working capital needs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may also use a portion of the net proceeds for
acquisitions, which may include the acquisition or licensing of
rights to potential new drugs, drug targets or drug delivery
technologies. Although we periodically evaluate acquisition and
licensing opportunities, we currently have no commitments or
agreements with respect to any specific acquisition or license.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pending the uses described above, we intend to
invest the net proceeds of this offering in short- to
medium-term, investment-grade, interest-bearing securities.
</FONT>

<!-- link1 "DIVIDEND POLICY" -->
<DIV align="left"><A NAME="004"></A></DIV>

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

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

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

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<!-- link1 "CAPITALIZATION" -->
<DIV align="left"><A NAME="005"></A></DIV>

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">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
    automatic conversion of all outstanding shares of our
    convertible preferred stock into an aggregate of 24,140,257
    shares of common stock; 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 adjust the
    pro forma information to give effect to:
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our 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 at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our 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 to Pfizer for cash proceeds of $10&nbsp;million,
    at a purchase price equal to the assumed initial public offering
    price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">our issuance
    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 upon exercise of outstanding warrants that will
    be cancelled if not exercised prior to completion of this
    offering, assuming that all warrants are exercised on a cashless
    basis based on an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the holders of the warrants referred to in the
last bullet point above exercise their warrants for cash, we
will issue an aggregate of 4,240,102 shares of common stock for
cash proceeds of approximately $28.5&nbsp;million.
</FONT>

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

<CENTER>
<TABLE width="90%" 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="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">As of June&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

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

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

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

<TR>
    <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="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,534</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="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligations, net of
    current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,355</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 colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred stock, par value
    $0.01 per share; 29,093,695 shares authorized actual and pro
    forma, no shares authorized pro forma as adjusted; 24,020,257
    shares outstanding actual, no shares outstanding pro forma and
    pro forma as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; (deficit) equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Convertible preferred stock, par value $0.01 per
    share; 120,000 shares authorized actual and pro forma, no shares
    authorized pro forma as adjusted; 120,000 shares outstanding
    actual, no shares outstanding pro forma and pro forma as adjusted
    </FONT></DIV>
    </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">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Common stock, par value $0.01 per share;
    60,000,000&nbsp;shares authorized actual and pro forma,
    125,000,000&nbsp;shares authorized pro forma as adjusted;
    3,994,196&nbsp;shares outstanding actual, 28,135,173&nbsp;shares
    outstanding pro
    forma, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    outstanding pro forma as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">286</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock, par value $0.01 per share; no
    shares authorized actual and pro forma, 5,000,000 shares
    authorized pro forma as adjusted; no shares outstanding actual,
    pro forma and pro forma 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>
</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">Additional paid in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Notes receivable from officers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(431</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(431</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&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">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,929</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,929</FONT></TD>
    <TD align="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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury stock, 425,000&nbsp;shares, at cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&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">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,522</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,522</FONT></TD>
    <TD align="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="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; (deficit) 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">(95,814</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,119</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="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">4,477,500 shares of common stock issuable upon
    the exercise of stock options outstanding as of August&nbsp;31,
    2003 at a weighted average exercise price of $1.64&nbsp;per
    share;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an aggregate of 4,900,000&nbsp;shares of common
    stock that will be reserved for future issuance under our 2003
    stock incentive plan and our 2003 employee stock purchase plan
    as of the completion of this offering; 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">833,333 shares of common stock issuable upon the
    exercise of warrants that will remain outstanding after this
    offering at an exercise price of $6.00 per share.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">22
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "DILUTION" -->
<DIV align="left"><A NAME="006"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our pro forma net tangible book value as of
June&nbsp;30, 2003 was approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, after giving effect to the conversion of all outstanding
shares of our convertible preferred stock into common stock upon
the closing of this offering. Pro forma net tangible book value
per share represents the amount of our total tangible assets
less total liabilities, divided by the number of shares of
common stock outstanding before giving effect to the sale of the
shares of our common stock in this offering. After giving effect
to the sale of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering, at an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, less estimated underwriting discounts and commissions and
offering expenses payable by us and the sale of $10&nbsp;million
of our common stock to Pfizer in a private offering concurrent
with this offering at a price per share equal to the initial
public offering price, our pro forma net tangible book value as
of June&nbsp;30, 2003 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. This represents an immediate increase in net tangible
book value per share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
existing stockholders and immediate dilution in net tangible
book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors purchasing our common stock in the
offering at the assumed initial public offering price. The
following table illustrates the per share dilution without
giving effect to the over-allotment option granted to the
underwriters:
</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="72%"><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>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><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 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 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="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">Pro forma net tangible book value per share at
    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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Increase per share attributable to 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>
</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>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share after
    the 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 valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dilution per share to 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 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;
<FONT size="2">Dilution per share to new investors is determined
by subtracting pro forma net tangible book value per share after
this offering from the initial public offering price per share
paid by a new investor. If any shares are issued in connection
with outstanding options, warrants or the underwriters&#146;
over-allotment option, you will experience further dilution.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the number of
shares of common stock purchased from us, the total
consideration paid and the average price per share paid by the
existing stockholders, by new investors in this offering and by
Pfizer in the private offering that will close concurrently with
this offering, before deduction of the underwriting discount and
commissions and other expenses of the offering.
</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="37%"><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>
    <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="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="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="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

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

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Existing 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">25,812,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,126,389</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.58</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">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 valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pfizer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000,000</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">9.10</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><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">Totals
    </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">%</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><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"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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;
<FONT size="2">The share data in the table above 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="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">3,627,195&nbsp;shares of common stock issuable
    upon exercise of stock options outstanding as of June&nbsp;30,
    2003 at a weighted average exercise price of $1.17 per share;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">5,529,875&nbsp;shares of common stock reserved
    for future issuance under our stock option plan as of
    June&nbsp;30, 2003;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">833,333 shares of common stock issuable upon the
    exercise of warrants outstanding as of June&nbsp;30, 2003 at a
    weighted average exercise price of $6.00 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">4,240,102 shares of common stock issuable upon
    the exercise of warrants outstanding as of June&nbsp;30, 2003 at
    a weighted average exercise price of $6.73 per share that will
    be cancelled if not exercised prior to the completion of this
    offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the underwriters&#146; over-allotment option
is exercised in full, the following will occur:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the percentage of shares of common stock held by
    existing stockholders will decrease to
    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; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares held by new investors will
    be increased
    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></TD>
</TR>

</TABLE>

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

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

<DIV>&nbsp;</DIV>

<!-- link1 "SELECTED FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="007"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the following selected financial
information together with our consolidated financial statements
and the related notes appearing at the end of this prospectus
and the &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; section of
this prospectus. We have derived the statement of operations
information for the period from our inception to
December&nbsp;31, 2000, for the years ended December&nbsp;31,
2001 and 2002 and for the six months ended June&nbsp;30, 2003,
and the balance sheet information as of December&nbsp;31, 2001
and 2002 and as of June&nbsp;30, 2003, from our audited
consolidated financial statements which are included in this
prospectus. We have derived the balance sheet information as of
December&nbsp;31, 2000 from our audited consolidated financial
statements, which are not included in this prospectus. The
statement of operations information for the six months ended
June&nbsp;30, 2002 is unaudited but includes, in the opinion of
our management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such
information. Our historical results for any prior or interim
period are not necessarily indicative of results to be expected
for a full fiscal year or for any future period. The pro forma
net loss attributable to common stockholders per share
information is computed using the weighted average number of
common shares outstanding, after giving pro forma effect to the
automatic conversion of all outstanding shares of our
convertible preferred stock into shares of our common stock
effective upon the completion of this offering, as if the
conversion had occurred at the date of the original issuance.
</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="35%"><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="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="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="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></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" align="center" nowrap><B><FONT size="1">February&nbsp;9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></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="3" align="center" nowrap><B><FONT size="1">(Date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Inception) to</FONT></B></TD>
    <TD></TD>
    <TD colspan="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 colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">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="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></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 information)</FONT></B></TD>
</TR>

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

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration revenue<BR>
    License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">2,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,550</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 collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">18,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,311</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">1,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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">12,292</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,649</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">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,982</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,815</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,647</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">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,680</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,380</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,369</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,080</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,171</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,518</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

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

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,551</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">(18,887</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">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.98</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">Weighted average shares outstanding&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,654,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,791,401</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.68</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>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma weighted average shares
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,837,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931,658</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>

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

<TR>
    <TD width="58%"><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="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="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
</TR>

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

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

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligations and
    redeemable convertible preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33,433</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,458</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(145,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(174,933</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">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,365</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,522</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,036</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95,814</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">24
</FONT>
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<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="008"></A></DIV>

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

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a biotechnology company with our first
product candidate, Macugen, currently in two Phase&nbsp;2/3
pivotal clinical trials for use in the treatment of wet AMD.
Macugen is also in a Phase&nbsp;2 clinical trial for use in the
treatment of DME. Our revenue for the six-month period ended
June&nbsp;30, 2003 was $18.6&nbsp;million, consisting of
amortization of the initial non-refundable, up-front, license
payment that we received from Pfizer under our collaboration
with Pfizer and reimbursement to us by Pfizer of a portion of
the ongoing development costs for Macugen. As a result of our
collaboration with Pfizer, we ceased to be a development-stage
company in February 2003. We have had no other income since
inception other than interest on short-term investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We commenced operations in April 2000. Since our
inception, we have generated significant losses. As of
June&nbsp;30, 2003, we had an accumulated deficit of
$106.5&nbsp;million. We expect to continue to spend significant
amounts on the development of Macugen and our other programs. We
expect to incur significantly greater commercialization costs as
we are beginning to recruit a domestic ophthalmic sales force.
We expect to begin to participate in detailing Xalatan together
with Pfizer in the middle of 2004. We also plan to continue to
invest in research for additional applications of Macugen and to
develop new drugs and drug delivery technologies. Additionally,
we plan to continue to evaluate possible acquisitions or
licenses of rights to potential new drugs, drug targets and drug
delivery technologies that would fit within our growth strategy.
Accordingly, we will need to generate significant revenues to
achieve and then maintain profitability.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our research and development expenses incurred
through June&nbsp;30, 2003 were expenses related primarily to
the development of Macugen. We expect to incur additional
research and development expenses of approximately
$40&nbsp;million to $50&nbsp;million relating to Macugen prior
to its commercial launch in the United States for use in the
treatment of wet AMD. These additional expenses are subject to
the risks and uncertainties associated with clinical trials and
the FDA and foreign regulatory review and approval process. As a
result, these additional expenses could exceed our estimated
amounts, possibly materially. Under our agreements with Pfizer,
Pfizer is obligated to fund specified percentages of the ongoing
development costs incurred pursuant to an agreed development
plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales and marketing and general and
administrative expenses consist primarily of salaries and
related expenses, general corporate activities and costs
associated with building a commercial infrastructure to market
and sell Macugen and to detail Xalatan. We anticipate that
general and administrative expenses will increase as a result of
the expected expansion of our operations, facilities and other
activities associated with the planned expansion of our
business, together with the additional costs associated with
operating as a public company. We expect sales and marketing
expenses to increase as we build our sales force and marketing
capabilities to support detailing Xalatan and, subject to
receiving required regulatory approvals, selling of Macugen.
</FONT>

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

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not generated taxable income to date. At
December&nbsp;31, 2002, net operating losses available to offset
future taxable income for federal income tax purposes were
approximately $74.7&nbsp;million. If not utilized, federal net
operating loss carryforwards will begin to expire in 2020. To
date, we have not recognized the potential tax benefit of our
net operating losses on our balance sheets or statements of
operations. The future utilization of our net operating loss
carryforwards may be limited based upon changes in ownership
pursuant to regulations promulgated under the Internal Revenue
Code.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our management&#146;s discussion and analysis of
our financial condition and results of operations are based on
our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial
statements requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported revenues and
expenses during the reporting periods. On an ongoing basis, we
evaluate our estimates and judgments related to revenue
recognition. We base our estimates on historical experience and
on various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our collaboration with Pfizer,
we recognize revenue from non-refundable, up-front, license and
milestone payments not specifically tied to a separate earnings
process ratably over the term of the collaboration, license and
related agreements. When the period of deferral cannot be
specifically identified from the agreement, our management
estimates the period based upon other critical factors contained
within the agreement. We continually review these estimates
which could result in a change in the deferral period and which
might impact the timing and the amount of revenue recognized.
When payments are specifically tied to a separate earnings
process, we will recognize revenue when the specific performance
obligation associated with the payment is completed. Performance
obligations typically consist of significant milestones in the
development life cycle of the related technology, such as
initiation of clinical trials, filing for approval with
regulatory agencies and receipt of approvals by regulatory
agencies. To date, we have received $75&nbsp;million as an
initial license fee from Pfizer. We will amortize this initial
license fee over 15&nbsp;years, the effective life of the
agreement. During the six-month period ended June&nbsp;30, 2003,
we recognized $2.1&nbsp;million of license fee revenue. At
June&nbsp;30, 2003, we had classified $5.0&nbsp;million of
deferred license fee revenue as current and the balance of
$67.9&nbsp;million as long term on our balance sheet.
</FONT>

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

<P align="center"><FONT size="2">26
</FONT>

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<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recorded deferred stock-based compensation
related to stock options granted to employees and directors of
$0.3&nbsp;million and related amortization of $0.1&nbsp;million
during 2001, of $1.3&nbsp;million and related amortization of
$0.2&nbsp;million during 2002, and of $0.9&nbsp;million and
related amortization of $0.3&nbsp;million during the six-month
period ended June&nbsp;30, 2003. We expect to record additional
deferred stock-based compensation of $3.1&nbsp;million and
related amortization of $0.3&nbsp;million for the three-month
period ended September&nbsp;30, 2003. We expect to amortize
approximately $5.1&nbsp;million of deferred stock-based
compensation in future periods, including $0.7&nbsp;million
during the second half of 2003, $1.4&nbsp;million during 2004,
$1.4&nbsp;million during 2005, $1.2&nbsp;million during 2006 and
$0.4&nbsp;million during 2007.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the Financial Accounting
Standards Board, or FASB, issued Interpretation No.&nbsp;46,
&#147;Consolidation of Variable Interest Entities,&#148; or
FIN&nbsp;46, which is an interpretation of Accounting Research
Bulletin No.&nbsp;51, &#147;Consolidated Financial
Statements.&#148; FIN&nbsp;46 requires that if an entity has a
controlling interest in a variable interest entity, the assets,
liabilities and results of activities of the variable interest
entity should be included in the consolidated financial
statements of the entity. 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 in the first interim or annual
period beginning after June&nbsp;15, 2003. We believe that the
adoption of FIN&nbsp;46 will not have a material effect on our
financial position or results of operations.
</FONT>

<P align="left">&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; or
SFAS&nbsp;150. This statement establishes how a company
classifies and measures certain financial instruments with
characteristics of both liabilities and equity, including
redeemable convertible preferred stock. This statement is
effective for financial instruments entered into or modified
after May&nbsp;31, 2003, and is otherwise effective at the
beginning of the interim period commencing July&nbsp;1, 2003,
except for mandatory redeemable financial instruments of
nonpublic companies. We believe that the adoption of
SFAS&nbsp;150 will not have a material effect on our financial
position or results of operations.
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Six Months Ended June&nbsp;30, 2003 and
    2002</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Revenue.</FONT></I><FONT size="2"> We
recognized revenue of $18.6&nbsp;million in the first six months
of 2003, consisting of $16.5&nbsp;million from reimbursement of
development costs and $2.1&nbsp;million from the amortization of
the initial non-refundable, up-front license payment that we
received from Pfizer in connection with our collaboration. The
first six months of 2003 was the first period in which we
generated revenue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development
Expenses.</FONT></I><FONT size="2"> Research and development
expenses increased 81% from $17.3&nbsp;million in the first six
months of 2002 to $31.3 million in the first six months of 2003.
The increase in research and development expenses of
$14.1&nbsp;million resulted primarily from the expansion during
the 2003 period of our Phase&nbsp;2/3 pivotal clinical trials
for the use of Macugen in the treatment of wet AMD, which became
fully enrolled in August 2002. Other factors contributing to the
increase in research and development expenses include the
commencement of our Phase&nbsp;2 clinical trial for the use of
Macugen in the treatment of DME and our Phase&nbsp;2
pharmacokinetic study of Macugen, the opening of our laboratory
facilities in Cedar Knolls, New Jersey and Woburn, Massachusetts
and the addition of 51 research and development staff. We
</FONT>

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

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<DIV align="left">
<FONT size="2">anticipate that research and development expenses
will continue to increase as we further advance Macugen to
commercialization and begin to devote additional resources to
other research and development projects.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Sales and Marketing
Expenses.</FONT></I><FONT size="2"> Sales and marketing expenses
were $1.3&nbsp;million in the first six months of 2003. We had
no sales and marketing expenses in 2002 or 2001. The sales and
marketing expenses in the first half of 2003 reflect personnel
expenses relating to our sales management personnel and
developing a sales force to support future sales of Macugen and
detailing of Xalatan under our agreements with Pfizer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and Administrative
Expenses.</FONT></I><FONT size="2"> General and administrative
expenses increased 4% from $1.9&nbsp;million in the first six
months of 2002 to $2.0&nbsp;million in the first six months of
2003. The increase resulted from increased management and
personnel expenses and increases in facilities and
infrastructure needed to support our Pfizer collaboration and
further development efforts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest Income.</FONT></I><FONT size="2">
Interest income increased from $0.8&nbsp;million in the first
six months of 2002 to $1.6&nbsp;million in the first six months
of 2003 as a result of a higher level of cash and marketable
securities available for investment during the six months ended
June&nbsp;30, 2003 compared to the same period in 2002.
</FONT>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development
Expenses.</FONT></I><FONT size="2"> Research and development
expenses increased 79% from $22.2&nbsp;million in 2001 to
$39.7&nbsp;million in 2002. The increase of $17.5&nbsp;million
resulted from the expansion in 2002 of our clinical development
programs relating to Macugen, primarily our Phase&nbsp;2/3
pivotal clinical trials of Macugen as a treatment for wet AMD,
which became fully enrolled in August 2002, the opening of our
laboratory facilities in Cedar Knolls, New Jersey and Woburn,
Massachusetts and the addition of 34 research and development
staff.
</FONT>

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

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Year Ended December&nbsp;31, 2001 and
    Period From Inception Through December&nbsp;31,
    2000</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development
Expenses.</FONT></I><FONT size="2"> Research and development
expenses more than doubled from $10.9&nbsp;million in the 2000
period to $22.2&nbsp;million in 2001. The increase of
$11.3&nbsp;million resulted from the expansion of our clinical
programs relating to Macugen, primarily the commencement of our
Phase&nbsp;2/3 pivotal clinical trials for the use of Macugen in
the treatment of wet AMD and the addition of 11 research and
development staff.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and Administrative
Expenses.</FONT></I><FONT size="2"> General and administrative
expenses increased significantly from $1.4&nbsp;million in 2000
to $4.3&nbsp;million in 2001. The increase of $2.9&nbsp;million
resulted from increases in the number of general and
administrative personnel, a full year of expenses in 2001
compared to nine months of operations in 2000 and an increase in
rental space.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest Income.</FONT></I><FONT size="2">
Interest income increased from $1.2&nbsp;million in 2000 to
$1.8&nbsp;million in 2001 due to a higher level of cash and
marketable securities available for investment during 2001
compared to 2000, as a result of a financing which took place in
July 2001.
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception, we have financed our
operations through the sale of our capital stock, the initial
up-front license fee that we received from Pfizer as part of our
Macugen collaboration and the receipt of interest income.
Through June&nbsp;30, 2003, we have received net proceeds of
$167.3&nbsp;million from the issuance of shares
</FONT>

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

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

<DIV align="left">
<FONT size="2">of common stock, convertible preferred stock and
warrants. We have also received net proceeds from capital
equipment financing of $2.4&nbsp;million. The table below
summarizes our issuances of convertible preferred stock through
June&nbsp;30, 2003.
</FONT>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="39%"><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="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

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

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

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

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

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

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

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

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

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

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our collaboration with Pfizer,
we received the $25.0&nbsp;million series&nbsp;D investment
reflected in the above table and a $75.0&nbsp;million up-front
license fee and Pfizer has agreed generally to fund a majority
of the ongoing development costs incurred pursuant to an agreed
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. Pfizer is also obligated under the terms of our
collaboration to purchase up to an additional $25.0&nbsp;million
of our common stock in specified circumstances, including
Pfizer&#146;s purchase of $10.0&nbsp;million of our common stock
at the initial public offering price concurrently with the
completion of this offering. These obligations of Pfizer are
currently our only committed external source of funds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, we had
$137.5&nbsp;million in cash, cash equivalents and marketable
securities. Also as of that date, we had pledged
$2.7&nbsp;million of restricted cash as collateral for letters
of credit for certain of our leased facilities. We believe that
our available cash, cash equivalents and marketable securities,
together with our net proceeds from this offering, expected
reimbursements from Pfizer under our collaboration and interest
income will be sufficient to fund anticipated levels of
operations through at least the end of 2005. We had no material
capital expenditures during the first six months of 2003 and
expect to have no material capital expenditures for the
remainder of 2003.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income
Taxes</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, we had net
operating loss carryforwards for federal income taxes of
$74.7&nbsp;million. Our utilization of the net operating loss
and tax credit carryforwards may be subject to annual
limitations pursuant to Section&nbsp;382 of the Internal Revenue
Code, and similar state provisions, as a result of changes in
our ownership structure. The annual limitations may result in
the expiration of net operating losses and credits prior to
utilization.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002 and 2001, we had
deferred tax assets representing the benefit of net operating
loss carryforwards and certain start up costs capitalized for
tax purposes. We did not record a benefit for the deferred tax
asset because realization of the benefit was uncertain and,
accordingly, a valuation allowance is provided to offset the
deferred tax asset.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash Flows</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the six months ended June&nbsp;30, 2003, our
operating activities generated net cash inflows of
$45.5&nbsp;million. This consisted of a net loss for the period
of $14.4&nbsp;million and an increase in amounts due from Pfizer
of $15.5&nbsp;million, offset by the receipt of deferred revenue
in connection with the Pfizer collaboration of
$75.0&nbsp;million, $2.1&nbsp;million of which was recorded as
revenue in the six months ended June&nbsp;30, 2003, and an
increase in accounts payable and accrued expenses of
$1.5&nbsp;million. We used $32.9&nbsp;million for investing
activities for the six&nbsp;months ended June&nbsp;30, 2003,
which consisted primarily of net purchases of marketable
securities. We received $24.6&nbsp;million from financing
activities during the six months ended June&nbsp;30, 2003,
primarily relating to the issuance of convertible preferred
stock to Pfizer for net proceeds, after transaction costs, of
$24.7&nbsp;million, offset by the repayment of capital leases of
$0.3&nbsp;million.
</FONT>

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2002, we
used net cash of $39.8&nbsp;million in operating activities.
This consisted of a net loss for the period of
$43.2&nbsp;million, offset in part by an increase in accounts
payable and accrued expenses of $1.6&nbsp;million. We used
$11.9&nbsp;million for investing activities in 2002, which
consisted principally of net purchases of marketable securities.
We received $54.0&nbsp;million from financing activities during
2002 relating primarily to the issuance of convertible preferred
stock and warrants in connection with our Series&nbsp;C-2
preferred stock financing. In addition, during 2002, we
purchased $2.4&nbsp;million of equipment under capital leases
with a repayment period of four years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2001, we
used net cash of $19.3&nbsp;million in operating activities.
This consisted of a net loss for the period of
$24.7&nbsp;million, offset in part by an increase in accounts
payable and accrued expenses of $5.1&nbsp;million. We used
$36.2&nbsp;million for investing activities in 2001, which
consisted primarily of net purchases of marketable securities.
We received $53.7&nbsp;million from financing activities during
2001 relating primarily to the issuance of convertible preferred
stock and warrants in connection with our Series&nbsp;C-1
preferred stock financing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the period from our inception on
February&nbsp;9, 2000 through December&nbsp;31, 2000, we used
net cash of $9.6&nbsp;million in operating activities. This
consisted of a net loss for the period of $11.1&nbsp;million,
offset in part by an increase in accounts payable and accrued
expenses of $0.7&nbsp;million and a non-cash charge of
$0.8&nbsp;million in connection with warrants issued to acquire
rights to Macugen. We used $19.7&nbsp;million for investing
activities in 2000, which consisted principally of net purchases
of marketable securities. We received $34.7&nbsp;million from
financing activities during 2000 relating principally to the
issuance of convertible preferred stock and warrants in
connection with our Series&nbsp;B preferred stock financing.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Funding Requirements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to devote substantial resources to
continue our research and development efforts and to expand our
sales, marketing and manufacturing programs associated with the
commercialization and launch of Macugen and our future products.
Our funding requirements will depend on numerous factors,
including:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our collaborative arrangement with
    Pfizer for the development and commercialization of Macugen;
    </FONT></TD>
</TR>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not expect to generate significant
additional funds, other than payments that we receive from our
collaboration with Pfizer, until we successfully obtain
marketing approval for, and begin selling, Macugen. We believe
that the key factors that will affect our internal and external
sources of cash are:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to successfully obtain marketing
    approval for and to commercially launch Macugen;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to successfully participate in
    selling Pfizer&#146;s product, Xalatan;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our other preclinical and clinical
    development programs;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the receptivity of the capital markets to
    financings by biotechnology companies; and
    </FONT></TD>
</TR>

</TABLE>

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to enter into additional strategic
    collaborations with corporate and academic collaborators and the
    success of such collaborations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our existing resources and the proceeds of
this offering are insufficient to satisfy our liquidity
requirements or if we acquire or license rights to additional
product candidates, we may need to raise additional external
funds through the sale of additional equity or debt securities.
The sale of additional equity securities may result in
additional dilution to our stockholders. Additional financing
may not be available in amounts or on terms acceptable to us or
at all. If we are unable to obtain additional financing, we may
be required to reduce the scope of, delay or eliminate some or
all of our planned research, development and commercialization
activities, which could harm our financial condition and
operating results.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Contractual Obligations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our major outstanding contractual obligations
relate to our capital leases from equipment financings,
facilities leases and obligations under a number of our
collaboration and alliance agreements to pay milestone payments
and royalties to the other parties to these agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have summarized in the table below our fixed
contractual cash obligations as of June&nbsp;30, 2003.
</FONT>

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

<TR>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Payments Due by Period</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Less than</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Four to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After Five</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Contractual Obligations</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, including interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,266,349</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">378,125</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">1,888,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Operating leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,030,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">761,553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,658,398</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,106,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,503,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total contractual cash obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,296,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,139,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,546,622</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,106,856</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">1,503,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under our agreements with Gilead, Nektar and
Isis, we are obligated to make specified payments upon achieving
specified milestones relating to the development and regulatory
approval of Macugen. These contingent payment obligations are
not included in the above table.
</FONT>

<P align="left">
<B><FONT size="2">Disclosure About Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our exposure to market risk is confined to our
cash, cash equivalents and marketable securities. We invest in
high-quality financial instruments, primarily money market
funds, federal agency notes, asset backed securities, corporate
debt securities and United&nbsp;States treasury notes, with the
effective duration of the portfolio less than nine months and no
security with an effective duration in excess of 2&nbsp;years,
which we believe are subject to limited credit risk. We
currently do not hedge interest rate exposure. Due to the
short-term nature of our investments, we do not believe that we
have any material exposure to interest rate risk arising from
our investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our transactions are conducted in
United&nbsp;States dollars, although we do have some development
and commercialization agreements with vendors located outside
the United&nbsp;States. Transactions under certain of these
agreements are conducted in United&nbsp;States dollars, subject
to adjustment based on significant fluctuations in currency
exchange rates. Transactions under certain other of these
agreements are conducted in the local foreign currency. If the
exchange rate undergoes a change of 10%, we do not believe that
it would have a material impact on our results of operations or
cash flows.
</FONT>

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

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<!-- link1 "BUSINESS" -->
<DIV align="left"><A NAME="009"></A></DIV>

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology. Our most advanced product
candidate is Macugen, which we are developing for the treatment
of wet AMD and DME. Both AMD and DME are serious diseases of the
retina that can lead to severe vision loss and blindness. In the
second half of 2001, we initiated two Phase&nbsp;2/3 pivotal
clinical trials of Macugen for the treatment of wet AMD. We are
in the process of compiling data from these trials to determine
if the results are satisfactory to proceed with preparing and
filing an NDA with the FDA for marketing approval of Macugen as
a treatment for wet AMD. The FDA has given &#147;fast
track&#148; designation to Macugen for the treatment of both wet
AMD and DME. We have entered into a collaboration with Pfizer to
develop and commercialize Macugen for the prevention and
treatment of diseases of the eye.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Wet AMD and DME are two of the leading causes of
severe vision loss and blindness in the adult population. In the
United States, we estimate that as many as 15&nbsp;million
people suffer from some form of AMD and that there are more than
1.6&nbsp;million cases of wet AMD. Approximately 200,000 new
cases of wet AMD arise each year in the United States. Although
wet AMD represents approximately 10% of all AMD cases, it is
responsible for 90% of the severe vision loss associated with
AMD, with a majority of wet AMD patients experiencing severe
vision loss in the affected eye within approximately two years
after diagnosis of the disease. Because AMD generally affects
adults over 50&nbsp;years of age, we expect the incidence of AMD
to increase significantly as the baby boom generation ages and
overall life expectancy increases. In the United States, there
are approximately 500,000 people suffering from DME, with
approximately 75,000 new cases each year. We expect the
incidence of DME in the United States to increase as the number
of people with diabetes increases. We believe that the
prevalence and incidence of AMD and DME in the European Union
are similar to those in the United States. Because the existing
treatments for both wet AMD and DME have significant
limitations, there is a significant unmet medical need for a new
therapy for these diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that Macugen may provide considerable
benefits over the existing therapies for wet AMD and DME because
it addresses the abnormal blood vessel growth and blood vessel
leakage associated with wet AMD and the blood vessel leakage
associated with DME. Significant scientific evidence suggests
that the presence in the eye of elevated levels of a protein
known as vascular endothelial growth factor, or VEGF, plays an
important role in causing this abnormal blood vessel growth and
blood vessel leakage. Macugen prevents VEGF from binding to its
natural receptor, thereby inhibiting such abnormal blood vessel
growth and blood vessel leakage.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are conducting one of our two Phase&nbsp;2/3
pivotal clinical trials for the use of Macugen in the treatment
of wet AMD in North America and one primarily outside North
America. There are 578 patients enrolled in the North American
trial and 612 in the international trial. All patients have
completed at least one year of participation in these trials.
For the first year of the trials, which are substantially
identical, we randomly divided the participants into four
groups. Three of these groups received different dose levels of
Macugen; the fourth group received a placebo injection. Some
patients in the trials may also receive photodynamic therapy,
the only currently FDA approved therapy for wet AMD, at their
physician&#146;s discretion if they are eligible for this
therapy. In these trials, we are testing the changes in a
patient&#146;s visual acuity from the beginning of the trial.
The primary endpoint in each trial is the proportion of patients
treated with Macugen losing fewer than 15 letters of visual
acuity at 54&nbsp;weeks compared to such proportion in the
control group. On the eye chart used in these clinical trials,
15 letters equates to three lines. We are treating patients for
a second year in these trials to determine whether prolonged
therapy with Macugen provides additional benefits. We are also
conducting a Phase&nbsp;2 clinical trial for the use of Macugen
in the treatment of DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, we entered into our
collaboration with Pfizer under which we and Pfizer are jointly
completing the development of Macugen and have agreed to
copromote Macugen in the United States. We
</FONT>

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

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

<DIV align="left">
<FONT size="2">have granted Pfizer the exclusive right to
develop and commercialize Macugen outside the United States
pursuant to a royalty-bearing license. Under the collaboration,
we are entitled to participate in the United States in detailing
Pfizer&#146;s product Xalatan&#174; for the treatment of
glaucoma.
</FONT>
</DIV>

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

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Maximize Commercial Potential of
    Macugen.</FONT></I><FONT size="2"> We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product.
    If the results of the first year of our Phase 2/3 pivotal
    clinical trials are satisfactory, we plan to proceed with
    preparing and filing an NDA with the FDA covering Macugen for
    the treatment of wet AMD. We are also exploring the application
    of Macugen to a range of additional ophthalmic indications.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.</FONT></I><FONT size="2"> We are in the
    process of establishing focused domestic sales and marketing
    capabilities for Macugen, Xalatan and other ophthalmic products
    that we may develop or acquire. We estimate that there are
    approximately 1,400 retinal specialists in the United States who
    perform most of the medical procedures involving back of the eye
    diseases. We plan to target most of our sales and marketing
    efforts at these specialists. Our senior management includes
    well-known ophthalmologists who have close relationships with
    many of the key opinion leaders and academic experts in the
    retinal field. We believe that the profile of our company and
    Macugen in the domestic retinal specialist community has been
    further enhanced by the participation of many retinal
    specialists in the Macugen clinical trials. We believe that the
    relationships of our senior management along with the existing
    familiarity of many retinal specialists with us and Macugen will
    facilitate our marketing and sales initiatives. In selling and
    marketing Macugen in the United States, our personnel will work
    collaboratively with Pfizer, which has substantial sales and
    marketing capabilities and will have primary responsibility for
    promoting this product in the domestic market to general
    ophthalmologists.
    </FONT></TD>
</TR>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Identify New Ophthalmic
    Products.</FONT></I><FONT size="2"> We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Explore Additional Non-Ophthalmic Indications
    for Macugen.</FONT></I><FONT size="2"> Third party preclinical
    and clinical research suggests that VEGF plays a key role in
    some non-ophthalmic diseases, particularly some types of cancer
    and psoriasis. We are using our preclinical research expertise
    to evaluate whether the anti-VEGF characteristics of Macugen and
    the underlying stability of its active molecule may make it a
    suitable local treatment for these and other diseases. For
    indications outside of ophthalmology, we plan to seek
    collaborators or licensees for drug development and
    commercialization.
    </FONT></TD>
</TR>

</TABLE>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The human eye possesses focusing elements in the
front, the cornea and lens, and a light-sensing element in the
back, the retina. Light falls on the photoreceptors that are
part of the retina, called rods and cones, and
</FONT>

<P align="center"><FONT size="2">33
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<DIV align="left">
<FONT size="2">is converted into electrical energy, which
travels via the optic nerve to the brain. The central most
portion of the retina is the macula, which is the region
responsible for seeing color and the acute central vision
necessary for activities such as reading, face recognition,
watching television and driving. The brain processes the complex
signals sent from the retina into vision. The following diagram
illustrates the principal elements of the anatomy of a healthy
eye, including a detailed cross-section of the back of the eye.
</FONT>
</DIV>

<P align="center">
<IMG src="y89680y8968000.gif" alt="(ANATOMY OF THE EYE GRAPHIC)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eye disease can be caused by many factors and can
affect both the front and back of the eye. In its most extreme
cases, eye disease can result in either partial or total
blindness. In the developed world, the major diseases that
result in blindness are those affecting the retina, including
AMD, diabetic retinopathy, of which DME is a manifestation, and
glaucoma. These diseases deny patients of their sight, and, as a
result, their ability to live independently and perform daily
activities.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Age-Related Macular
    Degeneration</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMD is a chronic, progressive disease of the
macula that results in the loss of central vision. The most
common symptoms are a central blurred or blank spot, distortion
of objects or simply blurred vision. Peripheral vision usually
remains intact. The disease typically affects patients initially
in one eye, with a high likelihood of it occurring in the second
eye over time. Because AMD is strongly correlated with aging, we
believe that it is likely for the disease to recur,
notwithstanding treatment, as the aging process continues. Thus,
patients who have been administered the existing therapies for
AMD frequently have required retreatment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. We estimate that as many as 15&nbsp;million people in the
United States suffer from some form of AMD, with more than
1.6&nbsp;million experiencing the active blood vessel growth and
blood vessel leakage associated with wet AMD. Approximately
200,000 new cases of wet AMD arise each year in the United
States. The rate of AMD increases sharply with age, from 18%
among people 70-74&nbsp;years of age to 47% among people
85&nbsp;years and older. According to the U.S.&nbsp;census
bureau, the number of people in the United States aged 50 or
older is approximately 80&nbsp;million and is expected to
increase by approximately 40% over the next two decades. We
expect that this increase in the number of elderly people will
result in a significant increase in the number of cases of AMD
in the United States.
</FONT>

<P align="center"><FONT size="2">34
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are two forms of AMD, &#147;dry&#148; AMD
and &#147;wet&#148; AMD.
</FONT>
<P>

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

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Dry AMD.</FONT></I><FONT size="2"> Dry AMD is
    the most common form, representing approximately 90% of all AMD
    cases. However, dry AMD accounts for only 10% of the severe
    vision loss associated with AMD. Dry AMD is characterized by the
    development of yellow-white deposits under the retina, known as
    drusen, and sometimes the deterioration of the retina, although
    without abnormal blood vessel growth and bleeding. There is no
    generally accepted treatment for dry AMD, although vitamins,
    antioxidants and zinc supplements may slow its progression. Over
    time, dry AMD cases often develop into wet AMD.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Wet AMD. </FONT></I><FONT size="2">Wet AMD
    represents approximately 10% of all cases of AMD, but is
    responsible for 90% of the severe vision loss associated with
    the disease. Wet AMD occurs when new blood vessels from the
    tissue layer in the eye just beneath the retina, called the
    choroid, invade into the retinal layers through a membrane known
    as Bruch&#146;s membrane. This abnormal blood vessel growth
    generally is known as angiogenesis and, in the context of wet
    AMD, is called choroidal neovascularization. These new blood
    vessels tend to be fragile and often bleed and leak fluid into
    the macula, resulting in loss of vision. Untreated, this blood
    vessel growth and leakage can lead to scarring and, eventually,
    to the destruction of the macula. The majority of patients with
    wet AMD experience severe vision loss in the affected eye within
    approximately two years after diagnosis of the disease.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following diagram is a detailed cross-section
of the back of the eye as affected by wet AMD.
</FONT>

<P align="center">
<IMG src="y89680y8968004.gif" alt="(WET AGE-RELATED MACULAR DEGENERATION GRAPHIC)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The abnormal blood vessel growth of wet AMD can
be located either directly under the area at the center of the
macula, known as the fovea, or away from the fovea. Wet AMD that
occurs directly under the fovea is known as subfoveal wet AMD.
Wet AMD that occurs elsewhere in the macula is known as either
extrafoveal or juxtafoveal wet AMD. The fovea is responsible for
the ability to see fine detail and color. More than 90% of wet
AMD cases are subfoveal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subfoveal wet AMD is divided into three principal
subtypes based on the pattern of the abnormal blood vessels as
seen in the retina through an imaging procedure known as
angiography. The classic pattern consists of well-defined
abnormal blood vessels with distinct edges. In the occult
pattern, the edges of the abnormal blood vessels are more poorly
demarcated and diffuse. The principal subtypes of subfoveal wet
AMD, based on the patterns of the abnormal blood vessels, are
the following:
</FONT>
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    <TD align="left">
    <I><FONT size="2">Predominantly
    Classic.</FONT></I><FONT size="2"> In the predominantly classic
    subtype, more than 50% of the patient&#146;s abnormal blood
    vessels are of the classic pattern. We estimate that this
    subtype accounts for approximately 25% of the cases of subfoveal
    wet AMD and generally has the most aggressive disease pathology,
    leading to more rapid vision loss than the other subtypes.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Minimally Classic.</FONT></I><FONT size="2">
    In the minimally classic subtype, fewer than 50% of the
    patient&#146;s abnormal blood vessels are of the classic
    pattern. We estimate that this subtype accounts for
    approximately 35% of the
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">35
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    <TD></TD>
    <TD align="left">
    <FONT size="2">cases of subfoveal wet AMD and generally has a
    less rapid rate of vision loss than the predominantly classic
    subtype, but a more rapid rate than the occult subtype.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Occult.</FONT></I><FONT size="2"> In the
    occult subtype, all of the patient&#146;s abnormal blood vessels
    are of the occult pattern. We estimate that this subtype
    accounts for approximately 40% of the cases of subfoveal wet AMD
    and generally has a less rapid rate of vision loss.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, there is an FDA-approved
therapy only for the predominantly classic subtype of wet AMD.
In the European Union, there is an approved therapy for only the
predominantly classic and occult subtypes. As a result, we
estimate that the approved therapy is only indicated for
approximately 25% of United States patients and 65% of European
patients, thus leaving a significant unmet medical need for the
balance.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Diabetic Macular Edema</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">DME is a complication of diabetic retinopathy, a
disease affecting the blood vessels of the retina. Diabetic
retinopathy results in multiple abnormalities in the retina,
including retinal thickening, hemorrhages, impeded blood flow,
excessive leakage of fluid from blood vessels and, in the final
stages, abnormal blood vessel growth. This blood vessel growth
can lead to large hemorrhages and severe retinal damage. When
the blood vessel leakage of diabetic retinopathy causes swelling
in the macula, it is referred to as DME. Poorly controlled blood
glucose levels, high blood pressure, abnormal kidney function
causing fluid retention, high cholesterol levels and other
general systemic factors are risk factors associated with DME.
The principal symptom of DME is a severe loss of central vision.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Diabetic retinopathy is the leading cause of
blindness in working age adults and the leading cause of vision
loss in diabetics. There are approximately 15&nbsp;million
diabetics in the United States and approximately
1.1&nbsp;million newly diagnosed cases of diabetes in the United
States each year. Prevent Blindness America and the National Eye
Institute estimate that in the United States there are over
5.3&nbsp;million people aged 18 or older with diabetic
retinopathy, including approximately 500,000 with DME. It is
estimated that there are approximately 75,000 new cases of DME
in the United States each year.
</FONT>

<DIV>&nbsp;</DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations of Currently Available
    Therapies for Wet AMD</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The two therapies currently available for the
treatment of wet AMD are photodynamic therapy and thermal laser
treatment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Photodynamic
Therapy.</FONT></I><FONT size="2"> Photodynamic therapy involves
the use of a light-activated drug, or photosensitizer, named
Visudyne&#174; to treat wet AMD. The therapy involves a two-step
process in which the drug is administered systemically by
intravenous infusion and then a dose of low energy light is
delivered to the target site to activate the photosensitizer and
destroy the newly grown abnormal blood vessels. Worldwide sales
of Visudyne in 2002 were approximately $287&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Visudyne therapy has an important therapeutic
indication limitation in that it is approved in the United
States only for the treatment of the predominantly classic
subtype of subfoveal wet AMD and in the European Union only for
the treatment of the predominantly classic and occult subtypes
of subfoveal wet AMD. Visudyne therapy also has a number of
clinical shortcomings, including side effects such as
photosensitivity and back pain. In the pivotal clinical trial of
Visudyne, approximately 91% of the patients who received
Visudyne for the treatment of wet AMD experienced a recurrence
of the condition within three months of treatment, necessitating
retreatment. Furthermore, the method of administering this
therapy requires the physician to invest in expensive laser
equipment and retain paramedical personnel to assist in the
intravenous infusion of the photosensitizer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Thermal Laser Treatment.
</FONT></I><FONT size="2">Thermal laser treatment, also known as
photocoagulation, for the treatment of wet AMD entails the use
of a high-energy laser to destroy the abnormal blood vessels
that are growing and leaking in the macula. This is a surgical
procedure and is not subject to FDA approval. Because the
lasered portions of the retina are irreversibly destroyed,
thermal laser treatment generally is used only for the minority
of wet AMD patients with the extrafoveal and juxtafoveal forms
of the disease, in which the abnormal blood vessel growth and
vessel leakage occur away from the center of the macula. Thermal
laser treatment is
</FONT>

<P align="center"><FONT size="2">36
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<DIV align="left">
<FONT size="2">generally not used for subfoveal wet AMD because
of the risk of immediate and permanent vision loss resulting
from the laser burns to the center of the macula. Approximately
50% of the patients who receive thermal laser therapy for the
treatment of wet AMD experience recurrence of the condition
during the ensuing year as a result of regrowth of the abnormal
blood vessels. In addition, patients treated with thermal laser
therapy frequently experience blind spots, known as scotomas, as
a result of the destruction of the area of the retina where the
treatment is administered.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations of Currently Available
    Therapies for DME</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is no approved drug therapy for DME in the
United States or the European Union. The current therapies for
the treatment of DME are thermal laser treatment and steroid
treatment administered by physicians on an off-label basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Thermal Laser
Treatment.</FONT></I><FONT size="2"> Thermal laser treatment
does not result in an improvement in vision in most patients,
and some patients continue to lose vision. As discussed above,
thermal laser treatment results in focused, localized
destruction of portions of the retina. As a result, patients
treated with this procedure frequently experience scotomas.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Steroid Therapy.</FONT></I><FONT size="2">
Some physicians recently have begun to treat DME on an off-label
basis with injections of corticosteroids into the vitreous, the
jelly-like fluid that fills the eye. This method of
administering drugs to the back of the eye is known as
intravitreal injection. The efficacy of steroid therapy for DME
is unknown. We believe that steroid therapy for DME may have a
number of significant side effects that can lead to loss of
vision, including worsening of cataracts and steroid-induced
glaucoma. The steroids typically used for this treatment are off
patent and inexpensive.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are developing Macugen as a novel therapy for
the treatment of wet AMD and DME. Based on research regarding
the pathologies of wet AMD and DME, our knowledge of the
mechanism of action of Macugen and the molecular and clinical
attributes of this product candidate, we believe that Macugen
will overcome many of the limitations of the existing therapies
for wet AMD and DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mechanism of Action.</FONT></I><FONT size="2">
The active ingredient in Macugen is a chemically synthesized
aptamer that binds to and inhibits the function of VEGF. An
aptamer is a single strand of nucleic acid that binds with
specificity to a particular target, such as VEGF. VEGF is a
protein that has been shown to play an important role in the
abnormal blood vessel growth and blood vessel leakage associated
with wet AMD and the blood vessel leakage associated with DME.
In multiple preclinical studies in animals, VEGF has been shown
to be associated with blood vessel growth and leakage in the
eye. In addition, in numerous animal species, anti-VEGF agents
have inhibited blood vessel formation and leakage in multiple
blood vessel layers of the eye, including the iris, the retina
and the choroid. In substantial human clinical research, VEGF
concentrations in eyes afflicted with wet AMD or DME were found
to correlate with the presence and severity of these diseases.
</FONT>

<P align="center"><FONT size="2">37
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following diagram illustrates how VEGF is
blocked from binding with its natural receptor after Macugen
binds with VEGF.
</FONT>

<P align="center">
<IMG src="y89680y8968001.gif" alt="(EXTRACELLULAR NEUTRALIZATION OF VEGF CHART)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Method of
Administration.</FONT></I><FONT size="2"> Macugen is currently
administered by intravitreal injection. Before a physician
administers the injection of Macugen, the patient receives
topical numbing drops and a superficial pre-injection of a local
anesthetic to numb the eye. The entire process from initial drop
through injection of Macugen takes under five minutes. By
injecting this medication into the vitreous, the physician
delivers Macugen directly to the affected eye tissue.
Intravitreal injections are commonly used in many other
therapies for eye disorders, including antibiotic and steroid
therapies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Specificity.</FONT></I><FONT size="2"> In
humans, there are at least five subtypes, or isoforms, of VEGF.
Based on preclinical <I>in vitro</I> and animal studies that we
have conducted, we believe that two of these VEGF isoforms,
isoforms&nbsp;165 and 121, are present in the eye in meaningful
levels. In these studies, elevated levels of the animal
counterpart of human isoform&nbsp;165 was required for abnormal
blood vessel growth in the retina. We believe that the unique
shape of the Macugen aptamer allows it to bind to VEGF
isoform&nbsp;165 with high specificity through a lock and key
type mechanism. In our animal models, we found that binding
Macugen with the animal counterpart of isoform&nbsp;165 was
highly effective in inhibiting abnormal blood vessel growth in
the retina. Macugen did not bind with the animal counterpart of
isoform&nbsp;121. In an animal study conducted by us involving a
direct comparison with a VEGF inhibitor that blocks all
isoforms, Macugen was as effective at inhibiting abnormal blood
vessel growth in the retina as the other VEGF inhibitor.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Anti-permeability.</FONT></I><FONT size="2">
VEGF is a very strong inducer of blood vessel permeability. For
example, in animal tests VEGF has been shown to be
50,000&nbsp;times more potent than histamine, the molecule
commonly associated with blood vessel leakage related to
allergies. Also in animal tests, it has been shown that VEGF is
required for the blood vessel permeability associated with wet
AMD and diabetic retinopathy. In addition to its anti-angiogenic
property of inhibiting abnormal blood vessel growth, Macugen has
been shown in animal tests to inhibit blood vessels from leaking
into the retina. By preventing blood vessel leakage as well as
abnormal blood vessel growth, Macugen offers a potential
two-pronged approach to the treatment of wet AMD. By preventing
blood vessel leakage, Macugen also offers a potential treatment
for DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">No Observed
Immunogenecity.</FONT></I><FONT size="2"> Aptamers in general
tend not to trigger adverse immune responses. To date, we have
not observed any meaningful clinical immunonologic reactions to
Macugen. We believe that the lack of any significant
inflammatory response will enable dosing at levels that will
allow for the administration of Macugen therapy every six weeks.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Satisfactory Side Effect
Profile.</FONT></I><FONT size="2"> In clinical trials of Macugen
conducted to date for wet AMD and DME, we have not observed any
serious drug-related adverse events. In addition, the incidence
of injection-related adverse events in these trials has been
well within what we believe to be the tolerable limits for a
drug that is administered via intravitreal injection.
</FONT>

<P align="center"><FONT size="2">38
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stability and Attractive Pharmacokinetic
Profile.</FONT></I><FONT size="2"> Macugen is a pegylated
molecule, which means that a molecule of polyethylene glycol is
attached to the strand of nucleic acid. This pegylation
increases the half-life of the product, which in turn increases
the time that Macugen actively targets the disease site. This
may allow for less frequent dosing. The unpegylated Macugen
aptamer also demonstrates high stability under various
temperature and pH levels, which suggests that the active
ingredient in Macugen may be suitable for administration via
different delivery mechanisms.
</FONT>

<P align="left">
<B><FONT size="2">Clinical Development of Macugen</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are conducting two Phase&nbsp;2/3 pivotal
clinical trials for the use of Macugen in the treatment of wet
AMD and a Phase&nbsp;2 clinical trial of Macugen for the use of
Macugen in the treatment of DME. We are also conducting or
planning to conduct a number of additional trials of Macugen.
The following table summarizes our material ongoing and planned
clinical trials of Macugen.
</FONT>

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    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
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    <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="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">First Patient</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Enrollment</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Indication</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Trial Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Phase</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Objectives</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Geography</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Enrolled</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Patients</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Status</FONT></B></TD>
</TR>

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMD
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2/3 (Pivotal)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Safety<BR>
    Dosage<BR>
    Efficacy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">International (including U.S.)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">October 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Fully Enrolled</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2/3 (Pivotal)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Safety<BR>
    Dosage<BR>
    Efficacy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">North America
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">August 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Fully Enrolled</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pharmacokinetics<BR>
    Safety<BR>
    Efficacy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">North America
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">January 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Fully Enrolled</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="23" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">DME
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Dosage<BR>
    Safety<BR>
    Proof of<BR>&nbsp;concept
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">International (including U.S.)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">October 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Fully Enrolled</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="23" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">Retinal Vein Occlusion
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Safety<BR>
    Dosage<BR>
    Proof of<BR>&nbsp;concept
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">North America
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top"><FONT size="2">2004 (estimated)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">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="top" nowrap><FONT size="2">Pending</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Clinical Trials for the Treatment of Wet
    AMD</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Phase 2/3 Pivotal Clinical
Trials.</FONT></I><FONT size="2"> In the second half of 2001, we
initiated two Phase&nbsp;2/3 pivotal clinical trials for the use
of Macugen in the treatment of subfoveal wet AMD. We are
conducting one of these trials in North America and one
primarily outside North America. There are 578&nbsp;patients
enrolled in the North American trial and 612 in the
international trial. Retinal specialists at 128 leading medical
centers are participating in these two Phase&nbsp;2/3 clinical
trials. As of August 2002, we had fully enrolled both trials and
had begun injections of Macugen or placebo in all patients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have enrolled patients with all three subtypes
of subfoveal wet AMD in these two clinical trials. The
proportion of patients in these trials with each subtype is
approximately the same as the subtype incidence among all
persons with subfoveal wet AMD. To be eligible to participate,
the patient&#146;s lesions associated with the disease had to be
of specified sizes and satisfy other characteristics. Patients
who previously received subfoveal thermal laser therapy or who
had significant subfoveal scarring or atrophy were not eligible
to participate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to enrollment in the studies, each
patient&#146;s visual acuity was measured to establish the
patient&#146;s baseline visual acuity. The baseline was
expressed as an ETDRS score, meaning the number of letters that
the patient could read on the Early Treatment Diabetic
Retinopathy Study, or ETDRS, eye chart. This is the standard eye
chart used in these types of trials. Each line on the ETDRS eye
chart has five letters. To be enrolled, the patient&#146;s
visual acuity in the study eye had to be between 20/40 and
20/320, and visual acuity in the other eye had to be better than
or equal to 20/800.
</FONT>

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

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To ensure that potential patients satisfied our
eligibility criteria, we engaged the Wilmer Technology
Assessment Program, part of the Wilmer Eye Institute at Johns
Hopkins University School of Medicine, to review the angiogram
of each patient&#146;s affected eye. Through that process, we
were able to confirm patient eligibility and properly classify
the patients into one of the subtypes of subfoveal wet AMD
before enrolling them in the study.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Macugen is administered in these Phase&nbsp;2/3
clinical trials by intravitreal injection. We randomly divided
the patients at the beginning of each of these clinical trials
into four groups. In the first year of these trials, three of
these groups received different dose levels of Macugen; the
fourth group received a placebo injection. All patients received
their injections every six weeks over the course of one year.
Enrolled patients with predominantly classic subfoveal wet AMD
were eligible to receive Visudyne during the trials at the
discretion of the treating physician. However, patients who
received Visudyne therapy more than once prior to the trials
were ineligible to participate in the trials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Three days after each injection, the patient
receives a telephone call from the clinical coordinator to
confirm the patient&#146;s comfort and well-being. The patient
returns for a check up seven days after injection. We designed
the study to be double masked, so that neither the patient nor
the investigational staff involved with assessing the vision of
the patient knows to which group each patient belongs. In the
United States, we are conducting the trials ourselves. We have
engaged a clinical research organization to conduct the clinical
trials in Europe, South America, Australia, Israel and other
countries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The primary efficacy endpoint in these trials is
the proportion of patients at 54&nbsp;weeks treated with Macugen
losing less than 15 letters, or three lines, of visual acuity on
the ETDRS eye chart from his or her baseline compared to such
proportion in the control group. This is the same primary
clinical endpoint as was used in the pivotal clinical trials of
Visudyne. Secondary clinical endpoints consist of a variety of
other visual parameters at the end of the 54-week study period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of July 2003, over 900 patients had received a
total of over 8,000 non-placebo individual intravitreal
injections in these trials with no serious adverse events
reported as definitively related to Macugen. We are in the
process of compiling data from the first year of treatment of
patients in these trials to determine if the results are
satisfactory to proceed with preparing and filing an NDA with
the FDA for marketing approval of Macugen as a treatment for wet
AMD. In previous trials for new therapies for the treatment of
wet AMD, including the pivotal clinical trials of Visudyne, the
FDA accepted clinical data from one year of treatment as the
basis for an NDA filing. Based on the significant unmet medical
need for a safe and effective treatment for wet AMD, the FDA has
granted &#147;fast track&#148; status for Macugen for the
treatment of this disease.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are treating patients in the second year of
these trials to determine whether prolonged therapy with Macugen
provides additional benefits. Because of the role of the aging
process in wet AMD, we believe that there is a significant
possibility that the disease will recur following the initial
Macugen treatment and, therefore, that prolonged therapy may be
required.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Phase&nbsp;1 and 2
Trials.</FONT></I><FONT size="2"> We completed a Phase&nbsp;1
and two Phase&nbsp;2 clinical trials for the use of Macugen in
the treatment of wet AMD prior to June 2001. These trials
included patients with all three subtypes of subfoveal wet AMD.
The primary purpose of these trials was to test for product
safety. In each of the three trials, Macugen was well tolerated,
and there were no serious adverse events definitively related to
the drug or its administration. Although these trials were
conducted on a relatively small number of patients and there
were no randomized controls or long-term patient follow up, we
observed encouraging effects of the drug on trial participants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the Phase&nbsp;1 trial, 15 patients received
escalating doses of Macugen one time via an intravitreal
injection in the affected eye. The patients were distributed
into five groups of three patients. Each group received a
different dose of Macugen. In this trial, 80% of the patients
showed stabilized or improved vision at the end of the
three-month period following the injection. For purposes of this
trial and our two Phase&nbsp;2 trials described below, we
defined stabilized vision as no loss of, or an increase in,
letters of visual acuity on the ETDRS eye chart. Approximately
27% of the patients in this trial showed the ability to read 15
or more additional letters on the ETDRS eye chart at the end of
the three-month period.
</FONT>

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

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the first Phase&nbsp;2 trial, 10 patients
received Macugen via an intravitreal injection in the affected
eye once a month for three months. Eight of the treated patients
were tested at the end of the three-month period, with
approximately 88% of the tested group showing stabilized or
improved vision and 25% showing the ability to read 15 or more
additional letters on the ETDRS eye chart at the end of the
three-month period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the second Phase&nbsp;2 trial, 11 patients
received Macugen via intravitreal injection in the affected eye
once a month for three months. This trial consisted solely of
patients with the predominantly classic form of subfoveal wet
AMD who were also receiving photodynamic therapy with Visudyne.
Ten of the treated patients were tested at the end of the
three-month period, with 90% of the tested group showing
stabilized or improved vision and 60% showing the ability to
read 15 or more additional letters on the ETDRS eye chart at the
end of the three-month period. Furthermore, only 40% of the
patients in this trial in which Macugen was administered in
combination with Visudyne experienced new blood vessel growth
and new blood vessel leakage after three months, thereby
necessitating retreatment with Visudyne. In the pivotal trials
of Visudyne, approximately 91% of patients experienced such
recurrence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Phase&nbsp;2 Pharmacokinetic
Study.</FONT></I><FONT size="2"> In January 2003, we began a
Phase&nbsp;2 clinical trial designed to obtain additional
pharmacokinetic data from the use of Macugen in the treatment of
wet AMD. The 147 patients enrolled in this trial will each
receive one year of treatment. Treatment will occur every six
weeks. Entry criteria for this trial were similar to those for
our Phase&nbsp;2/3 pivotal clinical trials. We will conduct
intensive blood sampling for pharmacokinetic data for each
patient on two occasions during the trial. Safety and efficacy
are secondary endpoints of the trial.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Phase&nbsp;2 Clinical Trials for the
    Treatment of DME</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have completed a Phase&nbsp;2 clinical trial
for the use of Macugen in the treatment of DME. Two clinical
centers enrolled 10 patients with DME. Patients were
administered an intravitreal injection in the affected eye once
a month for three months. As in the wet AMD Phase&nbsp;1 and 2
studies, the therapy was well tolerated, and there were no
serious adverse events definitively related to the drug or its
administration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We completed enrollment of 169 patients in a
Phase&nbsp;2 clinical trial for the use of Macugen in the
treatment of DME in July 2003. The patients enrolled in this
study were required to have been eligible for laser therapy for
DME. We are conducting the trial pursuant to a randomized,
double-masked placebo controlled protocol in which patients will
receive varying doses of Macugen via intravitreal injection
every six weeks for at least 12&nbsp;weeks and, at the
discretion of the investigators, for up to 30&nbsp;weeks. The
endpoints for this trial are visual acuity, retinal thickness
and the need for laser treatment at 12&nbsp;weeks and
36&nbsp;weeks after commencement of Macugen treatment. We expect
to complete this trial in February 2005.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Planned Retinal Vein Occlusion
    Trial</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2004, we plan to commence a Phase&nbsp;2
clinical trial designed to test the efficacy and safety of
Macugen for the treatment of retinal vein occlusion, a condition
that is characterized by high VEGF levels, abnormal blood vessel
growth and blood vessel leakage. Retinal vein occlusion occurs
when the circulation of a retinal vein becomes obstructed by an
adjacent blood vessel, causing blood vessel bleeding and leakage
in the retina. Laser therapy is sometimes used to treat this
condition, but with limited efficacy. We intend to enroll up to
198 patients and plan to treat these patients for between 12 and
24&nbsp;weeks. The primary endpoint will be visual acuity at
30&nbsp;weeks after commencement of Macugen treatment.
</FONT>

<P align="left">
<B><FONT size="2">Collaboration with Pfizer</FONT></B>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, we entered into collaboration,
license and related agreements with Pfizer to develop,
manufacture and commercialize Macugen for the prevention and
treatment of diseases of the eye and related conditions. Under
the terms of the agreements:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Upon effectiveness of the collaboration
    arrangements in February 2003, Pfizer paid us $100&nbsp;million,
    consisting of a $75&nbsp;million initial license fee and a
    $25&nbsp;million equity investment;
    </FONT></TD>
</TR>

</TABLE>

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer is obligated to purchase up to an
    additional $25&nbsp;million of our common stock in specified
    circumstances, including $10&nbsp;million of our common stock
    concurrently with the completion of this offering;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer will copromote Macugen with us in the
    United States and will share with us in profits and losses from
    the commercialization of Macugen in the United States, with our
    having the right to book all United States product sales;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer will commercialize Macugen outside the
    United States pursuant to an exclusive license and pay us a
    royalty on net sales;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer will generally fund a majority of the
    ongoing development costs incurred pursuant to an agreed
    development plan covering the development of Macugen for AMD,
    DME, retinal vein occlusion and other agreed upon ophthalmic
    indications;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer is potentially obligated to pay us up to
    $195.5 million in milestone payments based on the achievement of
    worldwide regulatory submissions and approvals; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer is potentially obligated to pay us up to
    $450&nbsp;million in milestone payments based upon attainment of
    agreed upon sales levels of Macugen.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the agreements, the parties&#146; sharing
of profits and losses from the commercialization of Macugen in
the United States and the payment of royalties to us by Pfizer
based on net sales of Macugen outside the United States extends,
on a country-by-country basis, until the later of 15 years after
commercial launch and the expiration of the patent rights
licensed to Pfizer in each particular country. Pfizer may
terminate the collaboration relationship upon six to twelve
months&#146; prior notice, depending on when such notice is
given. Either party may terminate the collaboration relationship
based upon material uncured breaches by the other party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The collaboration is governed by a joint
operating committee, consisting of an equal number of
representatives of us and Pfizer. There are also subcommittees
with equal representation from both parties that have
responsibility over development and regulatory, manufacturing
and commercialization matters. Ultimate decisionmaking authority
is vested in us as to some matters and in Pfizer as to other
matters. A third category of decisions requires the approval of
both us and Pfizer. Outside the United States, ultimate
decisionmaking authority as to most matters is vested in Pfizer.
</FONT>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Macugen collaboration, we
entered into an agreement with Pfizer under which our sales
force is entitled to participate in detailing Pfizer&#146;s
Xalatan glaucoma product on a nonexclusive basis in the United
States. Xalatan is a once-a-day prescription eye drop marketed
by Pfizer as a primary, or first line, therapy for glaucoma, an
eye disease that is associated with the degeneration of the
retinal cells responsible for transmitting images from the eye
to the brain.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under this agreement, Pfizer is obligated to pay
us a per detail fee for our details to general ophthalmologists
and a percentage of incremental net revenues that are above a
baseline threshold for our details to retinal specialists. We
expect that our sales activities will commence in the middle of
2004 and will continue for a period of three years after we
start detailing Xalatan. The agreement automatically terminates
upon a termination of the Macugen collaboration or upon
Pfizer&#146;s sale, assignment, exclusive license or other
disposition of the Xalatan product. In addition, we may
terminate the agreement upon four months&#146; prior notice.
Either party may terminate the agreement based upon material
uncured breaches by the other party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">By participating in the detailing of Xalatan, we
expect that our domestic sales force will be able to access and
form relationships with retinal specialists and general
ophthalmologists prior to commercial launch of Macugen. We view
the Xalatan agreement as primarily a strategic arrangement and
anticipate only a modest economic impact.
</FONT>

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to expand our pipeline of products to
treat diseases of the eye with unmet medical need, we are
actively pursuing a strategy to develop new drugs internally and
to license or otherwise acquire rights to potential new drugs
from third parties. We are also seeking to develop internally
and acquire rights to alternative mechanisms for delivering
ophthalmic drugs to the back of the eye.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conduct our internal research and development
activities at our Eyetech Research Center located in Woburn,
Massachusetts. We have 30 employees at this facility, including
a total of 15 employees who hold M.D. or Ph.D. degrees. We are
conducting research into the causes of AMD, diabetic retinopathy
and glaucoma as well as novel methods of drug delivery to the
back of the eye. We also are investigating the use of Macugen
for non-ophthalmic indications. We have developed proprietary
models that accelerate the study of disease processes and the
identification and validation of attractive molecular targets
for ophthalmic drug development. We have also developed tools
for studying the basic disease processes involved in the
degeneration of retinal cells associated with glaucoma.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current pipeline initiatives include the
following:
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Additional Ophthalmic Indications for
    Macugen</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to wet AMD, DME and retinal vein
occlusion, there are a number of ophthalmic conditions with
unmet medical need for which the VEGF inhibition of Macugen may
prove beneficial. We are exploring the potential therapeutic
benefit of Macugen for the treatment of the following
indications:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;High risk&#148; dry AMD, in which the
    patient is at risk of developing wet AMD more rapidly than other
    dry AMD patients. It is possible to identify this form of dry
    AMD through a routine eye examination. We believe that these
    high risk patients may benefit from treatment with Macugen as a
    preventative therapy if a drug delivery technology other than
    intravitreal injection can be developed.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Proliferative diabetic retinopathy, the most
    severe stage of diabetic retinopathy. The disease is
    characterized by angiogenesis and blood vessel leakage. The new
    vessels frequently bleed and damage the retina. Although laser
    therapy is effective at lowering the rate of blindness
    associated with the disease, the destruction of the retina
    resulting from the treatment leads to adverse side effects,
    including night blindness and visual field loss.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Uveitis, an inflammatory condition of the eye
    that often leads to macular edema. The swelling is largely a
    function of increased blood vessel leakage. Steroids are
    effective in some cases as a treatment for this condition,
    although their use is often complicated by the formation of
    cataracts and glaucoma.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Cystoid macular edema following cataract surgery,
    a condition that results from the inflammation caused by
    surgery. Steroid treatment is effective in some patients, but
    carries the risk of cataracts and glaucoma.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Myopic degeneration, a condition in which a
    patient with a high degree of nearsightedness develops choroidal
    neovascularization. The blood vessel growth and leakage in this
    condition closely mirrors that seen in wet AMD.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Inflammatory macular degeneration, a condition in
    which a patient with inflammation in the macular area from
    infections or other causes develops choroidal
    neovascularization. The blood vessel growth and leakage in this
    condition is similar to that seen in wet AMD.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Iris neovascularization, a serious complication
    of diabetic retinopathy or retinal vein occlusion involving new
    blood vessel growth on the surface of the colored part of the
    eye, or iris. This process leads to an intractable type of
    glaucoma that often leads to blindness. Animal testing has
    revealed that this process requires VEGF.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">43
</FONT>

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<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Alternate Delivery
    Technologies</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that technologies for the long-term
administration of drugs to the back of the eye which are more
convenient for physicians and patients than existing methods may
expand the potential markets for Macugen and other ophthalmic
therapies. We are working to develop alternative, more
convenient long-term drug delivery technologies. One example of
such an alternative technology that we are working on is a
sustained release drug delivery device to be placed on the
outside of the eye and programmed to deliver Macugen or other
drugs over a predetermined period of time ranging from months to
years.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Ophthalmic Drugs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through our research activities, we are seeking
to develop other novel drugs to treat other ophthalmic diseases,
including drugs that may enhance the efficacy of Macugen. We
have identified several distinct molecular targets that we
believe are attractive sites for pharmaceutical intervention to
treat ophthalmic blood vessel disease. One of these targets is
VEGF, which is addressed by Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A second of these molecular targets is involved
in the formation of new blood vessels that is independent of the
activity of VEGF. In March 2001, we sublicensed from Cell-Matrix
Inc., a subsidiary of CancerVax Corporation, five antibodies to
address this target. Some of these antibodies have been shown to
block abnormal blood vessel growth in preclinical animal tests.
We are investigating these antibodies in our preclinical
choroidal neovascularization models. We are directing our
research at determining how we can develop these antibodies to
work, either alone or in combination with Macugen therapy, for
the treatment of eye and other diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A third of these molecular targets may play a
role in the development and progression of diabetic retinopathy.
In animal studies, the target was operative at all stages of
diabetic retinopathy and the inhibition of this target both
prevented and reversed diabetic retinopathy. Human correlative
data also support the role of this target in human diabetic
retinopathy. We are seeking opportunities to license or develop
a drug candidate that addresses this target.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Additional Non-Ophthalmic Indications for
    Macugen</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">VEGF appears to play a pivotal role in several
non-ophthalmic diseases, including cancer and psoriasis. We are
using our preclinical expertise to research the potential
application of Macugen to these diseases. Because these diseases
are outside of our core expertise in ophthalmology and are not
part of our collaboration with Pfizer, we expect to pursue
collaboration or outlicensing opportunities if our research
suggests that Macugen is a promising therapy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cancer. </FONT></I><FONT size="2">Solid tumors
and their metastases rely on new blood vessel growth for their
survival. VEGF has been extensively validated in numerous
preclinical trials as a drug target for the treatment of some
types of cancers. In addition, in clinical trials recently
conducted by Genentech Inc. of its drug candidate Avastin&#153;,
VEGF was validated as a drug target for renal cancer and colon
cancer. In light of the stability of the unpegylated Macugen
aptamer, we believe that we may be able to formulate novel
locally administered, sustained release versions of Macugen for
use in the treatment of some types of solid tumors. We expect
that these formulations would be used at the time of cancer
surgery to provide therapy directly at the site of the disease.
We believe that these Macugen formulations might possess
advantages over intravenously administered drugs. For example, a
locally administered formulation of Macugen might be able to
access some types of brain tumors that are not accessible to
anti-VEGF drugs administered intravenously.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Psoriasis. </FONT></I><FONT size="2">Psoriasis
is a chronic inflammatory skin condition that causes skin cells
to grow too quickly, resulting in thick white or red patches of
skin. It represents a significant underserved medical need.
Preclinical and clinical data suggest that VEGF-induced blood
vessel growth and blood vessel leakage play a role in the
development of this condition. We are researching novel topical
formulations of Macugen for the treatment of psoriasis. We
believe that the ability to treat psoriasis in this manner might
prove to be superior to or synergistic with medications that are
delivered intravenously.
</FONT>

<P align="center"><FONT size="2">44
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have limited sales and marketing
capabilities and no distribution capabilities. However, we have
recruited a Chief Operating Officer, a Senior Vice President of
Marketing and Sales and other senior personnel with significant
experience in sales and marketing roles at large pharmaceutical
companies. Our plan is to develop our own specialized domestic
sales and marketing infrastructure to commercialize Macugen and
other ophthalmic products that we acquire or develop in the
future and to participate with Pfizer in selling Xalatan. We are
beginning to recruit our domestic ophthalmic sales force and
expect to begin participating in detailing Xalatan in the middle
of 2004. By participating in the detailing of Xalatan, we expect
that our domestic sales force will be able to access and form
relationships with retinal specialists and general
ophthalmologists prior to commercial launch of Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to focus our sales and marketing
efforts on retinal specialists. The ophthalmic medical community
in the United States is relatively small. We estimate that there
are approximately 1,400 retinal specialists in the United States
who perform most of the medical procedures involving back of the
eye diseases. Because of the small size of our target
professional audience in the United States, we believe that we
can best serve this market through a relatively small, dedicated
specialty sales force. Under our United States copromotion
arrangement with Pfizer for Macugen, our domestic sales force
will have primary responsibility for promoting and detailing
Macugen to retinal specialists, and Pfizer will have primary
responsibility for promoting Macugen to general ophthalmologists.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Outside the United States, we currently plan to
market and sell our products that receive regulatory approval
through established industry participants. However, we may
determine to establish our own sales and marketing organization
in key markets, including the European Union. We have granted
Pfizer exclusive commercialization rights with respect to
Macugen outside the United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to distribute Macugen in the United
States through Pfizer&#146;s distribution system. Under this
arrangement, the manufacturers of the drug product would ship
the product to Pfizer&#146;s distribution warehouses, and Pfizer
would perform order entry, customer service and accounts
receivable collection services on our behalf on a contract
basis. It is possible that we will develop the capabilities in
the future to perform these services on our own behalf.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have limited experience in, and we
do not own facilities for, manufacturing any products. Although
we intend to rely on contract manufacturers to produce our
products, we have recruited a Senior Vice President of
Manufacturing and other personnel with manufacturing experience
to oversee the production of Macugen and future products that we
may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The manufacturing process of the active
pharmaceutical ingredient of Macugen consists of chemical
synthesis, purification, pegylation, further purification and
finally freeze drying to form a powder. Each of these steps
involves a relatively common chemical engineering process. The
chemical synthesis is similar to small molecule manufacturing.
The components of the active pharmaceutical ingredient are
generally available from a number of suppliers. However, we rely
on a single source of supply for the pegylation reagent. For our
clinical trials of Macugen, we engaged a third party
manufacturer to manufacture the active pharmaceutical ingredient
and we are in the process of negotiating an agreement with an
affiliate of this third party manufacturer for commercial
supply. This third party manufacturer plans to produce
commercial quantities of Macugen at a different site than the
site used to manufacture the active pharmaceutical ingredient
for clinical trial use. Because of this change of site, the FDA
is requiring us to perform analytical tests to demonstrate that
changing the manufacturing location has not affected the
characteristics of the product. If we cannot establish that the
products are equivalent to the satisfaction of the FDA, we may
be delayed in obtaining, or may by unable to obtain, approval to
launch Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For our clinical supply of Macugen, we also
engaged a separate fill and finish manufacturer to formulate the
active pharmaceutical ingredient from a powder into a solution
and to fill the solution into syringes. We are negotiating with
this manufacturer to provide the fill and finish services for
commercial supply.
</FONT>

<P align="center"><FONT size="2">45
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to produce Macugen in the quantities
that we expect to be required to meet anticipated market demand,
we and our contract manufacturer will need to increase the
manufacturing capacity for the active pharmaceutical ingredient.
We initially intend to increase manufacturing capacity for the
active pharmaceutical ingredient by installing additional
manufacturing lines at the contract manufacturer&#146;s
facility. We are also exploring alternatives for increasing
manufacturing capacity, including developing alternative
manufacturing methods for the active pharmaceutical ingredient.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the future, we plan to enter into commercial
supply arrangements with alternative active pharmaceutical
ingredient and fill and finish manufacturers. It is possible
that either we or Pfizer may perform these functions ourselves.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are parties to two license agreements that we
believe are material to our business.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Gilead Sciences</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, we entered into an agreement with
Gilead and its wholly owned subsidiary NeXstar Pharmaceuticals,
Inc. for an exclusive worldwide license, under the patents and
know-how related to Macugen controlled by Gilead and its
affiliates, to develop, manufacture and commercialize products
containing Macugen. This license extends to all therapeutic
indications. Subject to a right of first negotiation in favor of
Gilead as to a limited set of indications, we have the right to
grant sublicenses under this license.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In exchange for the rights licensed from Gilead,
we paid Gilead an up-front license fee and issued Gilead a
warrant to purchase 833,333 shares of our series&nbsp;B
preferred stock at an exercise price of $6.00 per share. We also
agreed to make payments to Gilead based on achieving specified
development milestones and to pay royalties to Gilead based on
net sales of Macugen by us or our affiliates or sublicensees.
Our royalty obligation extends on a country-by-country basis
until the later of ten years after first commercial sale of
Macugen or the expiration of the last-to-expire patent licensed
from Gilead. Upon the expiration of the last-to-expire royalty
term, the agreement expires and, at our option, our license from
Gilead either (1)&nbsp;survives and remains exclusive, in which
case we would be obligated to continue paying Gilead a reduced
royalty on product sales or (2)&nbsp;survives and converts to
nonexclusive, in which case would not have any further royalty
obligation to Gilead.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The agreement obligates us to use commercially
reasonable efforts to develop, obtain regulatory approvals for
and commercialize Macugen. Each party has the right to terminate
the agreement if the other party materially breaches the
agreement.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Nektar Therapeutics</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, we entered into a license,
manufacturing and supply agreement with Nektar Therapeutics,
formerly Shearwater Corporation, relating to the pegylation of
Macugen that occurs by linking a reagent supplied by Nektar to
the active pharmaceutical ingredient. Under the terms of the
agreement, Nektar granted us various exclusive and nonexclusive
worldwide licenses, with the right to grant sublicenses, under
patents and know-how related to the reagent controlled by
Nektar, to develop, manufacture and commercialize Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In exchange for these rights, we paid Nektar an
up-front license fee, agreed to make payments to Nektar based on
achieving specified development milestones with respect to
Macugen and agreed to pay Nektar royalties based on net sales of
Macugen by us or our affiliates or sublicensees. We also agreed
to purchase the pegylation reagent for Macugen exclusively from
Nektar, subject to Nektar meeting its supply obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless we and Nektar agree to extend the term,
the agreement expires upon the expiration of the last-to-expire
patent licensed by us from Nektar. The agreement imposes
development and commercialization diligence requirements on us.
Each party has the right to terminate the agreement if the other
party materially breaches the agreement and upon the occurrence
of specified bankruptcy or insolvency events as to the other
party.
</FONT>

<P align="center"><FONT size="2">46
</FONT>

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<P align="left">
<B><FONT size="2">Patents and Proprietary Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success depends in part on our ability to
obtain and maintain proprietary protection for our product
candidates, technology and know-how, to operate without
infringing on the proprietary rights of others and to prevent
others from infringing our proprietary rights. Our policy is to
seek to protect our proprietary position by, among other
methods, filing United States and foreign patent applications
related to our proprietary technology, inventions and
improvements that are important to the development of our
business. We also rely on trade secrets, know-how, continuing
technological innovation and in-licensing opportunities to
develop and maintain our proprietary position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We own or license a total of 21&nbsp;United
States patents and 18&nbsp;United States patent applications as
well as numerous foreign counterparts to many of these patents
and patent applications. Our patent portfolio includes patents
and patent applications with claims covering the composition of
matter and methods of manufacturing and use of Macugen, as well
as the composition of matter and method of manufacturing of both
modified and unmodified aptamers in general and modified and
unmodified VEGF aptamers in particular. In addition, we have
patent applications covering various aspects of ophthalmic drug
delivery.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">United States patents generally have a term of
20&nbsp;years from the date of filing. The patents covering the
composition of matter of Macugen consist of eight United States
patents owned and licensed to us by Gilead. These United States
patents expire between 2010 and 2017. There are counterpart
filings to these United States patents, including both issued
patents and pending patent applications, in a number of other
jurisdictions, including Europe and Japan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We license patent rights from other patent owners
from time to time, both on an exclusive basis and on a
nonexclusive basis. Examples of such patent licenses include the
patent rights that we have licensed from Gilead and Nektar and a
nonexclusive, royalty-bearing patent license that we entered
into with Isis Pharmaceuticals, Inc. in December 2001, which
grants us rights under patents owned or controlled by Isis to
make, have made, use and sell the Macugen compound worldwide.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The patent positions of companies like ours are
generally uncertain and involve complex legal and factual
questions. Our ability to maintain and solidify our proprietary
position for our technology will depend on our success in
obtaining effective claims and enforcing those claims once
granted. We do not know whether any of our patent applications
or those patent applications that we license will result in the
issuance of any patents. Our issued patents and those that may
issue in the future, or those licensed to us, may be challenged,
invalidated or circumvented, which could limit our ability to
stop competitors from marketing related products or the length
of term of patent protection that we may have for our products.
In addition, the rights granted under any issued patents may not
provide us with proprietary protection or competitive advantages
against competitors with similar technology. Furthermore, our
competitors may independently develop similar technologies or
duplicate any technology developed by us. Because of the
extensive time required for development, testing and regulatory
review of a potential product, it is possible that, before any
of our products can be commercialized, any related patent may
expire or remain in force for only a short period following
commercialization, thereby reducing any advantage of the patent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may rely, in some circumstances, on trade
secrets to protect our technology. However, trade secrets are
difficult to protect. We seek to protect our proprietary
technology and processes, in part, by confidentiality agreements
with our employees, consultants, scientific advisors and other
contractors. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently
discovered by competitors. To the extent that our employees,
consultants or contractors use intellectual property owned by
others in their work for us, disputes may arise as to the rights
in related or resulting know-how and inventions.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The development and commercialization of new
drugs and drug delivery technologies is highly competitive. We
will face competition with respect to Macugen and any products
we may develop or
</FONT>

<P align="center"><FONT size="2">47
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<DIV align="left">
<FONT size="2">commercialize in the future from major
pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Macugen receives marketing approval, it will
compete against the currently approved therapies for the
treatment of wet AMD and DME described above under the captions
&#147;&#151;&nbsp;Eye Disease&nbsp;&#151; Limitations of
Currently Available Therapies for Wet AMD&#148; and
&#147;&#151;&nbsp;Eye Disease&nbsp;&#151; Limitations of
Currently Available Therapies for DME.&#148; There are also a
number of companies working to develop new drugs and other
therapies to treat wet AMD and DME. We believe that the
following product candidates are in Phase&nbsp;2 or Phase&nbsp;3
clinical trials:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Genentech, Inc. and Novartis are collaborating to
    develop a humanized monoclonal antibody fragment, administered
    by intravitreal injection, that targets VEGF for the treatment
    of wet AMD.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alcon, Inc. is developing a steroid for the
    treatment of predominantly classic subfoveal wet AMD. This drug
    candidate is injected behind the eye using a customized injector
    inserted around the eye.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Miravant Medical Technologies is developing a
    photodynamic therapy that is similar to Visudyne for the
    treatment of wet AMD.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Bausch &#38; Lomb Incorporated and Control
    Delivery Systems, Inc. are developing a surgically placed
    non-erodable intraocular implant for the delivery of steroids to
    treat DME and swelling resulting from other causes.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Oculex Pharmaceuticals is developing a
    bioerodable steroid implant for the treatment of persistent
    macular edema.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Eli Lilly &#38; Co. is developing an orally
    administered inhibitor of an enzyme named PKC beta for the
    treatment of diabetic retinopathy.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In addition, there are a number of other
companies that are developing anti-VEGF technologies. Some of
these companies may seek to apply their technologies to AMD, DME
and other ophthalmic indications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The key competitive factors affecting the success
of Macugen are likely to be its efficacy, safety profile, price
and method of administration. The efficacy and safety profile of
Macugen will depend upon the results of our clinical trials of
this product and experience with the product in the commercial
marketplace. Based on the results of our clinical trials to
date, we believe that Macugen will have an acceptable side
effect profile. We have not yet determined the price for Macugen
and do not expect to do so before commercial launch. The method
of administration of Macugen, intravitreal injection, is
commonly used to administer ophthalmic drugs and generally
accepted by patients facing the prospect of blindness. However,
a therapy that offers a less invasive method of administration
may have a competitive advantage over one administered by
intravitreal injection.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The licensing and acquisition of pharmaceutical
products, which is part of our strategy, is a highly competitive
area. A number of more established companies also are pursuing
strategies to license or acquire products. These established
companies may have a competitive advantage over us due to their
size, cash flow and institutional experience.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Government authorities in the United States, at
the federal, state and local level, and other countries
extensively regulate, among other things, the research,
development, testing, manufacture, labeling, promotion,
advertising, distribution, marketing and export and import of
pharmaceutical products such as those we are developing.
</FONT>

<DIV>&nbsp;</DIV>

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">United States Government
    Regulation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, the FDA regulates drugs and
biologics under the Federal Food, Drug, and Cosmetic Act, and,
in the case of biologics, also under the Public Health Service
Act, and implementing regulations. If we fail to comply with the
applicable United States requirements at any time during the
product development
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">process, approval process or after approval, we
may become subject to administrative or judicial sanctions.
These sanctions could include the FDA&#146;s refusal to approve
pending applications, license suspension or revocation,
withdrawal of an approval, a clinical hold, warning letters,
product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil
penalties or criminal prosecution. Any agency enforcement action
could have a material adverse effect on us.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The steps required before a drug or biologic may
be marketed in the United States include:
</FONT>
<P>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">preclinical laboratory tests, animal studies and
    formulation studies under FDA&#146;s good laboratory practices
    regulations;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">submission to the FDA of an Investigational New
    Drug application, or IND, for human clinical testing, which must
    become effective before human clinical trials may begin;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">adequate and well-controlled clinical trials to
    establish the safety and efficacy of the product for each
    indication;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">submission to the FDA of a New Drug Application,
    or NDA, or Biologics License Application, or BLA;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">satisfactory completion of an FDA inspection of
    the manufacturing facility or facilities at which the product is
    produced to assess compliance with current good manufacturing
    practice, or cGMP; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">FDA review and approval of the NDA or BLA.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Preclinical tests include laboratory evaluations
of product chemistry, toxicity, and formulation, as well as
animal studies. An IND sponsor must submit the results of the
preclinical tests, together with manufacturing information and
analytical data, to the FDA as part of the IND. The IND must
become effective before human clinical trials may begin. An IND
will automatically become effective 30&nbsp;days after receipt
by the FDA, unless before that time the FDA raises concerns or
questions about issues such as the conduct of the trials as
outlined in the IND. In that case, the IND sponsor and the FDA
must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Submission of an IND may not result
in the FDA allowing clinical trials to commence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clinical trials involve the administration of the
investigational product to human subjects under the supervision
of qualified investigators. Clinical trials are conducted under
protocols detailing, among other things, the objectives of the
study, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clinical trials typically are conducted in three
sequential phases, but the phases may overlap or be combined.
Each trial must be reviewed and approved by an independent
Institutional Review Board before it can begin. Phase 1 trials
usually involve the initial introduction of the investigational
drug into humans to evaluate the product&#146;s safety, dosage
tolerance and pharmacodynamics and, if possible, to gain an
early indication of its effectiveness.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Phase&nbsp;2 trials usually involve controlled
trials in a limited patient population to:
</FONT>
<P>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evaluate dosage tolerance and appropriate dosage;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">identify possible adverse effects and safety
    risks; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evaluate preliminarily the efficacy of the drug
    for specific indications.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Phase&nbsp;3 trials usually further evaluate
clinical efficacy and test further for safety in an expanded
patient population. Phase&nbsp;1, Phase&nbsp;2 and Phase&nbsp;3
testing may not be completed successfully within any specified
period, if at all. Furthermore, the FDA or we may suspend or
terminate clinical trials at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assuming successful completion of the required
clinical testing, the results of the preclinical studies and of
the clinical studies, together with other detailed information,
including information on the manufacture and composition of the
product, are submitted to the FDA in the form of an NDA or BLA
requesting approval to
</FONT>

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<FONT size="2">market the product for one or more indications.
The FDA reviews an NDA to determine, among other things, whether
a product is safe and effective for its intended use. The FDA
reviews a BLA to determine, among other things, whether the
product is safe, pure and potent and the facility in which it is
manufactured, processed, packed or held meets standards designed
to assure the product&#146;s continued safety, purity and
potency.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Before approving an application, the FDA will
inspect the facility or the facilities at which the product is
manufactured. The FDA will not approve the product unless cGMP
compliance is satisfactory. The FDA will issue an approval
letter if it determines that the application, manufacturing
process and manufacturing facilities are acceptable. If the FDA
determines the application, manufacturing process or
manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria
for approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The testing and approval process requires
substantial time, effort and financial resources, and each may
take several years to complete. The FDA may not grant approval
on a timely basis, or at all. We may encounter difficulties or
unanticipated costs in our efforts to secure necessary
governmental approvals, which could delay or preclude us from
marketing our products. The FDA may limit the indications for
use or place other conditions on any approvals that could
restrict the commercial application of the products. After
approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes and additional
labeling claims, are subject to further FDA review and approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After regulatory approval of a product is
obtained, we are required to comply with a number of
post-approval requirements. For example, as a condition of
approval of an application, the FDA may require post marketing
testing and surveillance to monitor the product&#146;s safety or
efficacy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, holders of an approved NDA or BLA
are required to report certain adverse reactions and production
problems to the FDA, to provide updated safety and efficacy
information and to comply with requirements concerning
advertising and promotional labeling for their products. Also,
quality control and manufacturing procedures must continue to
conform to cGMP after approval. The FDA periodically inspects
manufacturing facilities to assess compliance with cGMP, which
imposes certain procedural and documentation requirements.
Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory
compliance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We use, and will continue to use in at least the
near term, third party manufacturers to produce our products in
clinical and commercial quantities. Future FDA inspections may
identify compliance issues at our facilities or at the
facilities of our contract manufacturers that may disrupt
production or distribution, or require substantial resources to
correct. In addition, discovery of problems with a product or
the failure to comply with requirements may result in
restrictions on a product, manufacturer or holder of an approved
NDA or BLA, including withdrawal or recall of the product from
the market or other voluntary or FDA-initiated action that could
delay further marketing. Also, new government requirements may
be established that could delay or prevent regulatory approval
of our products under development.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Foreign Regulation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing
clinical trials and commercial sales and distribution of our
products, including Macugen. Whether or not we obtain FDA
approval for a product, we must obtain approval of a product by
the comparable regulatory authorities of foreign countries
before we can commence clinical trials or marketing of the
product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than
that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from country to country.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under European Union regulatory systems, we may
submit marketing authorizations either under a centralized or
decentralized procedure. The centralized procedure provides for
the grant of a single marketing
</FONT>

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<DIV align="left">
<FONT size="2">authorization that is valid for all European
Union member states. The decentralized procedure provides for
mutual recognition of national approval decisions. Under this
procedure, the holder of a national marketing authorization may
submit an application to the remaining member states. Within
90&nbsp;days of receiving the applications and assessment
report, each member state must decide whether to recognize
approval.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Third Party Reimbursement and Pricing
Controls</FONT></B>

<DIV>&nbsp;</DIV>

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

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

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States and elsewhere, sales of
therapeutic and other pharmaceutical products depend in
significant part on the availability of reimbursement to the
consumer from third party payors, such as government and private
insurance plans. Third party payors are increasingly challenging
the prices charged for medical products and services. It will be
time consuming and expensive for us to go through the process of
seeking reimbursement from Medicare and private payors. Our
products may not be considered cost effective, and reimbursement
may not be available or sufficient to allow us to sell our
products on a competitive and profitable basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In many foreign markets, including the countries
in the European Union, pricing of pharmaceutical products is
subject to governmental control. In the United States, there
have been, and we expect that there will continue to be, a
number of federal and state proposals to implement similar
governmental pricing control. While we cannot predict whether
such legislative or regulatory proposals will be adopted, the
adoption of such proposals could have a material adverse effect
on our business, financial condition and profitability.
</FONT>

<DIV>&nbsp;</DIV>

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

<TR>
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</TR>

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

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to obtaining required marketing
approvals, we plan to sell Macugen to physicians for use in the
treatment of conditions such as wet AMD and DME. We expect that
in the United States a majority of the patients who are treated
with Macugen for these indications will be Medicare
beneficiaries. The Centers for Medicare and Medicaid Services,
or CMS, is the agency within the Department of Health and Human
Services that administers Medicare and will be responsible for
reimbursement of the cost of Macugen when administered to
Medicare beneficiaries and for the cost of physician services
for administering the drug.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, Medicare makes separate payment for
drugs, such as Macugen, that meet statutorily covered
requirements, are not usually self-administered and are
furnished by physicians in the office setting. Medicare
currently pays for part of the cost of these
physician-administered drugs at the lower of the amount the
physician charges for the drug or 95% of the drug&#146;s
national &#147;average wholesale price&#148; as published by
certain data sources. Patients, or their secondary insurer, are
responsible for a coinsurance amount. Specifically, for
physician-administered drugs, Medicare pays 80% of 95% of the
average wholesale price, while patients, or their secondary
insurer, are responsible for the remaining&nbsp;20%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Macugen is approved for marketing by the FDA,
it will be covered by Medicare when administered in the
physician office unless CMS or a local Medicare contractor
decides not to cover it. CMS has asserted the authority of
Medicare not to cover particular drugs if it determines that
they are not &#147;reasonable and necessary&#148; for Medicare
beneficiaries. CMS may create a national coverage determination
for a product, which establishes on a nationwide basis the
indications that will be covered and the frequency limits for
administration of the product. However, for most new drugs that
are eligible for payment, CMS does not create a national
coverage determination and we do not know whether or not we will
obtain a national coverage determination for Macugen or our
other potential products. In these cases, the local Medicare
contractors who are responsible for administering the program on
a state by state basis have the discretion to issue local
medical review policies. These policies can include both
coverage criteria for the drug and frequency limits for the
administration of the drug. The local contractors in different
areas of the country may establish varying coverage criteria and
frequency limits for Macugen. If Medicare does cover Macugen,
under the current law and regulations we expect Macugen to be
paid at 95% of the average wholesale price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to payment for the drug itself, CMS
also reimburses physicians for administering the product to
Medicare beneficiaries. Medicare payment for physician services
is determined according to a prospectively set payment rate,
determined by a procedure code established by the American
Medical Association. These
</FONT>

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<FONT size="2">codes, called Current Procedural Terminology, or
CPT, codes, describe the procedure performed, but generally are
not drug specific. We believe that there is an existing CPT code
to describe the procedure for administering Macugen and that
most physicians will find this code to be adequate to cover the
cost of administration. However, if it is determined that the
existing CPT code and associated payment amount are not
applicable to Macugen, it may affect the willingness of
physicians to perform the procedure.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">CMS and Congress currently are considering
changes to Medicare reimbursement that could result in lower
payments for most drugs, including Macugen. CMS has formally
proposed various options that, if made final, would reduce the
Medicare payment for drugs effective as early as January&nbsp;1,
2004. In Congress, the United States House of Representatives
and the Senate have each passed bills that, in different ways,
would reduce Medicare payment for drugs effective in 2004 or
2005. Some or all of the proposed changes could become law if
the House and Senate pass a common bill that is not vetoed by
the President. Some of the provisions in the CMS proposal and
the pending congressional bills may result in payment amounts
that would not cover the costs of the drugs to physicians and
other purchasers. It is uncertain whether CMS will finalize its
proposed changes in Medicare payment for drugs and whether the
currently pending legislation will become law. It is unclear how
reduced Medicare payments for drugs would affect the use of
Macugen, but especially if the Medicare payment amounts fail to
cover the planned cost of the product, the effect on Macugen
could be adverse and material.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Commercial Insurers&#146; Payment for
    Physician-Administered Drugs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Commercial insurers usually offer two types of
benefits&nbsp;&#151; medical benefits and pharmacy benefits. In
most private insurance plans, physician-administered injectable
drugs, such as Macugen, are provided under the medical benefit.
If private insurers decide to cover Macugen, they will reimburse
for the drug in a variety of ways depending on the particular
insurance plan and the contract that the plan has negotiated
with physicians. Like Medicare, commercial insurers have the
authority to place coverage and utilization limits on
physician-administered drugs. If CMS or Congress adopts the
pending proposals for reduced Medicare payment for drugs,
private insurers may adopt similar reduced payment amounts.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that our success will depend greatly
on our ability to identify, attract and retain capable
employees. As of August&nbsp;31, 2003, we had 122 full time
employees, including a total of 28&nbsp;employees who hold M.D.
or Ph.D.&nbsp;degrees. Our employees are not represented by any
collective bargaining unit, and we believe our relations with
our employees are good.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech<SUP>TM</SUP>, Eyetech
Pharmaceuticals<SUP>TM</SUP> and Macugen are our trademarks. All
are covered by pending applications for registration in the
United States Patent and Trademark Office.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, we leased a total of
approximately 52,000 square feet of office and laboratory space.
Our leased properties are described below.
</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="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD align="center" nowrap><B><FONT size="1">Property Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Square Feet</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Use</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration Date</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York, New York
    </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">16,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Corporate Headquarters
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top" nowrap><FONT size="2">December 2010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Woburn, Massachusetts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Laboratory
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top" nowrap><FONT size="2">July 2007</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">Cedar Knolls, New Jersey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">25,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Laboratory
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top" nowrap><FONT size="2">April 2008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to require additional corporate
headquarters space and believe that suitable space is available
to us on commercially acceptable terms.
</FONT>

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

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

<P align="center"><FONT size="2">52
</FONT>

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

<!-- link1 "MANAGEMENT" -->
<DIV align="left"><A NAME="010"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our executive officers, directors and other
significant employees and their respective ages as of
August&nbsp;31, 2003 are as follows:
</FONT>

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

<TR>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Executive Officers and
    Directors</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John McLaughlin(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chairman of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer, M.D.
    </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">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Executive Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul G. Chaney
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Operating Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn P. Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="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">Chief Financial Officer and Senior Vice
    President, Finance
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis, M.D.
    </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">Chief Scientific Officer and Senior Vice
    President, Research
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas H. Altschuler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="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">Senior Vice President, Legal, General Counsel and
    Secretary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Srinivas Akkaraju, M.D., Ph.D.(2)
    </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
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick(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">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael Mullen(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">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel, 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">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">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ed Penhoet, Ph.D.(2)
    </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">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Henry Simon(1)(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">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Damion E. Wicker, M.D.(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">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">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Other Significant Employees</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denis O&#146;Shaughnessy, 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">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Clinical Development
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Arda Ural
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Marketing and Sales
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charles Williams
    </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">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Manufacturing
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Member of the Governance and Nominations 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 Compensation 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 Audit Committee
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John McLaughlin </FONT></I><FONT size="2">is a
co-founder of our company and has been our Chairman of the Board
and a director since February 2000. Mr.&nbsp;McLaughlin has
served as President and Chief Executive Officer of Corgentech,
Inc., a biopharmaceutical company, since January 2000. From
December 1997 to September 1999, Mr.&nbsp;McLaughlin was
president of Tularik, Inc., a biopharmaceutical company. From
September 1987 to December 1997, Mr.&nbsp;McLaughlin held a
number of senior management positions at Genentech, Inc., a
biopharmaceutical company, including Executive Vice President,
with responsibility for many commercial functions.
Mr.&nbsp;McLaughlin served as a counsel to the United States
House of Representatives committee responsible for drafting
several of the FDA laws, including those governing orphan drugs,
generic drug approvals, patent term extensions and export of
unapproved drugs from the United States, and previously
practiced law in Washington, D.C. Mr.&nbsp;McLaughlin received
his J.D. from Catholic University and B.A. from the University
of Notre Dame.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David R. Guyer, M.D.
</FONT></I><FONT size="2">is a co-founder of our company and has
been our Chief Executive Officer and a director since February
2000. Dr.&nbsp;Guyer is also currently a voluntary Clinical
Professor of Ophthalmology at the New York University School of
Medicine. From June 2000 to October 2002, he was also Professor
and Chairman of the Department of Ophthalmology at the New York
University School of Medicine. Dr.&nbsp;Guyer was Clinical
Associate Professor of Ophthalmology at Cornell University
Medical Center from July 1995 until June 2000, during which time
he also served as Director of Residency Training at Manhattan
Eye, Ear &#38; Throat Hospital and was in private practice.
Dr.&nbsp;Guyer has also served as the chief medical editor of
Ophthalmology Times from July 1996 to the present. From 1992 to
2000, Dr.&nbsp;Guyer was the Study Co-chairman of the
Pharmacological Therapy for Macular Degeneration Study Group, a
45-center worldwide group of retinal specialists studying drug
therapy for AMD. Dr.&nbsp;Guyer received his M.D. from The Johns
Hopkins University School of Medicine and his undergraduate
degree from Yale College. He was an
</FONT>

<P align="center"><FONT size="2">53
</FONT>

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

<DIV align="left">
<FONT size="2">ophthalmology resident at The Wilmer Eye
Institute, The Johns Hopkins University School of Medicine and
completed his fellowship training in retinal surgery at the
Massachusetts Eye and Ear Infirmary, a teaching affiliate of
Harvard Medical School, where he was a Heed-Knapp Fellow.
Dr.&nbsp;Guyer is the author of more than 100&nbsp;scientific
articles concerning ophthalmic diseases.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Paul G. Chaney</FONT></I><FONT size="2"> has
been our Chief Operating Officer since August 2003.
Mr.&nbsp;Chaney has more than 20&nbsp;years of experience in the
pharmaceutical industry, including from 1996 to August 2003,
serving in various senior management positions at Pharmacia
Corporation, a pharmaceutical company acquired by Pfizer in
April 2003, where he was responsible for the launch of several
products, including Tecnis&#174;, Xalatan and Xalcom&#174;. More
specifically, from July 2002 to August 2003, Mr.&nbsp;Chaney
served as Vice President, Global Commercial Operations,
Ophthalmology Franchise; from May 2001 to June 2002, he served
as Vice President, Global Ophthalmology Business; from February
2000 to April 2001, he served as Vice President, Global
Pharmaceutical Ophthalmology; from February 1998 to February
2000, he served as Business Director, Ophthalmology, North
America; and from February 1996 to February 1998, he served as
Director, U.S.&nbsp;Ophthalmology Business. Mr.&nbsp;Chaney
received a double B.A. with honors in English and Biological
Sciences from the University of Delaware.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Glenn P. Sblendorio</FONT></I><FONT size="2">
has been our Chief Financial Officer and Senior Vice President,
Finance since February 2002. From July 2000 to February 2002,
Mr.&nbsp;Sblendorio served as Senior Vice President of Business
Development for The Medicines Company, a specialty
pharmaceutical company. From 1998 to July 2000,
Mr.&nbsp;Sblendorio was the Chief Executive Officer, Chief
Financial Officer and Managing Director of MPM Capital Advisors,
LLC, an investment bank specializing in healthcare related
transactions. Mr.&nbsp;Sblendorio&#146;s pharmaceutical
experience also includes 12&nbsp;years at Hoffmann-La Roche,
Inc., a pharmaceutical company, in a variety of senior financial
positions, including Chief Financial Officer of Roche Molecular
Systems and Head of Finance-Controller for Amgen/ Roche Europe.
Mr.&nbsp;Sblendorio received his B.A. in Accounting from Pace
University and his M.B.A. in Finance from Fairleigh Dickinson
University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Anthony P. Adamis,
M.D.</FONT></I><FONT size="2"> is a co-founder of our company
and has been our Chief Scientific Officer and Senior Vice
President, Research since July 2002. Dr.&nbsp;Adamis has served
as a member of our Scientific Advisory Board since February 2002
and was our Director of Preclinical Research from February 2000
to June 2002. From January 1998 to June 2002, Dr.&nbsp;Adamis
was an Associate Professor of Ophthalmology at Harvard Medical
School. From 1992 to June 2002, Dr.&nbsp;Adamis served as
Director of Residency Training in Ophthalmology at the
Massachusetts Eye and Ear Infirmary, a teaching affiliate of
Harvard Medical School. During this time, he also served as a
principal investigator and co-director of the Retina Research
Institute for Diabetic Retinopathy and Macular Degeneration at
the Massachusetts Eye and Ear Infirmary. From January 2001 to
December 2001, Dr.&nbsp;Adamis also served as President of the
Medical Staff and from January 2001 to December 2002 was a
member of the board of directors of the Massachusetts Eye and
Ear Infirmary. Dr.&nbsp;Adamis is a specialist in ocular
vascular disease and ocular drug delivery. He co-discovered the
role that VEGF plays in new blood vessel growth and blood vessel
leakage related to various diseases of the eye. Dr.&nbsp;Adamis
received his M.D. with Honors from the University of Chicago
Pritzker School of Medicine and his undergraduate degree from
the University of Illinois, Urbana. Dr.&nbsp;Adamis completed
his ophthalmology residency training at the University of
Michigan. Dr.&nbsp;Adamis is the author of more than 100
scientific articles concerning ophthalmic diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Douglas H.
Altschuler</FONT></I><FONT size="2"> has been our Senior Vice
President, Legal, General Counsel and Secretary since May 2003.
From September 2001 to May 2003, Mr.&nbsp;Altschuler was the
General Counsel of Nektar Therapeutics, a provider of drug
delivery technology. From December 2000 through September 2001,
he was the General Counsel of Celera Genomics Group, a company
that researches and develops new therapeutics. From 1996 to
October 2000, Mr.&nbsp;Altschuler was the Vice President/
General Counsel and Compliance Officer of Mentor Corporation, a
medical device company. Mr.&nbsp;Altschuler received his J.D.
from the University of Arizona School of Law and a B.S. in
chemistry and biology from the University of Arizona.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Srinivas Akkaraju, M.D.,
Ph.D.</FONT></I><FONT size="2"> has been a director since July
2001. Since April 2001, Dr.&nbsp;Akkaraju has been a principal
of the Life Sciences team in the Healthcare Group at JPMorgan
Partners, LLC, formerly Chase Capital Partners, a global private
equity company affiliated with J.P.&nbsp;Morgan Chase&nbsp;&#38;
Co. From
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">October 1998 to April 2001, he was in the
Business and Corporate Development group at Genentech, Inc.,
most recently as senior manager, where he was responsible for
worldwide partnering activities including technology access
deals, in-licensing of early and late-stage therapeutics, and
out-licensing of Genentech development projects. In addition to
his business development role, he also served for the last year
as project team leader for one of Genentech&#146;s clinical
development products. During this time, Dr.&nbsp;Akkaraju was
also a founding member of BioStreet, an online marketplace for
biotech opportunities. Prior to joining Genentech in 1998,
Dr.&nbsp;Akkaraju was a graduate student at Stanford University.
Dr.&nbsp;Akkaraju received his undergraduate degrees in
Biochemistry and Computer Science from Rice University and his
M.D. and Ph.D. in Immunology from Stanford University.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marty Glick</FONT></I><FONT size="2"> is a
co-founder of our company and has been a director since February
2000. Mr.&nbsp;Glick has served as Executive Vice President and
Chief Financial Officer of Theravance Inc, a biopharmaceutical
company, since July 1998. From 1988 to October 1997,
Mr.&nbsp;Glick held various positions at Genentech, Inc.,
including serving as Vice President of Finance from 1995 to
October 1997. Mr.&nbsp;Glick is the chair of the Biotechnology
Industry Organization&#146;s Tax and Finance Committee.
Mr.&nbsp;Glick received his M.B.A. in Finance from the Kellogg
School of Management at Northwestern University. Mr. Glick is
also a Certified Public Accountant and a Chartered Accountant
(Canada).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael G. Mullen,
CFA</FONT></I><FONT size="2"> has been a director since October
2002. Since 1999, Mr.&nbsp;Mullen has been a member of the
Bellevue Group of Switzerland, which focuses on investing in
public and private biotechnology companies in the United States
and Europe. He currently serves as President of Bellevue
Research, Inc., the United States research arm of the Bellevue
Group. From 1990 to September 1999, Mr.&nbsp;Mullen held various
positions at SG Cowen Securities, formerly Cowen &#38; Co,
including partner, managing director and senior research analyst
in medical technology. Mr.&nbsp;Mullen is also a member of the
Board of Directors of Theravance Inc. Mr.&nbsp;Mullen received
his M.B.A. in Finance from the Kelley School of Business at
Indiana University, Bloomington. He is also a Chartered
Financial Analyst and a member of the Association for Investment
Management and Research.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Samir Patel, M.D.</FONT></I><FONT size="2"> is
a co-founder of our company and has been a director since
February 2000. From 1992 to June 2003, Dr.&nbsp;Patel served as
the Director of the Retina Service at the University of Chicago,
where he is an Associate Professor. Dr.&nbsp;Patel served as the
Residency Program Director at the University of Chicago from
1992 until July 2000. Dr.&nbsp;Patel received his M.D. from the
University of Massachusetts Medical School and was an
ophthalmology resident at the University of Chicago.
Dr.&nbsp;Patel completed his fellowship training in retinal
surgery at the Massachusetts Eye and Ear Infirmary, a teaching
affiliate of Harvard Medical School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Edward Penhoet,
Ph.D.</FONT></I><FONT size="2"> has been a director since July
2001. Dr.&nbsp;Penhoet is the Chief Program Officer for Science
and Higher Education Programs at the Gordon and Betty Moore
Foundation and is a Professor of Health Policy and Management at
the School of Public Health at the University of California,
Berkeley. Dr.&nbsp;Penhoet was the Dean of the School of Public
Health and Professor of Public Health and of Molecular and Cell
Biology at University of California, Berkeley from 1999 until
June 2003. Since 1981, Dr.&nbsp;Penhoet has also served as a
director of Chiron Corporation, a biotechnology company.
Dr.&nbsp;Penhoet served as Chiron&#146;s President and Chief
Executive Officer from the time he co-founded the company in
1981 until April 1998. From March 1997 to December 1998,
Dr.&nbsp;Penhoet was a chairperson of the California Healthcare
Institute. He is a member of the Boards of Directors of the Bay
Area Council, the Oakland Museum Foundation, the UC System
Biotech Advisory Committee, Kaiser Permanente, and the Advisory
board for the Lester Center for Entrepreneurship and Innovation
at UC Berkeley. He is also a director of Alta Partners, a
venture capital firm, and a member of the boards of
ZymoGenetics, Inc., a biopharmaceutical company, and Chiron
Corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Henry Simon</FONT></I><FONT size="2"> has been
a director since July 2001. Since 1987, Mr.&nbsp;Simon has held
various positions with Schroder Ventures in London, a global
private equity group, serving as the Chief Executive Officer of
the life sciences team until 1997, its Chairman from April 1997
to December 2001 and a Special Partner since January 2002.
Mr.&nbsp;Simon has been Chairman of Leica Microsystems AG since
1998, Chairman of Zarlink Semiconductors since 1994 and a
director of Gyros AB since September 2002. From 1988 to 1997, he
was the Chairman of Shire Pharmaceuticals and from 1993 to 1996
also served as the Chairman of Chiroscience. Prior
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">to joining Schroder Ventures, Mr.&nbsp;Simon was
President of Technicon Corporation, a diagnostics manufacturer,
and prior to that Group Executive and Vice President of ITT
Europe. Mr.&nbsp;Simon started his career at Bell Laboratories
in 1959 after graduating from the Institute of Technology in
Munich, Germany and the Royal Institute of Technology in
Stockholm, Sweden.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Damion E. Wicker,
M.D.</FONT></I><FONT size="2"> has been a director since July
2001. Since December 1996, Dr.&nbsp;Wicker has been a partner
with JPMorgan Partners, LLC. Prior to joining JPMorgan Partners
in 1993, Dr.&nbsp;Wicker was President of Adams Scientific, a
medical diagnostics company, and held various positions with MBW
Venture Partners, a venture capital firm. Dr.&nbsp;Wicker was
also a Commonwealth Fund Medical Fellow for the National
Institute of Health. He is currently a member of the NVCA Life
Science Group Board and the Board of Trustees of the New York
Academy of Medicine. Dr.&nbsp;Wicker is also a Director of V.I.
Technologies, Inc., a biotechnology company. Dr.&nbsp;Wicker
received a B.S. with honors from M.I.T, an M.D. from The Johns
Hopkins University School of Medicine, and an M.B.A. from The
Wharton School of the University of Pennsylvania.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Denis O&#146;Shaughnessy,
Ph.D.</FONT></I><FONT size="2"> has been our Senior Vice
President, Clinical Development since August 2000. From November
1990 to July 2000, Dr.&nbsp;O&#146;Shaughnessy held various
clinical research and management roles with
Hoffman-La&nbsp;Roche Inc., including Senior Manager responsible
for overseeing global clinical research programs.
Dr.&nbsp;O&#146;Shaughnessy received his Ph.D. from Royal
Post-Graduate Medical School in the United Kingdom and his
undergraduate degree from London University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Arda Ural</FONT></I><FONT size="2"> has been
our Senior Vice President, Marketing and Sales since September
2002. From 1992 to August 2002, Mr.&nbsp;Ural held various
positions at Pfizer Inc. in which he had marketing, sales and
business development responsibilities in several therapeutic
areas. More specifically, from January 2002 until September
2002, Mr.&nbsp;Ural was a Director/Team Leader for Pfizer&#146;s
Celebrex&#174; U.S.&nbsp;Team, from August 2000 until December
2001, Mr.&nbsp;Ural was a Director/Team Leader for Pfizer&#146;s
Cardura/XL Worldwide Team and from September 1998 until August
2000, Mr.&nbsp;Ural was a Marketing Director for Pfizer&#146;s
Viagra&#174; U.S.&nbsp;team. Mr.&nbsp;Ural received B.Sc. and
M.Sc. degrees in mechanical engineering from Bosporus University
in Istanbul, Turkey. He has also received an M.B.A. from Marmara
University in Istanbul.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Charles Williams</FONT></I><FONT size="2"> has
been our Senior Vice President, Manufacturing since November
2002. From November 2001 to October 2002, Mr.&nbsp;Williams
served as Senior Project Manager at Amgen, Inc., a biotechnology
company. From February 1996 to March 2000, he served as Vice
President of Operations for Cohesion Technologies, Inc., a
developer of biomaterials and biosurgical products.
Mr.&nbsp;Williams received his B.S. in chemical engineering from
the University of Tennessee, and completed all but his
dissertation for a M.S. in biochemical engineering from Rutgers
University. He also completed the Executive M.B.A. program at
Stanford University.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Audit Committee. </FONT></I><FONT size="2">The
members of our audit committee are Messrs.&nbsp;Simon, Glick and
Mullen. Mr.&nbsp;Simon chairs the committee. Our audit committee
assists our board of directors in its oversight of:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the integrity of our financial statements;
    </FONT></TD>
</TR>

<TR>
    <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 independent auditors&#146; qualifications and
    independence; 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 performance of our independent auditors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The audit committee has the sole and direct
responsibility for appointing, evaluating and retaining our
independent auditors and for overseeing their work. All audit
services to be provided to us and all non-audit services, other
than de minimis non-audit services, to be provided to us by our
independent auditors must be approved in advance by our audit
committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Compensation Committee.
</FONT></I><FONT size="2">The members of our compensation
committee are Mr.&nbsp;Glick and Drs.&nbsp;Akkaraju and Penhoet.
Dr.&nbsp;Penhoet chairs the committee. The purpose of our
compensation committee
</FONT>

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</FONT>
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<DIV align="left">
<FONT size="2">is to discharge the responsibilities of our board
of directors relating to compensation of our executive officers.
Specific responsibilities of our compensation committee include:
</FONT>
</DIV>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and recommending approval of
    compensation of our executive officers;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">administering our stock incentive and employee
    stock purchase 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">reviewing and making recommendations to our board
    with respect to incentive compensation and equity plans.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Governance and Nominations
Committee.</FONT></I><FONT size="2"> The members of our
governance and nominations committee are Messrs.&nbsp;McLaughlin
and Simon and Dr.&nbsp;Wicker. Mr.&nbsp;McLaughlin chairs the
committee. Our governance and nominations committee:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">identifies and recommends nominees for election
    to our board of directors;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">develops and recommends to our board our
    corporate governance 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">oversees the evaluation of our board and
    management.
    </FONT></TD>
</TR>

</TABLE>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of our executive officers serves as a member
of the board of directors or compensation committee, or other
committee serving an equivalent function, or of any other entity
that has one or more of its executive officers serving as a
member of our board of directors or compensation committee. None
of the members of our compensation committee has ever been our
employee.
</FONT>

<P align="left">
<B><FONT size="2">Election of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following this offering, our board of directors
will be divided into three classes, each of whose members will
serve for staggered three year terms. Mr.&nbsp;McLaughlin,
Dr.&nbsp;Akkaraju and Mr.&nbsp;Mullen will serve in the class of
directors whose terms will expire at our 2004 annual meeting;
Drs.&nbsp;Patel, Penhoet and Wicker will serve in the class of
directors whose terms will expire at our 2005 annual meeting;
and Mr.&nbsp;Glick, Dr.&nbsp;Guyer and Mr.&nbsp;Simon will serve
in the class of directors whose terms will expire at our 2006
annual meeting. Upon expiration of the term of a class of
directors, directors in that class will be eligible to be
elected for a new three-year term at the annual meeting of
stockholders in the year in which their term expires.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We reimburse each member of our board of
directors who is not a company employee for reasonable travel
and other expenses in connection with attending meetings of the
board of directors. In 2002, we granted to each of our board
members who is not our employee options to purchase
30,000&nbsp;shares of our common stock at an exercise price of
$1.44&nbsp;per share. These options are immediately exercisable.
However, the shares purchasable upon exercise of these options
are subject to our right of repurchase that, subject to the
director&#146;s continued service on our board, lapses monthly
over the four-year period from the date of grant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In September 2003, our board of directors
approved a program under our 2003 stock incentive plan in which
each non-employee director is eligible to receive an option to
purchase 30,000&nbsp;shares of our common stock upon his or her
appointment to our board of directors. One-quarter of these
options will vest on the first anniversary of the grant date and
then in 36&nbsp;equal monthly installments, subject to the
recipient&#146;s continued service as a director. Each
non-employee director is also eligible to receive an annual
grant of an option to purchase 7,500&nbsp;shares of our common
stock at each year&#146;s annual meeting after which he or she
will continue to serve as a director. These options will vest in
48&nbsp;monthly installments beginning one month after the grant
date, subject to the recipient&#146;s continued service as a
director. Each non-employee director stock option will terminate
on the earlier of ten years from the date of grant and
90&nbsp;days after the recipient ceases to serve as a director,
except in the case of death or disability, in which event the
option will terminate three months from the date of the
director&#146;s death or disability. The exercise price of all
of these options will equal the fair market value of our common
stock on the date of grant.
</FONT>

<P align="center"><FONT size="2">57
</FONT>

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<P align="left">
<B><FONT size="2">Scientific Advisory Board</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have established a scientific advisory board
made up of leading experts in the field of retinal disease.
Members of our scientific advisory board consult with us
regularly on matters relating&nbsp;to:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our research and development programs;
    </FONT></TD>
</TR>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market opportunities from a clinical perspective;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">new technologies relevant to our research and
    development programs; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">scientific and technical issues relevant to our
    business.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The current members of our scientific advisory
board are:
</FONT>

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

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Professional Affiliation</FONT></B></TD>
</TR>

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

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Research,<BR>
    Eyetech Pharmaceuticals, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark Blumenkranz, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor and Chairman of Ophthalmology,
    Stanford&nbsp;University
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Evangelos S. Gragoudas, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor of Ophthalmology,<BR>
    Harvard Medical School;<BR>
    Acting Chairman, Department of Ophthalmology,<BR>
    Massachusetts Eye and Ear Infirmary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morton F. Goldberg, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor and Chairman, Emeritus, of
    Ophthalmology, Johns Hopkins University School of Medicine
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dennis Henner, Ph.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">General Partner, MPM Capital Partners
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Joan W. Miller, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor of Ophthalmology, Harvard Medical School
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Steven Schwartz, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief of Retina Division, Doris Stein Eye
    Research Center, University of California, Los Angeles Medical
    School
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lawrence Singerman, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Clinical Professor of Ophthalmology,<BR>
    Case Western Reserve University School of Medicine;
    Ophthalmologist, Retina Associates of Cleveland;<BR>
    Founder, Macula Society
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lawrence A. Yannuzzi, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor of Clinical Ophthalmology,<BR>
    Columbia University
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the compensation
paid or accrued during the year ended December&nbsp;31, 2002 to
our chief executive officer and to our other most highly
compensated executive officers whose salary and bonus exceeded
$100,000 for the year ended December&nbsp;31, 2002. We refer to
these officers collectively as our named executive officers.
</FONT>

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

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

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

<TR>
    <TD 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">Long-Term</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

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

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

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Principal Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

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

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">325,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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 bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Glenn Sblendorio(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">192,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Anthony P. Adamis, M.D.(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">137,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(4)</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Research
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">
<HR size="1" width="18%" align="left" noshade>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Sblendorio joined our company in
    February 2002.
    </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">Dr.&nbsp;Adamis joined our company in July 2002.
    </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">Includes a $50,000 signing bonus paid to
    Dr.&nbsp;Adamis in July 2002.
    </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">Represents consulting fees paid to
    Dr.&nbsp;Adamis during 2002 before he joined our company as an
    employee in July 2002.
    </FONT></TD>
</TR>

</TABLE>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table contains information
regarding grants of options to purchase shares of our common
stock to our named executive officers during the year ended
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amounts in the following table represent
potential realizable gains that could be achieved for the
options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation
are calculated based on the requirements of the Securities and
Exchange Commission and do not represent an estimate or
projection of our future common stock prices. These amounts
represent certain assumed rates of appreciation in the value of
our common stock from the fair market value on the date of
grant. Actual gains, if any, on stock option exercises depend on
the future performance of the common stock and overall stock
market conditions. The amounts reflected in the following table
may not necessarily be achieved.
</FONT>

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

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

<TR>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="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="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>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Potential Realizable</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value at Assumed</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual Rates of Stock</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Price Appreciation for</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Option Term(2)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employees in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price Per</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted(#)(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5%($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">10%($)</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer, M.D.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Glenn Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/22/2012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Anthony P. Adamis, M.D.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7/1/2012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">
<HR size="1" width="18%" align="left" noshade>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To date, the options that we granted to our
    executive officers and other employees typically were
    exercisable as of the date of grant. However, the shares
    purchasable upon exercise of these options are
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">59
</FONT>

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

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

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">subject to our right of repurchase that, subject
    to continued employment on the applicable dates, lapses with
    respect to 25% of the shares on the first anniversary of the
    date of grant and thereafter in thirty-six monthly installments.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The dollar amounts under these columns are the
    result of calculations at rates set by the Securities and
    Exchange Commission and, therefore, are not intended to forecast
    possible future appreciation, if any, in the price of the
    underlying common stock. The potential realizable values are
    calculated using an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share and assuming that the market price appreciates from this
    price at the indicated rate for the entire term of each option
    and that each option is exercised and sold on the last day of
    its term at the assumed appreciated price.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Option
Exercises and Year-End Option Values</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides information about
the number of shares issued upon option exercises by our named
executive officers during the year ended December&nbsp;31, 2002,
and the value realized by our named executive officers. The
table also provides information about the number and value of
options held by our named executive officers at
December&nbsp;31, 2002.
</FONT>

<P align="center">
<B><FONT size="2">Aggregated Option Exercises in Last Fiscal
Year and</FONT></B>

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

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

<TR>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="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="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underlying Unexercised Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value of Unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">at</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">In-the-Money Options at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Acquired on</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Realized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Anthony P. Adamis, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The options that we granted to our executive
    officers, including Mr.&nbsp;Sblendorio and Dr.&nbsp;Adamis,
    were exercisable as of the date of grant. However, the shares
    purchasable upon exercise of these options are subject to our
    right of repurchase that, subject to continued employment on the
    applicable dates, lapses with respect to 25% of the shares on
    the first anniversary of the date of grant and thereafter in
    thirty-six monthly installments. As of August&nbsp;31, 2003, our
    right of repurchase had lapsed with respect to 75,000 of the
    shares underlying the options held by Mr.&nbsp;Sblendorio and
    60,937 of the shares underlying the options held by
    Dr.&nbsp;Adamis.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There was no public trading market for our common
stock as of December&nbsp;31, 2002. Accordingly, as permitted by
the rules of the Securities and Exchange Commission, we have
calculated the value of unexercised in-the-money options at
fiscal year-end on the basis of the fair market value of our
common stock as of December&nbsp;31, 2002 of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, as determined by our board of directors, less the
aggregate exercise price.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Guyer.
</FONT></I><FONT size="2">Pursuant to an employment agreement
effective April&nbsp;12, 2000 and amended August&nbsp;25, 2003,
we are employing Dr.&nbsp;Guyer as our Chief Executive Officer.
Under the amended agreement, Dr.&nbsp;Guyer receives an annual
base salary of $308,275, subject to increases upon an annual
review by our board of directors. The amended agreement provides
for a discretionary annual bonus based on Dr.&nbsp;Guyer&#146;s
performance and our company&#146;s business results as
determined by our board of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the amended agreement, either we or
Dr.&nbsp;Guyer may terminate his employment at any time, subject
to continuation of salary payment and benefits for
18&nbsp;months if we terminate Dr.&nbsp;Guyer&#146;s employment
without cause or if Dr. Guyer terminates his employment for good
reason. If we terminate Dr.&nbsp;Guyer&#146;s employment without
cause or if he terminates his employment for good reason within
three months before or
</FONT>

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

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

<DIV align="left">
<FONT size="2">12&nbsp;months following a change in control of
our company, we are obligated to pay Dr.&nbsp;Guyer a lump sum
payment equal to two years of his then current base salary and
reimburse Dr.&nbsp;Guyer for the costs of medical and dental
benefits for up to 18&nbsp;months. The amended agreement also
provides that upon any change in control of our company, 50% of
all of Dr.&nbsp;Guyer&#146;s unvested equity rights in our
company will immediately vest, and if we terminate
Dr.&nbsp;Guyer&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Dr.&nbsp;Guyer&#146;s unvested equity rights in our company
will immediately vest.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mr.&nbsp;Sblendorio.
</FONT></I><FONT size="2">Pursuant to an employment agreement
dated February&nbsp;1, 2002 and
amended &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;,
2003, we are employing Mr.&nbsp;Sblendorio as our Chief
Financial Officer. Under the amended agreement,
Mr.&nbsp;Sblendorio receives an annual base salary of $225,000.
The amended agreement provides for:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a guaranteed bonus for Mr.&nbsp;Sblendorio&#146;s
    first year of employment with us equal to 20% of his base
    salary, which was paid in April 2003;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an additional discretionary annual bonus based on
    Mr.&nbsp;Sblendorio&#146;s performance and our business results
    as determined by our board of directors or our senior management
    upon the recommendation of our Chief Executive Officer; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of stock options to purchase 200,000
    shares of common stock, which grant was made in February 2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the amended agreement, either we or
Mr.&nbsp;Sblendorio may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Mr.&nbsp;Sblendorio&#146;s employment
without cause or if Mr.&nbsp;Sblendorio terminates his
employment for good reason. If we terminate
Mr.&nbsp;Sblendorio&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following a change in control of our
company, we are obligated to pay Mr.&nbsp;Sblendorio a lump sum
payment equal to 15&nbsp;months of his then current base salary
and reimburse Mr.&nbsp;Sblendorio for the costs of medical and
dental benefits for up to 15&nbsp;months. The amended agreement
also provides that upon any change in control of our company,
50% of all of Mr.&nbsp;Sblendorio&#146;s unvested equity rights
in our company granted after the amendment of his employment
agreement will immediately vest, and if we terminate
Mr.&nbsp;Sblendorio&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Mr.&nbsp;Sblendorio&#146;s unvested equity rights in our
company granted after the amendment of his employment agreement
will immediately vest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Adamis.
</FONT></I><FONT size="2">Pursuant to an employment agreement
dated April&nbsp;12, 2002 and
amended &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;,
2003, we are employing Dr.&nbsp;Adamis as our Chief Scientific
Officer and Senior Vice President, Research. Under the amended
agreement, Dr.&nbsp;Adamis receives an annual base salary of
$275,000, subject to increases upon an annual review by our
board of directors. The amended agreement provides for:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a signing bonus of $50,000, which was paid in
    2002;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a guaranteed bonus equal to 30% of his base
    salary;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an additional discretionary annual bonus based on
    Dr.&nbsp;Adamis&#146;s performance and our company&#146;s
    business results as determined by our board of directors;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of stock options to purchase 225,000
    shares of common stock, which grant was made 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">the sale of an additional 75,000 shares of fully
    vested stock at a price of $1.36 per share, which shares were
    purchased by Dr.&nbsp;Adamis in February 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the amended agreement, either we or
Dr.&nbsp;Adamis may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Dr.&nbsp;Adamis&#146;s employment without
cause or if Dr.&nbsp;Adamis terminates his employment for good
reason. If we terminate Dr.&nbsp;Adamis&#146;s employment
without cause or if he terminates his employment for good reason
within three months before or 12&nbsp;months following a change
in control of our company, we are obligated to pay
Dr.&nbsp;Adamis a lump sum
</FONT>

<P align="center"><FONT size="2">61
</FONT>

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<DIV align="left">
<FONT size="2">payment equal to 15&nbsp;months of his then
current base salary and reimburse Dr.&nbsp;Adamis for the costs
of medical and dental benefits for up to 15&nbsp;months. The
amended agreement also provides that upon any change in control
of our company, 50% of all of Dr.&nbsp;Adamis&#146;s unvested
equity rights in our company granted after the amendment of his
employment agreement will immediately vest, and if we terminate
Dr.&nbsp;Adamis&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Dr.&nbsp;Adamis&#146;s unvested equity rights in our company
granted after the amendment of his employment agreement will
immediately vest.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Stock Option and Other Compensation
Plans</FONT></B>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2001 Stock Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2001 stock plan, as amended, was adopted by
our board of directors and approved by our stockholders in 2001.
The plan provides for the grant of incentive stock options,
non-statutory stock options and restricted stock awards. A
maximum of 8,175,000 shares of common stock are authorized for
issuance under our 2001 stock plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with the terms of the 2001 stock
plan, our board of directors has authorized our compensation
committee to administer the 2001 stock plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a change in control of our company occurs, an
option or other award under the 2001 stock plan will become
fully exercisable and fully vested if the option or award is not
assumed by the surviving corporation or its parent or if the
surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 2001 stock
plan. A change in control under the 2001 stock plan includes:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a merger or consolidation after which our
    stockholders own less than 50% of the surviving corporation or
    its parent company; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of all or substantially all of our
    assets.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This accelerated vesting provision shall not
apply, however, to a transaction if its sole purpose is to
change the jurisdiction of our incorporation or to create a
holding company owned by our stockholders in substantially the
same proportions in which they owned our shares prior to the
transaction.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we become a party to a merger or
consolidation, the agreement of merger or consolidation shall
provide the following for our outstanding options:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">continuation of the options by us, if we are the
    surviving corporation;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumption of the options by the surviving
    corporation or its parent;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">replacement of the options by comparable options
    by the surviving corporation or its parent;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">accelerated vesting of the options, followed by
    their cancellation; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">cancellation for a cash payment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, there were options to
purchase 4,477,500 shares of common stock outstanding under the
2001 stock plan and options to purchase 1,465,111 shares of
common stock had been exercised. After the effective date of the
2003 stock incentive plan described below, we will grant no
further stock options or other awards under the 2001 stock plan.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2003 Stock Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2003 stock incentive plan, which will become
effective on the date that the registration statement of which
this prospectus forms a part is declared effective, was adopted
by our board of directors on September&nbsp;10, 2003 and
approved by our stockholders
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003. The plan provides for the grant of incentive stock
options, non-statutory stock options, restricted stock awards
and other stock-based awards. Upon effectiveness,
4,400,000&nbsp;shares of common stock will be reserved for
issuance under the 2003 stock incentive plan. In addition, the
2003 stock incentive plan contains an &#147;evergreen
provision&#148; which allows for
</FONT>

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

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<DIV align="left">
<FONT size="2">an annual increase in the number of shares
available for issuance under the plan on the first day of each
of our fiscal years during the period beginning in fiscal year
2005 and ending on the second day of fiscal year 2013. The
annual increase in the number of shares shall be equal to the
lowest of:
</FONT>
</DIV>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2,500,000&nbsp;shares;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">5% of our outstanding shares on the first day of
    the fiscal year; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an amount determined by our board of directors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under this provision, no annual increase shall be
made to the extent that the number of shares of common stock
available for issuance under the 2003 stock incentive plan and
all other employee or director equity incentive plans, including
our 2003 employee stock purchase plan, would exceed 30% of our
outstanding shares on the first day of the applicable fiscal
year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with the terms of the 2003 stock
incentive plan, our board of directors has authorized our
compensation committee to administer the 2003 stock incentive
plan. In accordance with the provisions of the 2003 stock
incentive plan, our compensation committee will select the
recipients of awards and determine:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of common stock covered by
    options and the dates upon which the options become exercisable;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the exercise price of options;
    </FONT></TD>
</TR>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the method of payment of the exercise price; and
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of common stock subject to
    any restricted stock or other stock-based awards and the terms
    and conditions of such awards, including conditions for
    repurchase, issue price and repurchase price.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition our board of directors or any
committee to which the board of directors delegates authority
has the authority, with the consent of the affected plan
participants, to reprice or otherwise amend outstanding options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon a merger or other reorganization event under
our 2003 stock incentive plan, our board of directors shall
provide that all of our outstanding options shall be assumed or
substituted by the successor corporation. However, if the
succeeding corporation does not agree to assume, or substitute
for, outstanding options, then our board of directors shall
provide that all unexercised options will become exercisable in
full prior to the completion of the reorganization event and
that these options will terminate upon the completion of the
reorganization event if not previously exercised. Our board of
directors may also provide for a cash payment equal to the value
of any outstanding options. If the reorganization event also
constitutes a change in control event under our 2003 stock
incentive plan, any assumed or substituted option will become
immediately exercisable in full if on or prior to the date that
is six&nbsp;months after the reorganization event an option
holder&#146;s employment with us or our succeeding corporation
is terminated by us or the succeeding corporation without cause,
as defined in our 2003 stock incentive plan. In addition, upon a
change in control event that is not also a reorganization event
under our 2003 stock incentive plan, each option will continue
to vest according to its original vesting schedule, except that
an option will become immediately exercisable in full if on or
prior to the date that is six&nbsp;months after the change in
control event an option holder&#146;s employment with us or the
succeeding corporation is terminated by us or the succeeding
corporation without cause. Our 2003 stock incentive plan
provides similar change in control vesting provisions for
restricted stock and other awards under the plan.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2003 Employee Stock Purchase
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2003 employee stock purchase plan, which will
become effective on the date that the registration statement of
which this prospectus forms a part is declared effective, was
adopted by our board of directors on
</FONT>

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

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<DIV align="left">
<FONT size="2">September&nbsp;10, 2003 and approved by our
stockholders
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2003. The plan provides for the issuance of up to
500,000&nbsp;shares of our common stock to participating
employees.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of our employees, including directors who are
employees, and all employees of any participating subsidiaries:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whose customary employment is more than
    20&nbsp;hours per week for more than five months in a calendar
    year;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">who were employed by us for at least 90&nbsp;days
    prior to enrolling; and
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;who are employed on the first day of
a designated payroll deduction offering period
</FONT>

<P align="left">
<FONT size="2">are eligible to participate in the 2003 employee
stock purchase plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Employees who would immediately after the grant
of an option under the 2003 employee stock purchase plan own 5%
or more of the total combined voting power or value of our stock
or the stock of any of our subsidiaries are not eligible to
participate in the purchase plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will make one or more offerings to our
employees to purchase stock under the 2003 employee stock
purchase plan. Offerings will begin on each February&nbsp;1 and
August&nbsp;1, except that our first offering commencement date
will begin on the date on which trading of our common stock
commences on the NASDAQ National Market in connection with this
offering. Each offering commencement date will begin a six-month
period during which payroll deductions will be made and held for
the purchase of our common stock at the end of the purchase plan
period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On the first day of a designated payroll
deduction period, or offering period, we will grant to each
eligible employee who has elected to participate in the purchase
plan an option to purchase shares of our common stock as
follows: the employee may authorize up to 10% of his or her base
pay to be deducted by us during the offering period. On the last
day of the offering period, the employee is deemed to have
exercised the option, at the option exercise price, to the
extent of accumulated payroll deductions. Under the terms of the
purchase plan, the option exercise price is an amount equal to
85% of the lower of the closing price of our common stock on the
first day or the last day of the offering period. For purposes
of the first offering period under the purchase plan, the
closing price of our common stock on the first day of such
period is deemed to equal the initial public offering price per
share in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In no event may an employee purchase in any one
offering period a number of shares which exceeds the number of
shares determined by dividing:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the product of $2,083 and the number of full
    months in the offering period, by
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the closing price of a share of our common stock
    on the commencement date of the offering period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors may, in its discretion,
choose a different offering period for each subsequent offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An employee who is not a participant on the last
day of the offering period is not entitled to exercise any
option, and the employee&#146;s accumulated payroll deductions
will be refunded. An employee&#146;s rights under the purchase
plan terminate upon voluntary withdrawal from the purchase plan
at any time, or when the employee ceases employment for any
reason, except that upon termination of employment because of
death, the balance in the employee&#146;s account will be paid
to the employee&#146;s beneficiary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because participation in the purchase plan is
voluntary, we cannot now determine the number of shares of our
common stock to be purchased by any particular current executive
officer, by all current executive officers as a group or by
non-executive employees as a group.
</FONT>

<P align="left">
<B><FONT size="2">Limitation of Liability and Indemnification of
Officers and Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation that will be in
effect upon completion of this offering limits the personal
liability of directors for breach of fiduciary duty to the
maximum extent permitted by the Delaware General
</FONT>

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

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<DIV align="left">
<FONT size="2">Corporation Law. Our certificate of incorporation
provides that no director will have personal liability to us or
to our stockholders for monetary damages for breach of fiduciary
duty or other duty as a director. However, these provisions do
not eliminate or limit the liability of any of our directors:
</FONT>
</DIV>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for any breach of their duty of loyalty to us or
    our stockholders;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for voting or assenting to unlawful payments of
    dividends or other distributions; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for any transaction from which the director
    derived an improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any amendment to or repeal of these provisions
will not eliminate or reduce the effect of these provisions in
respect of any act or failure to act, or any cause of action,
suit or claim that would accrue or arise prior to any amendment
or repeal or adoption of an inconsistent provision. If the
Delaware General Corporation Law is amended to provide for
further limitations on the personal liability of directors of
corporations, then the personal liability of our directors will
be further limited to the greatest extent permitted by the
Delaware General Corporation Law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our certificate of incorporation
provides that we must indemnify our directors and officers and
we must advance expenses, including attorneys&#146; fees, to our
directors and officers in connection with legal proceedings,
subject to very limited exceptions.
</FONT>

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

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

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our incorporation in February 2000, we have
engaged in the following transactions with our directors and
officers and holders of more than&nbsp;5% of our voting
securities and affiliates of our directors, officers and
5%&nbsp;stockholders:
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Common Stock to
    Founders</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, in connection with our formation,
we issued common stock at a price per share of $0.01 to the
following directors:
</FONT>

<CENTER>
<TABLE width="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="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John McLaughlin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;A Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, we issued 120,000 shares of our
series A convertible preferred stock at a price per share of
$1.25 to the following directors:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series&nbsp;A Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John McLaughlin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series&nbsp;A convertible
preferred stock will automatically convert into an aggregate of
120,000&nbsp;shares of our common stock upon the consummation of
this offering.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;B Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2000 and January 2001, we issued an
aggregate of 5,786,998 shares of our series B convertible
preferred stock at a price per share of $6.00 for a total
purchase price of $34.7&nbsp;million. We also issued warrants to
purchase an aggregate of 1,142,902 shares of series&nbsp;B
convertible preferred stock at an exercise price of
$6.00&nbsp;per share in connection with our series&nbsp;B
financing. The following table sets forth the number of
series&nbsp;B shares and warrants sold to our
5%&nbsp;stockholders and their affiliates.
</FONT>

<CENTER>
<TABLE width="90%" 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="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>
    <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>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Series&nbsp;B</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,666,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">333,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series&nbsp;B convertible
preferred stock will automatically convert into an aggregate of
5,786,998 shares of our common stock upon the consummation of
this offering. Any warrants issued as part of our series&nbsp;B
Financing that are not exercised prior to completion of this
offering will be cancelled.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;C Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July and August 2001, we issued an aggregate
of 7,964,229 shares of our series&nbsp;C-1 convertible preferred
stock at a price per share of $6.80 for a total purchase price
of $54.2&nbsp;million. We also issued warrants to purchase an
aggregate of 1,592,846 shares of series&nbsp;C-1 convertible
preferred stock at an exercise price of
</FONT>

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

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

<DIV align="left">
<FONT size="2">$6.80 per share in connection with this portion
of our series&nbsp;C financing. The following table sets forth
the number of series&nbsp;C-1 shares and warrants sold to our
5%&nbsp;stockholders and their affiliates.
</FONT>
</DIV>

<CENTER>
<TABLE width="90%" 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="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>
    <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>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Series&nbsp;C-1</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">735,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech II, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">735,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">JPMorgan Partners (BHCA), LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">367,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,499,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Biotech Growth SA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,470,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">294,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,999,944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">MPM Capital Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,176,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,999,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series&nbsp;C-1 convertible
preferred stock will automatically convert into an aggregate of
7,964,229 shares of common stock upon the consummation of this
offering. Any warrants that are not exercised prior to
completion of this offering will be cancelled.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2002, we issued an aggregate of
7,521,777 shares of our series&nbsp;C-2 convertible preferred
stock at a price per share of $7.20 for a total purchase price
of $54.2&nbsp;million. We also issued warrants to purchase an
aggregate of 1,504,354 shares of series&nbsp;C-2 convertible
preferred stock at an exercise price of $7.20 per share in
connection with this portion of our series&nbsp;C financing. The
following table sets forth the number of series&nbsp;C-2 shares
and warrants sold to our 5%&nbsp;stockholders and their
affiliates.
</FONT>

<CENTER>
<TABLE width="90%" 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="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>
    <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>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Series&nbsp;C-2</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech II, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">JPMorgan Partners (BHCA), LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,736,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">347,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,499,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Biotech Growth SA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,388,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">277,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,999,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">MPM Capital Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,111,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,999,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series&nbsp;C-2 convertible
preferred stock will automatically convert into an aggregate of
7,521,777 shares of common stock upon the consummation of this
offering. Any warrants that are not exercised prior to
completion of this offering will be cancelled.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;D Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, in connection with our Pfizer
collaboration, we issued an aggregate of 2,747,253&nbsp;shares
of our series&nbsp;D convertible preferred stock to an affiliate
of Pfizer at a price per share of $9.10 for a total purchase
price of $25.0&nbsp;million. All shares of our series D
convertible preferred stock will automatically convert into an
aggregate of 2,747,253&nbsp;shares of common stock upon the
consummation of this offering.
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Pfizer Collaboration</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, we entered into collaboration,
license and related agreements with Pfizer to collaboratively
develop, manufacture and commercialize Macugen for the
prevention and treatment of diseases of the eye and related
conditions. These agreements are discussed above under the
heading &#147;Business&nbsp;&#151; Collaboration with
Pfizer.&#148;
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Consulting Agreement with Samir
    Patel</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In October 2001, we entered into a consulting
agreement with Samir Patel, one of our founders and a member of
our board of directors, under which Dr.&nbsp;Patel provides
consulting services to us relating to our
</FONT>

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

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

<DIV align="left">
<FONT size="2">development, clinical investigation and
commercialization of Macugen. The consulting agreement
terminates on December&nbsp;31, 2003, unless extended by mutual
agreement of us and Dr.&nbsp;Patel. Under the terms of the
agreement, Dr.&nbsp;Patel provides at least 40&nbsp;hours per
month of consulting services to us in exchange for annual
compensation of $85,000.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loan to Executive Officer</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July 1, 2002, we provided a loan to Anthony P.
Adamis, our Chief Scientific Officer and Senior Vice President,
Research, that is evidenced by a promissory note in the
aggregate principal amount of $102,000. The note bears interest
at a fixed annual rate of 4.71%, with the interest payable at
maturity, and matures in July 2008. Dr.&nbsp;Adamis used the
proceeds from the loan to acquire 75,000&nbsp;shares of our
common stock. Dr.&nbsp;Adamis has pledged those shares to secure
the loan. As of June&nbsp;30, 2003, the total amount outstanding
under the loan was approximately $106,000 including accrued
interest.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Director Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Please see &#147;Management&nbsp;&#151; Director
Compensation&#148; for a discussion of options granted to our
non-employee directors.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Executive Compensation and Employment
    Agreements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Please see &#147;Management&nbsp;&#151; Executive
Compensation&#148; and &#147;&#151;&nbsp;Stock Options&#148; for
additional information on compensation of our executive
officers. Information regarding employment agreements with
several of our executive officers is set forth under
&#147;Management&nbsp;&#151; Employment Agreements.&#148;
</FONT>

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

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

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->
<DIV align="left"><A NAME="012"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information with
respect to the beneficial ownership of our common stock as of
August&nbsp;31, 2003, by:
</FONT>
<P>

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our named executive officers;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each person, or group of affiliated persons, who
    is known by us to beneficially own more than 5% of our common
    stock; 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 of our directors and executive officers as a
    group.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The column entitled &#147;Percentage of Shares
Beneficially Owned&nbsp;&#151; Before Offering&#148; is based on
28,180,368&nbsp;shares of common stock outstanding as of
August&nbsp;31, 2003, assuming conversion of all outstanding
shares of convertible preferred stock, but assuming no exercise
of outstanding warrants or options. The column entitled
&#147;Percentage of Shares Beneficially Owned&nbsp;&#151; After
Offering&#148; is based
on &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 to be outstanding after this offering, including
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that we are selling in this offering and
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that we are selling to Pfizer in a concurrent private sale at an
assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, but not including any shares issuable upon exercise of
warrants or options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of the table below, we deem shares
subject to options or warrants that are currently exercisable or
exercisable within 60&nbsp;days of August&nbsp;31, 2003 to be
outstanding and to be beneficially owned by the person holding
the options for the purpose of computing the percentage
ownership of that person but we do not treat them as outstanding
for the purpose of computing the percentage ownership of any
other person. Except as otherwise noted, the persons or entities
in this table have sole voting and investing power with respect
to all of the shares of common stock beneficially owned by them,
subject to community property laws, where applicable. Except as
otherwise set forth below, the street address of the beneficial
owner is c/o&nbsp;Eyetech Pharmaceuticals, Inc., 500 Seventh
Avenue, 18th Floor, New York, New York 10018.
</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="53%"><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="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</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">Beneficially Owned&nbsp;&#151;</FONT></B></TD>
</TR>

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

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Before</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Address of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">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 valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J.P. Morgan Partners (BHCA), 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">4,289,215</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">1221 Avenue of the Americas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</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">New York, NY 10020
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,715,683</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">22 Church Street
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hamilton, Bermuda HM&nbsp;11
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Biotech Growth N.V.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,431,362</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">One Cambridge Center
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cambridge, MA 02142
    </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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pfizer Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(5)</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">235 E. 42nd Street
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York, NY 10017
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">MPM Capital Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,745,095</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">111 Huntington Avenue, 31st Floor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</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">Boston, MA 02199
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,715,686</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(7)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.5</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">%</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">95 Greene Street, 7th Floor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</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">Jersey City, NJ 07302
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,400,489</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(8)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">125 S. Wacker Drive, Suite 1675
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chicago, IL 60606
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John McLaughlin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">645,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">69
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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

<TR>
    <TD width="56%"><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="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="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"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></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></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Beneficially Owned&nbsp;&#151;</FONT></B></TD>
</TR>

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

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name and Address of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">Glenn P. Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(10)</FONT></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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">Srinivas Akkaraju
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(12)</FONT></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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">638,625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(13)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">Michael Mullen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,461,362</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(14)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">570,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(15)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">Ed Penhoet
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(16)</FONT></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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Henry Simon
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(17)</FONT></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">Damion E. Wicker
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,319,215</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(18)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">%</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">All directors and executive officers as a group
    (13&nbsp;persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,199,202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(19)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41.5</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">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Less than 1%.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 3,574,346 shares and warrants to
    purchase 714,869&nbsp;shares. Dr.&nbsp;Wicker, a member of our
    board of directors, is a Partner with J.P.&nbsp;Morgan Partners,
    LLC, an affiliate of J.P. Morgan Partners (BHCA), L.P., and may
    be deemed to hold voting and dispositive power for these shares.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 1,395,364 shares and warrants to
    purchase 279,072&nbsp;shares held by Schroder Ventures
    International Life Sciences Fund&nbsp;II, LP1;
    594,278&nbsp;shares and warrants to purchase 118,856&nbsp;shares
    held by Schroder Ventures International Life Science
    Fund&nbsp;II, LP2; 158,371&nbsp;shares and warrants to purchase
    31,675&nbsp;shares held by Schroder Ventures International Life
    Sciences Fund&nbsp;II, LP3; 21,526&nbsp;shares and warrants to
    purchase 4,306&nbsp;shares held by Schroder Ventures
    International Life Sciences Fund&nbsp;II Strategic Partners LP;
    warrants to purchase 5,617&nbsp;shares held by Schroder Ventures
    International Life Sciences Fund Co-Investment Scheme;
    40,128&nbsp;shares and warrants to purchase 2,409&nbsp;shares
    held by Schroder Ventures International Life Sciences
    Fund&nbsp;II Group Co-Investment Scheme; 171,866&nbsp;shares and
    warrants to purchase 34,373&nbsp;shares held by Schroder
    Ventures Investment Limited; and 714,869&nbsp;shares and
    warrants to purchase 142,973&nbsp;shares held by International
    Biotechnology Trust&nbsp;plc.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 2,859,468&nbsp;shares and warrants to
    purchase 571,894&nbsp;shares held by Biotech Growth, N.V., an
    affiliate of BB Biotech&nbsp;AG. Mr.&nbsp;Mullen, a member of
    our board of directors, is President of Bellevue Research, Inc.,
    a wholly owned subsidiary of Asset Management&nbsp;N.V., which
    is the asset manager for BB Biotech&#146;s portfolios, and holds
    voting and dispositive power for these shares.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Shares are held by Pfizer Ireland
    Pharmaceuticals, an affiliate of Pfizer.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Based
    on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock to be beneficially owned after this offering,
    which includes the 2,747,253&nbsp;shares owned prior to this
    offering
    and &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 to be purchased from us concurrently with the
    closing of this offering, assuming an initial public offering
    price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 138,284&nbsp;shares and warrants to
    purchase 27,656&nbsp;shares held by MPM BioVentures II, LP;
    1,253,108&nbsp;shares and warrants to purchase
    250,622&nbsp;shares held by MPM Bioventures&nbsp;II-QP, LP;
    441,245&nbsp;shares and warrants to purchase 88,249&nbsp;shares
    held by MPM BioVentures GmbH&nbsp;&#38; Co.; 26,021&nbsp;shares
    and warrants to purchase 5,204&nbsp;shares held by MPM Asset
    Management Investors; and 428,921&nbsp;shares and warrants to
    purchase 85,785&nbsp;shares held by MPM BioEquities Master
    Fund,&nbsp;LP.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 613,333&nbsp;shares and warrants to
    purchase 122,667&nbsp;shares held by Merrill Lynch KECALP L.P.
    1999; 53,333&nbsp;shares and warrants to purchase
    10,667&nbsp;shares held by Merrill Lynch KECALP International
    L.P. 1999; and 1,596,405&nbsp;shares and warrants to purchase
    319,281&nbsp;shares held by Merrill Lynch Ventures
    L.P.&nbsp;2001.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 1,500,000 shares and warrants to
    purchase 300,000&nbsp;shares held by Lakeview EyeTech, L.P.; and
    500,408&nbsp;shares and warrants to purchase 100,081&nbsp;shares
    held by Lakeview EyeTech II,&nbsp;L.P.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">70
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 105,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 71,875&nbsp;shares will have lapsed within
    60&nbsp;days of August&nbsp;31, 2003.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 200,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 83,333 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 225,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 70,312 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Consists of 30,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 30,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003; also includes 15,625 shares of common
    stock that we have a right to repurchase.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(14)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 30,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003; also includes the shares and warrants
    described in Note&nbsp;(3) above. Mr.&nbsp;Mullen disclaims
    beneficial ownership of the shares held by Biotech Growth N.V.,
    except to the extent of his pecuniary interest therein.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(15)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 30,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(16)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Consists of 30,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(17)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Consists of 30,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60&nbsp;days of
    August&nbsp;31, 2003.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(18)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 30,000 shares of common stock issuable
    upon exercise of stock options exercisable within 60&nbsp;days
    of August&nbsp;31, 2003, of which our right to repurchase 6,250
    shares will have lapsed within 60&nbsp;days of August&nbsp;31,
    2003; also includes the shares and warrants described in
    Note&nbsp;(1) above. Dr.&nbsp;Wicker disclaims beneficial
    ownership of the shares held by J.P. Morgan Partners (BHCA),
    L.P., except to the extent of his pecuniary interest therein.
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD><FONT size="2">(19)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 1,215,000&nbsp;shares of common stock
    issuable upon exercise of stock options exercisable within
    60&nbsp;days of August&nbsp;31, 2003, of which our right to
    repurchase 269,270 shares will have lapsed within 60&nbsp;days
    of August&nbsp;31, 2003; also includes the shares and warrants
    described in Notes&nbsp;(1) and (3) above.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">71
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following description of our capital stock
and provisions of our certificate of incorporation and bylaws
are summaries and are qualified by reference to the certificate
of incorporation and the bylaws that will be in effect upon the
completion of this offering. Copies of these documents have been
filed with the Securities and Exchange Commission as exhibits to
our registration statement, of which this prospectus forms a
part. The descriptions of the common stock and preferred stock
reflect changes to our capital structure that will occur upon
the completion of this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of this offering, our
authorized capital stock will consist of 125,000,000 shares of
common stock, par value $0.01 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share, all of which
preferred stock will remain undesignated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, we had issued and
outstanding:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">4,040,111 shares of common stock, held by 18
    stockholders of record;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">120,000 shares of series&nbsp;A convertible
    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">5,786,998 shares of series&nbsp;B convertible
    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">7,964,229 shares of series&nbsp;C-1 convertible
    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">7,521,777 shares of series&nbsp;C-2 convertible
    preferred stock; 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">2,747,253 shares of series&nbsp;D convertible
    preferred stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, we also had
outstanding:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">warrants to purchase 1,976,235 shares of
    series&nbsp;B preferred stock at an exercise price of $6.00 per
    share;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">warrants to purchase 1,592,846 shares of
    series&nbsp;C-1 preferred stock at an exercise price of $6.80
    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">warrants to purchase 1,504,354 shares of
    series&nbsp;C-2 preferred stock at an exercise price of $7.20
    per share.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of this offering, all of the
outstanding shares of our preferred stock will automatically
convert into a total of 24,140,257 shares of our common stock.
In addition, upon completion of this offering, warrants to
purchase an aggregate of 833,333 shares of series&nbsp;B
preferred stock will remain outstanding and will be exercisable
for 833,333 shares of common stock at an exercise price of $6.00
per share. All other warrants that are not exercised prior to
the completion of this offering will be cancelled. If all of the
cancellable warrants are exercised on a cashless basis, assuming
an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, we will issue an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and receive no cash proceeds. If all of these
warrants are exercised for cash, we will issue an aggregate of
4,240,102 shares of common stock for cash proceeds of
approximately $28.5&nbsp;million.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of common stock are entitled to one vote
for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are
entitled to receive proportionately any dividends as may be
declared by our board of directors, subject to any preferential
dividend rights of outstanding preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to receive
proportionately our net assets available after the payment of
all debts and other liabilities and subject to the prior rights
of any outstanding preferred stock. Holders of common stock have
no preemptive, subscription, redemption or conversion rights.
Our outstanding shares of common stock are and the shares
offered by us in this offering will be, when issued and paid
for, validly issued, fully paid and nonassessable. The
</FONT>

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

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<DIV align="left">
<FONT size="2">rights, preferences and privileges of holders of
common stock are subject to and may be adversely affected by,
the rights of the holders of shares of any series of preferred
stock that we may designate and issue in the future.
</FONT>
</DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of our certificate of
incorporation, our board of directors is authorized to issue
shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion
to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation
preferences of each series of preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of authorizing our board of directors
to issue preferred stock and determine its rights and
preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock,
while providing flexibility in connection with possible
acquisitions, future financings and other corporate purposes,
could have the effect of making it more difficult for a third
party to acquire, or could discourage a third party from seeking
to acquire, a majority of our outstanding voting stock. Upon
completion of this offering, there will be no shares of
preferred stock outstanding and we have no present plans to
issue any shares of preferred stock.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, we will have
outstanding warrants to purchase 833,333 shares of our common
stock at an exercise price of $6.00 per share. The warrants
expire on March&nbsp;30, 2005 and provide for adjustments in the
event of specified mergers, reorganizations, reclassifications,
stock dividends, stock splits or other changes in our corporate
structure.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, options to purchase
4,477,500 shares of common stock at a weighted average exercise
price of $1.64 per share were outstanding. Options to purchase
an aggregate of 1,465,111 shares of common stock have been
exercised under our stock option plan as of August&nbsp;31, 2003.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to Section&nbsp;203 of the General
Corporation Law of the State of Delaware. Subject to certain
exceptions, Section&nbsp;203 prevents a publicly held Delaware
corporation from engaging in a &#147;business combination&#148;
with any &#147;interested stockholder&#148; for three years
following the date that the person became an interested
stockholder, unless the interested stockholder attained such
status with the approval of our board of directors or unless the
business combination is approved in a prescribed manner. A
&#147;business combination&#148; includes, among other things, a
merger or consolidation involving us, and the interested
stockholder and the sale of more than 10% of our assets. In
general, an &#147;interested stockholder&#148; is any entity or
person beneficially owning 15% or more of our outstanding voting
stock and any entity or person affiliated with or controlling or
controlled by such entity or person. The restrictions contained
in Section&nbsp;203 are not applicable to any of our existing
stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation and our bylaws
divide our board of directors into three classes with staggered
three-year terms. In addition, our certificate of incorporation
and our bylaws provide that directors may be removed only for
cause and only by the affirmative vote of the holders of 75% of
our shares of capital stock present in person or by proxy and
entitled to vote. Under our certificate of incorporation and
bylaws, any vacancy on our board of directors, including a
vacancy resulting from an enlargement of our board of directors,
may be filled only by vote of a majority of our directors then
in office. The classification of our board of directors and the
limitations on the ability of our stockholders to remove
directors and fill vacancies could make it more difficult for a
third party to acquire, or discourage a third party from seeking
to acquire, control of our company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation and our bylaws
provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of
stockholders may only be taken if it is properly
</FONT>

<P align="center"><FONT size="2">73
</FONT>

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<DIV align="left">
<FONT size="2">brought before such meeting and may not be taken
by written action in lieu of a meeting. Our certificate of
incorporation and our bylaws also provide that, except as
otherwise required by law, special meetings of the stockholders
can only be called by our chairman of the board, our chief
executive officer or our board of directors. In addition, our
bylaws establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of
stockholders, including proposed nominations of candidates for
election to our board of directors. Stockholders at an annual
meeting may only consider proposals or nominations specified in
the notice of meeting or brought before the meeting by or at the
direction of our board of directors or by a stockholder of
record on the record date for the meeting, who is entitled to
vote at the meeting and who has delivered timely written notice
in proper form to our secretary of the stockholder&#146;s
intention to bring such business before the meeting. These
provisions could have the effect of delaying until the next
stockholder meeting stockholder actions that are favored by the
holders of a majority of our outstanding voting securities.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The General Corporation Law of the State of
Delaware provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is
required to amend a corporation&#146;s certificate of
incorporation or bylaws, unless a corporation&#146;s certificate
of incorporation or bylaws, as the case may be, requires a
greater percentage. Our bylaws may be amended or repealed by a
majority vote of our board of directors or by the affirmative
vote of the holders of at least 75% of the votes which all our
stockholders would be entitled to cast in any annual election of
directors. In addition, the affirmative vote of the holders of
at least 75% of the votes which all our stockholders would be
entitled to cast in any election of directors is required to
amend or repeal or to adopt any provisions inconsistent with any
of the provisions of our certificate of incorporation described
in the prior two paragraphs.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of this offering, holders of
an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, including shares of common stock underlying
outstanding options and warrants, will have the right to require
us to register these shares under the Securities Act under
specific circumstances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Demand Registration
Rights.</FONT></I><FONT size="2"> Beginning six months after the
completion of this offering, subject to specified limitations,
holders
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, including shares of common stock underlying
outstanding options and warrants, may require that we register
all or part of these securities for sale under the Securities
Act. Until we are entitled to register our shares on
Form&nbsp;S-3, a short form registration statement, these
holders may only make three demands for registration of their
securities. Once we are entitled to use Form&nbsp;S-3, holders
of these shares may make demands for registrations on
Form&nbsp;S-3 on up to two occasions during any 12-month period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Incidental Registration
Rights.</FONT></I><FONT size="2"> If we register any of our
common stock, either for our own account or for the account of
other security holders, the holders of an aggregate
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, including shares of common stock underlying
outstanding options and warrants, are entitled to notice of the
registration and to include their shares of common stock in the
registration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Limitations and
Expenses.</FONT></I><FONT size="2"> Other than in a demand
registration, with specified exceptions, a holder&#146;s right
to include shares in a registration is subject to the right of
the underwriters to limit the number of shares included in the
offering. We will pay all fees, costs and expenses of any demand
or incidental registrations, and the holders of the securities
being registered will pay all selling expenses.
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transfer agent and registrar for our common
stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<B><FONT size="2">NASDAQ National Market</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have applied for the quotation of our common
stock on the NASDAQ National Market under the symbol
&#147;EYET.&#148;
</FONT>

<P align="center"><FONT size="2">74
</FONT>

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<DIV align="left"><A NAME="014"></A></DIV>

<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no market
for our common stock, and we cannot assure you that a liquid
trading market for our common stock will develop or be sustained
after this offering. Future sales of substantial amounts of
common stock, including shares issued upon exercise of options
and warrants, in the public market after this offering, or the
anticipation of those sales, could adversely affect market
prices prevailing from time to time and could impair our ability
to raise capital through sales of our equity securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of 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:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the automatic conversion of all outstanding
    shares of our convertible preferred stock into an aggregate of
    24,140,259&nbsp;shares of 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">our sale
    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 to Pfizer, assuming an initial public offering
    price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">our 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 upon exercise of outstanding warrants that will
    be cancelled if not exercised prior to completion of this
    offering, assuming that all warrants are exercised on a cashless
    basis based on an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Of these shares,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
sold in this offering will be freely tradable without
restriction under the Securities Act unless purchased by our
&#147;affiliates,&#148; as that term is defined in Rule&nbsp;144
under the Securities Act. The
remaining &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 to be outstanding after this offering are
&#147;restricted securities&#148; under Rule&nbsp;144. All of
these restricted securities will be subject to the 180-day
lock-up period described below. After the 180-day
period, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will be freely tradeable under Rule&nbsp;144(k)
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will be eligible for resale under Rule&nbsp;144, subject to
volume limitations. An
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will become freely tradeable under Rule&nbsp;144(k) in
August&nbsp;2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule&nbsp;144 or 701 under the
Securities Act, which rules are summarized below.
</FONT>

<P align="left">
<B><FONT size="2">Rule 144</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144, beginning
90&nbsp;days after the date of this prospectus, 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="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">1% of the number of shares of 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;&nbsp;shares
    immediately after this offering; 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 average weekly trading volume of the 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;
<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="left">
<B><FONT size="2">Rule 144(k)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the lock-up agreements described
below, shares of our common stock eligible for sale under
Rule&nbsp;144(k) may be sold immediately upon the completion of
this offering. In general, under Rule&nbsp;144(k), a person may
sell shares of common stock acquired from us immediately upon
completion of this offering, without regard to manner of sale,
the availability of public information or volume, if:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the person is not our affiliate and has not been
    our affiliate at any time during the three months preceding such
    a sale; 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 person 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.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">75
</FONT>

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<P align="left">
<B><FONT size="2">Rule 701</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;701 of the Securities
Act, any of our employees, consultants or advisors who purchased
shares from us in connection with a qualified compensatory stock
plan or other written agreement is eligible to resell those
shares 90&nbsp;days after the effective date of this offering in
reliance on Rule&nbsp;144, but without compliance with various
restrictions, including the holding period, contained in
Rule&nbsp;144.
</FONT>

<P align="left">
<B><FONT size="2">Lock-up Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The holders of substantially all of our currently
outstanding stock have agreed that, subject to the exceptions
described in the &#147;Underwriters&#148; section, without the
prior written consent of Merrill Lynch, Pierce, Fenner &#38;
Smith Incorporated and Morgan Stanley &#38; Co. Incorporated on
behalf of the underwriters, they will not, during the period
ending 180&nbsp;days after the date of this prospectus:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furthermore, stockholders who purchased shares
from us upon exercise of stock options have agreed with us that
they will not sell any of their shares for a period of
180&nbsp;days after the date of this prospectus.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of this offering, the holders
of 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 our common stock will have the right to require us to
register these shares under the Securities Act under certain
circumstances. After registration pursuant to these rights,
these shares will become freely tradable without restriction
under the Securities Act. For more information regarding these
registration rights, see &#147;Description of Capital
Stock&nbsp;&#151; Registration Rights.&#148;
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, we had outstanding
options to purchase 4,477,500 shares of common stock. Following
this offering, we intend to file registration statements on
Form&nbsp;S-8 under the Securities Act to register all of the
shares of common stock subject to outstanding stock options and
options and other awards issuable pursuant to our 2003 stock
incentive plan and 2003 employee stock purchase plan.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, there will be
warrants outstanding to purchase 833,333 shares of common stock
at an exercise price of $6.00 per share. Any shares purchased
pursuant to the &#147;cashless exercise&#148; feature of these
warrants will be freely tradeable under Rule&nbsp;144(k),
subject to the 180-day look-up period described above.
</FONT>

<P align="center"><FONT size="2">76
</FONT>

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<DIV align="left"><A NAME="015"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Merrill
Lynch, Pierce, Fenner &#38; Smith Incorporated, Morgan Stanley
&#38; Co. Incorporated, Credit Suisse First Boston LLC and Bear,
Stearns &#38; Co. Inc. are acting as representatives, have
severally agreed to purchase, and we have agreed to sell to
them, severally, the number of shares indicated below:
</FONT>

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

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

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

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

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

<TR bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch, Pierce, Fenner &#38; Smith
    </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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size="2">Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morgan Stanley &#38; Co. Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Credit Suisse First Boston 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 align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bear, Stearns &#38; Co. Inc.&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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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 bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters are offering the shares of
common stock subject to their acceptance of the shares from us
and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and
accept delivery of the shares of common stock offered by this
prospectus are subject to the approval of specified legal
matters by their counsel and to other conditions. The
underwriters are obligated to take and pay for all of the shares
of common stock offered by this prospectus if any such shares
are taken. However, the underwriters are not required to take or
pay for the shares covered by the underwriters&#146;
over-allotment option described below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering
price and other selling terms may from time to time be varied by
the representatives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted to the underwriters an option,
exercisable for 30&nbsp;days from the date of this prospectus,
to purchase up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the
additional shares of common stock as the number listed next to
the underwriter&#146;s name in the preceding table bears to the
total number of shares of common stock listed next to the names
of all underwriters in the preceding table. If the
underwriters&#146; option is exercised in full, the total price
to the public would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
the total underwriters&#146; discounts and commissions would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
the total proceeds to us would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As Joint Book-Running Managers on behalf of the
underwriting syndicate, Merrill Lynch, Pierce, Fenner &#38;
Smith Incorporated and Morgan Stanley &#38; Co. Incorporated
will be responsible for recording a list of potential investors
that have expressed an interest in purchasing shares of common
stock as part of this offering.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have informed us that they do
not intend sales to discretionary accounts to exceed five
percent of the total number of shares of common stock offered by
them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, each of our directors and officers and
holders of substantially all of our outstanding stock have
agreed that, without the prior written consent of Merrill Lynch,
Pierce, Fenner &#38; Smith Incorporated and Morgan Stanley &#38;
Co. Incorporated on behalf of the underwriters, we and they will
not, during the period ending 180&nbsp;days after the date of
this prospectus:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares to the underwriters;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus that is
    described in this prospectus or of which the underwriters have
    been advised in writing;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares or options to
    purchase shares of common stock pursuant to our stock incentive
    and employee stock purchase plans, provided that the recipient
    of the shares agrees to be subject to the restrictions described
    in this paragraph;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock in
    connection with acquisition, licensing, collaboration or similar
    strategic arrangements, provided that the recipient of the
    shares agrees to be subject to the restrictions described in
    this paragraph;
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares; or
    </FONT></TD>
</TR>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfers by any person other than us by gift,
    will or intestacy, or to immediate family members, provided that
    the transferee agrees to be bound by such restrictions and the
    transfer does not require a filing under the Exchange Act other
    than filing a Form&nbsp;5 after the termination of the 180-day
    period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the underwriting
discounts and commissions that we are to pay to the underwriters
in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the
underwriters&#146; option to purchase additional shares of our
common stock.
</FONT>

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

<TR>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Paid by Eyetech</FONT></B></TD>
</TR>

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

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full Exercise</FONT></B></TD>
</TR>

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

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

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

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate the offering of the common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be
</FONT>

<P align="center"><FONT size="2">78
</FONT>

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<DIV align="left">
<FONT size="2">created if the underwriters are concerned that
there may be downward pressure on the price of the common stock
in the open market after pricing that could adversely affect
investors who purchase in this offering. In addition, to
stabilize the price of the common stock, the underwriters may
bid for, and purchase, shares of common stock in the open
market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for
distributing the common stock in this offering, if the syndicate
repurchases previously distributed common stock in transactions
to cover syndicate short positions or to stabilize the price of
the common stock. Any of these activities may stabilize or
maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any
time.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Merrill Lynch KECALP L.P. 1999, Merrill Lynch
KECALP International L.P. 1999 and Merrill Lynch Ventures L.P.
2001, each of which is an affiliate of Merrill Lynch, Pierce,
Fenner &#38; Smith Incorporated, one of the underwriters,
beneficially own in the aggregate 2,715,686 shares, or 9.5%, of
our common stock, assuming conversion of all of our outstanding
convertible preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have applied for quotation of our common stock
on the NASDAQ National Market under the symbol &#147;EYET.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the underwriters have agreed to indemnify
each other against certain liabilities, including liabilities
under the Securities Act.
</FONT>

<P align="left">
<B><FONT size="2">Directed Share Program</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At our request, the underwriters have reserved
for sale, at the initial public offering price, up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
offered in this prospectus for directors, officers, employees,
business associates and other persons with whom we have a
relationship. The number of shares of common stock available for
sale to the general public will be reduced to the extent these
persons purchase reserved shares. Any reserved shares which are
not purchased will be offered by the underwriters to the general
public on the same basis as the other shares offered by this
prospectus.
</FONT>

<P align="left">
<B><FONT size="2">Pricing of the Offering</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. The initial public offering price
will be determined by negotiations between us and the
representatives. Among the factors to be considered in
determining the initial public offering price will be our future
prospects and those of our industry in general, our revenues,
earnings and other financial operating information in recent
periods, and the price-earnings ratios, price-sales ratios,
market prices of securities and financial and operating
information of companies engaged in activities similar to ours.
The estimated initial public offering price range set forth on
the cover page of this preliminary prospectus is subject to
change as a result of market conditions and other factors.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

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<!-- link1 "LEGAL MATTERS" -->
<DIV align="left"><A NAME="016"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain legal matters with respect to the
validity of the shares of common stock offered hereby will be
passed upon for us by Hale and Dorr LLP, New York, New York.
Ropes &#38; Gray LLP has acted as counsel for the underwriters
in connection with certain legal matters related to this
offering.
</FONT>

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<DIV align="left"><A NAME="017"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Ernst &#38; Young LLP, independent auditors, have
audited our consolidated financial statements at
December&nbsp;31, 2001 and 2002 and at June&nbsp;30, 2003, and
for the period from February&nbsp;9, 2000 (date of inception)
through December&nbsp;31, 2000, for each of the two years in the
period ended December&nbsp;31, 2002 and for the six months ended
June&nbsp;30, 2003, as set forth in their report. We have
included our financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst
&#38; Young LLP&#146;s report, given on their authority as
experts in accounting and auditing.
</FONT>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="018"></A></DIV>

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Securities and Exchange
Commission a registration statement on Form&nbsp;S-1 under the
Securities Act with respect to the shares of common stock we are
offering to sell. This prospectus, which constitutes part of the
registration statement, does not include all of the information
contained in the registration statement. You should refer to the
registration statement and its exhibits for additional
information. Whenever we make reference in this prospectus to
any of our contracts, agreements or other documents, the
references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for copies
of the actual contract, agreement or other document. When we
complete this offering, we will also be required to file annual,
quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. We
anticipate making these documents publicly available, free of
charge, on our website at <I>www.eyetech.com </I>as soon as
reasonably practicable after filing such documents with the
Securities and Exchange Commission.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You can read the registration statement and our
future filings with the Securities and Exchange Commission, over
the Internet at the Securities and Exchange Commission&#146;s
web site at <I>http://www.sec.gov</I>. You may also read and
copy any document that we file with the Securities and Exchange
Commission at its public reference room at 450 Fifth Street,
N.W., Washington, DC 20549.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, DC 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the
operation of the public reference room.
</FONT>

<P align="center"><FONT size="2">80
</FONT>

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

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>

<P align="center">
<B><FONT size="2">INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

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

<TR>
    <TD width="93%"><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>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of 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">Consolidated Balance Sheets as of
    December&nbsp;31, 2001 and 2002 and June&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">Consolidated Statements of Operations for the
    Period from February&nbsp;9, 2000 (Date of Inception) to
    December&nbsp;31, 2000 and Years Ended December&nbsp;31, 2001
    and 2002 and for the Six Months Ended June&nbsp;30, 2002
    (Unaudited) and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">Consolidated Statements of Stockholders&#146;
    Deficit for the Period from February&nbsp;9, 2000 (Date of
    Inception) to December&nbsp;31, 2000 and Years Ended
    December&nbsp;31, 2001 and 2002 and for the Six&nbsp;Months
    Ended June&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">Consolidated Statements of Cash Flows for the
    Period from February&nbsp;9, 2000 (Date of Inception) to
    December&nbsp;31, 2000 and Years Ended December&nbsp;31, 2001
    and 2002 and for the Six Months Ended June&nbsp;30, 2002
    (Unaudited) and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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 Consolidated 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>

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

<!-- link1 "REPORT OF INDEPENDENT AUDITORS" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT AUDITORS</FONT></B>

<P align="left">
<FONT size="2">The Board of Directors and Stockholders
</FONT>

<DIV align="left">
<FONT size="2">Eyetech Pharmaceuticals, Inc.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
balance sheets of Eyetech Pharmaceuticals, Inc. as of
December&nbsp;31, 2001 and 2002, and June&nbsp;30, 2003, and the
related consolidated statements of operations,
stockholders&#146; deficit, and cash flows for the period from
February&nbsp;9, 2000 (date of inception) to December&nbsp;31,
2000, the years ended December&nbsp;31, 2001 and 2002 and the
six months ended June&nbsp;30, 2003. These financial statements
are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Eyetech Pharmaceuticals, Inc.
at December&nbsp;31, 2001 and 2002 and June&nbsp;30, 2003, and
the consolidated results of its operations and its cash flows
for the period from February&nbsp;9, 2000 (date of inception) to
December&nbsp;31, 2000, the years ended December&nbsp;31, 2001
and 2002 and the six months ended June&nbsp;30, 2003, in
conformity with accounting principles generally accepted in the
United States.
</FONT>
<P>

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

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">/s/ ERNST &#38; YOUNG LLP
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Metropark, New Jersey
</FONT>

<DIV align="left">
<FONT size="2">August&nbsp;19, 2003
</FONT>
</DIV>

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

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

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

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

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><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="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</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">June 30,</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">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</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><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">(Note&nbsp;2)</FONT></B></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="18" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,522,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,916,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,916,741</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,496,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,359,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,616,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,616,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,472,000</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">15,472,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">663,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">971,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,108,146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,108,146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total 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">57,681,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,121,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,113,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,113,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">402,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,012,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,021,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,021,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,581,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,665,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,665,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,665,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">789,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,293,008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,293,008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,090,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,589,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,093,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,093,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

</TR>

<TR>
    <TD colspan="18" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146;
    (DEFICIT)&nbsp;EQUITY</FONT></B></TD>
</TR>

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

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,815,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,442,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,911,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,911,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">588,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">588,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred rent liability, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <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">5,815,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,152,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,634,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,634,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue, net of current
    portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,916,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,916,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,656,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,355,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,355,098</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">Other liabilities, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">423,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">423,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; $.01 par value; 29,093,695 shares authorized;
    13,751,227, 21,273,004 and 24,020,257 and no shares issued and
    outstanding at December&nbsp;31, 2001 and 2002, June&nbsp;30,
    2003, and pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,457,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,323,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,578,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; (deficit)&nbsp;equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible preferred stock&nbsp;&#151; $.01 par
    value; 120,000 shares authorized, issued and outstanding at
    December&nbsp;31, 2001 and 2002 and June&nbsp;30, 2003 and no
    shares pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&nbsp;&#151; $.01 par value;
    60,000,000 shares authorized; 4,152,000 issued and 3,652,000
    outstanding at December&nbsp;31, 2001; 4,162,000 issued and
    3,737,000 outstanding at December&nbsp;31, 2002; 4,419,916
    issued and 3,994,916 outstanding at June&nbsp;30, 2003; and
    28,560,173 issued and 28,135,173 outstanding pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,294,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,125,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,900,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,387,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(397,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(203,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,299,163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,929,320</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,929,320</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury stock, at cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,365,385</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,635,129</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,521,774</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">(106,521,774</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>
    <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">(34,327,358</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,036,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95,814,154</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">77,764,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146;
    (deficit)&nbsp;equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,090,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,589,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,093,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">162,093,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February&nbsp;9,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000 (date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception) to</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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">Six Months Ended June&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="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 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="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration revenue:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">2,083,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,549,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,633,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,878,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,156,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,663,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,282,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,337,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,311,351</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">1,413,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,338,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,318,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,916,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,999,868</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">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,291,855</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">26,495,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,982,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,199,179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,649,194</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">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,291,855</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,495,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,982,189</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,199,179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,016,030</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,180,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,815,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,808,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">819,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,647,312</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">(11,111,305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,379,573</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,368,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,079,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,171,598</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,517,927</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191,143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,269,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,551,171</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">(18,886,645</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">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.98</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">Weighted average shares outstanding&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,654,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,791,401</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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.68</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>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma weighted average shares
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,837,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931,658</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>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; DEFICIT" -->
<DIV align="left"><A NAME="020"></A></DIV>

<DIV align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146;
DEFICIT</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">Period from February&nbsp;9, 2000 (date of
inception) to December&nbsp;31, 2000,</FONT></B>

<DIV align="center">
<B><FONT size="2">years ended December&nbsp;31, 2001 and 2002
and the six months ended June&nbsp;30, 2003</FONT></B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><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="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Series A Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Loans to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deferred</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at February&nbsp;9, 2000 (date of
    inception)
    </FONT></DIV>
    </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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock in exchange for cash
    </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">3,000,000</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">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Issuance of Series&nbsp;A 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">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Warrants issued in connection with the issuance
    of Series&nbsp;B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,040,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Warrant issued in exchange for technology
    </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">758,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to non-employees
    </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">97,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized appreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,000</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">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,895,718</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">&#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">&#150;</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">Warrants issued in connection with the issuance
    of Series&nbsp;C-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,134,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">321,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,152,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">679,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(600,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized appreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,152,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,294,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(203,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;C-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,384,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,334,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,334,763</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(102,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,048,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <FONT size="2">Preferred&nbsp;stock accretion
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,162,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,125,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(397,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,299,163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">915,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(915,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,070</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,416</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">704,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at June&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,419,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,900,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,929,320</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Treasury Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</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">Income</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Loss)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at February&nbsp;9, 2000 (date of
    inception)
    </FONT></DIV>
    </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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock in exchange for cash
    </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">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;A convertible 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">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,040,041</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">Warrant issued in exchange for technology
    </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">758,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to non-employees
    </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">97,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,079,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,079,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111,305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111,305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized appreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,057,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#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">&#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">54,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191,143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,061,390</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">Warrants issued in connection with the issuance
    of Series&nbsp;C-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,134,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</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">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized appreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,379,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,365,385</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,327,358</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;C-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,384,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</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">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(75,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,048,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <FONT size="2">Preferred&nbsp;stock accretion
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,295,369</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,635,129</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,036,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#150;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">704,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,517,927</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,517,927</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,368,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,368,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,373,769</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at June&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">227,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,521,774</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95,814,154</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>

</TR>

</TABLE>

<DIV align="center">
<FONT size="2">See accompanying notes.
</FONT>
</DIV>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS" -->
<DIV align="left"><A NAME="021"></A></DIV>

<DIV align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</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="26%"><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="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD 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>
</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>
</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"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111,305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,379,573</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">(14,368,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398,572</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">Loss on disposal of assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,627</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">Noncash stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">382,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,287,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">406,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">990,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash license expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">758,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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 colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(142,803</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(333,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(92,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,957</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,472,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(212,710</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(79,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,073</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">479,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,100</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">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(503,613</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">710,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,105,096</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,626,614</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,654,508</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,468,833</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">Deferred license fee revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,916,665</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">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,239</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">498,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(47,649</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(84,788</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>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,636,638</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,268,776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,821,082</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,198,630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,474,356</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">
    <B><FONT size="2">Investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(333,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(192,840</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(582,330</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(593,154</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">(1,427,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(113,675,065</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(289,359,394</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(136,447,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,214,897</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(186,729,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,018,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,017,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,796,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,027,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">155,498,841</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">Increase in restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(600,536</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(980,561</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,084,543</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(635,187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">750</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">Interest receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(370,779</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,538</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(220,361</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(278,239</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(125,000</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">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(839,395</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(351,309</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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>

</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) provided by investing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,715,072</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36,186,360</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,942,446</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,017,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,935,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of Series&nbsp;A
    convertible preferred stock and warrants, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of redeemable convertible
    preferred stock and warrants, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,472,953</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">53,585,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,154,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,736,944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of capital leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(127,184</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(954</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(273,142</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>

</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 (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,652,953</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">53,676,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,033,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(854</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,586,035</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>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase (decrease)&nbsp;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">5,301,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,778,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,269,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,181,563</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,124,896</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 at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,301,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,522,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,522,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="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>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,301,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,522,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,340,794</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">42,916,741</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>

</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">Noncash financing and investing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repurchase of restricted common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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">
    <FONT size="2">Fixed assets capitalized using capital leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,355,686</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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 colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders in connection with exercise
    of stock options and stock purchase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#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">34,416</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>

</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 disclosures of cash flow
    information</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid during the period for:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">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">104,982</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>

</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">Income taxes paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</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">579,495</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>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link1 "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="022"></A></DIV>

<DIV align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">June&nbsp;30, 2003</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Organization and Description of
    Business</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech Pharmaceuticals, Inc. and its wholly
owned subsidiary (collectively, &#147;Eyetech&#148; or the
&#147;Company&#148;), is a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. The Company&#146;s
initial focus is on diseases affecting the back of the eye,
particularly the retina. The Company&#146;s most advanced
product candidate is Macugen&#153; (pegaptanib sodium), which it
is developing for the treatment of both the wet form of
age-related macular degeneration, known as AMD, and for the
treatment of diabetic macular edema, known as DME, which is a
complication of diabetic retinopathy. In the second half of
2001, the Company initiated two phase&nbsp;2/3 pivotal clinical
trials of Macugen for the treatment of wet AMD. The Company is
also currently conducting a phase&nbsp;2 clinical trial for the
use of Macugen in the treatment of DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company formed a wholly owned subsidiary in
Ireland in 2002. There has been no activity in this company
since inception in 2002. The Company operates in a single
business segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to February 2003, the Company operated as a
development-stage company and did not generate any revenue.
Effective February 2003, the Company exited the development
stage when it entered into several concurrent agreements with
Pfizer Inc. (&#147;Pfizer&#148;) (see Note&nbsp;11).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Basis of Presentation and Significant
    Accounting Policies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Interim Financial Statements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements for the six months ended
June&nbsp;30, 2002 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present
fairly the results of operations and cash flows for the six
months ended June&nbsp;30, 2002 have been made. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States have been
condensed or eliminated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Consolidation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying consolidated financial
statements include the accounts of Eyetech Pharmaceuticals, Inc.
and its wholly owned subsidiary. All intercompany significant
account balances and transactions have been eliminated in
consolidation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company considers all highly liquid
investments with an original maturity of three months or less to
be cash equivalents. At June&nbsp;30, 2003 the Company has
substantially all of its cash and cash equivalents deposited
with one financial institution.
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Marketable Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketable securities are classified as
&#147;available-for-sale&#148; and are carried at market value
with unrealized gains and losses reported as other comprehensive
income or loss, which is a separate component of
stockholders&#146; deficit.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Concentration of Credit Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
equivalents and marketable securities. The Company has
established guidelines relating to diversification and
maturities that allows the Company to manage risk.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fair Value of Financial
    Instruments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amounts of the Company&#146;s
financial instruments, which include cash and cash equivalents,
accounts payable and accrued expenses, approximate their fair
values. The estimated fair value of the redeemable convertible
preferred stock at June&nbsp;30, 2003, is approximately
$219,000,000, based on the February 2003 preferred stock sales
price of $9.10 per share.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Property and Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment is stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which range from three to
seven years. Leasehold improvements are amortized over the
estimated useful lives of the assets or related lease terms,
whichever is shorter.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Long-Lived Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standard (&#147;SFAS&#148;)&nbsp;No.&nbsp;144, &#147;Accounting
for the Impairment or Disposal of Long-Lived Assets&#148;
(&#147;SFAS&nbsp;144&#148;), which addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS&nbsp;No.&nbsp;121,
&#147;Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of,&#148; and the accounting
and reporting provisions of Accounting Principles Board
(&#147;APB&#148;) Opinion&nbsp;No.&nbsp;30, &#147;Reporting the
Results of Operations,&#148; for a disposal of a segment of a
business. The adoption of SFAS&nbsp;144 as of January&nbsp;1,
2002 did not have any significant impact on the Company&#146;s
consolidated financial position, results of operations or cash
flows.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenues associated with the Company&#146;s
collaboration with Pfizer consist of non-refundable, up-front
license fees and reimbursement of development expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company uses revenue recognition criteria
outlined in Staff Accounting Bulletin&nbsp;No.&nbsp;101,
&#147;Revenue Recognition in Financial Statements&#148; and
Emerging Issues Task Force (&#147;EITF&#148;) Issue 00-21
&#147;Revenue Arrangements with Multiple Deliverables&#148;
(&#147;EITF&nbsp;00-21&#148;). Accordingly, revenues from
licensing agreements are recognized based on the performance
requirements of the agreement. Non-refundable up-front fees,
where the Company has an ongoing involvement or performance
obligation, are generally recorded as deferred revenue in the
balance sheet and amortized into license fees in the statement
of operations over the term of the performance obligation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenues derived from reimbursements of costs
associated with the development of Macugen are recorded in
compliance with EITF Issue 99-19 &#147;Reporting Revenue Gross
as a Principal Versus Net as an Agent&#148;
(&#147;EITF&nbsp;99-19&#148;), and EITF Issue&nbsp;01-14
&#147;Income Statement Characterization of Reimbursements
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<FONT size="2">Received For &#147;Out-of-Pocket&#148; Expenses
Incurred&#148; (&#147;EITF&nbsp;01-14&#148;). According to the
criteria established by these EITF Issues, in transactions where
the Company acts as a principal, with discretion to choose
suppliers, bears credit risk and performs part of the services
required in the transaction, the Company has met the criteria to
record revenue for the gross amount of the reimbursements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Research and Development
    Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Research and development costs are expensed as
incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-Based Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, SFAS No.&nbsp;148,
&#147;Accounting for Stock-Based Compensation&nbsp;&#151;
Transition and Disclosure&nbsp;&#151; an amendment of FASB
Statement No.&nbsp;123&#148; (&#147;SFAS&nbsp;148&#148;) was
issued. SFAS&nbsp;148 provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation from the
intrinsic value-based method of accounting prescribed by APB
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees&#148; (&#147;APB 25&#148;). In addition, SFAS&nbsp;148
amends the disclosure requirements of SFAS No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation&#148; (&#147;SFAS
123&#148;). The Company adopted the disclosure requirements of
SFAS&nbsp;148 effective December&nbsp;31, 2002. As allowed by
SFAS&nbsp;123, the Company has elected to continue to apply the
intrinsic value-based method of accounting prescribed in
APB&nbsp;25 and, accordingly, does not recognize compensation
expense for stock option grants made at an exercise price equal
to or in excess of the fair market value of the stock at the
date of grant.
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Had compensation cost for the Company&#146;s
outstanding employee stock options been determined based on the
fair value at the grant dates for those options consistent with
SFAS&nbsp;123, the Company&#146;s net loss and basic and diluted
net loss per share, would have been changed to the following pro
forma amounts:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"><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>
    <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="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders, as
    reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191,143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,269,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,551,171</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">(18,886,645</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: Non-cash employee compensation as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,624</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(216,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(350,877</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(107,871</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(667,069</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>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SFAS 123 pro forma net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,203,767</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,272,397</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,382,021</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,569,734</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">(19,267,878</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">Basic and diluted loss attributable to common
    stockholders per share, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.98</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>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted loss attributable to common
    stockholders per share, SFAS&nbsp;123 pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.50</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.45</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.09</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.63</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">(5.08</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">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note&nbsp;2),
    SFAS&nbsp;123 pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.74</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</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;
<FONT size="2">SFAS&nbsp;123 pro forma information regarding net
loss is required by SFAS&nbsp;123, and has been determined as if
the Company had accounted for its stock-based employee
compensation under the fair value method prescribed in
SFAS&nbsp;123. The fair value of the options was estimated at
the date of grant using the minimum value pricing model with the
following assumptions:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <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" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk-free interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5%</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">5.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5%-5.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8%-5.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8%-2.87%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividend yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">5 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The effects of applying SFAS 123 in this pro
forma disclosure are not indicative of future amounts. Stock
option grants are expensed over their respective vesting periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for options issued to
nonemployees under SFAS&nbsp;123 and EITF Issue&nbsp;96-18
&#147;Accounting for Equity Investments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling
Goods or Services&#148; (&#147;EITF&nbsp;96-18&#148;). As such,
the value of such options is periodically remeasured and income
or expense is recognized during their vesting terms.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Comprehensive Loss</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company reports comprehensive loss in
accordance with SFAS No.&nbsp;130, &#147;Reporting Comprehensive
Income&#148; (&#147;SFAS 130&#148;). SFAS&nbsp;130 establishes
rules for the reporting and display of comprehensive loss and
its components. SFAS&nbsp;130 requires unrealized gains on
available-for-sale securities to be included in other
comprehensive loss.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company utilizes the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets
and liabilities and are measured using enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. A valuation allowance is provided when it is more
likely than not that some portion or all of a deferred tax asset
will not be realized.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Net Loss Per Share</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company computes net loss per share in
accordance with Statement of Financial Accounting
Standards&nbsp;128, &#147;Earnings per Share&#148; (&#147;SFAS
No.&nbsp;128&#148;). Under the provisions of SFAS&nbsp;128,
basic net loss per common share (&#147;Basic EPS&#148;) is
computed by dividing net loss by the weighted-average number of
common shares outstanding. Diluted net loss per common share
(&#147;Diluted EPS&#148;) is computed by dividing net loss by
the weighted-average number of common shares and dilutive common
shares equivalents then outstanding. Common equivalent shares
consist of the incremental common shares issuable upon the
conversion of preferred stock, shares issuable upon the exercise
of stock options and the conversion of preferred stock upon the
exercise of warrants. Diluted EPS is identical to Basic EPS
since common equivalent shares are excluded from the
calculation, as their effect is anti-dilutive.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Unaudited Pro Forma
    Information</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The unaudited pro forma balance sheet as of
June&nbsp;30, 2003 reflects the automatic conversion of all
outstanding shares of the Company&#146;s convertible preferred
stock into an aggregate of 24,140,257 shares of common stock
upon completion of the Company&#146;s initial public offering.
The unaudited pro forma balance sheet as of June&nbsp;30, 2003
does not include the exercise of 4,240,102 outstanding warrants
exercisable for shares of the Company&#146;s redeemable
convertible preferred stock, which in turn automatically convert
into shares of the Company&#146;s common stock effective upon
the assumed closing of the Company&#146;s initial public
offering. Any of these warrants that are not exercised prior to
the completion of the assumed closing of the Company&#146;s
initial public offering will be cancelled. The warrants may be
exercised by paying the exercise price in cash or pursuant to a
cashless exercise feature based on the initial public offering
price. If all of these warrants are exercised for cash, the
Company will issue an aggregate of 4,240,102 shares of
redeemable convertible preferred stock for cash proceeds of
approximately $28.5&nbsp;million. The unaudited pro forma
balance sheet as of June&nbsp;30, 2003 also does not include the
exercise of outstanding warrants to purchase 833,333 shares of
the Company&#146;s redeemable convertible preferred stock which
will become exercisable into the Company&#146;s common stock
effective upon the assumed closing of the Company&#146;s initial
public offering.
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unaudited pro forma net loss per share is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock, into
shares of the Company&#146;s common stock effective upon the
assumed closing of the Company&#146;s proposed initial public
offering, as if such conversion had occurred at the date of the
original issuance.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reclassification</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain prior period amounts have been
reclassified to conform to current year presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recently Issued Accounting
    Pronouncements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the Financial Accounting
Standards Board, issued Interpretation No.&nbsp;46,
&#147;Consolidation of Variable Interest Entities&#148;
(&#147;FIN&nbsp;46&#148;), which is an interpretation of
Accounting Research Bulletin No.&nbsp;51, &#147;Consolidated
Financial Statements.&#148; FIN&nbsp;46 requires that if an
entity has a controlling interest in a variable interest entity,
the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated
financial statements of the entity. 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 46 must be applied in the first interim or
annual period beginning after June&nbsp;15, 2003. The Company
believes that the adoption of FIN&nbsp;46 will not have a
material effect on the financial position or results of
operation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, SFAS No.&nbsp;150, &#147;Accounting
for Certain Financial Instruments with Characteristics of both
Liabilities and Equity&#148; (&#147;SFAS&nbsp;150&#148;) was
issued. This statement establishes how a company classifies and
measures certain financial instruments with characteristics of
both liabilities and equity, including redeemable convertible
preferred stock. This statement is effective for financial
instruments entered into or modified after May&nbsp;31, 2003,
and otherwise effective at the beginning of the interim period
commencing July&nbsp;1, 2003, except for mandatory redeemable
financial instruments of nonpublic companies. The Company
believes that the adoption of SFAS&nbsp;150 will not have a
material effect on the financial position or results of
operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Available for Sale Investments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Available for sale investments consist primarily
of federal agency notes, asset backed securities, mortgage
backed securities, corporate debt, and United States treasury
notes at December&nbsp;31, 2001 and 2002 and June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of available for sale
investments as of December&nbsp;31, 2001 and 2002 and
June&nbsp;30, 2003:
</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="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">December&nbsp;31, 2001</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities within one year:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,047,521</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,879</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,079,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,295,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,879</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,329,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities between one to five years:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,141,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,353</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,281,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,014,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,516,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,666,114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States treasury notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,187,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,204,632</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,845,485</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">324,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,166,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,141,465</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,496,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">December&nbsp;31, 2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities within one year:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,143,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,168,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,621,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,665,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">639,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,738</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,953,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,005,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,357,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,375</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,477,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities between one to five years:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,909,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,970,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,937,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,961,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,423,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,341</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,437,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States treasury notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,497,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,512,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,768,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,882,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,126,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,375</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,359,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">June&nbsp;30, 2003</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities within one year:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,677,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(607</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,696,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,557,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,394</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,605,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,192,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,049</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,280,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,427,024</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,656</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,582,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities between one to five years:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,892,505</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">2,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,895,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,682,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,715,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,573,359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,600,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,813,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,469</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,822,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,962,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,431</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,034,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,389,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,887</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,616,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<B><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and
Equipment</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment consists of the following:
</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="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" 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" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture and office equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">479,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">550,429</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Computer equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">688,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,003,494</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">Laboratory equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,828,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,756,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">454,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">537,597</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">525,894</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">3,452,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,848,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(123,436</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(440,164</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(827,095</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">402,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,012,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,021,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Included in property and equipment are assets
recorded under capital leases with a cost of approximately
$2,355,686 at December&nbsp;31, 2002 and June&nbsp;30, 2003.
There were no assets under capital leases prior to 2002.
Amortization of the assets recorded under capital leases is
included with depreciation expense. The accumulated amortization
related to these assets under capital leases was approximately
$196,000 and $237,000 at December&nbsp;31, 2002 and
June&nbsp;30, 2003, respectively.
</FONT>

<P align="left">
<B><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
Payable and Accrued Expenses</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accounts payable and accrued expenses consist of
the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" 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" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Clinical development expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,106,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,696,767</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">3,374,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License 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">2,000,000</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">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT 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">Payroll and related expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,204,000</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">1,438,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,131,359</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">302,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">825,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,036,414</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 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">202,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,481,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,369,485</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,815,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,442,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,911,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Redeemable
Convertible Preferred Stock and Stockholders&#146;
Deficit</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, the Company is
authorized to issue 60,000,000&nbsp;shares of common stock. Each
holder of common stock is entitled to one vote for each share of
common stock held of record on all matters on which stockholders
generally are entitled to vote.
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, the Company had
reserved shares of common stock for issuance as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,157,070</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;A preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;B preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,786,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;C-1 and C-2 preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,486,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;D preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of warrants to purchase Series&nbsp;B,
    C-1 and C-2 preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,073,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,370,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, employees and non-employees
exercised options to purchase 1,152,000&nbsp;shares of the
Company&#146;s common stock for total consideration of $691,200.
Of this amount, the Company loaned $600,000 to one of the
purchasers of the stock pursuant to a full recourse note (see
Note&nbsp;10). Of those shares, 1,075,000 were restricted, and
generally vest over a four-year period. At June&nbsp;30, 2003,
31,771 shares remain restricted. Unvested shares are subject to
the Company&#146;s repurchase at the option&#146;s exercise
price. During 2002, one non-employee exercised an option to
purchase 10,000&nbsp;shares of the Company&#146;s common stock
in exchange for $6,000 in cash. During the six&nbsp;months ended
June&nbsp;30, 2003 employees and non-employees exercised options
to purchase 257,916&nbsp;shares of the Company&#146;s common
stock in exchange for cash of $122,000 and a full recourse note
of $34,000.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During March 2000, the Company sold 120,000
shares of Series&nbsp;A convertible preferred stock
(&#147;Series&nbsp;A&#148;) for $150,000. During April 2000, the
Company sold 5,766,332&nbsp;shares of Series&nbsp;B redeemable
convertible preferred stock (&#147;Series&nbsp;B&#148;) and
warrants to purchase 1,142,902&nbsp;shares of Series&nbsp;B for
approximately $34,473,000, net of issuance costs. The
Company&#146;s estimate of the fair value of the warrants was
determined to be $1,040,000. The warrants have an exercise price
of $6.00.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During January 2001, the Company sold
20,666&nbsp;shares of Series&nbsp;B for $124,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During July and August 2001, the Company sold
7,964,229&nbsp;shares of Series&nbsp;C-1 redeemable convertible
preferred stock (&#147;Series&nbsp;C-1&#148;) and warrants to
purchase 1,592,846&nbsp;shares of Series&nbsp;C-1 for
approximately $53,461,000, net of issuance costs. The
Company&#146;s estimate of the fair value of the warrants was
determined to be approximately $2,134,000. The warrants have an
exercise price of $6.80.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of certain defined events,
the Company sold and issued to the purchasers of the
Series&nbsp;C-1, 7,521,777&nbsp;shares of Series&nbsp;C-2
redeemable convertible preferred stock
(&#147;Series&nbsp;C-2&#148;) and warrants to purchase
1,504,354&nbsp;shares of Series&nbsp;C-2 for approximately
$54,157,000, net of issuance costs, in August 2002. The
Company&#146;s estimate of the fair value of the warrants was
determined to be approximately $3,385,000. The warrants have an
exercise price of $7.20.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, the Company authorized the issuance of
2,747,253&nbsp;shares of Series&nbsp;D convertible preferred
stock (&#147;Series&nbsp;D&#148;). Concurrent with the closing
in February 2003 of the agreements with Pfizer to jointly
develop and commercialize Macugen, the Company sold
2,747,253&nbsp;shares of Series&nbsp;D to Pfizer for
$24,736,944, net of issuance costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Pfizer agreements, the
Company has also agreed to sell, and Pfizer has agreed to
purchase, up to $25,000,000 worth of additional capital stock
upon the completion of certain milestones at the then current
market price (see Note&nbsp;11).
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred Stock
Warrants</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Warrants issued in connection with the
Series&nbsp;B and Series&nbsp;C-1 and C-2 are exercisable over
periods ranging from 2 to 6&nbsp;years at the option of the
holder. Of the 5,073,435 outstanding warrants to purchase
redeemable preferred stock, 4,240,102 will automatically expire
upon an initial public offering of the Company stock,
dissolution or merger of the Company, as defined. The remaining
833,333 warrants do not expire upon the completion of an initial
public offering. The Company is required to give the warrant
holder notice of such transaction at least fifteen&nbsp;days
prior to consummation. In addition, the warrants expire if the
Company completes certain milestones in connection with its
development of Macugen.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Preferred stockholders are entitled to the number
of votes equal to the number of shares of common stock into
which each share of preferred stock is convertible.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The holders of Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D are entitled
to annual non-cumulative dividends when, and if, declared, prior
and in preference to any dividends payable on common stock, at a
rate of $0.10 per share, $0.48 per share, $0.54 per share, $0.58
per share and $0.73 per share, respectively. As of June&nbsp;30,
2003, no dividends had been declared.
</FONT>

<P align="left">
<I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liquidation</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a defined liquidation event
(&#147;Liquidation Event&#148;), which includes a liquidation,
dissolution, winding up of the Company or a merger,
consolidation or reorganization of the Company that results in
the transfer of 50% or more of the outstanding voting power of
the Company or a sale of substantially all the assets of the
Company, the Series&nbsp;A, Series&nbsp;B, Series&nbsp;C-1,
Series&nbsp;C-2 and Series&nbsp;D preferred stockholders are
entitled to, prior and in preference to any other stockholders,
a liquidation preference distribution of the sum of
1.5&nbsp;times the original per share purchase price paid to the
Company, plus all declared and unpaid dividends, or if greater,
the amount per share as would have been payable had each share
of preferred stock been converted into the Company&#146;s common
stock prior to such Liquidation Event. The Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D preferred
stockholders rank senior in preference to the Series&nbsp;A
preferred stockholders, and share ratably on a pari passu basis
in the event of a liquidation. After payment of full
preferential amount to Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D preferred
stockholders, the remaining assets shall be distributed ratably
among the holders of common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes convertible
preferred stock issued and outstanding (excluding preferred
stock warrants of 5,073,435), with liquidation preferences for
each series at June&nbsp;30, 2003:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Issued and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Liquidation</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Authorized Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preference</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;A
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,763,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,786,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,082,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;C-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,557,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,964,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,235,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;C-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,026,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,521,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,235,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;D
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,213,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,140,257</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">252,278,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Conversion</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each holder of Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D may convert
at any time, at its option, shares of preferred into common
stock on a one-for-one basis subject to certain adjustments
including dilutive issuances and splits, as defined. Conversion
will occur automatically concurrent with a firm underwritten
public offering of not less than $40,000,000 ($25,000,000 for
Series&nbsp;A and Series&nbsp;B) with a per share price of not
less than $12.00 per share. Convertible preferred stock will
also automatically convert upon the vote of the holders of at
least 66&nbsp;2/3% of the then outstanding shares for
Series&nbsp;B, Series&nbsp;C-1 and Series&nbsp;C-2 or the
majority of the then outstanding shares of Series&nbsp;D and
Series&nbsp;A. In addition, the Series&nbsp;D will automatically
convert upon the conversion of all Series&nbsp;B and
Series&nbsp;C into common stock and either the occurrence of a
$10,000,000 equity capital investment or a public offering not
less than $20,000,000.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Redemption</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At any time on or after July&nbsp;20, 2010, at
the request of the holders of not less than 66&nbsp;2/3% of the
then outstanding Series&nbsp;C-1, Series&nbsp;C-2 and a majority
of the Series&nbsp;D and Series&nbsp;B or upon a liquidation
event as defined above, the Company shall redeem for cash such
convertible preferred stock at the greater of the sum of 1.5
times the original series issue price plus declared but unpaid
dividends or the amount per share as would have been payable had
each share been converted into common stock. Accordingly, the
Company is recording and accreting the Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D to its
defined redemption value through July&nbsp;20, 2010.
Series&nbsp;A is not redeemable at the option of the holder.
</FONT>

<P align="left">
<B><FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
Options</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has reserved a maximum of
8,175,000&nbsp;shares under the Company&#146;s 2001 Stock Option
Plan (the &#147;2001&nbsp;Plan&#148;) and 2,747,500&nbsp;shares
for stock options granted prior to the adoption of the 2001
Plan. Stock options may be granted to employees and consultants.
Granted stock options are immediately exercisable into
restricted shares and generally vest over a four-year period and
expire ten years from date of grant. Additionally, options that
are exercised into restricted shares of common stock continue to
vest under the original terms of the related options.
</FONT>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes option activity
for the Company:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at February&nbsp;9, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,147,500</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">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 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">1,147,500</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">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,253,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,152,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(265,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,983,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,885,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(105,084</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,753,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(257,916</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135,305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at June&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,627,195</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">1.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information about
vested stock options outstanding:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" 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="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vested stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">581,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,210,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,336,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average exercise price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information about
stock options outstanding at June&nbsp;30, 2003:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options Vested</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$0.60
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,523,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,060,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;1.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.4</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;1.36
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">999,062</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208,125</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">8.9</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;1.44
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">780,000</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">36,250</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">9.4</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;2.91
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,627,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,336,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the granting of employee stock
options in 2001, 2002 and the six months ended June&nbsp;30,
2003, the Company recorded deferred compensation of
approximately $321,000, $1,335,000 and $916,000, respectively.
Deferred compensation is being amortized over the vesting period
of the options
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<FONT size="2">resulting in non-cash stock-based compensation
expense of approximately $118,000, $239,000 and $285,000 for the
years ended December&nbsp;31, 2001 and 2002 and the six months
ended June&nbsp;30, 2003, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the period February&nbsp;9, 2000 (date of
inception) to December&nbsp;31, 2000, the years ended
December&nbsp;31, 2001 and 2002, and the six months ended
June&nbsp;30, 2003, the Company granted a total of 452,500,
345,500, 137,500 and 5,000, respectively, in stock options to
certain consultants and Scientific Advisory Board members. The
Company has accounted for these options in accordance with EITF
96-18 and, accordingly, recorded non-cash expense of $97,000,
$264,000, $1,049,000 and $705,000 for the period February 9,
2000 (date of inception) to December&nbsp;31, 2000, the years
ended December&nbsp;31, 2001 and 2002, and the six months ended
June&nbsp;30, 2003, respectively. The Company will continue to
remeasure the fair value of unvested stock options to these
consultants and Scientific Advisory Board members until vesting
is complete.
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<B><FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss Per
Share</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the computation of
basic and diluted net loss attributable to common stockholders
per share.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD 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 valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Numerator:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111,305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,379,573</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">(14,368,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,079,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,171,598</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,517,927</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Numerator for basic and diluted net loss
    attributable to common stockholders per share&#151;net loss
    attributable for common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191,143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,269,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,551,171</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">(18,886,645</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">Denominator:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator for basic and dilutive net loss
    attributable to common stockholders per
    share&#151;weighted-average shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,654,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,791,401</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">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.98</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">Denominator for unaudited pro forma basic and
    diluted net loss attributable to common stockholders per
    share&#151;weighted average shares (Note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,837,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931,658</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>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.68</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>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows dilutive common share
equivalents outstanding, which are not included in the above
historical calculations, as the effect of their inclusion is
anti-dilutive during each period:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="31%"><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="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="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception) to</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,886,332</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">13,871,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,393,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,871,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,140,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,147,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,983,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,753,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,873,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,627,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,976,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,569,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,073,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,073,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,073,435</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,010,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,423,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,219,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,818,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,840,887</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>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002, the Company has a net
operating loss for federal income tax purposes of approximately
$74,660,000, which begins to expire in 2020.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred income taxes reflect the net effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The Company&#146;s deferred tax
assets relate primarily to net operating loss carryforwards and
non-cash stock-based compensation. For the years ended
December&nbsp;31, 2001 and 2002 the change in valuation
allowance was approximately $9,582,000 and $17,249,000,
respectively. At December&nbsp;31, 2001, 2002, and June&nbsp;30,
2003, a valuation allowance was recorded to fully offset the net
deferred tax asset. The change in the valuation allowance for
the six months ended June&nbsp;30, 2003 was approximately
$5,712,000. Significant components of the Company&#146;s
deferred tax assets are 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="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</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>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,599,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,864,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,738,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued bonus
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">505,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311,000</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">Stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192,000</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">707,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,103,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">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">15,000</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Start-up costs, net of amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">349,000</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">236,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,167,000</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">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">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total gross deferred tax 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">14,155,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,374,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,674,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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">Deferred tax liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">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">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(112,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(700,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized gain on securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(142,000</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>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total gross deferred tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(142,000</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">(112,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(700,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">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">(14,013,000</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">(31,262,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36,974,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of the statutory tax rates and
the effective tax rates for the period February&nbsp;9, 2000
(date of inception) to December&nbsp;31, 2000, the years ended
December&nbsp;31, 2002 and 2001, and the six months ended
June&nbsp;30, 2003 is as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="19%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February 9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" 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>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statutory rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State and local income taxes (net of federal tax
    benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</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">Change in valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</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>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
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    <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="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</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>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Loans to Stockholders</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;15, 2001, the Company hired a new
President and Chief Operating Officer (the
&#147;Executive&#148;). The employment agreement with the
Executive provided for a $600,000 loan the proceeds of which was
used to exercise 1,000,000 stock options at a per share exercise
price of $0.60. The 1,000,000 restricted common shares were to
vest over a four-year period. The loan was a full-recourse note
and was non-interest bearing. Additionally, the Company loaned
the Executive an additional $500,000. This loan was also
non-interest bearing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;8, 2001, the Company and the
Executive mutually agreed to terminate the employment of the
Executive. In connection with the termination agreement, 500,000
of the 1,000,000 restricted common shares were immediately
vested, and the Company exercised its right to repurchase the
remaining 500,000 unvested shares at the original exercise price
of $0.60 or $300,000, which was credited to the $600,000 loan
principal due from the Executive. The Executive repaid $5,000 of
the loan principal during 2002. The remaining loan balance of
$295,000 is due in January 2007 and is collateralized by 500,000
restricted common shares. Additionally, the Company forgave
$250,000 of the $500,000 loan principal which was included as
additional expense. The remaining $250,000 of the loan principal
was repaid during 2002.
</FONT>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collaboration
Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, the Company licensed the rights to
certain technology from a corporate licensor in exchange for
$7,000,000 and a warrant to purchase 833,333 shares of
Series&nbsp;B Convertible Preferred Stock at an exercise price
of $6.00 per share. The warrant is exercisable at any time
through March&nbsp;30, 2005. The Company&#146;s estimate of the
fair value of the warrant was determined to be $758,333. In
addition, the Company may be required to make additional
payments upon the achievement of certain specified events, as
defined, in the licensing agreement. During the period from
February&nbsp;9, 2000 (date of inception) to December&nbsp;31,
2000, the Company recorded an expense of $7,758,333 which has
been classified as a research and development expense, related
to the licensed technology.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2001, the Company signed a license
agreement for the nonexclusive rights to certain technology from
a corporate licensor in exchange for an initial irrevocable and
nonrefundable license fee of
</FONT>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<FONT size="2">$2,000,000 which was paid in 2002. Additionally,
the Company may be required to make additional payments upon the
achievement of certain specified events, as defined in the
license agreement. For the year ended December&nbsp;31, 2001,
the Company recorded the $2,000,000 license fee as a research
and development expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2001, the Company entered into a
two-year research agreement under which the Company pays a
collaborator for the development of a delivery device to be used
in conjunction with Macugen. Such payments are included as
research and development expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, the Company entered into a
license, manufacturing and supply agreement for the use of
certain technology rights to certain patents of a component of
Macugen. The contract calls for specified pricing based on
quantities purchased. The Company may be required to make
additional payments upon the achievement of certain specified
events, as defined in the license agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2002, the Company licensed the rights
for a certain delivery technology for $500,000. The Company may
be required to make additional payments upon the achievement of
certain specified events, as defined in the license agreement.
Such payments are included as research and development expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, Pfizer and the Company entered
into several concurrent agreements to jointly develop and
commercialize Macugen. Under the terms of the agreement, which
became effective February&nbsp;3, 2003 when government approval
was obtained, Pfizer made initial payments of $100,000,000 which
included the purchase of 2,747,253&nbsp;shares of the
Company&#146;s Series&nbsp;D preferred stock for $24,736,944,
net of issuance costs and a $75,000,000 initial license fee
which is being amortized over the expected term of the agreement
(estimated at 15&nbsp;years). In addition, the Company has
agreed to sell to Pfizer and Pfizer has agreed to purchase from
the Company, up to an additional $25,000,000 of the
Company&#146;s capital stock at the then current market price
upon the completion of certain events, including $10,000,000 of
the Company&#146;s common stock at the initial public offering
price concurrently with the successful completion of an initial
public offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the achievement of certain specified
worldwide regulatory submission and approvals, the Company would
be eligible to receive up to an additional $195,500,000 in
milestone payments. The Company also has the potential to
receive up to an additional $450,000,000 in milestone payments,
which are contingent upon successful commercialization of
Macugen and which are based on attainment of agreed-upon sales
levels. Pfizer may terminate the collaboration relationship upon
six to twelve months&#146; prior notice, depending on when such
notice is given.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If approved, Macugen will be co-promoted by the
Company and Pfizer in the United States where Eyetech will have
an ophthalmology sales force, maintain the inventory, book all
United States product sales and each will share in profits and
losses from the sale of Macugen products in the United States.
Outside the United States, Pfizer will market the product
exclusively under a license, for which the Company will receive
royalty income. As part of the agreement, the Company will begin
to assemble a sales force prior to commercial launch of Macugen
which also allows for the detailing Pfizer&#146;s Xalatan&#174;
ophthalmologic treatment in exchange for specified royalties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of the agreement, both parties
will expend funds related to the co-promotion and development of
Macugen. Pfizer will generally fund a majority of the ongoing
development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. In certain instances, the Company will reimburse
Pfizer for the Company&#146;s share of costs that Pfizer incurs.
This funding resulted in the recognition by the Company of
$16,549,829 in revenue and $1,077,829 in research and
development expense during the six months ended June&nbsp;30,
2003. In addition, the Company recognized $2,083,335 in
connection with the amortization of the $75,000,000 initial
license fee paid by Pfizer.
</FONT>

<P align="center"><FONT size="2">F-23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<B><FONT size="2">12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
Leases</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases laboratory equipment and other
equipment under capital leases that bear interest from 9.6% to
10.1% and expire in 2006. The following is a schedule of the
future minimum lease payments under these capital leases as of
June&nbsp;30, 2003:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Remainder of 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">378,000</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">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">756,000</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">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">438,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR 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 align="right" valign="bottom" nowrap><FONT size="2">2,266,000</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">Less amount representing interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Present value of the minimum lease payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,944,000</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">Less current portion of capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">589,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,355,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases office and laboratory space in
New York, New York, Cedar Knolls, New Jersey and Woburn,
Massachusetts. During 2002, the Company leased certain office
space in New York, New York, which expires on July&nbsp;31,
2007. Under the lease agreements, the Company has secured bank
letters of credit totaling approximately $2,666,000 which are
fully cash collateralized and the cash is categorized as
restricted cash in the balance sheet.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rent expense for the period February&nbsp;9, 2000
(date of inception) to December&nbsp;31, 2000, the years ended
December&nbsp;31, 2001 and 2002 and the six months ended
June&nbsp;30, 2003 was approximately $332,000, $482,000,
$1,380,000 and $722,000, respectively. Future minimum lease
commitments, net of sublease income, are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Remainder of 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">762,000</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">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,543,000</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">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551,000</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">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,564,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,231,000</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">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">876,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,504,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <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">9,031,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Company&#146;s agreements with Gilead,
Nektar and Isis, it is obligated to make specified payments upon
achieving specified milestones relating to the development and
regulatory approval of Macugen. These contingent payment
obligations are not included in the above table.
</FONT>

<P align="left">
<B><FONT size="2">14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;401(k)
Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains a defined contribution
401(k) plan available to eligible employees. Employee
contributions are voluntary and are determined on an individual
basis, limited by the maximum amounts
</FONT>

<P align="center"><FONT size="2">F-24
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<FONT size="2">allowable under federal tax regulations. The
Company has discretion to make contributions to the plan.
However, to date no contributions have been made.
</FONT>

<P align="left">
<B><FONT size="2">15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selected
Quarterly Financial Data (Unaudited)</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Quarter Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September 30</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2001</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,581,212</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,041,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,816,970</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,240,515</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,958,852</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,419,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,588,020</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,208,043</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss) per common share*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.02</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.79</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,747,753</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,631,821</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,697,851</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,096,037</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,833,552</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,717,620</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,971,922</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,746,650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss)&nbsp;per common
    share*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2003</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,631,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,918,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,266,462</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">(8,102,256</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,525,425</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,361,220</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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">Basic and diluted net (loss)&nbsp;per common
    share*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&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">
<HR size="1" width="18%" align="left" noshade>
<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">Per common share amounts for the quarters and
    full years have been calculated separately. Accordingly,
    quarterly amounts do not add to the annual amount because of
    differences in the weighted average common shares outstanding
    during each period principally due to the effect of the
    Company&#146;s issuing shares of its common stock during the
    year.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">Diluted EPS is identical to Basic EPS since
    common equivalent shares are excluded from the calculation, as
    their effect is anti-dilutive.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Events
(unaudited) Subsequent to Date of Independent Auditors
Report</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, the Company&#146;s
Board of Directors approved the Company&#146;s 2003 Stock
Incentive Plan (the &#147;2003 Incentive Plan&#148;). The 2003
Incentive Plan, which remains subject to stockholder approval,
will become effective on the date that the registration
statement relating to the Company&#146;s initial public offering
is declared effective. Under the 2003 Incentive Plan, 4,400,000
shares of common stock will be authorized for issuance, subject
to annual increases beginning in 2005 in accordance with the
terms of the 2003 Incentive Plan. Upon the effectiveness of the
2003 Incentive Plan, the Company will grant no further stock
options or other awards under the Company&#146;s 2001 Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, the Company&#146;s
Board of Directors approved the Company&#146;s 2003 Employee
Stock Purchase Plan (the &#147;2003 Purchase Plan&#148;). The
2003 Purchase Plan, which remains subject to
</FONT>

<P align="center"><FONT size="2">F-25
</FONT>

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<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (CONTINUED)</FONT></B>

<P align="center">
<B><FONT size="2">(Information as of June&nbsp;30, 2002 and the
six months then ended is unaudited)</FONT></B>

<P align="left">
<FONT size="2">stockholder approval, will become effective on
the date that the registration statement relating to the
Company&#146;s initial public offering is declared effective.
Under the 2003 Purchase Plan, 500,000 shares of common stock
will be reserved for sale to participating employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, the Company&#146;s
Board of Directors approved a Restated Certificate of
Incorporation. The Restated Certificate of Incorporation, which
remains subject to stockholder approval, will become effective
upon the consummation of the Company&#146;s initial public
offering, will increase the Company&#146;s authorized common
stock to 125,000,000 shares and will authorize 5,000,000 shares
of preferred stock, issuable in one or more series to be
designated by the Company&#146;s Board of Directors.
</FONT>

<P align="center"><FONT size="2">F-26
</FONT>

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<DIV align="left">
<FONT size="2">
</FONT>
</DIV>

<P align="center">
<IMG src="y89680y8968005.gif" alt="(EYETECH LOGO)">

<DIV>&nbsp;</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">PART II</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;13.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Other Expenses of Issuance and
    Distribution</FONT></I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><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 valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities and Exchange Commission registration
    fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">National Association of Securities Dealers Inc.
    fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500</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 Stock Market listing 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">100,000</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">Accountants&#146; 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">Blue Sky 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">Transfer Agent&#146;s fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD 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">Miscellaneous
    </FONT></DIV>
    </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>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<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 filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;14.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Indemnification of Directors and
    Officers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;102 of the General Corporation Law
of the State of Delaware permits a corporation to eliminate the
personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an
improper personal benefit. The Registrant&#146;s certificate of
incorporation provides that no director of the Registrant shall
be personally liable to it or its stockholders for monetary
damages for any breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability,
except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of
liability of directors for breaches of fiduciary duty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;145 of the General Corporation Law
of the State of Delaware provides that a corporation has the
power to indemnify a director, officer, employee, or agent of
the corporation and certain other persons serving at the request
of the corporation in related capacities against expenses
(including attorneys&#146; fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which
he is or is threatened to be made a party by reason of such
position, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful, except that, in the case of actions brought by or in
the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or
other adjudicating court determines that, despite the
adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Registrant&#146;s certificate of
incorporation provides that the Registrant will indemnify each
person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Registrant) by
reason of the fact that he or she is or was, or has agreed to
become, a director or officer of the Registrant, or is or was
serving, or has agreed to serve, at the Registrant&#146;s
request as a director, officer, partner, employee or trustee of,
or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise(all such persons being
referred to as an &#147;Indemnitee&#148;), or by reason of any
action alleged to have been taken or omitted in such capacity,
against all expenses (including attorneys&#146; fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding and any appeal therefrom, if such
</FONT>

<P align="center"><FONT size="2">II-1
</FONT>

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<DIV align="left">
<FONT size="2">Indedmnitee acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the
Registrant&#146;s best interests, and, with respect to any
criminal action or proceeding, he or she had no reasonable cause
to believe his or her conduct was unlawful. The
Registrant&#146;s certificate of incorporation provides that the
Registrant will indemnify any Indemnitee who was or in a party
to an action or suit by or in the right of the Registrant to
procure a judgment in its favor by reason of the fact that the
Indemnitee is or was, or has agreed to become, a director or
officer of the Registrant, or is or was serving, or has agreed
to serve, at the Registrant&#146;s request as a director,
officer, partner, employee or trustee of, or in a similar
capacity with, another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys&#146; fees) and, to the extent
permitted by law, amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding, and any appeal therefrom, if the Indemnitee acted in
good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the Registrant,
except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant, unless a court
determines that, despite such adjudication but in view of all of
the circumstances, he or she is entitled to indemnification of
such expenses. Notwithstanding the foregoing, to the extent that
any Indemnitee has been successful, on the merits or otherwise,
he or she will be indemnified by the Registrant against all
expenses (including attorneys&#146; fees) actually and
reasonably incurred in connection therewith. Expenses must be
advanced to an Indemnitee under certain circumstances.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;15.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Recent Sales of Unregistered
    Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Set forth below in chronological order is a
description of the Registrant&#146;s sales of unregistered
securities since incorporation. The sales made to investors were
made in accordance with Section&nbsp;4(2) or Regulation&nbsp;D
of the Securities Act. Sales to the Registrant&#146;s employees,
consultants, directors and officers were deemed to be exempt
from registration under the Securities Act in reliance on
Rule&nbsp;701 promulgated Section&nbsp;3(b) of the Securities
Act as transactions under compensatory benefit plans and
contracts related to compensation under Rule&nbsp;701. No
underwriters were used for any of the following transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, in connection with the
Registrant&#146;s formation, the Registrant issued an aggregate
of 3,000,000 shares of common stock for aggregate cash
consideration of $30,000 to the Registrant&#146;s founders,
David&nbsp;A. Guyer, Marty Glick, John McLaughlin and Samir
Patel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, the Registrant issued an aggregate
of 120,000 shares of series&nbsp;A convertible preferred stock
for aggregate cash consideration of $150,000 to Marty Glick,
John McLaughlin and Samir Patel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;30, 2000, the Registrant issued to
Gilead Sciences, Inc. a warrant to purchase 833,333&nbsp;shares
of series&nbsp;B convertible preferred stock at an exercise
price of $6.00 per share in partial consideration for the
Registrant entering into a license agreement whereby Gilead
Sciences, Inc. licensed to the Registrant rights to a certain
drug.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April, August, October and November 2000, and
January and February 2001, the Registrant issued an aggregate of
5,786,998 shares of series B convertible preferred stock at a
price per share of $6.00, together with warrants to purchase an
aggregate of 1,142,902&nbsp;shares of series B convertible
preferred stock at an exercise price of $6.00&nbsp;per share to
a group of investors, including Merrill Lynch Ventures Entities,
Lakeview EyeTech, L.P. and Schroder Ventures Entities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July and August 2001, the Registrant issued an
aggregate of 7,964,229 shares of series&nbsp;C-1 convertible
preferred stock at a price per share of $6.80, together with
warrants to purchase an aggregate of 1,592,846 shares of
series&nbsp;C-1 convertible preferred stock at an exercise price
of $6.80 per share to a group of investors, including
J.P.&nbsp;Morgan Partners (BHCA), L.P., Biotech Growth, S.A.
(BB&nbsp;Biotech), MPM Entities, Merrill Lynch Ventures
Entities, Lakeview EyeTech&nbsp;II, L.P. and Schroder Ventures
Entities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2002, the Registrant issued an
aggregate of 7,521,777&nbsp;shares of series&nbsp;C-2
convertible preferred stock at a price per share of $7.20,
together with warrants to purchase an aggregate of 1,504,354
shares of series&nbsp;C-2 convertible preferred stock at an
exercise price of $7.20 per share to existing investors,
including
</FONT>

<P align="center"><FONT size="2">II-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">J.P.&nbsp;Morgan Partners (BHCA), L.P., Biotech
Growth, S.A. (BB&nbsp;Biotech), MPM Entities, Merrill Lynch
Ventures Entities, Lakeview EyeTech&nbsp;II, L.P. and Schroder
Ventures Entities.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, the Registrant issued 2,747,253
shares of series&nbsp;D convertible preferred stock to an
affiliate of Pfizer Inc. at a price per share of $9.10.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of August&nbsp;31, 2003, the Registrant had
issued to employees, directors and consultants 1,465,111 shares
of common stock upon the exercise of stock options at a weighted
average exercise price of $0.60&nbsp;per share and
75,000&nbsp;shares of restricted common stock at a purchase
price of $1.36&nbsp;per share. In addition, options to purchase
3,420,000&nbsp;shares of common stock were outstanding under the
Registrant&#146;s 2001 Stock Plan, and options to purchase
1,057,500&nbsp;shares of common stock were outstanding outside
the Registrant&#146;s 2001 Stock&nbsp;Plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;16.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Exhibits</FONT></I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="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="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Second Amended and Restated Certificate of
    Incorporation of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Restated Certificate of Incorporation of
    the Registrant to be effective upon closing of the 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">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Bylaws of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">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 Second Amended and Restated Bylaws of the
    Registrant to be effective upon the closing of the offering
    </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">Specimen Certificate evidencing shares of common
    stock
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement, dated as of March&nbsp;31,
    2000, by and between the Registrant and Gilead Sciences, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement Amendment, dated as of
    September&nbsp;4, 2003, by and among the Registrant, Gilead
    Sciences, Inc. and University License Equity Holdings, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Series&nbsp;D Preferred Stock Purchase Agreement,
    dated as of December&nbsp;17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Investors&#146; Rights
    Agreement, dated as of February&nbsp;7, 2003, by and among the
    Registrant and the parties listed therein
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Hale and Dorr 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">2001 Stock Plan, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Employee Stock Purchase Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;17,
    2002, by and between Pfizer Inc. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Collaboration Agreement, dated as of
    December&nbsp;17, 2002, by and between Pfizer Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License, Manufacturing and Supply Agreement,
    dated February&nbsp;5, 2002, by and between Shearwater
    Corporation and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Licensing Agreement, dated as of March&nbsp;30,
    2000 and amended on May&nbsp;9, 2000, December&nbsp;4, 2001 and
    April&nbsp;12, 2002, by and between Gilead Sciences, Inc. and
    the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;31,
    2001, by and between Isis Pharmaceuticals, Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated as of
    October&nbsp;30, 2001, by and between the Registrant and Samir
    Patel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Employment Agreement, dated as of
    April&nbsp;12, 2000, by and between the Registrant and
    David&nbsp;R. Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Executive Employment Agreement,
    dated as of August&nbsp;25, 2003, by and between the Registrant
    and David&nbsp;R. Guyer
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Paul Chaney and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    February&nbsp;1, 2002, by and between the Registrant and Glenn
    Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2003, by and between the Registrant and Glenn Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of April&nbsp;12,
    2002, by and between the Registrant and Anthony&nbsp;P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2003, by and between the Registrant and Anthony&nbsp;P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Douglas&nbsp;H. Altschuler and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Promissory Note, dated
    July&nbsp;1, 2002, issued by Anthony&nbsp;P. Adamis to the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated July&nbsp;1, 2002,
    by and between Anthony&nbsp;P. Adamis and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sublease Agreement, dated as of December&nbsp;19,
    2001 and amended as of February&nbsp;22, 2002, by and between
    AnswerThink, Inc., successor in interest to AnswerThink
    Consulting Group, Inc., and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Lease Agreement, dated March&nbsp;14, 2002, by
    and between First Industrial, L.P. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Commercial Lease, dated March&nbsp;27, 2002, by
    and between Cummings Properties, LLC and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</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">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Ernst&nbsp;&#38; Young LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Hale and Dorr LLP (included in
    Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (included on signature page)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;*&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 as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;17.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Undertakings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes to
provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
</FONT>

<P align="center"><FONT size="2">II-4
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;For purposes of determining any
    liability under the Securities Act, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance upon Rule&nbsp;430A and contained in the
    form of prospectus filed by the registrant pursuant to
    Rule&nbsp;424(b)(1) or (4) or 497(h) under the Securities Act
    shall be deemed to be part of the registration statement as of
    the time it was declared effective.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;For purposes of determining any
    liability under the Securities Act, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-5
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York,
New York on the 12th&nbsp;day of September, 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">
    <FONT size="2">EYETECH PHARMACEUTICALS, INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ DAVID R. GUYER
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">David R. Guyer, M.D.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">Chief Executive Officer, Director</FONT></I></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">POWER OF ATTORNEY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the undersigned directors and officers of
Eyetech Pharmaceuticals, Inc. hereby severally constitute and
appoint David&nbsp;A Guyer, Glenn&nbsp;P. Sblendorio and
Douglas&nbsp;H. Altschuler, and each of them, his/her true and
lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution for him/her and in his/her
name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
Registration Statement, and any subsequent registration
statements pursuant to Rule&nbsp;462 of the Securities Act of
1933, as amended and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that each of said
attorney-in-fact or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
</FONT>

<CENTER>
<TABLE width="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="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ DAVID R. GUYER<BR>
    <HR size="1" noshade>David R. Guyer, M.D.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Executive Officer, Director<BR>
    (Principal Executive Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">September&nbsp;12, 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/ GLENN P. SBLENDORIO<BR>
    <HR size="1" noshade>Glenn P. Sblendorio
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Financial Officer (Principal Financial and
    Accounting Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">September&nbsp;12, 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/ JOHN MCLAUGHLIN<BR>
    <HR size="1" noshade>John McLaughlin
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chairman of the Board&nbsp;of&nbsp;Directors
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">September&nbsp;12, 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/ SRINIVAS AKKARAJU<BR>
    <HR size="1" noshade>Srinivas Akkaraju, 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">September&nbsp;12, 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/ MARTY GLICK<BR>
    <HR size="1" noshade>Marty Glick
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">September&nbsp;12, 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/ MICHAEL G. MULLEN<BR>
    <HR size="1" noshade>Michael G. Mullen, CFA
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">September&nbsp;12, 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/ SAMIR PATEL<BR>
    <HR size="1" noshade>Samir Patel, M.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">September&nbsp;12, 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/ EDWARD PENHOET<BR>
    <HR size="1" noshade>Edward Penhoet, 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">September&nbsp;12, 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/ HENRY SIMON<BR>
    <HR size="1" noshade>Henry Simon
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">September&nbsp;12, 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/ DAMION E. WICKER<BR>
    <HR size="1" noshade>Damion E. Wicker, M.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">September&nbsp;12, 2003
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-6
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="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="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Second Amended and Restated Certificate of
    Incorporation of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Restated Certificate of Incorporation of
    the Registrant to be effective upon closing of the 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">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Bylaws of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">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 Second Amended and Restated Bylaws of the
    Registrant to be effective upon the closing of the offering
    </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">Specimen Certificate evidencing shares of common
    stock
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement, dated as of March&nbsp;31,
    2000, by and between the Registrant and Gilead Sciences, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement Amendment, dated as of
    September&nbsp;4, 2003, by and among the Registrant, Gilead
    Sciences, Inc. and University License Equity Holdings, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Series&nbsp;D Preferred Stock Purchase Agreement,
    dated as of December&nbsp;17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Investors&#146; Rights
    Agreement, dated as of February&nbsp;7, 2003, by and among the
    Registrant and the parties listed therein
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Hale and Dorr 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">2001 Stock Plan, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Employee Stock Purchase Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;17,
    2002, by and between Pfizer Inc. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Collaboration Agreement, dated as of
    December&nbsp;17, 2002, by and between Pfizer Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License, Manufacturing and Supply Agreement,
    dated February&nbsp;5, 2002, by and between Shearwater
    Corporation and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Licensing Agreement, dated as of March&nbsp;30,
    2000 and amended on May&nbsp;9, 2000, December&nbsp;4, 2001 and
    April&nbsp;12, 2002, by and between Gilead Sciences, Inc. and
    the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8&#134;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;31,
    2001, by and between Isis Pharmaceuticals, Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated as of
    October&nbsp;30, 2001, by and between the Registrant and Samir
    Patel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Employment Agreement, dated as of
    April&nbsp;12, 2000, by and between the Registrant and
    David&nbsp;R. Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Executive Employment Agreement,
    dated as of August&nbsp;25, 2003, by and between the Registrant
    and David&nbsp;R. Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Paul Chaney and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    February&nbsp;1, 2002, by and between the Registrant and Glenn
    Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2003, by and between the Registrant and Glenn Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of April&nbsp;12,
    2002, by and between the Registrant and Anthony&nbsp;P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2003, by and between the Registrant and Anthony&nbsp;P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Douglas&nbsp;H. Altschuler and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Promissory Note, dated
    July&nbsp;1, 2002, issued by Anthony&nbsp;P. Adamis to the
    Registrant
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="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="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated July&nbsp;1, 2002,
    by and between Anthony&nbsp;P. Adamis and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sublease Agreement, dated as of December&nbsp;19,
    2001 and amended as of February&nbsp;22, 2002, by and between
    AnswerThink, Inc., successor in interest to AnswerThink
    Consulting Group, Inc., and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Lease Agreement, dated March&nbsp;14, 2002, by
    and between First Industrial, L.P. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Commercial Lease, dated March&nbsp;27, 2002, by
    and between Cummings Properties, LLC and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</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">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Ernst&nbsp;&#38; Young LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Hale and Dorr LLP (included in
    Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (included on signature page)
    </FONT></TD>
</TR>

</TABLE>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
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</TABLE>
<P>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
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<TR valign="top">
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment requested as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
    </FONT></TD>
</TR>

</TABLE>
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</HTML>
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{"company-data": {"conformed-name": "EYETECH PHARMACEUTICALS INC", "cik": "0001115285", "irs-number": "134104684", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-108781", "film-number": "03894490"}, "business-address": {"street1": "300 EAST 42ND ST 3RD FL", "city": "NEW YORK", "state": "NY", "zip": "10017", "phone": "2128831700"}, "mail-address": {"street1": "500 SEVENTH AVE 18TH FL", "city": "NEW YORK", "state": "NY", "zip": "10018"}}
EYETECH PHARMACEUTICALS, INC.
Table of Contents
As filed with the Securities and Exchange
Commission on September 12, 2003
Registration
No. 333-
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Eyetech Pharmaceuticals, Inc.
(Exact name of registrant as specified in its
charter)
Delaware
2834
13-4104684
(State or other jurisdiction
of incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
500 Seventh Avenue, 18th Floor
New York, New York 10018
(212) 997-9241
(Address, including zip code, and telephone
number,
including area code, of registrant's
principal executive offices)
David R. Guyer, M.D.
Chief Executive Officer
Eyetech Pharmaceuticals, Inc.
500 Seventh Avenue, 18th Floor
New York, New York 10018
(212) 997-9241
(Name, address, including zip code and
telephone number,
including area code, of agent for
service)
Copies to:
David E. Redlick, Esq.
Stuart R. Nayman, Esq.
Hale and Dorr LLP
300 Park Avenue
New York, New York 10022
(212) 937-7200
Douglas H. Altschuler, Esq.
Eyetech Pharmaceuticals, Inc.
500 Seventh Avenue, 18th Floor
New York, New York 10018
(212) 997-9241
Patrick O'Brien, Esq.
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110
(617) 951-7000
Approximate date of
commencement of proposed sale to the public:
As soon as
practicable after this Registration Statement is declared
effective.
If any of the securities
being registered on this Form are offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended (the "Securities Act") please
check the following
box.
o
If this Form is filed to
register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If this Form is a
post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering.
o
If this Form is a
post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering.
o
If delivery of the
prospectus is expected to be made pursuant to Rule 434,
please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum
Amount of
Securities to be Registered
Aggregate Offering Price(1)
Registration Fee(2)
Common Stock, par value $0.01 per share
$100,000,000
$8,090
(1)
Estimated solely for the purpose of computing the
    registration fee in accordance with Rule 457(o) under the
    Securities Act.
(2)
Calculated pursuant to Rule 457(o) based on
    an estimate of the proposed maximum aggregate offering price.
The Registrant hereby
amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until Registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act or until
the Registration Statement shall become effective on such date
as the Commission, acting pursuant to Section 8(a), may
determine.
Table of Contents
The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the
offer or sale is not permitted.
PROSPECTUS
(Subject to
Completion)
Issued September 12,
2003
Shares
Common Stock
We are
offering                      shares
of our common stock. This is our initial public offering and no
public market currently exists for our shares. We anticipate
that the initial public offering price will be between
$          and
$          per
share.
We have applied to have our common stock approved
for quotation on the NASDAQ National Market under the symbol
"EYET."
Investing in the common stock involves risks. See "Risk
Factors" beginning on page 6.
PRICE
$                        A
SHARE
Underwriting
Price to
Discounts and
Proceeds
Public
Commissions
to Eyetech
Per Share
$
$
$
Total
$
$
$
We have granted the underwriters the right to
purchase up to an
additional                 shares
of common stock to cover over-allotments.
The Securities and Exchange Commission and state
securities regulators have not approved or disapproved these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares to
purchasers
on                     ,
2003.
Joint Book-Running Managers
Merrill Lynch & Co.
Morgan Stanley
Bear, Stearns & Co. Inc.
Credit Suisse First Boston
,
2003
TABLE OF CONTENTS
PROSPECTUS SUMMARY
RISK FACTORS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
PRINCIPAL STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
SHARES ELIGIBLE FOR FUTURE SALE
UNDERWRITERS
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2ND A/R CERTIFICATE OF INCORPORATION
FORM OF RESTATED CERTIFICATE OF INCORPORATION
A/R BYLAWS OF THE REGISTRANT
FORM OF 2ND A/R BYLAWS
WARRANT AGREEMENT
WARRANT AGREEMENT AMENDMENT
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
A/R INVESTORS' RIGHTS AGREEMENT
2001 STOCK PLAN
2003 STOCK INCENTIVE PLAN
2003 EMPLOYEE STOCK PURCHASE PLAN
LICENSE AGREEMENT
COLLABORATION AGREEMENT
LICENSE, MANUFACTURING AND SUPPLY AGREEMENT
LICENSING AGREEMENT
LICENSE AGREEMENT
CONSULTING AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT: GUYER
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT: CHANEY
EMPLOYMENT AGREEMENT: SBLENDORIO
EMPLOYMENT AGREEMENT: ADAMIS
EMPLOYMENT AGREEMENT: ALTSCHULER
RESTRICTED STOCK PURCHASE PROMISSORY NOTE
STOCK PLEDGE AGREEMENT
SUBLEASE AGREEMENT
LEASE AGREEMENT
COMMERCIAL LEASE
LIST OF SUBSIDIARIES
CONSENT OF ERNST & YOUNG LLP
Table of Contents
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
6
Special Note Regarding Forward-Looking Statements
20
Use of Proceeds
21
Dividend Policy
21
Capitalization
22
Dilution
23
Selected Financial Information
24
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
25
Business
32
Management
53
Certain Relationships and Related Party
    Transactions
66
Principal Stockholders
69
Description of Capital Stock
72
Shares Eligible for Future Sale
75
Underwriters
77
Legal Matters
80
Experts
80
Where You Can Find Additional Information
80
Index to Financial Statements
F-1
You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or any sale of the common stock. In this
prospectus, unless otherwise stated or the context otherwise
requires, references to "Eyetech," "we,"
"us," "our" and similar references refer to
Eyetech Pharmaceuticals, Inc.
Until                     ,
2003 (25 days after the commencement of this offering), all
dealers that buy, sell or trade shares of our common stock,
whether or not participating in this offering, may be required
to deliver a prospectus. This delivery requirement is in
addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
For investors outside the United States: Neither
we nor any of the underwriters have done anything that would
permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. You are required to
inform yourselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus.
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained
in this prospectus. This summary does not contain all of the
information you should consider before buying shares of our
common stock. You should read the entire prospectus carefully,
especially the "Risk Factors" section and our
consolidated financial statements and the related notes
appearing at the end of this prospectus, before deciding to
invest in shares of our common stock.
Eyetech Pharmaceuticals, Inc.
We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology.
Our most advanced product candidate is
Macugen™ (pegaptanib sodium), which we are developing for
the treatment of the wet form of age-related macular
degeneration, known as AMD, and for the treatment of diabetic
macular edema, known as DME. Both AMD and DME are serious
diseases of the retina that can lead to severe vision loss and
blindness. We are in the process of compiling data from our two
Phase 2/3 pivotal clinical trials of Macugen to determine if the
results are satisfactory to proceed with preparing and filing a
new drug application, or NDA, with the United States Food and
Drug Administration, or FDA, for marketing approval of Macugen
as a treatment for wet AMD. The FDA has given "fast
track" designation to Macugen for the treatment of both wet
AMD and DME. We have entered into a collaboration with Pfizer
Inc. to develop and commercialize Macugen for the prevention and
treatment of diseases of the eye.
AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. In the United States, we estimate that there are more
than 1.6 million cases of wet AMD, with approximately
200,000 new cases arising each year. Because AMD generally
affects adults over 50 years of age, we expect the
incidence of AMD to increase significantly as the baby boom
generation ages and overall life expectancy increases. Diabetic
retinopathy is the leading cause of blindness in working age
adults and the leading cause of vision loss in diabetics. DME is
a common complication of diabetic retinopathy and often results
in severe vision loss and blindness. In the United States, there
are approximately 500,000 people suffering from DME, with
approximately 75,000 new cases each year. We expect the
incidence of DME to increase as the number of people with
diabetes increases. Because the existing treatments for both wet
AMD and DME have significant limitations, there is a significant
unmet medical need for a new therapy for these diseases.
Macugen.
We
believe that Macugen may provide considerable benefits over the
existing therapies for wet AMD and DME because it addresses the
abnormal blood vessel growth and blood vessel leakage associated
with wet AMD and the blood vessel leakage associated with DME.
Abnormal blood vessel growth and blood vessel leakage are
associated with elevated levels of a protein known as vascular
endothelial growth factor, or VEGF, in the eye. The active
ingredient in Macugen is a chemically synthesized aptamer, which
is a single strand of nucleic acid that binds with specificity
to a particular target. Macugen binds with high specificity to
VEGF and prevents VEGF from binding to its natural receptor,
thereby inhibiting abnormal blood vessel growth and blood vessel
leakage. To date, Macugen has been administered by injection to
more than 900 individuals, and we have not observed any serious
drug-related adverse events or meaningful immunologic reactions.
In addition, the incidence of injection-related adverse events
has been well within what we believe to be the tolerable limits
for a drug that is administered via injection in the back of the
eye.
Clinical
Trials.
We are conducting one of
our two Phase 2/3 pivotal clinical trials for the use of Macugen
in the treatment of wet AMD in North America with 578 enrolled
patients and one primarily outside North America with 612
enrolled patients. In these trials, which are substantially
identical, we are testing the changes in a patient's visual
acuity from the beginning of the trial. The primary endpoint in
each trial is the proportion of patients treated with Macugen
losing fewer than 15 letters of visual acuity at 54 weeks
1
Table of Contents
compared to such proportion in the control group.
On the eye chart used in these clinical trials, 15 letters
equates to three lines. We are treating patients for a second
year in these trials to determine whether prolonged therapy with
Macugen provides additional benefits. All patients have
completed at least one year of participation in these trials. We
are also conducting a Phase 2 clinical trial for the use of
Macugen in the treatment of DME.
Collaboration with
Pfizer.
In December 2002, we
entered into our collaboration with Pfizer. In February 2003,
Pfizer paid us $100 million, consisting of a
$75 million up-front license fee and a $25 million
equity investment. Pfizer's financial obligations to us
include equity investments of up to an additional
$25 million, funding of a majority of the ongoing
development costs for Macugen, payments of up to
$195.5 million based on regulatory milestones and payments
of up to $450 million based on sales milestones. We and
Pfizer have agreed to copromote Macugen in the United States and
to share in profits and losses. We have granted Pfizer the
exclusive right to develop and commercialize Macugen outside the
United States pursuant to a royalty-bearing license. Under the
collaboration, we are entitled to participate in the United
States in detailing Pfizer's product Xalatan® for the
treatment of glaucoma.
Business
Strategy.
Our mission is to
develop and commercialize novel therapeutics to treat diseases
of the eye, with an initial focus on diseases of the back of the
eye. The key elements of our strategy are to:
•
Maximize Commercial Potential of
    Macugen.
We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product.
    We are also exploring the application of Macugen to a range of
    additional ophthalmic indications.
•
Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.
We are in the
    process of establishing focused domestic sales and marketing
    capabilities that will primarily target the approximately 1,400
    retinal specialists in the United States who perform most of the
    medical procedures involving back of the eye diseases. Our
    senior management includes well-known ophthalmologists who have
    close relationships with many of the key opinion leaders and
    academic experts in the retinal field, which we believe will
    facilitate our marketing and sales initiatives.
•
Develop Alternative Drug Delivery
    Technologies.
We are working to
    develop or acquire alternative technologies for the
    administration of drugs to the back of the eye that could
    facilitate the use of Macugen and other drugs as chronic or even
    preventative treatments for various back of the eye diseases.
•
Identify New Ophthalmic
    Products.
We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease.
•
Explore Additional Non-Ophthalmic Indications
    for Macugen.
We are using our
    preclinical research expertise to evaluate whether the anti-VEGF
    characteristics of Macugen and the underlying stability of its
    active molecule may make it an attractive local treatment for
    cancer, psoriasis and other diseases.
Management
Team.
We are led by a team of
experienced pharmaceutical industry executives and recognized
experts in ophthalmology and vision research. We believe that
this team provides us with a significant complement of
capabilities in the discovery, development and commercialization
of novel therapeutics to treat diseases of the eye.
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Concurrent Private Share Sale to
Pfizer
In connection with our collaboration with Pfizer,
concurrently with the closing of this offering, Pfizer will
purchase from us in a private sale $10 million of our
common stock at a price per share equal to the initial public
offering price. Assuming an initial public offering price of
$          per
share, Pfizer will
purchase                    shares
of our common stock. This purchase is part of the up to
$25 million in additional equity investments that Pfizer is
obligated to make under our collaboration.
Convertible Preferred Stock Warrants
As part of our series B preferred stock
financing, we issued warrants to purchase 1,142,902 shares of
our series B convertible preferred stock at an exercise
price of $6.00 per share. As part of our series C preferred
stock financing, we issued warrants to purchase 1,592,846 shares
of our series C-1 convertible preferred stock at an
exercise price of $6.80 per share and 1,504,354 shares of our
series C-2 convertible preferred stock at an exercise price
of $7.20 per share.
In connection with this offering, all of those
warrants will become exercisable for shares of our common stock,
and any of those warrants that are not exercised prior to
completion of this offering will be cancelled. The warrants may
be exercised by paying the exercise price in cash or pursuant to
a cashless exercise feature based on the initial public offering
price. If all of these warrants are exercised on a cashless
basis, assuming an initial public offering price of
$          per
share, we will issue an aggregate
of            shares
of common stock and receive no cash proceeds. If all of these
warrants are exercised for cash, we will issue an aggregate of
4,240,102 shares of common stock for cash proceeds of
approximately $28.5 million.
The warrants to purchase 833,333 shares of our
series B convertible preferred stock at an exercise price
of $6.00 per share that we issued in connection with our license
agreement with Gilead Sciences, Inc. will remain outstanding
after this offering and will be exercisable for 833,333 shares
of common stock at a price of $6.00 per share.
We were incorporated under the laws of the State
of Delaware in February 2000. Our principal executive offices
are located at 500 Seventh Avenue, 18th Floor, New York, New
York 10018, and our telephone number is (212) 997-9241. Our
website address is
www.eyetech.com
. The information on
our website is not a part of this prospectus. We have included
our website address in this document as an inactive textual
reference only.
Eyetech™, Eyetech Pharmaceuticals™ and
Macugen™ are our trademarks. Each of the other trademarks,
trade names or service marks appearing in this prospectus
belongs to its respective holder.
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Table of Contents
THE OFFERING
Common stock offered
shares
Common stock to be outstanding after this offering
shares
Use of proceeds
We estimate that our net proceeds from this
    offering will be
    $           million
    at an assumed initial public offering price of
    $          per
    share, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us. We intend to
    use these net proceeds to fund our research and development
    activities, to build our sales and marketing capabilities and
    for general corporate purposes, including working capital needs
    and potential acquisitions. See "Use of Proceeds."
Risk factors
You should read the "Risk Factors"
    section of this prospectus for a discussion of factors to
    consider carefully before deciding to invest in shares of our
    common stock.
Proposed NASDAQ National Market symbol
EYET
The number of shares of our common stock to be
outstanding after this offering is based on 28,180,368 shares
outstanding as of August 31, 2003, and
includes           shares
that we will issue in our concurrent private sale to Pfizer,
assuming an initial public offering price of
$          per
share. The number of shares of common stock to be outstanding
after this offering does not take into account:
•
4,477,500 shares of common stock issuable upon
    the exercise of stock options outstanding as of August 31,
    2003 at a weighted average exercise price of $1.64 per share;
•
an aggregate of 4,900,000 shares of common
    stock that will be reserved for future issuance under our 2003
    stock incentive plan and our 2003 employee stock purchase plan
    as of the completion of this offering; and
•
833,333 shares of common stock issuable upon the
    exercise of warrants that will remain outstanding after this
    offering at an exercise price of $6.00 per share.
The number of shares of common stock to be
outstanding after this offering also does not include up to
4,240,102 shares of common stock issuable upon exercise of
warrants that will be cancelled if not exercised prior to the
completion of this offering. If all of these warrants are
exercised on a cashless basis, assuming an initial public
offering price of
$           per
share, we will issue an aggregate
of                     shares
of common stock and receive no cash proceeds. If all of these
warrants are exercised for cash, we will issue an aggregate of
4,240,102 shares of common stock for cash proceeds of
approximately $28.5 million.
Unless otherwise noted, the information in this
prospectus assumes that the underwriters do not exercise their
over-allotment option and reflects the automatic conversion of
all outstanding shares of our convertible preferred stock into
an aggregate of 24,140,257 shares of common stock upon the
completion of this offering.
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Table of Contents
SUMMARY FINANCIAL INFORMATION
The following is a summary of our financial
information. You should read this information together with our
consolidated financial statements and the related notes
appearing at the end of this prospectus and the
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this
prospectus.
The pro forma net loss attributable to common
stockholders per share information is computed using the
weighted average number of common shares outstanding, after
giving pro forma effect to the automatic conversion of all
outstanding shares of our convertible preferred stock into
shares of our common stock effective upon the completion of this
offering, as if the conversion had occurred at the date of the
original issuance.
The pro forma balance sheet information gives
effect to the automatic conversion of all outstanding shares of
our convertible preferred stock into an aggregate of
24,140,257 shares of common stock upon the completion of
this offering. The pro forma as adjusted balance sheet
information gives further effect to:
•
our sale
    of                  shares
    of common stock in this offering at an assumed initial public
    offering price of
    $          per
    share, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us;
•
our sale
    of                  shares
    of common stock to Pfizer for cash proceeds of $10 million,
    at a purchase price equal to the assumed initial public offering
    price of
    $         per
    share; and
•
our issuance
    of                  shares
    of common stock upon exercise of outstanding warrants that will
    be cancelled if not exercised prior to completion of this
    offering, assuming that all warrants are exercised on a cashless
    basis based on an assumed initial public offering price of
    $         per share.
Period from
February 9, 2000
Six Months
(Date of
Year Ended December 31,
Ended June 30,
Inception) to
December 31, 2000
2001
2002
2002
2003
(Unaudited)
(In thousands, except share and per share information)
Statement of Operations Information:
Collaboration revenue
License fees
$
—
$
—
$
—
$
—
$
2,083
Reimbursement of development costs
—
—
—
—
16,550
Total collaboration revenue
$
—
$
—
$
—
$
—
$
18,633
Operating expenses:
Research and development
10,879
22,157
39,663
17,282
31,338
Sales and marketing
—
—
—
—
1,311
General and administrative
1,413
4,338
5,319
1,917
2,000
Total operating expenses
12,292
26,495
44,982
19,199
34,649
Loss from operations
(12,292
)
(26,495
)
(44,982
)
(19,199
)
(16,016
)
Interest income
1,181
1,815
1,809
820
1,647
Net loss
(11,111
)
(24,680
)
(43,173
)
(18,380
)
(14,369
)
Preferred stock accretion
(1,080
)
(2,494
)
(5,096
)
(2,171
)
(4,518
)
Net loss attributable to common stockholders
$
(12,191
)
$
(27,174
)
$
(48,270
)
$
(20,551
)
$
(18,887
)
Basic and diluted net loss attributable to common
    stockholders per share
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(5.62
)
$
(4.98
)
Weighted average shares outstanding —
    basic and diluted
2,219,178
3,659,422
3,697,192
3,654,548
3,791,401
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
$
(1.73
)
$
(0.68
)
Unaudited pro forma weighted average shares
    outstanding — basic and diluted
27,837,449
27,931,658
As of June 30, 2003
Pro Forma
Actual
Pro Forma
As Adjusted
(Unaudited)
(In thousands)
Balance Sheet Information:
Cash, cash equivalents and marketable securities
$
137,534
$
137,534
Total assets
162,093
162,093
Long-term capital lease obligations and
    redeemable convertible preferred stock
(174,933
)
(1,355
)
Accumulated deficit
(106,522
)
(106,522
)
Total stockholders' (deficit) equity
(95,814
)
77,764
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RISK FACTORS
This offering involves a high degree of risk.
You should consider carefully the risks and uncertainties
described below and the other information in this prospectus,
including the consolidated financial statements and the related
notes appearing at the end of this prospectus, before deciding
to invest in shares of our common stock. If any of the following
risks or uncertainties actually occurs, our business, prospects,
financial condition and operating results would likely suffer,
possibly materially. In that event, the market price of our
common stock could decline and you could lose all or part of
your investment.
Risks Relating to Our Business
We
depend heavily on the success of our lead product candidate,
Macugen, which is still under development. If we are unable to
commercialize Macugen, or experience significant delays in doing
so, our business will be materially harmed.
We have invested a significant portion of our
time and financial resources since our inception in the
development of Macugen. We anticipate that in the near term our
ability to generate revenues will depend solely on the
successful development and commercialization of Macugen. The
commercial success of Macugen will depend on several factors,
including the following:
• successful completion of clinical
trials;
• receipt of marketing approvals from
the FDA and similar foreign regulatory authorities;
• establishing commercial manufacturing
arrangements with third party manufacturers;
• launching commercial sales of the
product in collaboration with Pfizer; and
• acceptance of the product in the
medical community and with third party payors.
If the data from our ongoing Phase 2/3 pivotal
clinical trials for the use of Macugen in the treatment of wet
AMD are not satisfactory, we may not proceed with our planned
filing of a new drug application for Macugen or we may be forced
to delay the filing or narrow the indication for which we seek
marketing approval. Even if the results of the ongoing pivotal
trials appear satisfactory and we file a new drug application as
planned, the FDA may not accept our filing, may request
additional information from us, including data from additional
clinical trials, and, ultimately, may not grant marketing
approval for Macugen. If we are not successful in
commercializing Macugen, or are significantly delayed in doing
so, our business will be materially harmed and we may need to
curtail or cease operations.
The
success of Macugen depends heavily on our collaboration with
Pfizer, which was established only recently and involves a
complex sharing of control over decisions, responsibilities and
costs and benefits. Any loss of Pfizer as a collaborator, or
adverse development in the collaboration, would materially harm
our business.
In December 2002, we entered into our
collaboration with Pfizer to develop and commercialize Macugen
for the prevention and treatment of diseases of the eye. The
collaboration involves a complex sharing of control over
decisions, responsibilities and costs and benefits. In addition,
Pfizer may terminate the collaboration relationship upon six to
twelve months' prior notice, depending on when such notice
is given. Any loss of Pfizer as a collaborator in the
development or commercialization of Macugen, dispute over the
terms of, or decisions regarding, the collaboration or other
adverse development in our relationship with Pfizer would
materially harm our business and might accelerate our need for
additional capital.
If
our clinical trials are unsuccessful, or if we experience
significant delays in these trials, our ability to commercialize
Macugen and our future product candidates will be
impaired.
We must provide the FDA and similar foreign
regulatory authorities with preclinical and clinical data that
demonstrate that our product candidates are safe and effective
for each target indication before they can be approved for
commercial distribution. The preclinical testing and clinical
trials of any product candidates
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that we develop must comply with regulation by
numerous federal, state and local government authorities in the
United States, principally the FDA, and by similar agencies in
other countries. Clinical development is a long, expensive and
uncertain process and is subject to delays. We may encounter
delays or rejections based on our inability to enroll enough
patients to complete our clinical trials. Patient enrollment
depends on many factors, including the size of the patient
population, the nature of the trial protocol, the proximity of
patients to clinical sites and the eligibility criteria for the
study. Delays in planned patient enrollment may result in
increased costs and delays, which could have a harmful effect on
our ability to develop products.
It may take several years to complete the testing
of a product, and failure can occur at any stage of testing. For
example:
•
interim results of preclinical or clinical
    studies do not necessarily predict their final results, and
    acceptable results in early studies might not be seen in later
    studies;
•
potential products that appear promising at early
    stages of development may ultimately fail for a number of
    reasons, including the possibility that the products may be
    ineffective, less effective than products of our competitors or
    cause harmful side effects;
•
any preclinical or clinical test may fail to
    produce results satisfactory to the FDA or foreign regulatory
    authorities;
•
preclinical and clinical data can be interpreted
    in different ways, which could delay, limit or prevent
    regulatory approval;
•
negative or inconclusive results from a
    preclinical study or clinical trial or adverse medical events
    during a clinical trial could cause a preclinical study or
    clinical trial to be repeated or a program to be terminated,
    even if other studies or trials relating to the program are
    successful;
•
the FDA can place a clinical hold on a trial if,
    among other reasons, it finds that patients enrolled in the
    trial are or would be exposed to an unreasonable and significant
    risk of illness or injury;
•
we may encounter delays or rejections based on
    changes in regulatory agency policies during the period in which
    we develop a drug or the period required for review of any
    application for regulatory agency approval; and
•
our clinical trials may not demonstrate the
    safety and efficacy of any products or result in marketable
    products.
We are currently conducting two Phase 2/3
pivotal clinical trials for the use of Macugen in the treatment
of wet AMD and a Phase 2 clinical trial for the use of
Macugen in the treatment of DME. To obtain marketing approval,
we may decide to, or the FDA or other regulatory authorities may
require us to, pursue additional clinical trials or other
studies of Macugen. If we are unable to successfully complete
our clinical trials of Macugen or the results of these trials,
particularly the ongoing Phase 2/3 pivotal clinical trials,
are not positive or are only modestly positive, we may not be
able to obtain marketing approval for Macugen or may obtain
approval for indications that are not as broad as intended. If
this occurs, our business will be materially harmed.
Our product development costs will increase if we
experience delays in testing or approvals. Significant clinical
trial delays could allow our competitors to bring products to
market before we do and impair our ability to commercialize our
products or potential products.
We
face substantial competition which may result in others
discovering, developing or commercializing products before or
more successfully than us.
The development and commercialization of new
drugs is highly competitive. We will face competition with
respect to Macugen and any products we may develop or
commercialize in the future from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide. Our competitors may develop products or other novel
technologies that are more effective, safer or less costly than
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any that we are developing. Our competitors may
also obtain FDA or other regulatory approval for their products
more rapidly than we may obtain approval for ours.
The two therapies currently available for the
treatment of wet AMD are photodynamic therapy, which was
developed by QLT, Inc. and is marketed by Novartis AG, and
thermal laser treatment. The current therapies for the treatment
of DME are thermal laser treatment and steroid treatment
administered by physicians on an off-label basis. Macugen will
compete against these therapies if it is approved for marketing.
Additional treatments for these diseases are in various stages
of preclinical or clinical testing. Potential treatments in late
stage clinical trials include drugs sponsored by Alcon, Inc., a
collaboration of Genentech, Inc. and Novartis, Oculex
Pharmaceuticals, Inc., Miravant Medical Technologies, Eli Lilly
and Co. and Bausch & Lomb Incorporated. Some of the sponsors
of these potential products have recently announced favorable
results from Phase 1 or Phase 2 clinical trials. The
Genentech/ Novartis collaboration is developing an anti-VEGF
humanized antibody fragment for intravitreal injection. This
product candidate may be viewed as particularly competitive with
Macugen because of the similarity of its mechanism of action.
Other laser, surgical or pharmaceutical treatments for AMD and
DME may also compete against Macugen. These competitive
therapies may result in pricing pressure if we receive marketing
approval for Macugen even if Macugen is otherwise viewed as a
preferable therapy.
Many of our competitors have substantially
greater financial, technical and human resources than we have.
Additional mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources being
concentrated in our competitors. Competition may increase
further as a result of advances made in the commercial
applicability of technologies and greater availability of
capital for investment in these fields.
We may not be successful in our efforts to
    expand our portfolio of products.
A key element of our strategy is to commercialize
a portfolio of new ophthalmic drugs in addition to Macugen. We
are seeking to do so through our internal research programs and
through licensing or otherwise acquiring the rights to potential
new drugs and drug targets for the treatment of ophthalmic
disease.
A significant portion of the research that we are
conducting involves new and unproven technologies. Research
programs to identify new disease targets and product candidates
require substantial technical, financial and human resources
whether or not we ultimately identify any candidates. Our
research programs may initially show promise in identifying
potential product candidates, yet fail to yield product
candidates for clinical development for a number of reasons,
including:
•
the research methodology used may not be
    successful in identifying potential product candidates; or
•
potential product candidates may on further study
    be shown to have harmful side effects or other characteristics
    that indicate they are unlikely to be effective drugs.
We may be unable to license or acquire suitable
product candidates or products from third parties for a number
of reasons. In particular, the licensing and acquisition of
pharmaceutical products is a competitive area. A number of more
established companies are also pursuing strategies to license or
acquire products in the ophthalmic field. These established
companies may have a competitive advantage over us due to their
size, cash resources and greater clinical development and
commercialization capabilities. Other factors that may prevent
us from licensing or otherwise acquiring suitable product
candidates include the following:
•
we may be unable to license or acquire the
    relevant technology on terms that would allow us to make an
    appropriate return from the product;
•
companies that perceive us to be their
    competitors may be unwilling to assign or license their product
    rights to us; or
•
we may be unable to identify suitable products or
    product candidates within our areas of expertise.
If we are unable to develop suitable potential
product candidates through internal research programs or by
obtaining rights to novel therapeutics from third parties, our
business will suffer.
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Market acceptance of Macugen and other
    products we develop in the future that are based on new
    technologies may be limited.
The commercial success of the products for which
we may obtain marketing approval from the FDA or other
regulatory authorities will depend upon the acceptance of these
products by the medical community and third party payors as
clinically useful, cost-effective and safe. We expect that many
of the products that we develop will be based upon new
technologies. For example, Macugen is an aptamer, which is a
type of nucleic acid. To date, no aptamer has been approved as a
pharmaceutical by the FDA. As a result, it may be more difficult
for us to achieve market acceptance of our products,
particularly the first products that we introduce to the market
based on new technologies. Our efforts to educate the medical
community about these potentially unique approaches may require
greater resources than would be typically required for products
based on conventional technologies. The safety, efficacy,
convenience and cost-effectiveness of our products as compared
to competitive products will also affect market acceptance.
We
are in the process of establishing our sales and marketing
capabilities. We will need to successfully recruit marketing and
sales personnel and build a marketing and sales infrastructure
to successfully commercialize Macugen and other products that we
develop, acquire or license.
We have limited experience in marketing or
selling products and are in the process of establishing our
sales and marketing capabilities. To achieve commercial success
for any approved product, we must either develop a sales and
marketing organization or outsource these functions to third
parties. We are beginning to recruit a specialty sales force to
participate in detailing Xalatan and, assuming regulatory
approval, to market and sell Macugen in the United States in
collaboration with Pfizer. If we are not successful in
recruiting sales and marketing personnel or in building a sales
and marketing infrastructure, our business will materially
suffer. Moreover, if the commercial launch of Macugen is delayed
as a result of FDA requirements or other reasons, we may
establish sales and marketing capabilities too early relative to
the launch of Macugen. This may be expensive, and our investment
would be lost if we cannot retain our sales and marketing
personnel.
We
expect to depend on collaborations with third parties to develop
and commercialize our products.
Our business strategy includes entering into
collaborations with corporate and academic collaborators for the
research, development and commercialization of additional
product candidates, such as our collaboration with Pfizer. These
arrangements may not be scientifically or commercially
successful. The termination of any of these arrangements might
adversely affect our ability to develop, commercialize and
market our products.
The success of these arrangements will depend
heavily on the efforts and activities of our collaborators. Our
collaborators will have significant discretion in determining
the efforts and resources that they will apply to these
collaborations. The risks that we face in connection with these
collaborations, including our collaboration with Pfizer, include
the following:
•
our collaboration agreements are, or are expected
    to be, for fixed terms and subject to termination under various
    circumstances, including, in many cases, on short notice without
    cause;
•
we expect to be required in our collaboration
    agreements not to conduct specified types of research and
    development in the field that is the subject of the
    collaboration. These agreements may have the effect of limiting
    the areas of research and development that we may pursue, either
    alone or in cooperation with third parties;
•
our collaborators may develop and commercialize,
    either alone or with others, products and services that are
    similar to or competitive with our products that are the subject
    of the collaboration with us; and
•
our collaborators may change the focus of their
    development and commercialization efforts. Pharmaceutical and
    biotechnology companies historically have re-evaluated their
    priorities following mergers and consolidations, which have been
    common in recent years in these industries. The ability of our
    products to reach their potential could be limited if our
    collaborators decrease or fail to increase spending relating to
    such products.
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Collaborations with pharmaceutical companies and
other third parties often are terminated or allowed to expire by
the other party. Such terminations or expirations can adversely
affect us financially as well as harm our business reputation.
We
may not be successful in establishing additional collaborations,
which could adversely affect our ability to develop and
commercialize products and services.
An important element of our business strategy is
entering into collaborations for the development and
commercialization of products when we believe that doing so will
maximize product value. If we are unable to reach agreements
with suitable collaborators, we may fail to meet our business
objectives for the affected product or program. We face
significant competition in seeking appropriate collaborators.
Moreover, these collaboration arrangements are complex to
negotiate and time-consuming to document. We may not be
successful in our efforts to establish additional collaborations
or other alternative arrangements. The terms of any additional
collaborations or other arrangements that we establish may not
be favorable to us. Moreover, these collaborations or other
arrangements may not be successful.
We
have no manufacturing capabilities and limited manufacturing
personnel. We expect to depend on third parties to manufacture
Macugen and future products. If these manufacturers fail to meet
our requirements or those of the FDA and similar foreign
regulatory bodies, our product development and commercialization
efforts may be materially harmed.
We have limited personnel with experience in, and
we do not own facilities for, manufacturing any products. There
are a limited number of manufacturers that operate under the
FDA's and the European Union's current good
manufacturing practices regulations and are both capable of
manufacturing Macugen and willing to do so.
For our clinical trials of Macugen, we engaged a
third party manufacturer to produce the active pharmaceutical
ingredient. We are in the process of negotiating an agreement
with an affiliate of this third party for commercial supply. For
our clinical trials of Macugen, we also engaged a separate fill
and finish manufacturer to formulate the active pharmaceutical
ingredient from a powder into a solution and to fill the
solution into syringes. We are negotiating with this
manufacturer to provide the fill and finish services for
commercial supply. We may be unable to conclude agreements for
commercial supply with these third party manufacturers, or may
be unable to do so on acceptable terms. Even if we conclude
these agreements, these manufacturers will be single source
suppliers to us for a significant period of time. We also expect
to continue to rely on a single source of supply for the
pegylation reagent used in the manufacture of Macugen.
The manufacturer of the active pharmaceutical
ingredient of Macugen with whom we are currently negotiating an
agreement for commercial supply plans to produce commercial
quantities at a different site than the site used to manufacture
the active pharmaceutical ingredient for clinical trial use.
Because of this change of site, the FDA is requiring us to
perform analytical tests to demonstrate that changing the
manufacturing location has not affected the characteristics of
the product. If we cannot establish that the products are
equivalent to the satisfaction of the FDA, we may not obtain or
may be delayed in obtaining approval to launch Macugen.
In order to obtain approval of our products,
including Macugen, by the FDA and foreign regulatory agencies,
we need to complete testing on both the active pharmaceutical
ingredient and on the finished product in the packaging we
propose for commercial sale. This includes testing of stability,
identification of impurities and testing of other product
specifications. With respect to Macugen, this testing is ongoing
and has not been completed. If this testing is delayed or
produces unfavorable results, we may not obtain or may be
delayed in obtaining approval to launch Macugen.
In order to produce Macugen in the quantities
necessary to meet anticipated market demand if the product is
approved, we and our contract manufacturer will need to increase
the manufacturing capacity for the active pharmaceutical
ingredient. We initially intend to increase manufacturing
capacity for the active pharmaceutical ingredient by installing
additional manufacturing lines at the contract
manufacturer's facility. We are also exploring alternatives
for increasing manufacturing capacity, including developing
alternative
10
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manufacturing methods for the active
pharmaceutical ingredient. If we are unable to increase our
manufacturing capacity, or if the cost of this increased
capacity is uneconomic to us, we may not be able to produce
Macugen in a sufficient quantity to meet the requirements for
the launch of the product or to meet future demand. In addition,
our revenues and gross margins could be adversely affected.
Reliance on third party manufacturers entails
risks to which we would not be subject if we manufactured
products ourselves, including:
•
reliance on the third party for regulatory
    compliance and quality assurance;
•
the possible breach of the manufacturing
    agreement by the third party because of factors beyond our
    control; and
•
the possibility of termination or nonrenewal of
    the agreement by the third party, based on its own business
    priorities, at a time that is costly or inconvenient for us.
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 products, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product,
operating restrictions and criminal prosecutions, any of which
could significantly and adversely affect our business. Changing
manufacturers may require revalidation of the manufacturing
process and procedures in accordance with FDA mandated current
good manufacturing practices. This revalidation may be costly
and time consuming.
We may in the future elect to manufacture some of
our products in our own manufacturing facilities. We would need
to invest substantial additional funds and recruit qualified
personnel in order to build or lease and operate any
manufacturing facilities.
Macugen
and our other potential products may not be commercially viable
if we fail to obtain an adequate level of reimbursement for
these products by Medicare and other third party payors. The
markets for our products may also be limited by the indications
for which the use may be reimbursed or the frequency in which it
may be administered.
The availability and levels of reimbursement by
governmental and other third party payors affect the market for
products such as Macugen and others that we may develop. These
third party payors continually attempt to contain or reduce the
costs of healthcare by challenging the prices charged for
medical products and services. In some foreign countries,
particularly the countries of the European Union, the pricing of
prescription pharmaceuticals is subject to governmental control.
In these countries, pricing negotiations with governmental
authorities can take six to twelve months or longer after the
receipt of regulatory marketing approval for a product. To
obtain reimbursement or pricing approval in some countries, we
may be required to conduct a clinical trial that compares the
cost-effectiveness of our products, including Macugen, to other
available therapies. If reimbursement for our products is
unavailable or limited in scope or amount or if pricing is set
at unsatisfactory levels, our business could be materially
harmed.
Because most persons suffering from wet AMD are
elderly, we expect that coverage for Macugen in the United
States will be primarily through the Medicare program. Although
drugs that are not usually self-administered are ordinarily
covered by Medicare, the Medicare program has taken the position
that it can decide not to cover particular drugs if it
determines that they are not "reasonable and
necessary" for Medicare beneficiaries. Our business would
be materially adversely affected if the Medicare program were to
make such a determination and deny reimbursement of Macugen. Our
business also could be adversely affected if physicians are not
reimbursed by Medicare for the cost of the procedure in which
they administer Macugen on a basis satisfactory to the
administering physicians. If the local contractors that
administer the Medicare program are slow to reimburse physicians
for Macugen, the physicians may pay us more slowly, which would
adversely affect our working capital requirements.
We also will need to obtain approvals for payment
for Macugen from private insurers, including managed care
organizations. This can be a time consuming and expensive
process. Our business would be materially
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adversely affected if we do not receive approval
for reimbursement of Macugen from private insurers on a
satisfactory basis.
Our business could also be adversely affected if
the Medicare program or other reimbursing bodies or payors limit
the indications for which Macugen will be reimbursed to a
smaller set than we believe it is effective in treating or
establish a limitation on the frequency with which Macugen may
be administered that is less often than we believe would be
effective.
We expect to experience pricing pressures in
connection with the sale of Macugen and our future products due
to the trend toward programs aimed at reducing healthcare costs,
the increasing influence of health maintenance organizations and
additional legislative proposals.
Legislative
or regulatory reform of the healthcare system may affect our
ability to sell our products profitably.
In both the United States and some foreign
jurisdictions, there have been a number of legislative and
regulatory proposals to change the healthcare system in ways
that could affect our ability to sell our products profitably.
In the United States, new legislation has been proposed at the
federal and state levels that would result in significant
changes to the healthcare system, either nationally or at the
state level. For example, in the United States, both the House
of Representatives and the Senate have passed bills that, in
different ways, would reduce Medicare payments for drugs. In
addition, the Centers for Medicare and Medicaid Services, the
agency within the Department of Health and Human Services that
administers Medicare and will be responsible for reimbursement
of the cost of Macugen, has asserted the authority of Medicare
not to cover particular drugs if it determines that they are not
"reasonable and necessary" for Medicare beneficiaries.
Further federal and state proposals and healthcare reforms are
likely. Our results of operations could be materially adversely
affected if these or other healthcare reforms are adopted.
We face the risk of product liability
    claims and may not be able to obtain insurance.
Our business exposes us to the risk of product
liability claims that is inherent in the manufacturing, testing
and marketing of drugs and related products. If the use of one
or more of our products harms people, we may be subject to
costly and damaging product liability claims. Although we have
product liability and clinical trial liability insurance that we
believe is appropriate, this insurance is subject to deductibles
and coverage limitations. We may not be able to obtain or
maintain adequate protection against potential liabilities. If
we are unable to obtain insurance at acceptable cost or
otherwise protect against potential product liability claims, we
will be exposed to significant liabilities, which may materially
and adversely affect our business and financial position. These
liabilities could prevent or interfere with our product
development and commercialization efforts.
We
depend on our key personnel. If we are not able to retain them
or recruit additional technical personnel, our business will
suffer.
We are highly dependent on the principal members
of our management and scientific staff, particularly
Dr. David R. Guyer, our co-founder and Chief Executive
Officer, and Dr. Anthony P. Adamis, our co-founder,
Chief Scientific Officer and Senior Vice President, Research.
Our employment agreements with these and our other executive
officers are terminable on short or no notice. We do not carry
key man life insurance on any of our key personnel. The loss of
service of any of our key employees could harm our business.
In addition, our growth will require us to hire a
significant number of qualified technical, commercial and
administrative personnel. There is intense competition from
other companies and research and academic institutions for
qualified personnel in the areas of our activities. If we cannot
continue to attract and retain, on acceptable terms, the
qualified personnel necessary for the continued development of
our business, we may not be able to sustain our operations or
grow.
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We depend on third parties in the conduct
    of our clinical trials for Macugen and any failure of those
    parties to fulfill their obligations could adversely affect our
    development and commercialization plans.
We depend on independent clinical investigators,
contract research organizations and other third party service
providers in the conduct of our clinical trials for Macugen and
expect to do so with respect to other product candidates. We
rely heavily on these parties for successful execution of our
clinical trials, but do not control many aspects of their
activities. For example, the investigators are not our
employees. However, we are responsible for ensuring that each of
our clinical trials is conducted in accordance with the general
investigational plan and protocols for the trial. Third parties
may not complete activities on schedule, or may not conduct our
clinical trials in accordance with regulatory requirements or
our stated protocols. The failure of these third parties to
carry out their obligations could delay or prevent the
development, approval and commercialization of Macugen and
future product candidates.
Regulatory Risks
We may not be able to obtain marketing
    approval for any of the products resulting from our development
    efforts, including Macugen. Failure to obtain these approvals
    could materially harm our business.
All of the products that we are developing or may
develop in the future will require additional research and
development. The research and development work that we must
perform will include extensive preclinical studies and clinical
trials. We will be required to obtain an effective
investigational new drug application, or IND, prior to
initiating human clinical trials and must obtain regulatory
approval prior to any commercial distribution. This process is
expensive, uncertain and lengthy, often taking a number of years
until a product is approved for commercial distribution. We have
only one product, Macugen, that has advanced to the point that
it is undergoing clinical trials. We have not received
regulatory approval to market Macugen in any jurisdiction.
Failure to obtain required regulatory approvals could materially
harm our business.
We may need to successfully address a number of
technological challenges in order to complete the development of
Macugen or any of our future products. Moreover, these products
may not be effective, may be only moderately effective or may
prove to have undesirable or unintended side effects, toxicities
or other characteristics that may preclude our obtaining
regulatory approval or prevent or limit commercial use, which
could have a material adverse effect on our business. The FDA
and other regulatory authorities may not approve any product
that we develop.
The "fast track" designation for
    development of Macugen may not actually lead to a faster
    development or regulatory review or approval
    process.
If a drug is intended for the treatment of a
serious or life-threatening condition and the drug demonstrates
the potential to address unmet medical needs for this condition,
the drug sponsor may apply for FDA "fast track"
designation. The fast track classification does not apply to the
product alone, but applies to the combination of the product and
the specific indication or indications for which it is being
studied. The FDA's fast track programs are designed to
facilitate the clinical development and evaluation of the
drug's safety and efficacy for the fast track indication or
indications. Marketing applications filed by sponsors of
products in fast track development may qualify for expedited
review under policies or procedures offered by the FDA, but the
fast track designation does not assure such qualification.
Although we have obtained a fast track designation from the FDA
for Macugen for the treatment of both wet AMD and DME, we may
not experience a faster development process, review or approval
compared to conventional FDA procedures. Our fast track
designation may be withdrawn by the FDA if it believes that the
designation is no longer supported by data from our clinical
development program. Our fast track designation does not
guarantee that we will qualify for or be able to take advantage
of the expedited review procedures.
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Our
products could be subject to restrictions or withdrawal from the
market and we may be subject to penalties if we fail to comply
with regulatory requirements, or if we experience unanticipated
problems with our products, when and if any of them are
approved.
Any product for which we obtain marketing
approval, along with the manufacturing processes, post-approval
clinical data, advertising and promotional activities for such
product, will be subject to continual requirements, review and
periodic inspections by the FDA and other regulatory bodies.
Even if regulatory approval of a product is granted, the
approval may be subject to limitations on the indicated uses for
which the product may be marketed or to the conditions of
approval, or contain requirements for costly post-marketing
testing and surveillance to monitor the safety or efficacy of
the product. Later discovery of previously unknown problems with
our products, manufacturer or manufacturing processes, or
failure to comply with regulatory requirements, may result in:
•
restrictions on such products or manufacturing
    processes;
•
withdrawal of the products from the market;
•
voluntary or mandatory recall;
•
fines;
•
suspension of regulatory approvals;
•
product seizure;
•
injunctions or the imposition of civil; and
•
criminal penalties.
We may be slow to adapt, or we may never adapt,
to changes in existing regulatory requirements or adoption of
new regulatory requirements or policies.
Failure
to obtain regulatory approval in foreign jurisdictions would
prevent us from marketing our products abroad.
We intend to have our products marketed outside
the United States. In order to market our products in the
European Union and many other foreign jurisdictions, we must
obtain separate regulatory approvals and comply with numerous
and varying regulatory requirements. In the case of Macugen,
Pfizer has responsibility to obtain regulatory approvals outside
the United States, and we will depend on Pfizer to obtain these
approvals. The approval procedure varies among countries and can
involve additional testing. The time required to obtain approval
may differ from that required to obtain FDA approval. The
foreign regulatory approval process may include all of the risks
associated with obtaining FDA approval. We may not obtain
foreign regulatory approvals on a timely basis, if at all.
Approval by the FDA does not ensure approval by regulatory
authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory
authorities in other foreign countries or by the FDA. We and our
collaborators may not be able to file for regulatory approvals
and may not receive necessary approvals to commercialize our
products in any market. The failure to obtain these approvals
could materially adversely affect our business, financial
condition and results of operations.
We
have only limited experience in regulatory affairs, and some of
our products may be based on new technologies. These factors may
affect our ability or the time we require to obtain necessary
regulatory approvals.
We have only limited experience in filing and
prosecuting the applications necessary to gain regulatory
approvals. Moreover, some of the products that are likely to
result from our product development, licensing and acquisition
programs may be based on new technologies that have not been
extensively tested in humans. The regulatory requirements
governing these types of products may be less well defined or
more rigorous than for conventional products. As a result, we
may experience a longer regulatory process in connection with
obtaining regulatory approvals of any products that we develop,
license or acquire.
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Risks Relating to Intellectual
Property
If we are unable to obtain protection for
    the intellectual property incorporated into our products, the
    value of our technology and products will be adversely
    affected.
Our success will depend in large part on our
ability or the ability of our licensors to obtain protection in
the United States and other countries for the intellectual
property incorporated into our products. The patent situation in
the field of biotechnology and pharmaceuticals generally is
highly uncertain and involves complex legal and scientific
questions. Neither we nor our licensors may be able to obtain
issued patents relating to our technology. Even if issued,
patents may be challenged, invalidated, or circumvented, which
could limit our ability to stop competitors from marketing
similar products or the length of term of patent protection we
may have for our products. In addition, our patents and our
licensors' patents also may not afford us protection
against competitors with similar technology. Because patent
applications in the United States and many foreign jurisdictions
are typically not published until 18 months after filing,
or in some cases not at all, and because publications of
discoveries in the scientific literature often lag behind actual
discoveries, neither we nor our licensors can be certain that we
or they were the first to make the inventions claimed in issued
patents or pending patent applications, or that we or they were
the first to file for protection of the inventions set forth in
these patent applications.
If
we fail to comply with our obligations in the agreements under
which we license development or commercialization rights to
products or technology from third parties, we could lose license
rights that are important to our business.
We are a party to a number of technology licenses
that are important to our business and expect to enter into
additional licenses in the future. For example, we hold licenses
from Gilead and Nektar Therapeutics under patents relating to
Macugen. These licenses impose various commercialization,
milestone payment, royalty, insurance, and other obligations on
us. If we fail to comply with these obligations, the licensor
may have the right to terminate the license, in which event we
would not be able to market products, including Macugen, that
were covered by the license.
Third
parties may own or control patents or patent applications and
require us to seek licenses, which could increase our
development and commercialization costs, or prevent us from
developing or marketing our products or services.
We may not have rights under some patents or
patent applications related to our proposed products. Third
parties may own or control these patents and patent applications
in the United States and abroad. Therefore, in some cases, in
order to develop, manufacture, sell or import certain of our
proposed products, including Macugen, we or our collaborators
may choose to seek, or be required to seek, licenses under third
party patents issued in the United States and abroad or under
patents that might issue from United States and foreign patent
applications. In such event, we would most likely be required to
pay license fees or royalties or both to the licensor. If
licenses are not available to us on acceptable terms, we or our
collaborators may not be able to develop, manufacture, sell or
import the affected products.
If we are unable to protect the
    confidentiality of our proprietary information and know how, the
    value of our technology and products could be adversely
    affected.
In addition to patented technology, we rely upon
unpatented proprietary technology, processes, and know how. We
seek to protect this information in part by confidentiality
agreements with our employees, consultants and third parties.
These agreements may be breached, and we may not have adequate
remedies for any such breach. In addition, our trade secrets may
otherwise become known or be independently developed by
competitors.
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Third parties may own or control patents or
    patent applications that would be infringed by our technologies,
    drug targets or potential products. This could cause us to
    become involved in expensive patent litigation or other
    proceedings, which could result in our incurring substantial
    costs and expenses and liability for damages and could require
    us to stop some of our development and commercialization
    efforts.
We may not have rights under some patents or
patent applications that would be infringed by technologies that
we use in our research, drug targets that we select or product
candidates that we seek to develop and commercialize. Third
parties may own or control these patents and patent applications
in the United States and abroad. These third parties could bring
claims against us or our collaborators that would cause us to
incur substantial expenses and, if successful against us, could
cause us to pay substantial damages. Further, if a patent
infringement suit were brought against us or our collaborators,
we or they could be forced to stop or delay research,
development, manufacturing or sales of the product or product
candidate that is the subject of the suit. As a result, we or
our collaborators may choose to seek, or be required to seek, a
license from the third party and would most likely be required
to pay license fees or royalties or both. These licenses may not
be available on acceptable terms, or at all. Even if we or our
collaborators were able to obtain a license, the rights may be
nonexclusive, which would give our competitors access to the
same intellectual property. Ultimately, we could be prevented
from commercializing a product, or be forced to cease some
aspect of our business operations, as a result of patent
infringement claims, which could harm our business significantly.
There has been substantial litigation and other
proceedings regarding the patent and other intellectual property
rights in the pharmaceutical and biotechnology industries. In
addition to infringement claims against us, we may become a
party to other patent litigation and other proceedings,
including interference proceedings declared by the United States
Patent and Trademark Office and opposition proceedings in the
European Patent Office, regarding intellectual property rights
with respect to our products and technology. The cost to us of
any patent litigation or other proceeding, even if resolved in
our favor, could be substantial. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater
financial resources. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could
have a material adverse effect on our ability to compete in the
marketplace. Patent litigation and other proceedings may also
absorb significant management time.
Risks Relating to Our Financial Results and
Need for Financing
We
have a limited operating history and have incurred losses since
inception. If we do not generate significant revenues, we will
not be able to achieve profitability.
We have no current source of product revenue. We
have a limited operating history and have focused primarily on
clinical trials of Macugen. We began operations in 2000, and we
have not been profitable in any quarter since inception. As of
June 30, 2003, we had an accumulated deficit of
approximately $106.5 million. We expect to increase our
spending significantly as we continue to expand our
infrastructure, development programs and commercialization
activities. As a result, we will need to generate significant
revenues to pay these costs and achieve profitability. We do not
know whether or when we will become profitable because of the
significant uncertainties with respect to our ability to
generate revenues from the sale of our products and from our
existing and potential future collaborations.
We
may need additional financing, which may be difficult to obtain.
Our failure to obtain necessary financing or doing so on
unattractive terms could adversely affect our development
programs and other operations.
We will require substantial funds to conduct
development, including preclinical testing and clinical trials,
of our potential products. We will also require substantial
funds to meet our obligations to our collaborators and maximize
the prospective benefits to us from our collaborations,
manufacture and market products that are approved for commercial
sale in the future, including Macugen.
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Our future capital requirements will depend on
many factors, including:
•
the success of our collaboration with Pfizer to
    develop and commercialize Macugen;
•
the scope and results of our clinical trials;
•
advancement of other product candidates into
    development;
•
potential acquisition or in-licensing of other
    products or technologies;
•
the timing of, and the costs involved in,
    obtaining regulatory approvals;
•
the cost of manufacturing activities;
•
the cost of commercialization activities,
    including product marketing, sales and distribution;
•
the costs involved in preparing, filing,
    prosecuting, maintaining and enforcing patent claims and other
    patent-related costs, including litigation costs and the results
    of such litigation;
•
our ability to establish and maintain additional
    collaborative arrangements; and
•
the success of our detailing agreement with
    Pfizer relating to Xalatan.
Additional financing may not be available to us
when we need it or it may not be available on favorable terms.
If we are unable to obtain adequate financing on a timely basis,
we may be required to significantly curtail one or more of our
development, licensing or acquisition programs. We could be
required to seek funds through arrangements with collaborators
or others that may require us to relinquish rights to some of
our technologies, product candidates or products which we would
otherwise pursue on our own. If we raise additional funds by
issuing equity securities, our then-existing stockholders will
experience dilution and the terms of any new equity securities
may have preferences over our common stock.
Risks Related to This Offering
We
have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
We cannot specify with certainty the particular
uses of the net proceeds that we will receive from this
offering. Our management will have broad discretion in the
application of the net proceeds, including for any of the
purposes described in "Use of Proceeds." Our
stockholders may not agree with the manner in which our
management chooses to allocate and spend the net proceeds. The
failure by our management to apply these funds effectively could
have a material adverse effect on our business. Pending their
use, we may invest the net proceeds from this offering in a
manner that does not produce income or that loses value.
After
this offering, our executive officers, directors and major
stockholders will maintain the ability to control all matters
submitted to stockholders for approval.
When this offering is completed, our executive
officers, directors and stockholders who owned more than 5% of
our outstanding common stock before the completion of this
offering, will, in the aggregate, beneficially own shares
representing
approximately           %
of our capital stock. As a result, if these stockholders were to
choose to act together, they would be able to control all
matters submitted to our stockholders for approval, as well as
our management and affairs. For example, these persons, if they
choose to act together, will control the election of directors
and approval of any merger, consolidation or sale of all or
substantially all of our assets. This concentration of voting
power could delay or prevent an acquisition of our company on
terms that other stockholders may desire.
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Antitakeover
defenses that we have in place could delay or prevent an
acquisition and could adversely affect the price of our common
stock because purchasers cannot acquire a controlling
interest.
Provisions of our corporate charter and bylaws
and applicable provisions of the General Corporation Law of the
State of Delaware may make it more difficult for or prevent a
third party from acquiring control of us without the approval of
our board of directors. These provisions include:
•
a classified board of directors;
•
limitations on the removal of directors;
•
limitations on stockholder proposals at meetings
    of stockholders;
•
the inability of stockholders to act by written
    consent or to call special meetings; and
•
the ability of our board of directors to
    designate the terms of and issue new series of preferred stock
    without stockholder approval.
The affirmative vote of the holders of at least
75% of our shares of capital stock entitled to vote is necessary
to amend or repeal the above provisions of our certificate of
incorporation. In addition, absent approval of our board of
directors, our bylaws may only be amended or repealed by the
affirmative vote of the holders of at least 75% of our shares of
capital stock entitled to vote.
These provisions may have the effect of
entrenching our management team and may deprive you of the
opportunity to sell your shares to potential acquirors at a
premium over prevailing prices. This potential inability to
obtain a control premium could reduce the market price of our
common stock.
If you purchase shares of common stock in
    this offering, you will suffer immediate and substantial
    dilution of your investment.
Purchasers of common stock in this offering will
pay a price per share that substantially exceeds the per share
value of our tangible assets after subtracting our liabilities
and the per share price paid by our existing stockholders and by
persons who exercise currently outstanding options to acquire
our common stock. Accordingly, assuming an initial public
offering price of
$          per
share, you will experience immediate and substantial dilution of
approximately
$          per
share, representing the difference between our pro forma net
tangible book value per share after giving effect to this
offering and the assumed initial public offering price. In
addition, purchasers of common stock in this offering will have
contributed
approximately           %
of the aggregate price paid by all purchasers of our stock but
will own only
approximately           %
of our common stock outstanding after this offering.
An active trading market for our common
    stock may not develop.
Prior to this offering, there has been no public
market for our common stock. Although we have applied to have
our common stock quoted on the NASDAQ National Market, an active
trading market for our shares may never develop or be sustained
following this offering. The initial public offering price for
our common stock will be determined through negotiations with
the underwriters. This initial public offering price may vary
from the market price of our common stock after the offering.
Investors may not be able to sell their common stock at or above
the initial public offering price.
If our stock price is volatile, purchasers
    of our common stock could incur substantial
    losses.
Our stock price is likely to be volatile. The
stock market in general and the market for biotechnology
companies in particular have experienced extreme volatility that
has often been unrelated to the operating performance of
particular companies. As a result of this volatility, investors
may not be able to sell their common stock at or above the
initial public offering price. The market price for our common
stock may be influenced by many factors, including:
•
results of our clinical trials or those of our
    competitors;
•
the regulatory status of Macugen and our other
    potential products;
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•
failure of any of our product candidates, if
    approved, to achieve commercial success;
•
developments concerning our collaborators,
    including Pfizer;
•
regulatory developments in the United States and
    foreign countries;
•
developments or disputes concerning patents or
    other proprietary rights;
•
our ability to manufacture products to commercial
    standards;
•
public concern over our drugs;
•
litigation;
•
the departure of key personnel;
•
future sales of our common stock;
•
variations in our financial results or those of
    companies that are perceived to be similar to us;
•
changes in the structure of healthcare payment
    systems;
•
investors' perceptions of us; and
•
general economic, industry and market conditions.
If there are substantial sales of our
    common stock, our stock price could decline.
If our existing stockholders sell a large number
of shares of our common stock or the public market perceives
that existing stockholders might sell shares of common stock,
the market price of our common stock could decline
significantly. All of the shares being sold in this offering
will be freely tradable without restriction or further
registration under the federal securities laws, unless purchased
by our "affiliates" as that term is defined in
Rule 144 under the Securities Act. Of the
remaining                      shares
outstanding upon completion of this
offering,                     may
be sold pursuant to Rule 144 upon the expiration of 180-day
lock-up agreements.
Existing stockholders holding an aggregate
of                      shares
of common stock, including shares of common stock underlying
options and warrants, have rights with respect to the
registration of these shares of common stock with the Securities
and Exchange Commission. If we register their shares of common
stock following the expiration of the lock-up agreements, they
can sell those shares in the public market.
Promptly following this offering, we intend to
register
approximately                      shares
of common stock that are authorized for issuance under our stock
plans. As of August 31, 2003, 4,477,500 shares were
subject to outstanding options, all of which were immediately
exercisable and of which our right to repurchase
1,457,239 shares underlying the options had lapsed. 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.
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SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking
statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, included
in this prospectus regarding our strategy, future operations,
future financial position, future revenues, projected costs,
prospects, plans and objectives of management are
forward-looking statements. The words "anticipates,"
"believes," "estimates,"
"expects," "intends," "may,"
"plans," "projects," "will,"
"would" and similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain these identifying words. We
may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the
cautionary statements included in this prospectus, particularly
in the "Risk Factors" section, that we believe could
cause actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or
investments we may make. We do not assume any obligation to
update any forward-looking statements.
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USE OF PROCEEDS
We estimate that the net proceeds from our sale
of                      shares
of common stock in this offering will be approximately
$                     million,
or approximately
$                     million
if the underwriters exercise their over-allotment option in
full. This estimate is based upon an assumed initial public
offering price of
$           per
share, less estimated underwriting discounts and commissions and
offering expenses payable by us. We will also receive
$10 million from our concurrent private sale of common
stock to Pfizer, and we may receive up to an additional
$28.5 million if holders of our outstanding warrants elect
to exercise those warrants for cash prior to the completion of
this offering.
We intend to use all of these net proceeds
approximately as follows:
•
% to
    fund our research and development activities;
•
% to
    build our sales and marketing capabilities; and
•
% for
    general corporate purposes, including working capital needs.
We may also use a portion of the net proceeds for
acquisitions, which may include the acquisition or licensing of
rights to potential new drugs, drug targets or drug delivery
technologies. Although we periodically evaluate acquisition and
licensing opportunities, we currently have no commitments or
agreements with respect to any specific acquisition or license.
Pending the uses described above, we intend to
invest the net proceeds of this offering in short- to
medium-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on
either our common stock or preferred stock. We currently intend
to retain all of our future earnings to finance the growth and
development of our business. We do not intend to pay cash
dividends to our stockholders in the foreseeable future.
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CAPITALIZATION
The following table sets forth our cash, cash
equivalents and marketable securities and our capitalization as
of June 30, 2003:
•
on an actual basis;
•
on a pro forma basis to give effect to the
    automatic conversion of all outstanding shares of our
    convertible preferred stock into an aggregate of 24,140,257
    shares of common stock; and
•
on a pro forma as adjusted basis to adjust the
    pro forma information to give effect to:
•
our sale
    of                    shares
    of common stock in this offering at an assumed initial public
    offering price of
    $          per
    share, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us;
•
our sale
    of                    shares
    of common stock to Pfizer for cash proceeds of $10 million,
    at a purchase price equal to the assumed initial public offering
    price of
    $                    per
    share; and
•
our issuance
    of                    shares
    of common stock upon exercise of outstanding warrants that will
    be cancelled if not exercised prior to completion of this
    offering, assuming that all warrants are exercised on a cashless
    basis based on an assumed initial public offering price of
    $          per
    share.
If the holders of the warrants referred to in the
last bullet point above exercise their warrants for cash, we
will issue an aggregate of 4,240,102 shares of common stock for
cash proceeds of approximately $28.5 million.
You should read this table together with our
consolidated financial statements and the related notes
appearing at the end of this prospectus and the
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this
prospectus.
As of June 30, 2003
Pro Forma
Actual
Pro Forma
As Adjusted
(In thousands)
(Unaudited)
Cash, cash equivalents and marketable securities
$
137,534
$
137,534
$
Long-term capital lease obligations, net of
    current portion
$
1,355
$
1,355
$
Redeemable convertible preferred stock, par value
    $0.01 per share; 29,093,695 shares authorized actual and pro
    forma, no shares authorized pro forma as adjusted; 24,020,257
    shares outstanding actual, no shares outstanding pro forma and
    pro forma as adjusted
173,578
—
Stockholders' (deficit) equity
Convertible preferred stock, par value $0.01 per
    share; 120,000 shares authorized actual and pro forma, no shares
    authorized pro forma as adjusted; 120,000 shares outstanding
    actual, no shares outstanding pro forma and pro forma as adjusted
150
—
Common stock, par value $0.01 per share;
    60,000,000 shares authorized actual and pro forma,
    125,000,000 shares authorized pro forma as adjusted;
    3,994,196 shares outstanding actual, 28,135,173 shares
    outstanding pro
    forma,          shares
    outstanding pro forma as adjusted
44
286
Preferred stock, par value $0.01 per share; no
    shares authorized actual and pro forma, 5,000,000 shares
    authorized pro forma as adjusted; no shares outstanding actual,
    pro forma and pro forma as adjusted
Additional paid in capital
12,901
186,387
Notes receivable from officers
(431
)
(431
)
Deferred compensation
(1,929
)
(1,929
)
Treasury stock, 425,000 shares, at cost
(255
)
(255
)
Accumulated other comprehensive income
228
228
Accumulated deficit
(106,522
)
(106,522
)
Total stockholders' (deficit) equity
(95,814
)
77,764
Total capitalization
$
79,119
$
79,119
$
The above share data exclude the following:
•
4,477,500 shares of common stock issuable upon
    the exercise of stock options outstanding as of August 31,
    2003 at a weighted average exercise price of $1.64 per
    share;
•
an aggregate of 4,900,000 shares of common
    stock that will be reserved for future issuance under our 2003
    stock incentive plan and our 2003 employee stock purchase plan
    as of the completion of this offering; and
•
833,333 shares of common stock issuable upon the
    exercise of warrants that will remain outstanding after this
    offering at an exercise price of $6.00 per share.
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DILUTION
Our pro forma net tangible book value as of
June 30, 2003 was approximately
$                    million,
or approximately
$           per
share, after giving effect to the conversion of all outstanding
shares of our convertible preferred stock into common stock upon
the closing of this offering. Pro forma net tangible book value
per share represents the amount of our total tangible assets
less total liabilities, divided by the number of shares of
common stock outstanding before giving effect to the sale of the
shares of our common stock in this offering. After giving effect
to the sale of
the            shares
of common stock in this offering, at an assumed initial public
offering price of
$           per
share, less estimated underwriting discounts and commissions and
offering expenses payable by us and the sale of $10 million
of our common stock to Pfizer in a private offering concurrent
with this offering at a price per share equal to the initial
public offering price, our pro forma net tangible book value as
of June 30, 2003 would have been
$           per
share. This represents an immediate increase in net tangible
book value per share of
$               to
existing stockholders and immediate dilution in net tangible
book value of
$           per
share to new investors purchasing our common stock in the
offering at the assumed initial public offering price. The
following table illustrates the per share dilution without
giving effect to the over-allotment option granted to the
underwriters:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share at
    June 30, 2003
$
Increase per share attributable to new investors
Pro forma net tangible book value per share after
    the offering
Dilution per share to new investors
$
Dilution per share to new investors is determined
by subtracting pro forma net tangible book value per share after
this offering from the initial public offering price per share
paid by a new investor. If any shares are issued in connection
with outstanding options, warrants or the underwriters'
over-allotment option, you will experience further dilution.
The following table summarizes the number of
shares of common stock purchased from us, the total
consideration paid and the average price per share paid by the
existing stockholders, by new investors in this offering and by
Pfizer in the private offering that will close concurrently with
this offering, before deduction of the underwriting discount and
commissions and other expenses of the offering.
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
25,812,920
%
$
144,126,389
%
$
5.58
New investors
Pfizer
2,747,253
25,000,000
9.10
Totals
%
$
%
The share data in the table above is based on
shares outstanding as of June 30, 2003 and excludes:
•
3,627,195 shares of common stock issuable
    upon exercise of stock options outstanding as of June 30,
    2003 at a weighted average exercise price of $1.17 per share;
•
5,529,875 shares of common stock reserved
    for future issuance under our stock option plan as of
    June 30, 2003;
•
833,333 shares of common stock issuable upon the
    exercise of warrants outstanding as of June 30, 2003 at a
    weighted average exercise price of $6.00 per share; and
•
4,240,102 shares of common stock issuable upon
    the exercise of warrants outstanding as of June 30, 2003 at
    a weighted average exercise price of $6.73 per share that will
    be cancelled if not exercised prior to the completion of this
    offering.
If the underwriters' over-allotment option
is exercised in full, the following will occur:
•
the percentage of shares of common stock held by
    existing stockholders will decrease to
    approximately           %
    of the total number of shares of our common stock outstanding
    after this offering; and
•
the number of shares held by new investors will
    be increased
    to                     or
    approximately           %
    of the total number of shares of our common stock outstanding
    after this offering.
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Table of Contents
SELECTED FINANCIAL INFORMATION
You should read the following selected financial
information together with our consolidated financial statements
and the related notes appearing at the end of this prospectus
and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of
this prospectus. We have derived the statement of operations
information for the period from our inception to
December 31, 2000, for the years ended December 31,
2001 and 2002 and for the six months ended June 30, 2003,
and the balance sheet information as of December 31, 2001
and 2002 and as of June 30, 2003, from our audited
consolidated financial statements which are included in this
prospectus. We have derived the balance sheet information as of
December 31, 2000 from our audited consolidated financial
statements, which are not included in this prospectus. The
statement of operations information for the six months ended
June 30, 2002 is unaudited but includes, in the opinion of
our management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of such
information. Our historical results for any prior or interim
period are not necessarily indicative of results to be expected
for a full fiscal year or for any future period. The pro forma
net loss attributable to common stockholders per share
information is computed using the weighted average number of
common shares outstanding, after giving pro forma effect to the
automatic conversion of all outstanding shares of our
convertible preferred stock into shares of our common stock
effective upon the completion of this offering, as if the
conversion had occurred at the date of the original issuance.
Period from
February 9, 2000
Six Months Ended
(Date of
Year Ended December 31,
June 30,
Inception) to
December 31, 2000
2001
2002
2002
2003
(Unaudited)
(In thousands, except share and per share information)
Statement of Operations Information:
Collaboration revenue
License fees
$
—
$
—
$
—
$
—
$
2,083
Reimbursement of development costs
—
—
—
—
16,550
Total collaboration revenue
$
—
$
—
$
—
$
—
$
18,633
Operating expenses:
Research and development
10,879
22,157
39,663
17,282
31,338
Sales and marketing
—
—
—
—
1,311
General and administrative
1,413
4,338
5,319
1,917
2,000
Total operating expenses
12,292
26,495
44,982
19,199
34,649
Loss from operations
(12,292
)
(26,495
)
(44,982
)
(19,199
)
(16,016
)
Interest income
1,181
1,815
1,809
820
1,647
Net loss
(11,111
)
(24,680
)
(43,173
)
(18,380
)
(14,369
)
Preferred stock accretion
(1,080
)
(2,494
)
(5,096
)
(2,171
)
(4,518
)
Net loss attributable to common stockholders
$
(12,191
)
$
(27,174
)
$
(48,270
)
$
(20,551
)
$
(18,887
)
Basic and diluted net loss attributable to common
    stockholders per share
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(5.62
)
$
(4.98
)
Weighted average shares outstanding —
    basic and diluted
2,219,178
3,659,422
3,697,192
3,654,548
3,791,401
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
$
(1.73
)
$
(0.68
)
Unaudited pro forma weighted average shares
    outstanding — basic and diluted
27,837,449
27,931,658
As of December 31,
As of
June 30,
2000
2001
2002
2003
(In thousands)
Balance Sheet Information:
Cash, cash equivalents and marketable securities
$
24,012
$
57,019
$
69,151
$
137,534
Total assets
25,252
60,090
76,589
162,093
Long-term capital lease obligations and
    redeemable convertible preferred stock
(33,433
)
(88,458
)
(145,980
)
(174,933
)
Accumulated deficit
(11,111
)
(39,365
)
(87,635
)
(106,522
)
Total stockholders' deficit
(8,981
)
(34,327
)
(78,036
)
(95,814
)
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and
analysis of our financial condition and results of operations
together with our consolidated financial statements and the
related notes appearing at the end of this prospectus. Some of
the information contained in this discussion and analysis or set
forth elsewhere in this prospectus, including information with
respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve
risks and uncertainties. You should review the "Risk
Factors" section of this prospectus for a discussion of
important factors that could cause actual results to differ
materially from the results described in or implied by the
forward-looking statements contained in the following discussion
and analysis.
Overview
We are a biotechnology company with our first
product candidate, Macugen, currently in two Phase 2/3
pivotal clinical trials for use in the treatment of wet AMD.
Macugen is also in a Phase 2 clinical trial for use in the
treatment of DME. Our revenue for the six-month period ended
June 30, 2003 was $18.6 million, consisting of
amortization of the initial non-refundable, up-front, license
payment that we received from Pfizer under our collaboration
with Pfizer and reimbursement to us by Pfizer of a portion of
the ongoing development costs for Macugen. As a result of our
collaboration with Pfizer, we ceased to be a development-stage
company in February 2003. We have had no other income since
inception other than interest on short-term investments.
We commenced operations in April 2000. Since our
inception, we have generated significant losses. As of
June 30, 2003, we had an accumulated deficit of
$106.5 million. We expect to continue to spend significant
amounts on the development of Macugen and our other programs. We
expect to incur significantly greater commercialization costs as
we are beginning to recruit a domestic ophthalmic sales force.
We expect to begin to participate in detailing Xalatan together
with Pfizer in the middle of 2004. We also plan to continue to
invest in research for additional applications of Macugen and to
develop new drugs and drug delivery technologies. Additionally,
we plan to continue to evaluate possible acquisitions or
licenses of rights to potential new drugs, drug targets and drug
delivery technologies that would fit within our growth strategy.
Accordingly, we will need to generate significant revenues to
achieve and then maintain profitability.
Most of our expenditures to date have been for
research and development activities and general and
administrative expenses. Research and development expenses
represent costs incurred for product acquisition, clinical
trials and activities relating to regulatory filings and
manufacturing development efforts. We outsource our foreign
clinical trials and our global manufacturing development
activities to third parties to maximize efficiency and minimize
our internal overhead. We expense our research and development
costs as they are incurred.
Our research and development expenses incurred
through June 30, 2003 were expenses related primarily to
the development of Macugen. We expect to incur additional
research and development expenses of approximately
$40 million to $50 million relating to Macugen prior
to its commercial launch in the United States for use in the
treatment of wet AMD. These additional expenses are subject to
the risks and uncertainties associated with clinical trials and
the FDA and foreign regulatory review and approval process. As a
result, these additional expenses could exceed our estimated
amounts, possibly materially. Under our agreements with Pfizer,
Pfizer is obligated to fund specified percentages of the ongoing
development costs incurred pursuant to an agreed development
plan.
Sales and marketing and general and
administrative expenses consist primarily of salaries and
related expenses, general corporate activities and costs
associated with building a commercial infrastructure to market
and sell Macugen and to detail Xalatan. We anticipate that
general and administrative expenses will increase as a result of
the expected expansion of our operations, facilities and other
activities associated with the planned expansion of our
business, together with the additional costs associated with
operating as a public company. We expect sales and marketing
expenses to increase as we build our sales force and marketing
capabilities to support detailing Xalatan and, subject to
receiving required regulatory approvals, selling of Macugen.
25
Table of Contents
We have not generated taxable income to date. At
December 31, 2002, net operating losses available to offset
future taxable income for federal income tax purposes were
approximately $74.7 million. If not utilized, federal net
operating loss carryforwards will begin to expire in 2020. To
date, we have not recognized the potential tax benefit of our
net operating losses on our balance sheets or statements of
operations. The future utilization of our net operating loss
carryforwards may be limited based upon changes in ownership
pursuant to regulations promulgated under the Internal Revenue
Code.
Critical Accounting Policies and Significant
Judgments and Estimates
Our management's discussion and analysis of
our financial condition and results of operations are based on
our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial
statements requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported revenues and
expenses during the reporting periods. On an ongoing basis, we
evaluate our estimates and judgments related to revenue
recognition. We base our estimates on historical experience and
on various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
While our significant accounting policies are
more fully described in Note 2 to our consolidated
financial statements appearing at the end of this prospectus, we
believe that the following accounting policies relating to
revenue recognition and stock-based compensation charges are
most critical to aid you in fully understanding and evaluating
our reported financial results.
Revenue Recognition
In connection with our collaboration with Pfizer,
we recognize revenue from non-refundable, up-front, license and
milestone payments not specifically tied to a separate earnings
process ratably over the term of the collaboration, license and
related agreements. When the period of deferral cannot be
specifically identified from the agreement, our management
estimates the period based upon other critical factors contained
within the agreement. We continually review these estimates
which could result in a change in the deferral period and which
might impact the timing and the amount of revenue recognized.
When payments are specifically tied to a separate earnings
process, we will recognize revenue when the specific performance
obligation associated with the payment is completed. Performance
obligations typically consist of significant milestones in the
development life cycle of the related technology, such as
initiation of clinical trials, filing for approval with
regulatory agencies and receipt of approvals by regulatory
agencies. To date, we have received $75 million as an
initial license fee from Pfizer. We will amortize this initial
license fee over 15 years, the effective life of the
agreement. During the six-month period ended June 30, 2003,
we recognized $2.1 million of license fee revenue. At
June 30, 2003, we had classified $5.0 million of
deferred license fee revenue as current and the balance of
$67.9 million as long term on our balance sheet.
We report our revenues on a gross reporting
basis, which includes reimbursement to us from Pfizer of
Pfizer's share of our cost of development of Macugen for
the period. We have determined that our responsibilities under
our contracts with Pfizer to manage and assume responsibilities
for obtaining FDA approvals for Macugen, including our separate
contractual relationships and responsibilities to our clinical
development contractors and our interaction with monitors and
patients qualify us as principal under the criteria set forth in
Emerging Issues Task Force, or EITF, Issue 99-19
"Reporting Gross Revenue as a Principal vs. Net as an
Agent." Additionally, under EITF Issue 01-14,
"Income Statement Characterization of Reimbursements
Received for "Out-of-Pocket" Expenses Incurred,"
in those cases where we have a primary obligation to conduct
clinical studies and bear risk for selection of and payment to
vendors, among other conditions, we recognize reimbursements of
those costs to us by Pfizer as revenue, instead of as an offset
to the expense incurred. We record as expenses costs incurred by
Pfizer for which we are contractually liable. In future periods
we may be liable for costs incurred where we do not meet the
criteria to be considered as the principal. We would record
these costs as expenses, and we may be required to reimburse
Pfizer.
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Table of Contents
Stock-based Compensation
    Charges
Stock-based compensation charges represent the
difference between the exercise price of options granted to
employees and directors and the fair value of our common stock
on the date of grant for financial statement purposes in
accordance with Accounting Principles Board Opinion No. 25
and its related interpretations. We recognize this compensation
charge over the vesting periods of the shares purchasable upon
exercise of options.
We recorded deferred stock-based compensation
related to stock options granted to employees and directors of
$0.3 million and related amortization of $0.1 million
during 2001, of $1.3 million and related amortization of
$0.2 million during 2002, and of $0.9 million and
related amortization of $0.3 million during the six-month
period ended June 30, 2003. We expect to record additional
deferred stock-based compensation of $3.1 million and
related amortization of $0.3 million for the three-month
period ended September 30, 2003. We expect to amortize
approximately $5.1 million of deferred stock-based
compensation in future periods, including $0.7 million
during the second half of 2003, $1.4 million during 2004,
$1.4 million during 2005, $1.2 million during 2006 and
$0.4 million during 2007.
Accounting Pronouncements
In January 2003, the Financial Accounting
Standards Board, or FASB, issued Interpretation No. 46,
"Consolidation of Variable Interest Entities," or
FIN 46, which is an interpretation of Accounting Research
Bulletin No. 51, "Consolidated Financial
Statements." FIN 46 requires that if an entity has a
controlling interest in a variable interest entity, the assets,
liabilities and results of activities of the variable interest
entity should be included in the consolidated financial
statements of the entity. 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 in the first interim or annual
period beginning after June 15, 2003. We believe that the
adoption of FIN 46 will not have a material effect on our
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," or
SFAS 150. This statement establishes how a company
classifies and measures certain financial instruments with
characteristics of both liabilities and equity, including
redeemable convertible preferred stock. This statement is
effective for financial instruments entered into or modified
after May 31, 2003, and is otherwise effective at the
beginning of the interim period commencing July 1, 2003,
except for mandatory redeemable financial instruments of
nonpublic companies. We believe that the adoption of
SFAS 150 will not have a material effect on our financial
position or results of operations.
Results of Operations
Six Months Ended June 30, 2003 and
    2002
Revenue.
We
recognized revenue of $18.6 million in the first six months
of 2003, consisting of $16.5 million from reimbursement of
development costs and $2.1 million from the amortization of
the initial non-refundable, up-front license payment that we
received from Pfizer in connection with our collaboration. The
first six months of 2003 was the first period in which we
generated revenue.
Research and Development
Expenses.
Research and development
expenses increased 81% from $17.3 million in the first six
months of 2002 to $31.3 million in the first six months of 2003.
The increase in research and development expenses of
$14.1 million resulted primarily from the expansion during
the 2003 period of our Phase 2/3 pivotal clinical trials
for the use of Macugen in the treatment of wet AMD, which became
fully enrolled in August 2002. Other factors contributing to the
increase in research and development expenses include the
commencement of our Phase 2 clinical trial for the use of
Macugen in the treatment of DME and our Phase 2
pharmacokinetic study of Macugen, the opening of our laboratory
facilities in Cedar Knolls, New Jersey and Woburn, Massachusetts
and the addition of 51 research and development staff. We
27
Table of Contents
anticipate that research and development expenses
will continue to increase as we further advance Macugen to
commercialization and begin to devote additional resources to
other research and development projects.
Sales and Marketing
Expenses.
Sales and marketing expenses
were $1.3 million in the first six months of 2003. We had
no sales and marketing expenses in 2002 or 2001. The sales and
marketing expenses in the first half of 2003 reflect personnel
expenses relating to our sales management personnel and
developing a sales force to support future sales of Macugen and
detailing of Xalatan under our agreements with Pfizer.
General and Administrative
Expenses.
General and administrative
expenses increased 4% from $1.9 million in the first six
months of 2002 to $2.0 million in the first six months of
2003. The increase resulted from increased management and
personnel expenses and increases in facilities and
infrastructure needed to support our Pfizer collaboration and
further development efforts.
Interest Income.
Interest income increased from $0.8 million in the first
six months of 2002 to $1.6 million in the first six months
of 2003 as a result of a higher level of cash and marketable
securities available for investment during the six months ended
June 30, 2003 compared to the same period in 2002.
Years Ended December 31, 2002 and
    2001
Research and Development
Expenses.
Research and development
expenses increased 79% from $22.2 million in 2001 to
$39.7 million in 2002. The increase of $17.5 million
resulted from the expansion in 2002 of our clinical development
programs relating to Macugen, primarily our Phase 2/3
pivotal clinical trials of Macugen as a treatment for wet AMD,
which became fully enrolled in August 2002, the opening of our
laboratory facilities in Cedar Knolls, New Jersey and Woburn,
Massachusetts and the addition of 34 research and development
staff.
General and Administrative
Expenses.
General and administrative
expenses increased 23% from $4.3 million in 2001 to
$5.3 million in 2002. The increase of $1.0 million
resulted principally from an increase in rent related to the
opening of our laboratory facilities in Cedar Knolls, New Jersey
and Woburn, Massachusetts and from an increase in professional
fees arising from the negotiation of the Pfizer collaboration.
Interest Income.
Interest income remained constant at $1.8 million for 2002
and 2001.
Year Ended December 31, 2001 and
    Period From Inception Through December 31,
    2000
Research and Development
Expenses.
Research and development
expenses more than doubled from $10.9 million in the 2000
period to $22.2 million in 2001. The increase of
$11.3 million resulted from the expansion of our clinical
programs relating to Macugen, primarily the commencement of our
Phase 2/3 pivotal clinical trials for the use of Macugen in
the treatment of wet AMD and the addition of 11 research and
development staff.
General and Administrative
Expenses.
General and administrative
expenses increased significantly from $1.4 million in 2000
to $4.3 million in 2001. The increase of $2.9 million
resulted from increases in the number of general and
administrative personnel, a full year of expenses in 2001
compared to nine months of operations in 2000 and an increase in
rental space.
Interest Income.
Interest income increased from $1.2 million in 2000 to
$1.8 million in 2001 due to a higher level of cash and
marketable securities available for investment during 2001
compared to 2000, as a result of a financing which took place in
July 2001.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have financed our
operations through the sale of our capital stock, the initial
up-front license fee that we received from Pfizer as part of our
Macugen collaboration and the receipt of interest income.
Through June 30, 2003, we have received net proceeds of
$167.3 million from the issuance of shares
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of common stock, convertible preferred stock and
warrants. We have also received net proceeds from capital
equipment financing of $2.4 million. The table below
summarizes our issuances of convertible preferred stock through
June 30, 2003.
Number of
Number of Shares
Approximate
Series
Date
Shares
Underlying Warrants
Gross Proceeds
(In thousands)
A
March 2000
120,000
—
$
150
B
April 2000
5,766,332
1,142,902
34,600
B
January 2001
20,666
—
124
C-1
July — August 2001
7,964,229
1,592,846
54,200
C-2
August 2002
7,521,777
1,504,354
54,200
D
February 2003
2,747,253
—
25,000
In connection with our collaboration with Pfizer,
we received the $25.0 million series D investment
reflected in the above table and a $75.0 million up-front
license fee and Pfizer has agreed generally to fund a majority
of the ongoing development costs incurred pursuant to an agreed
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. Pfizer is also obligated under the terms of our
collaboration to purchase up to an additional $25.0 million
of our common stock in specified circumstances, including
Pfizer's purchase of $10.0 million of our common stock
at the initial public offering price concurrently with the
completion of this offering. These obligations of Pfizer are
currently our only committed external source of funds.
As of June 30, 2003, we had
$137.5 million in cash, cash equivalents and marketable
securities. Also as of that date, we had pledged
$2.7 million of restricted cash as collateral for letters
of credit for certain of our leased facilities. We believe that
our available cash, cash equivalents and marketable securities,
together with our net proceeds from this offering, expected
reimbursements from Pfizer under our collaboration and interest
income will be sufficient to fund anticipated levels of
operations through at least the end of 2005. We had no material
capital expenditures during the first six months of 2003 and
expect to have no material capital expenditures for the
remainder of 2003.
Income
Taxes
As of December 31, 2002, we had net
operating loss carryforwards for federal income taxes of
$74.7 million. Our utilization of the net operating loss
and tax credit carryforwards may be subject to annual
limitations pursuant to Section 382 of the Internal Revenue
Code, and similar state provisions, as a result of changes in
our ownership structure. The annual limitations may result in
the expiration of net operating losses and credits prior to
utilization.
At December 31, 2002 and 2001, we had
deferred tax assets representing the benefit of net operating
loss carryforwards and certain start up costs capitalized for
tax purposes. We did not record a benefit for the deferred tax
asset because realization of the benefit was uncertain and,
accordingly, a valuation allowance is provided to offset the
deferred tax asset.
Cash Flows
For the six months ended June 30, 2003, our
operating activities generated net cash inflows of
$45.5 million. This consisted of a net loss for the period
of $14.4 million and an increase in amounts due from Pfizer
of $15.5 million, offset by the receipt of deferred revenue
in connection with the Pfizer collaboration of
$75.0 million, $2.1 million of which was recorded as
revenue in the six months ended June 30, 2003, and an
increase in accounts payable and accrued expenses of
$1.5 million. We used $32.9 million for investing
activities for the six months ended June 30, 2003,
which consisted primarily of net purchases of marketable
securities. We received $24.6 million from financing
activities during the six months ended June 30, 2003,
primarily relating to the issuance of convertible preferred
stock to Pfizer for net proceeds, after transaction costs, of
$24.7 million, offset by the repayment of capital leases of
$0.3 million.
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For the year ended December 31, 2002, we
used net cash of $39.8 million in operating activities.
This consisted of a net loss for the period of
$43.2 million, offset in part by an increase in accounts
payable and accrued expenses of $1.6 million. We used
$11.9 million for investing activities in 2002, which
consisted principally of net purchases of marketable securities.
We received $54.0 million from financing activities during
2002 relating primarily to the issuance of convertible preferred
stock and warrants in connection with our Series C-2
preferred stock financing. In addition, during 2002, we
purchased $2.4 million of equipment under capital leases
with a repayment period of four years.
For the year ended December 31, 2001, we
used net cash of $19.3 million in operating activities.
This consisted of a net loss for the period of
$24.7 million, offset in part by an increase in accounts
payable and accrued expenses of $5.1 million. We used
$36.2 million for investing activities in 2001, which
consisted primarily of net purchases of marketable securities.
We received $53.7 million from financing activities during
2001 relating primarily to the issuance of convertible preferred
stock and warrants in connection with our Series C-1
preferred stock financing.
For the period from our inception on
February 9, 2000 through December 31, 2000, we used
net cash of $9.6 million in operating activities. This
consisted of a net loss for the period of $11.1 million,
offset in part by an increase in accounts payable and accrued
expenses of $0.7 million and a non-cash charge of
$0.8 million in connection with warrants issued to acquire
rights to Macugen. We used $19.7 million for investing
activities in 2000, which consisted principally of net purchases
of marketable securities. We received $34.7 million from
financing activities during 2000 relating principally to the
issuance of convertible preferred stock and warrants in
connection with our Series B preferred stock financing.
Funding Requirements
We expect to devote substantial resources to
continue our research and development efforts and to expand our
sales, marketing and manufacturing programs associated with the
commercialization and launch of Macugen and our future products.
Our funding requirements will depend on numerous factors,
including:
•
the success of our collaborative arrangement with
    Pfizer for the development and commercialization of Macugen;
•
the scope and results of our clinical trials;
•
advancement of other product candidates into
    development;
•
potential acquisition or in-licensing of other
    products or technologies;
•
the timing of, and the costs involved in,
    obtaining regulatory approvals;
•
the cost of manufacturing activities;
•
the cost of commercialization activities,
    including product marketing, sales and distribution;
•
the costs involved in preparing, filing,
    prosecuting, maintaining and enforcing patent claims and other
    patent-related costs, including litigation costs and the results
    of such litigation;
•
our ability to establish and maintain additional
    collaborative arrangements; and
•
the success of our detailing agreement with
    Pfizer relating to Xalatan.
We do not expect to generate significant
additional funds, other than payments that we receive from our
collaboration with Pfizer, until we successfully obtain
marketing approval for, and begin selling, Macugen. We believe
that the key factors that will affect our internal and external
sources of cash are:
•
our ability to successfully obtain marketing
    approval for and to commercially launch Macugen;
•
our ability to successfully participate in
    selling Pfizer's product, Xalatan;
•
the success of our other preclinical and clinical
    development programs;
•
the receptivity of the capital markets to
    financings by biotechnology companies; and
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•
our ability to enter into additional strategic
    collaborations with corporate and academic collaborators and the
    success of such collaborations.
If our existing resources and the proceeds of
this offering are insufficient to satisfy our liquidity
requirements or if we acquire or license rights to additional
product candidates, we may need to raise additional external
funds through the sale of additional equity or debt securities.
The sale of additional equity securities may result in
additional dilution to our stockholders. Additional financing
may not be available in amounts or on terms acceptable to us or
at all. If we are unable to obtain additional financing, we may
be required to reduce the scope of, delay or eliminate some or
all of our planned research, development and commercialization
activities, which could harm our financial condition and
operating results.
Contractual Obligations
Our major outstanding contractual obligations
relate to our capital leases from equipment financings,
facilities leases and obligations under a number of our
collaboration and alliance agreements to pay milestone payments
and royalties to the other parties to these agreements.
We have summarized in the table below our fixed
contractual cash obligations as of June 30, 2003.
Payments Due by Period
Less than
One to
Four to
After Five
Contractual Obligations
Total
One Year
Three Years
Five Years
Years
Capital lease obligations, including interest
$
2,266,349
$
378,125
$
1,888,224
—
—
Operating leases
9,030,643
761,553
4,658,398
$
2,106,856
$
1,503,836
Total contractual cash obligations
$
11,296,992
$
1,139,678
$
6,546,622
$
2,106,856
$
1,503,836
Under our agreements with Gilead, Nektar and
Isis, we are obligated to make specified payments upon achieving
specified milestones relating to the development and regulatory
approval of Macugen. These contingent payment obligations are
not included in the above table.
Disclosure About Market Risk
Our exposure to market risk is confined to our
cash, cash equivalents and marketable securities. We invest in
high-quality financial instruments, primarily money market
funds, federal agency notes, asset backed securities, corporate
debt securities and United States treasury notes, with the
effective duration of the portfolio less than nine months and no
security with an effective duration in excess of 2 years,
which we believe are subject to limited credit risk. We
currently do not hedge interest rate exposure. Due to the
short-term nature of our investments, we do not believe that we
have any material exposure to interest rate risk arising from
our investments.
Most of our transactions are conducted in
United States dollars, although we do have some development
and commercialization agreements with vendors located outside
the United States. Transactions under certain of these
agreements are conducted in United States dollars, subject
to adjustment based on significant fluctuations in currency
exchange rates. Transactions under certain other of these
agreements are conducted in the local foreign currency. If the
exchange rate undergoes a change of 10%, we do not believe that
it would have a material impact on our results of operations or
cash flows.
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BUSINESS
Overview
We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology. Our most advanced product
candidate is Macugen, which we are developing for the treatment
of wet AMD and DME. Both AMD and DME are serious diseases of the
retina that can lead to severe vision loss and blindness. In the
second half of 2001, we initiated two Phase 2/3 pivotal
clinical trials of Macugen for the treatment of wet AMD. We are
in the process of compiling data from these trials to determine
if the results are satisfactory to proceed with preparing and
filing an NDA with the FDA for marketing approval of Macugen as
a treatment for wet AMD. The FDA has given "fast
track" designation to Macugen for the treatment of both wet
AMD and DME. We have entered into a collaboration with Pfizer to
develop and commercialize Macugen for the prevention and
treatment of diseases of the eye.
Wet AMD and DME are two of the leading causes of
severe vision loss and blindness in the adult population. In the
United States, we estimate that as many as 15 million
people suffer from some form of AMD and that there are more than
1.6 million cases of wet AMD. Approximately 200,000 new
cases of wet AMD arise each year in the United States. Although
wet AMD represents approximately 10% of all AMD cases, it is
responsible for 90% of the severe vision loss associated with
AMD, with a majority of wet AMD patients experiencing severe
vision loss in the affected eye within approximately two years
after diagnosis of the disease. Because AMD generally affects
adults over 50 years of age, we expect the incidence of AMD
to increase significantly as the baby boom generation ages and
overall life expectancy increases. In the United States, there
are approximately 500,000 people suffering from DME, with
approximately 75,000 new cases each year. We expect the
incidence of DME in the United States to increase as the number
of people with diabetes increases. We believe that the
prevalence and incidence of AMD and DME in the European Union
are similar to those in the United States. Because the existing
treatments for both wet AMD and DME have significant
limitations, there is a significant unmet medical need for a new
therapy for these diseases.
We believe that Macugen may provide considerable
benefits over the existing therapies for wet AMD and DME because
it addresses the abnormal blood vessel growth and blood vessel
leakage associated with wet AMD and the blood vessel leakage
associated with DME. Significant scientific evidence suggests
that the presence in the eye of elevated levels of a protein
known as vascular endothelial growth factor, or VEGF, plays an
important role in causing this abnormal blood vessel growth and
blood vessel leakage. Macugen prevents VEGF from binding to its
natural receptor, thereby inhibiting such abnormal blood vessel
growth and blood vessel leakage.
We are conducting one of our two Phase 2/3
pivotal clinical trials for the use of Macugen in the treatment
of wet AMD in North America and one primarily outside North
America. There are 578 patients enrolled in the North American
trial and 612 in the international trial. All patients have
completed at least one year of participation in these trials.
For the first year of the trials, which are substantially
identical, we randomly divided the participants into four
groups. Three of these groups received different dose levels of
Macugen; the fourth group received a placebo injection. Some
patients in the trials may also receive photodynamic therapy,
the only currently FDA approved therapy for wet AMD, at their
physician's discretion if they are eligible for this
therapy. In these trials, we are testing the changes in a
patient's visual acuity from the beginning of the trial.
The primary endpoint in each trial is the proportion of patients
treated with Macugen losing fewer than 15 letters of visual
acuity at 54 weeks compared to such proportion in the
control group. On the eye chart used in these clinical trials,
15 letters equates to three lines. We are treating patients for
a second year in these trials to determine whether prolonged
therapy with Macugen provides additional benefits. We are also
conducting a Phase 2 clinical trial for the use of Macugen
in the treatment of DME.
In December 2002, we entered into our
collaboration with Pfizer under which we and Pfizer are jointly
completing the development of Macugen and have agreed to
copromote Macugen in the United States. We
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have granted Pfizer the exclusive right to
develop and commercialize Macugen outside the United States
pursuant to a royalty-bearing license. Under the collaboration,
we are entitled to participate in the United States in detailing
Pfizer's product Xalatan® for the treatment of
glaucoma.
We are led by a team of experienced
pharmaceutical industry executives and recognized experts in
ophthalmology and vision research. We believe that this team
provides us with a significant complement of capabilities in the
discovery, development and commercialization of novel therapies
to treat diseases of the eye.
Our Business Strategy
Our mission is to develop and commercialize novel
therapeutics to treat diseases of the eye, with an initial focus
on diseases of the back of the eye. The key elements of our
strategy in support of this mission are to:
•
Maximize Commercial Potential of
    Macugen.
We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product.
    If the results of the first year of our Phase 2/3 pivotal
    clinical trials are satisfactory, we plan to proceed with
    preparing and filing an NDA with the FDA covering Macugen for
    the treatment of wet AMD. We are also exploring the application
    of Macugen to a range of additional ophthalmic indications.
•
Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.
We are in the
    process of establishing focused domestic sales and marketing
    capabilities for Macugen, Xalatan and other ophthalmic products
    that we may develop or acquire. We estimate that there are
    approximately 1,400 retinal specialists in the United States who
    perform most of the medical procedures involving back of the eye
    diseases. We plan to target most of our sales and marketing
    efforts at these specialists. Our senior management includes
    well-known ophthalmologists who have close relationships with
    many of the key opinion leaders and academic experts in the
    retinal field. We believe that the profile of our company and
    Macugen in the domestic retinal specialist community has been
    further enhanced by the participation of many retinal
    specialists in the Macugen clinical trials. We believe that the
    relationships of our senior management along with the existing
    familiarity of many retinal specialists with us and Macugen will
    facilitate our marketing and sales initiatives. In selling and
    marketing Macugen in the United States, our personnel will work
    collaboratively with Pfizer, which has substantial sales and
    marketing capabilities and will have primary responsibility for
    promoting this product in the domestic market to general
    ophthalmologists.
•
Develop Alternative Drug Delivery
    Technologies.
We are working to
    develop or acquire alternative technologies for the
    administration of drugs to the back of the eye. We believe that
    these new drug delivery technologies could facilitate the use of
    Macugen and other drugs as chronic or even preventative
    treatments for various back of the eye diseases.
•
Identify New Ophthalmic
    Products.
We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease.
•
Explore Additional Non-Ophthalmic Indications
    for Macugen.
Third party preclinical
    and clinical research suggests that VEGF plays a key role in
    some non-ophthalmic diseases, particularly some types of cancer
    and psoriasis. We are using our preclinical research expertise
    to evaluate whether the anti-VEGF characteristics of Macugen and
    the underlying stability of its active molecule may make it a
    suitable local treatment for these and other diseases. For
    indications outside of ophthalmology, we plan to seek
    collaborators or licensees for drug development and
    commercialization.
Eye Disease
The human eye possesses focusing elements in the
front, the cornea and lens, and a light-sensing element in the
back, the retina. Light falls on the photoreceptors that are
part of the retina, called rods and cones, and
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Table of Contents
is converted into electrical energy, which
travels via the optic nerve to the brain. The central most
portion of the retina is the macula, which is the region
responsible for seeing color and the acute central vision
necessary for activities such as reading, face recognition,
watching television and driving. The brain processes the complex
signals sent from the retina into vision. The following diagram
illustrates the principal elements of the anatomy of a healthy
eye, including a detailed cross-section of the back of the eye.
Eye disease can be caused by many factors and can
affect both the front and back of the eye. In its most extreme
cases, eye disease can result in either partial or total
blindness. In the developed world, the major diseases that
result in blindness are those affecting the retina, including
AMD, diabetic retinopathy, of which DME is a manifestation, and
glaucoma. These diseases deny patients of their sight, and, as a
result, their ability to live independently and perform daily
activities.
Age-Related Macular
    Degeneration
AMD is a chronic, progressive disease of the
macula that results in the loss of central vision. The most
common symptoms are a central blurred or blank spot, distortion
of objects or simply blurred vision. Peripheral vision usually
remains intact. The disease typically affects patients initially
in one eye, with a high likelihood of it occurring in the second
eye over time. Because AMD is strongly correlated with aging, we
believe that it is likely for the disease to recur,
notwithstanding treatment, as the aging process continues. Thus,
patients who have been administered the existing therapies for
AMD frequently have required retreatment.
AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. We estimate that as many as 15 million people in the
United States suffer from some form of AMD, with more than
1.6 million experiencing the active blood vessel growth and
blood vessel leakage associated with wet AMD. Approximately
200,000 new cases of wet AMD arise each year in the United
States. The rate of AMD increases sharply with age, from 18%
among people 70-74 years of age to 47% among people
85 years and older. According to the U.S. census
bureau, the number of people in the United States aged 50 or
older is approximately 80 million and is expected to
increase by approximately 40% over the next two decades. We
expect that this increase in the number of elderly people will
result in a significant increase in the number of cases of AMD
in the United States.
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There are two forms of AMD, "dry" AMD
and "wet" AMD.
•
Dry AMD.
Dry AMD is
    the most common form, representing approximately 90% of all AMD
    cases. However, dry AMD accounts for only 10% of the severe
    vision loss associated with AMD. Dry AMD is characterized by the
    development of yellow-white deposits under the retina, known as
    drusen, and sometimes the deterioration of the retina, although
    without abnormal blood vessel growth and bleeding. There is no
    generally accepted treatment for dry AMD, although vitamins,
    antioxidants and zinc supplements may slow its progression. Over
    time, dry AMD cases often develop into wet AMD.
•
Wet AMD.
Wet AMD
    represents approximately 10% of all cases of AMD, but is
    responsible for 90% of the severe vision loss associated with
    the disease. Wet AMD occurs when new blood vessels from the
    tissue layer in the eye just beneath the retina, called the
    choroid, invade into the retinal layers through a membrane known
    as Bruch's membrane. This abnormal blood vessel growth
    generally is known as angiogenesis and, in the context of wet
    AMD, is called choroidal neovascularization. These new blood
    vessels tend to be fragile and often bleed and leak fluid into
    the macula, resulting in loss of vision. Untreated, this blood
    vessel growth and leakage can lead to scarring and, eventually,
    to the destruction of the macula. The majority of patients with
    wet AMD experience severe vision loss in the affected eye within
    approximately two years after diagnosis of the disease.
The following diagram is a detailed cross-section
of the back of the eye as affected by wet AMD.
The abnormal blood vessel growth of wet AMD can
be located either directly under the area at the center of the
macula, known as the fovea, or away from the fovea. Wet AMD that
occurs directly under the fovea is known as subfoveal wet AMD.
Wet AMD that occurs elsewhere in the macula is known as either
extrafoveal or juxtafoveal wet AMD. The fovea is responsible for
the ability to see fine detail and color. More than 90% of wet
AMD cases are subfoveal.
Subfoveal wet AMD is divided into three principal
subtypes based on the pattern of the abnormal blood vessels as
seen in the retina through an imaging procedure known as
angiography. The classic pattern consists of well-defined
abnormal blood vessels with distinct edges. In the occult
pattern, the edges of the abnormal blood vessels are more poorly
demarcated and diffuse. The principal subtypes of subfoveal wet
AMD, based on the patterns of the abnormal blood vessels, are
the following:
•
Predominantly
    Classic.
In the predominantly classic
    subtype, more than 50% of the patient's abnormal blood
    vessels are of the classic pattern. We estimate that this
    subtype accounts for approximately 25% of the cases of subfoveal
    wet AMD and generally has the most aggressive disease pathology,
    leading to more rapid vision loss than the other subtypes.
•
Minimally Classic.
In the minimally classic subtype, fewer than 50% of the
    patient's abnormal blood vessels are of the classic
    pattern. We estimate that this subtype accounts for
    approximately 35% of the
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cases of subfoveal wet AMD and generally has a
    less rapid rate of vision loss than the predominantly classic
    subtype, but a more rapid rate than the occult subtype.
•
Occult.
In the
    occult subtype, all of the patient's abnormal blood vessels
    are of the occult pattern. We estimate that this subtype
    accounts for approximately 40% of the cases of subfoveal wet AMD
    and generally has a less rapid rate of vision loss.
In the United States, there is an FDA-approved
therapy only for the predominantly classic subtype of wet AMD.
In the European Union, there is an approved therapy for only the
predominantly classic and occult subtypes. As a result, we
estimate that the approved therapy is only indicated for
approximately 25% of United States patients and 65% of European
patients, thus leaving a significant unmet medical need for the
balance.
Diabetic Macular Edema
DME is a complication of diabetic retinopathy, a
disease affecting the blood vessels of the retina. Diabetic
retinopathy results in multiple abnormalities in the retina,
including retinal thickening, hemorrhages, impeded blood flow,
excessive leakage of fluid from blood vessels and, in the final
stages, abnormal blood vessel growth. This blood vessel growth
can lead to large hemorrhages and severe retinal damage. When
the blood vessel leakage of diabetic retinopathy causes swelling
in the macula, it is referred to as DME. Poorly controlled blood
glucose levels, high blood pressure, abnormal kidney function
causing fluid retention, high cholesterol levels and other
general systemic factors are risk factors associated with DME.
The principal symptom of DME is a severe loss of central vision.
Diabetic retinopathy is the leading cause of
blindness in working age adults and the leading cause of vision
loss in diabetics. There are approximately 15 million
diabetics in the United States and approximately
1.1 million newly diagnosed cases of diabetes in the United
States each year. Prevent Blindness America and the National Eye
Institute estimate that in the United States there are over
5.3 million people aged 18 or older with diabetic
retinopathy, including approximately 500,000 with DME. It is
estimated that there are approximately 75,000 new cases of DME
in the United States each year.
Limitations of Currently Available
    Therapies for Wet AMD
The two therapies currently available for the
treatment of wet AMD are photodynamic therapy and thermal laser
treatment.
Photodynamic
Therapy.
Photodynamic therapy involves
the use of a light-activated drug, or photosensitizer, named
Visudyne® to treat wet AMD. The therapy involves a two-step
process in which the drug is administered systemically by
intravenous infusion and then a dose of low energy light is
delivered to the target site to activate the photosensitizer and
destroy the newly grown abnormal blood vessels. Worldwide sales
of Visudyne in 2002 were approximately $287 million.
Visudyne therapy has an important therapeutic
indication limitation in that it is approved in the United
States only for the treatment of the predominantly classic
subtype of subfoveal wet AMD and in the European Union only for
the treatment of the predominantly classic and occult subtypes
of subfoveal wet AMD. Visudyne therapy also has a number of
clinical shortcomings, including side effects such as
photosensitivity and back pain. In the pivotal clinical trial of
Visudyne, approximately 91% of the patients who received
Visudyne for the treatment of wet AMD experienced a recurrence
of the condition within three months of treatment, necessitating
retreatment. Furthermore, the method of administering this
therapy requires the physician to invest in expensive laser
equipment and retain paramedical personnel to assist in the
intravenous infusion of the photosensitizer.
Thermal Laser Treatment.
Thermal laser treatment, also known as
photocoagulation, for the treatment of wet AMD entails the use
of a high-energy laser to destroy the abnormal blood vessels
that are growing and leaking in the macula. This is a surgical
procedure and is not subject to FDA approval. Because the
lasered portions of the retina are irreversibly destroyed,
thermal laser treatment generally is used only for the minority
of wet AMD patients with the extrafoveal and juxtafoveal forms
of the disease, in which the abnormal blood vessel growth and
vessel leakage occur away from the center of the macula. Thermal
laser treatment is
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generally not used for subfoveal wet AMD because
of the risk of immediate and permanent vision loss resulting
from the laser burns to the center of the macula. Approximately
50% of the patients who receive thermal laser therapy for the
treatment of wet AMD experience recurrence of the condition
during the ensuing year as a result of regrowth of the abnormal
blood vessels. In addition, patients treated with thermal laser
therapy frequently experience blind spots, known as scotomas, as
a result of the destruction of the area of the retina where the
treatment is administered.
Limitations of Currently Available
    Therapies for DME
There is no approved drug therapy for DME in the
United States or the European Union. The current therapies for
the treatment of DME are thermal laser treatment and steroid
treatment administered by physicians on an off-label basis.
Thermal Laser
Treatment.
Thermal laser treatment
does not result in an improvement in vision in most patients,
and some patients continue to lose vision. As discussed above,
thermal laser treatment results in focused, localized
destruction of portions of the retina. As a result, patients
treated with this procedure frequently experience scotomas.
Steroid Therapy.
Some physicians recently have begun to treat DME on an off-label
basis with injections of corticosteroids into the vitreous, the
jelly-like fluid that fills the eye. This method of
administering drugs to the back of the eye is known as
intravitreal injection. The efficacy of steroid therapy for DME
is unknown. We believe that steroid therapy for DME may have a
number of significant side effects that can lead to loss of
vision, including worsening of cataracts and steroid-induced
glaucoma. The steroids typically used for this treatment are off
patent and inexpensive.
Macugen
We are developing Macugen as a novel therapy for
the treatment of wet AMD and DME. Based on research regarding
the pathologies of wet AMD and DME, our knowledge of the
mechanism of action of Macugen and the molecular and clinical
attributes of this product candidate, we believe that Macugen
will overcome many of the limitations of the existing therapies
for wet AMD and DME.
Mechanism of Action.
The active ingredient in Macugen is a chemically synthesized
aptamer that binds to and inhibits the function of VEGF. An
aptamer is a single strand of nucleic acid that binds with
specificity to a particular target, such as VEGF. VEGF is a
protein that has been shown to play an important role in the
abnormal blood vessel growth and blood vessel leakage associated
with wet AMD and the blood vessel leakage associated with DME.
In multiple preclinical studies in animals, VEGF has been shown
to be associated with blood vessel growth and leakage in the
eye. In addition, in numerous animal species, anti-VEGF agents
have inhibited blood vessel formation and leakage in multiple
blood vessel layers of the eye, including the iris, the retina
and the choroid. In substantial human clinical research, VEGF
concentrations in eyes afflicted with wet AMD or DME were found
to correlate with the presence and severity of these diseases.
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The following diagram illustrates how VEGF is
blocked from binding with its natural receptor after Macugen
binds with VEGF.
Method of
Administration.
Macugen is currently
administered by intravitreal injection. Before a physician
administers the injection of Macugen, the patient receives
topical numbing drops and a superficial pre-injection of a local
anesthetic to numb the eye. The entire process from initial drop
through injection of Macugen takes under five minutes. By
injecting this medication into the vitreous, the physician
delivers Macugen directly to the affected eye tissue.
Intravitreal injections are commonly used in many other
therapies for eye disorders, including antibiotic and steroid
therapies.
Specificity.
In
humans, there are at least five subtypes, or isoforms, of VEGF.
Based on preclinical
in vitro
and animal studies that we
have conducted, we believe that two of these VEGF isoforms,
isoforms 165 and 121, are present in the eye in meaningful
levels. In these studies, elevated levels of the animal
counterpart of human isoform 165 was required for abnormal
blood vessel growth in the retina. We believe that the unique
shape of the Macugen aptamer allows it to bind to VEGF
isoform 165 with high specificity through a lock and key
type mechanism. In our animal models, we found that binding
Macugen with the animal counterpart of isoform 165 was
highly effective in inhibiting abnormal blood vessel growth in
the retina. Macugen did not bind with the animal counterpart of
isoform 121. In an animal study conducted by us involving a
direct comparison with a VEGF inhibitor that blocks all
isoforms, Macugen was as effective at inhibiting abnormal blood
vessel growth in the retina as the other VEGF inhibitor.
Anti-permeability.
VEGF is a very strong inducer of blood vessel permeability. For
example, in animal tests VEGF has been shown to be
50,000 times more potent than histamine, the molecule
commonly associated with blood vessel leakage related to
allergies. Also in animal tests, it has been shown that VEGF is
required for the blood vessel permeability associated with wet
AMD and diabetic retinopathy. In addition to its anti-angiogenic
property of inhibiting abnormal blood vessel growth, Macugen has
been shown in animal tests to inhibit blood vessels from leaking
into the retina. By preventing blood vessel leakage as well as
abnormal blood vessel growth, Macugen offers a potential
two-pronged approach to the treatment of wet AMD. By preventing
blood vessel leakage, Macugen also offers a potential treatment
for DME.
No Observed
Immunogenecity.
Aptamers in general
tend not to trigger adverse immune responses. To date, we have
not observed any meaningful clinical immunonologic reactions to
Macugen. We believe that the lack of any significant
inflammatory response will enable dosing at levels that will
allow for the administration of Macugen therapy every six weeks.
Satisfactory Side Effect
Profile.
In clinical trials of Macugen
conducted to date for wet AMD and DME, we have not observed any
serious drug-related adverse events. In addition, the incidence
of injection-related adverse events in these trials has been
well within what we believe to be the tolerable limits for a
drug that is administered via intravitreal injection.
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Stability and Attractive Pharmacokinetic
Profile.
Macugen is a pegylated
molecule, which means that a molecule of polyethylene glycol is
attached to the strand of nucleic acid. This pegylation
increases the half-life of the product, which in turn increases
the time that Macugen actively targets the disease site. This
may allow for less frequent dosing. The unpegylated Macugen
aptamer also demonstrates high stability under various
temperature and pH levels, which suggests that the active
ingredient in Macugen may be suitable for administration via
different delivery mechanisms.
Clinical Development of Macugen
We are conducting two Phase 2/3 pivotal
clinical trials for the use of Macugen in the treatment of wet
AMD and a Phase 2 clinical trial of Macugen for the use of
Macugen in the treatment of DME. We are also conducting or
planning to conduct a number of additional trials of Macugen.
The following table summarizes our material ongoing and planned
clinical trials of Macugen.
First Patient
Number of
Enrollment
Indication
Trial Name
Phase
Objectives
Geography
Enrolled
Patients
Status
AMD
EOP 1003
2/3 (Pivotal)
Safety
Dosage
Efficacy
International (including U.S.)
October 2001
612
Fully Enrolled
EOP 1004
2/3 (Pivotal)
Safety
Dosage
Efficacy
North America
August 2001
578
Fully Enrolled
EOP 1006
2
Pharmacokinetics
Safety
Efficacy
North America
January 2003
147
Fully Enrolled
DME
EOP 1005
2
Dosage
Safety
Proof of
concept
International (including U.S.)
October 2002
169
Fully Enrolled
Retinal Vein Occlusion
EOP 1019
2
Safety
Dosage
Proof of
concept
North America
2004 (estimated)
198
Pending
Clinical Trials for the Treatment of Wet
    AMD
Phase 2/3 Pivotal Clinical
Trials.
In the second half of 2001, we
initiated two Phase 2/3 pivotal clinical trials for the use
of Macugen in the treatment of subfoveal wet AMD. We are
conducting one of these trials in North America and one
primarily outside North America. There are 578 patients
enrolled in the North American trial and 612 in the
international trial. Retinal specialists at 128 leading medical
centers are participating in these two Phase 2/3 clinical
trials. As of August 2002, we had fully enrolled both trials and
had begun injections of Macugen or placebo in all patients.
We have enrolled patients with all three subtypes
of subfoveal wet AMD in these two clinical trials. The
proportion of patients in these trials with each subtype is
approximately the same as the subtype incidence among all
persons with subfoveal wet AMD. To be eligible to participate,
the patient's lesions associated with the disease had to be
of specified sizes and satisfy other characteristics. Patients
who previously received subfoveal thermal laser therapy or who
had significant subfoveal scarring or atrophy were not eligible
to participate.
Prior to enrollment in the studies, each
patient's visual acuity was measured to establish the
patient's baseline visual acuity. The baseline was
expressed as an ETDRS score, meaning the number of letters that
the patient could read on the Early Treatment Diabetic
Retinopathy Study, or ETDRS, eye chart. This is the standard eye
chart used in these types of trials. Each line on the ETDRS eye
chart has five letters. To be enrolled, the patient's
visual acuity in the study eye had to be between 20/40 and
20/320, and visual acuity in the other eye had to be better than
or equal to 20/800.
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To ensure that potential patients satisfied our
eligibility criteria, we engaged the Wilmer Technology
Assessment Program, part of the Wilmer Eye Institute at Johns
Hopkins University School of Medicine, to review the angiogram
of each patient's affected eye. Through that process, we
were able to confirm patient eligibility and properly classify
the patients into one of the subtypes of subfoveal wet AMD
before enrolling them in the study.
Macugen is administered in these Phase 2/3
clinical trials by intravitreal injection. We randomly divided
the patients at the beginning of each of these clinical trials
into four groups. In the first year of these trials, three of
these groups received different dose levels of Macugen; the
fourth group received a placebo injection. All patients received
their injections every six weeks over the course of one year.
Enrolled patients with predominantly classic subfoveal wet AMD
were eligible to receive Visudyne during the trials at the
discretion of the treating physician. However, patients who
received Visudyne therapy more than once prior to the trials
were ineligible to participate in the trials.
Three days after each injection, the patient
receives a telephone call from the clinical coordinator to
confirm the patient's comfort and well-being. The patient
returns for a check up seven days after injection. We designed
the study to be double masked, so that neither the patient nor
the investigational staff involved with assessing the vision of
the patient knows to which group each patient belongs. In the
United States, we are conducting the trials ourselves. We have
engaged a clinical research organization to conduct the clinical
trials in Europe, South America, Australia, Israel and other
countries.
The primary efficacy endpoint in these trials is
the proportion of patients at 54 weeks treated with Macugen
losing less than 15 letters, or three lines, of visual acuity on
the ETDRS eye chart from his or her baseline compared to such
proportion in the control group. This is the same primary
clinical endpoint as was used in the pivotal clinical trials of
Visudyne. Secondary clinical endpoints consist of a variety of
other visual parameters at the end of the 54-week study period.
As of July 2003, over 900 patients had received a
total of over 8,000 non-placebo individual intravitreal
injections in these trials with no serious adverse events
reported as definitively related to Macugen. We are in the
process of compiling data from the first year of treatment of
patients in these trials to determine if the results are
satisfactory to proceed with preparing and filing an NDA with
the FDA for marketing approval of Macugen as a treatment for wet
AMD. In previous trials for new therapies for the treatment of
wet AMD, including the pivotal clinical trials of Visudyne, the
FDA accepted clinical data from one year of treatment as the
basis for an NDA filing. Based on the significant unmet medical
need for a safe and effective treatment for wet AMD, the FDA has
granted "fast track" status for Macugen for the
treatment of this disease.
We are treating patients in the second year of
these trials to determine whether prolonged therapy with Macugen
provides additional benefits. Because of the role of the aging
process in wet AMD, we believe that there is a significant
possibility that the disease will recur following the initial
Macugen treatment and, therefore, that prolonged therapy may be
required.
Phase 1 and 2
Trials.
We completed a Phase 1
and two Phase 2 clinical trials for the use of Macugen in
the treatment of wet AMD prior to June 2001. These trials
included patients with all three subtypes of subfoveal wet AMD.
The primary purpose of these trials was to test for product
safety. In each of the three trials, Macugen was well tolerated,
and there were no serious adverse events definitively related to
the drug or its administration. Although these trials were
conducted on a relatively small number of patients and there
were no randomized controls or long-term patient follow up, we
observed encouraging effects of the drug on trial participants.
In the Phase 1 trial, 15 patients received
escalating doses of Macugen one time via an intravitreal
injection in the affected eye. The patients were distributed
into five groups of three patients. Each group received a
different dose of Macugen. In this trial, 80% of the patients
showed stabilized or improved vision at the end of the
three-month period following the injection. For purposes of this
trial and our two Phase 2 trials described below, we
defined stabilized vision as no loss of, or an increase in,
letters of visual acuity on the ETDRS eye chart. Approximately
27% of the patients in this trial showed the ability to read 15
or more additional letters on the ETDRS eye chart at the end of
the three-month period.
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In the first Phase 2 trial, 10 patients
received Macugen via an intravitreal injection in the affected
eye once a month for three months. Eight of the treated patients
were tested at the end of the three-month period, with
approximately 88% of the tested group showing stabilized or
improved vision and 25% showing the ability to read 15 or more
additional letters on the ETDRS eye chart at the end of the
three-month period.
In the second Phase 2 trial, 11 patients
received Macugen via intravitreal injection in the affected eye
once a month for three months. This trial consisted solely of
patients with the predominantly classic form of subfoveal wet
AMD who were also receiving photodynamic therapy with Visudyne.
Ten of the treated patients were tested at the end of the
three-month period, with 90% of the tested group showing
stabilized or improved vision and 60% showing the ability to
read 15 or more additional letters on the ETDRS eye chart at the
end of the three-month period. Furthermore, only 40% of the
patients in this trial in which Macugen was administered in
combination with Visudyne experienced new blood vessel growth
and new blood vessel leakage after three months, thereby
necessitating retreatment with Visudyne. In the pivotal trials
of Visudyne, approximately 91% of patients experienced such
recurrence.
Phase 2 Pharmacokinetic
Study.
In January 2003, we began a
Phase 2 clinical trial designed to obtain additional
pharmacokinetic data from the use of Macugen in the treatment of
wet AMD. The 147 patients enrolled in this trial will each
receive one year of treatment. Treatment will occur every six
weeks. Entry criteria for this trial were similar to those for
our Phase 2/3 pivotal clinical trials. We will conduct
intensive blood sampling for pharmacokinetic data for each
patient on two occasions during the trial. Safety and efficacy
are secondary endpoints of the trial.
Phase 2 Clinical Trials for the
    Treatment of DME
We have completed a Phase 2 clinical trial
for the use of Macugen in the treatment of DME. Two clinical
centers enrolled 10 patients with DME. Patients were
administered an intravitreal injection in the affected eye once
a month for three months. As in the wet AMD Phase 1 and 2
studies, the therapy was well tolerated, and there were no
serious adverse events definitively related to the drug or its
administration.
We completed enrollment of 169 patients in a
Phase 2 clinical trial for the use of Macugen in the
treatment of DME in July 2003. The patients enrolled in this
study were required to have been eligible for laser therapy for
DME. We are conducting the trial pursuant to a randomized,
double-masked placebo controlled protocol in which patients will
receive varying doses of Macugen via intravitreal injection
every six weeks for at least 12 weeks and, at the
discretion of the investigators, for up to 30 weeks. The
endpoints for this trial are visual acuity, retinal thickness
and the need for laser treatment at 12 weeks and
36 weeks after commencement of Macugen treatment. We expect
to complete this trial in February 2005.
Planned Retinal Vein Occlusion
    Trial
In 2004, we plan to commence a Phase 2
clinical trial designed to test the efficacy and safety of
Macugen for the treatment of retinal vein occlusion, a condition
that is characterized by high VEGF levels, abnormal blood vessel
growth and blood vessel leakage. Retinal vein occlusion occurs
when the circulation of a retinal vein becomes obstructed by an
adjacent blood vessel, causing blood vessel bleeding and leakage
in the retina. Laser therapy is sometimes used to treat this
condition, but with limited efficacy. We intend to enroll up to
198 patients and plan to treat these patients for between 12 and
24 weeks. The primary endpoint will be visual acuity at
30 weeks after commencement of Macugen treatment.
Collaboration with Pfizer
Macugen
In December 2002, we entered into collaboration,
license and related agreements with Pfizer to develop,
manufacture and commercialize Macugen for the prevention and
treatment of diseases of the eye and related conditions. Under
the terms of the agreements:
•
Upon effectiveness of the collaboration
    arrangements in February 2003, Pfizer paid us $100 million,
    consisting of a $75 million initial license fee and a
    $25 million equity investment;
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•
Pfizer is obligated to purchase up to an
    additional $25 million of our common stock in specified
    circumstances, including $10 million of our common stock
    concurrently with the completion of this offering;
•
Pfizer will copromote Macugen with us in the
    United States and will share with us in profits and losses from
    the commercialization of Macugen in the United States, with our
    having the right to book all United States product sales;
•
Pfizer will commercialize Macugen outside the
    United States pursuant to an exclusive license and pay us a
    royalty on net sales;
•
Pfizer will generally fund a majority of the
    ongoing development costs incurred pursuant to an agreed
    development plan covering the development of Macugen for AMD,
    DME, retinal vein occlusion and other agreed upon ophthalmic
    indications;
•
Pfizer is potentially obligated to pay us up to
    $195.5 million in milestone payments based on the achievement of
    worldwide regulatory submissions and approvals; and
•
Pfizer is potentially obligated to pay us up to
    $450 million in milestone payments based upon attainment of
    agreed upon sales levels of Macugen.
Under the agreements, the parties' sharing
of profits and losses from the commercialization of Macugen in
the United States and the payment of royalties to us by Pfizer
based on net sales of Macugen outside the United States extends,
on a country-by-country basis, until the later of 15 years after
commercial launch and the expiration of the patent rights
licensed to Pfizer in each particular country. Pfizer may
terminate the collaboration relationship upon six to twelve
months' prior notice, depending on when such notice is
given. Either party may terminate the collaboration relationship
based upon material uncured breaches by the other party.
The collaboration is governed by a joint
operating committee, consisting of an equal number of
representatives of us and Pfizer. There are also subcommittees
with equal representation from both parties that have
responsibility over development and regulatory, manufacturing
and commercialization matters. Ultimate decisionmaking authority
is vested in us as to some matters and in Pfizer as to other
matters. A third category of decisions requires the approval of
both us and Pfizer. Outside the United States, ultimate
decisionmaking authority as to most matters is vested in Pfizer.
Xalatan
In connection with the Macugen collaboration, we
entered into an agreement with Pfizer under which our sales
force is entitled to participate in detailing Pfizer's
Xalatan glaucoma product on a nonexclusive basis in the United
States. Xalatan is a once-a-day prescription eye drop marketed
by Pfizer as a primary, or first line, therapy for glaucoma, an
eye disease that is associated with the degeneration of the
retinal cells responsible for transmitting images from the eye
to the brain.
Under this agreement, Pfizer is obligated to pay
us a per detail fee for our details to general ophthalmologists
and a percentage of incremental net revenues that are above a
baseline threshold for our details to retinal specialists. We
expect that our sales activities will commence in the middle of
2004 and will continue for a period of three years after we
start detailing Xalatan. The agreement automatically terminates
upon a termination of the Macugen collaboration or upon
Pfizer's sale, assignment, exclusive license or other
disposition of the Xalatan product. In addition, we may
terminate the agreement upon four months' prior notice.
Either party may terminate the agreement based upon material
uncured breaches by the other party.
By participating in the detailing of Xalatan, we
expect that our domestic sales force will be able to access and
form relationships with retinal specialists and general
ophthalmologists prior to commercial launch of Macugen. We view
the Xalatan agreement as primarily a strategic arrangement and
anticipate only a modest economic impact.
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Pipeline Initiatives
In order to expand our pipeline of products to
treat diseases of the eye with unmet medical need, we are
actively pursuing a strategy to develop new drugs internally and
to license or otherwise acquire rights to potential new drugs
from third parties. We are also seeking to develop internally
and acquire rights to alternative mechanisms for delivering
ophthalmic drugs to the back of the eye.
We conduct our internal research and development
activities at our Eyetech Research Center located in Woburn,
Massachusetts. We have 30 employees at this facility, including
a total of 15 employees who hold M.D. or Ph.D. degrees. We are
conducting research into the causes of AMD, diabetic retinopathy
and glaucoma as well as novel methods of drug delivery to the
back of the eye. We also are investigating the use of Macugen
for non-ophthalmic indications. We have developed proprietary
models that accelerate the study of disease processes and the
identification and validation of attractive molecular targets
for ophthalmic drug development. We have also developed tools
for studying the basic disease processes involved in the
degeneration of retinal cells associated with glaucoma.
Our current pipeline initiatives include the
following:
Additional Ophthalmic Indications for
    Macugen
In addition to wet AMD, DME and retinal vein
occlusion, there are a number of ophthalmic conditions with
unmet medical need for which the VEGF inhibition of Macugen may
prove beneficial. We are exploring the potential therapeutic
benefit of Macugen for the treatment of the following
indications:
•
"High risk" dry AMD, in which the
    patient is at risk of developing wet AMD more rapidly than other
    dry AMD patients. It is possible to identify this form of dry
    AMD through a routine eye examination. We believe that these
    high risk patients may benefit from treatment with Macugen as a
    preventative therapy if a drug delivery technology other than
    intravitreal injection can be developed.
•
Proliferative diabetic retinopathy, the most
    severe stage of diabetic retinopathy. The disease is
    characterized by angiogenesis and blood vessel leakage. The new
    vessels frequently bleed and damage the retina. Although laser
    therapy is effective at lowering the rate of blindness
    associated with the disease, the destruction of the retina
    resulting from the treatment leads to adverse side effects,
    including night blindness and visual field loss.
•
Uveitis, an inflammatory condition of the eye
    that often leads to macular edema. The swelling is largely a
    function of increased blood vessel leakage. Steroids are
    effective in some cases as a treatment for this condition,
    although their use is often complicated by the formation of
    cataracts and glaucoma.
•
Cystoid macular edema following cataract surgery,
    a condition that results from the inflammation caused by
    surgery. Steroid treatment is effective in some patients, but
    carries the risk of cataracts and glaucoma.
•
Myopic degeneration, a condition in which a
    patient with a high degree of nearsightedness develops choroidal
    neovascularization. The blood vessel growth and leakage in this
    condition closely mirrors that seen in wet AMD.
•
Inflammatory macular degeneration, a condition in
    which a patient with inflammation in the macular area from
    infections or other causes develops choroidal
    neovascularization. The blood vessel growth and leakage in this
    condition is similar to that seen in wet AMD.
•
Iris neovascularization, a serious complication
    of diabetic retinopathy or retinal vein occlusion involving new
    blood vessel growth on the surface of the colored part of the
    eye, or iris. This process leads to an intractable type of
    glaucoma that often leads to blindness. Animal testing has
    revealed that this process requires VEGF.
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Alternate Delivery
    Technologies
We believe that technologies for the long-term
administration of drugs to the back of the eye which are more
convenient for physicians and patients than existing methods may
expand the potential markets for Macugen and other ophthalmic
therapies. We are working to develop alternative, more
convenient long-term drug delivery technologies. One example of
such an alternative technology that we are working on is a
sustained release drug delivery device to be placed on the
outside of the eye and programmed to deliver Macugen or other
drugs over a predetermined period of time ranging from months to
years.
Other Ophthalmic Drugs
Through our research activities, we are seeking
to develop other novel drugs to treat other ophthalmic diseases,
including drugs that may enhance the efficacy of Macugen. We
have identified several distinct molecular targets that we
believe are attractive sites for pharmaceutical intervention to
treat ophthalmic blood vessel disease. One of these targets is
VEGF, which is addressed by Macugen.
A second of these molecular targets is involved
in the formation of new blood vessels that is independent of the
activity of VEGF. In March 2001, we sublicensed from Cell-Matrix
Inc., a subsidiary of CancerVax Corporation, five antibodies to
address this target. Some of these antibodies have been shown to
block abnormal blood vessel growth in preclinical animal tests.
We are investigating these antibodies in our preclinical
choroidal neovascularization models. We are directing our
research at determining how we can develop these antibodies to
work, either alone or in combination with Macugen therapy, for
the treatment of eye and other diseases.
A third of these molecular targets may play a
role in the development and progression of diabetic retinopathy.
In animal studies, the target was operative at all stages of
diabetic retinopathy and the inhibition of this target both
prevented and reversed diabetic retinopathy. Human correlative
data also support the role of this target in human diabetic
retinopathy. We are seeking opportunities to license or develop
a drug candidate that addresses this target.
Additional Non-Ophthalmic Indications for
    Macugen
VEGF appears to play a pivotal role in several
non-ophthalmic diseases, including cancer and psoriasis. We are
using our preclinical expertise to research the potential
application of Macugen to these diseases. Because these diseases
are outside of our core expertise in ophthalmology and are not
part of our collaboration with Pfizer, we expect to pursue
collaboration or outlicensing opportunities if our research
suggests that Macugen is a promising therapy.
Cancer.
Solid tumors
and their metastases rely on new blood vessel growth for their
survival. VEGF has been extensively validated in numerous
preclinical trials as a drug target for the treatment of some
types of cancers. In addition, in clinical trials recently
conducted by Genentech Inc. of its drug candidate Avastin™,
VEGF was validated as a drug target for renal cancer and colon
cancer. In light of the stability of the unpegylated Macugen
aptamer, we believe that we may be able to formulate novel
locally administered, sustained release versions of Macugen for
use in the treatment of some types of solid tumors. We expect
that these formulations would be used at the time of cancer
surgery to provide therapy directly at the site of the disease.
We believe that these Macugen formulations might possess
advantages over intravenously administered drugs. For example, a
locally administered formulation of Macugen might be able to
access some types of brain tumors that are not accessible to
anti-VEGF drugs administered intravenously.
Psoriasis.
Psoriasis
is a chronic inflammatory skin condition that causes skin cells
to grow too quickly, resulting in thick white or red patches of
skin. It represents a significant underserved medical need.
Preclinical and clinical data suggest that VEGF-induced blood
vessel growth and blood vessel leakage play a role in the
development of this condition. We are researching novel topical
formulations of Macugen for the treatment of psoriasis. We
believe that the ability to treat psoriasis in this manner might
prove to be superior to or synergistic with medications that are
delivered intravenously.
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Sales and Marketing
We currently have limited sales and marketing
capabilities and no distribution capabilities. However, we have
recruited a Chief Operating Officer, a Senior Vice President of
Marketing and Sales and other senior personnel with significant
experience in sales and marketing roles at large pharmaceutical
companies. Our plan is to develop our own specialized domestic
sales and marketing infrastructure to commercialize Macugen and
other ophthalmic products that we acquire or develop in the
future and to participate with Pfizer in selling Xalatan. We are
beginning to recruit our domestic ophthalmic sales force and
expect to begin participating in detailing Xalatan in the middle
of 2004. By participating in the detailing of Xalatan, we expect
that our domestic sales force will be able to access and form
relationships with retinal specialists and general
ophthalmologists prior to commercial launch of Macugen.
We expect to focus our sales and marketing
efforts on retinal specialists. The ophthalmic medical community
in the United States is relatively small. We estimate that there
are approximately 1,400 retinal specialists in the United States
who perform most of the medical procedures involving back of the
eye diseases. Because of the small size of our target
professional audience in the United States, we believe that we
can best serve this market through a relatively small, dedicated
specialty sales force. Under our United States copromotion
arrangement with Pfizer for Macugen, our domestic sales force
will have primary responsibility for promoting and detailing
Macugen to retinal specialists, and Pfizer will have primary
responsibility for promoting Macugen to general ophthalmologists.
Outside the United States, we currently plan to
market and sell our products that receive regulatory approval
through established industry participants. However, we may
determine to establish our own sales and marketing organization
in key markets, including the European Union. We have granted
Pfizer exclusive commercialization rights with respect to
Macugen outside the United States.
We expect to distribute Macugen in the United
States through Pfizer's distribution system. Under this
arrangement, the manufacturers of the drug product would ship
the product to Pfizer's distribution warehouses, and Pfizer
would perform order entry, customer service and accounts
receivable collection services on our behalf on a contract
basis. It is possible that we will develop the capabilities in
the future to perform these services on our own behalf.
Manufacturing
We currently have limited experience in, and we
do not own facilities for, manufacturing any products. Although
we intend to rely on contract manufacturers to produce our
products, we have recruited a Senior Vice President of
Manufacturing and other personnel with manufacturing experience
to oversee the production of Macugen and future products that we
may develop.
The manufacturing process of the active
pharmaceutical ingredient of Macugen consists of chemical
synthesis, purification, pegylation, further purification and
finally freeze drying to form a powder. Each of these steps
involves a relatively common chemical engineering process. The
chemical synthesis is similar to small molecule manufacturing.
The components of the active pharmaceutical ingredient are
generally available from a number of suppliers. However, we rely
on a single source of supply for the pegylation reagent. For our
clinical trials of Macugen, we engaged a third party
manufacturer to manufacture the active pharmaceutical ingredient
and we are in the process of negotiating an agreement with an
affiliate of this third party manufacturer for commercial
supply. This third party manufacturer plans to produce
commercial quantities of Macugen at a different site than the
site used to manufacture the active pharmaceutical ingredient
for clinical trial use. Because of this change of site, the FDA
is requiring us to perform analytical tests to demonstrate that
changing the manufacturing location has not affected the
characteristics of the product. If we cannot establish that the
products are equivalent to the satisfaction of the FDA, we may
be delayed in obtaining, or may by unable to obtain, approval to
launch Macugen.
For our clinical supply of Macugen, we also
engaged a separate fill and finish manufacturer to formulate the
active pharmaceutical ingredient from a powder into a solution
and to fill the solution into syringes. We are negotiating with
this manufacturer to provide the fill and finish services for
commercial supply.
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In order to produce Macugen in the quantities
that we expect to be required to meet anticipated market demand,
we and our contract manufacturer will need to increase the
manufacturing capacity for the active pharmaceutical ingredient.
We initially intend to increase manufacturing capacity for the
active pharmaceutical ingredient by installing additional
manufacturing lines at the contract manufacturer's
facility. We are also exploring alternatives for increasing
manufacturing capacity, including developing alternative
manufacturing methods for the active pharmaceutical ingredient.
In the future, we plan to enter into commercial
supply arrangements with alternative active pharmaceutical
ingredient and fill and finish manufacturers. It is possible
that either we or Pfizer may perform these functions ourselves.
License Agreements
We are parties to two license agreements that we
believe are material to our business.
Gilead Sciences
In March 2000, we entered into an agreement with
Gilead and its wholly owned subsidiary NeXstar Pharmaceuticals,
Inc. for an exclusive worldwide license, under the patents and
know-how related to Macugen controlled by Gilead and its
affiliates, to develop, manufacture and commercialize products
containing Macugen. This license extends to all therapeutic
indications. Subject to a right of first negotiation in favor of
Gilead as to a limited set of indications, we have the right to
grant sublicenses under this license.
In exchange for the rights licensed from Gilead,
we paid Gilead an up-front license fee and issued Gilead a
warrant to purchase 833,333 shares of our series B
preferred stock at an exercise price of $6.00 per share. We also
agreed to make payments to Gilead based on achieving specified
development milestones and to pay royalties to Gilead based on
net sales of Macugen by us or our affiliates or sublicensees.
Our royalty obligation extends on a country-by-country basis
until the later of ten years after first commercial sale of
Macugen or the expiration of the last-to-expire patent licensed
from Gilead. Upon the expiration of the last-to-expire royalty
term, the agreement expires and, at our option, our license from
Gilead either (1) survives and remains exclusive, in which
case we would be obligated to continue paying Gilead a reduced
royalty on product sales or (2) survives and converts to
nonexclusive, in which case would not have any further royalty
obligation to Gilead.
The agreement obligates us to use commercially
reasonable efforts to develop, obtain regulatory approvals for
and commercialize Macugen. Each party has the right to terminate
the agreement if the other party materially breaches the
agreement.
Nektar Therapeutics
In February 2002, we entered into a license,
manufacturing and supply agreement with Nektar Therapeutics,
formerly Shearwater Corporation, relating to the pegylation of
Macugen that occurs by linking a reagent supplied by Nektar to
the active pharmaceutical ingredient. Under the terms of the
agreement, Nektar granted us various exclusive and nonexclusive
worldwide licenses, with the right to grant sublicenses, under
patents and know-how related to the reagent controlled by
Nektar, to develop, manufacture and commercialize Macugen.
In exchange for these rights, we paid Nektar an
up-front license fee, agreed to make payments to Nektar based on
achieving specified development milestones with respect to
Macugen and agreed to pay Nektar royalties based on net sales of
Macugen by us or our affiliates or sublicensees. We also agreed
to purchase the pegylation reagent for Macugen exclusively from
Nektar, subject to Nektar meeting its supply obligations.
Unless we and Nektar agree to extend the term,
the agreement expires upon the expiration of the last-to-expire
patent licensed by us from Nektar. The agreement imposes
development and commercialization diligence requirements on us.
Each party has the right to terminate the agreement if the other
party materially breaches the agreement and upon the occurrence
of specified bankruptcy or insolvency events as to the other
party.
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Patents and Proprietary Rights
Our success depends in part on our ability to
obtain and maintain proprietary protection for our product
candidates, technology and know-how, to operate without
infringing on the proprietary rights of others and to prevent
others from infringing our proprietary rights. Our policy is to
seek to protect our proprietary position by, among other
methods, filing United States and foreign patent applications
related to our proprietary technology, inventions and
improvements that are important to the development of our
business. We also rely on trade secrets, know-how, continuing
technological innovation and in-licensing opportunities to
develop and maintain our proprietary position.
We own or license a total of 21 United
States patents and 18 United States patent applications as
well as numerous foreign counterparts to many of these patents
and patent applications. Our patent portfolio includes patents
and patent applications with claims covering the composition of
matter and methods of manufacturing and use of Macugen, as well
as the composition of matter and method of manufacturing of both
modified and unmodified aptamers in general and modified and
unmodified VEGF aptamers in particular. In addition, we have
patent applications covering various aspects of ophthalmic drug
delivery.
United States patents generally have a term of
20 years from the date of filing. The patents covering the
composition of matter of Macugen consist of eight United States
patents owned and licensed to us by Gilead. These United States
patents expire between 2010 and 2017. There are counterpart
filings to these United States patents, including both issued
patents and pending patent applications, in a number of other
jurisdictions, including Europe and Japan.
We license patent rights from other patent owners
from time to time, both on an exclusive basis and on a
nonexclusive basis. Examples of such patent licenses include the
patent rights that we have licensed from Gilead and Nektar and a
nonexclusive, royalty-bearing patent license that we entered
into with Isis Pharmaceuticals, Inc. in December 2001, which
grants us rights under patents owned or controlled by Isis to
make, have made, use and sell the Macugen compound worldwide.
The patent positions of companies like ours are
generally uncertain and involve complex legal and factual
questions. Our ability to maintain and solidify our proprietary
position for our technology will depend on our success in
obtaining effective claims and enforcing those claims once
granted. We do not know whether any of our patent applications
or those patent applications that we license will result in the
issuance of any patents. Our issued patents and those that may
issue in the future, or those licensed to us, may be challenged,
invalidated or circumvented, which could limit our ability to
stop competitors from marketing related products or the length
of term of patent protection that we may have for our products.
In addition, the rights granted under any issued patents may not
provide us with proprietary protection or competitive advantages
against competitors with similar technology. Furthermore, our
competitors may independently develop similar technologies or
duplicate any technology developed by us. Because of the
extensive time required for development, testing and regulatory
review of a potential product, it is possible that, before any
of our products can be commercialized, any related patent may
expire or remain in force for only a short period following
commercialization, thereby reducing any advantage of the patent.
We may rely, in some circumstances, on trade
secrets to protect our technology. However, trade secrets are
difficult to protect. We seek to protect our proprietary
technology and processes, in part, by confidentiality agreements
with our employees, consultants, scientific advisors and other
contractors. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently
discovered by competitors. To the extent that our employees,
consultants or contractors use intellectual property owned by
others in their work for us, disputes may arise as to the rights
in related or resulting know-how and inventions.
Competition
The development and commercialization of new
drugs and drug delivery technologies is highly competitive. We
will face competition with respect to Macugen and any products
we may develop or
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commercialize in the future from major
pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide.
If Macugen receives marketing approval, it will
compete against the currently approved therapies for the
treatment of wet AMD and DME described above under the captions
"— Eye Disease — Limitations of
Currently Available Therapies for Wet AMD" and
"— Eye Disease — Limitations of
Currently Available Therapies for DME." There are also a
number of companies working to develop new drugs and other
therapies to treat wet AMD and DME. We believe that the
following product candidates are in Phase 2 or Phase 3
clinical trials:
•
Genentech, Inc. and Novartis are collaborating to
    develop a humanized monoclonal antibody fragment, administered
    by intravitreal injection, that targets VEGF for the treatment
    of wet AMD.
•
Alcon, Inc. is developing a steroid for the
    treatment of predominantly classic subfoveal wet AMD. This drug
    candidate is injected behind the eye using a customized injector
    inserted around the eye.
•
Miravant Medical Technologies is developing a
    photodynamic therapy that is similar to Visudyne for the
    treatment of wet AMD.
•
Bausch & Lomb Incorporated and Control
    Delivery Systems, Inc. are developing a surgically placed
    non-erodable intraocular implant for the delivery of steroids to
    treat DME and swelling resulting from other causes.
•
Oculex Pharmaceuticals is developing a
    bioerodable steroid implant for the treatment of persistent
    macular edema.
•
Eli Lilly & Co. is developing an orally
    administered inhibitor of an enzyme named PKC beta for the
    treatment of diabetic retinopathy.
In addition, there are a number of other
companies that are developing anti-VEGF technologies. Some of
these companies may seek to apply their technologies to AMD, DME
and other ophthalmic indications.
The key competitive factors affecting the success
of Macugen are likely to be its efficacy, safety profile, price
and method of administration. The efficacy and safety profile of
Macugen will depend upon the results of our clinical trials of
this product and experience with the product in the commercial
marketplace. Based on the results of our clinical trials to
date, we believe that Macugen will have an acceptable side
effect profile. We have not yet determined the price for Macugen
and do not expect to do so before commercial launch. The method
of administration of Macugen, intravitreal injection, is
commonly used to administer ophthalmic drugs and generally
accepted by patients facing the prospect of blindness. However,
a therapy that offers a less invasive method of administration
may have a competitive advantage over one administered by
intravitreal injection.
The licensing and acquisition of pharmaceutical
products, which is part of our strategy, is a highly competitive
area. A number of more established companies also are pursuing
strategies to license or acquire products. These established
companies may have a competitive advantage over us due to their
size, cash flow and institutional experience.
Government Regulation
Government authorities in the United States, at
the federal, state and local level, and other countries
extensively regulate, among other things, the research,
development, testing, manufacture, labeling, promotion,
advertising, distribution, marketing and export and import of
pharmaceutical products such as those we are developing.
United States Government
    Regulation
In the United States, the FDA regulates drugs and
biologics under the Federal Food, Drug, and Cosmetic Act, and,
in the case of biologics, also under the Public Health Service
Act, and implementing regulations. If we fail to comply with the
applicable United States requirements at any time during the
product development
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process, approval process or after approval, we
may become subject to administrative or judicial sanctions.
These sanctions could include the FDA's refusal to approve
pending applications, license suspension or revocation,
withdrawal of an approval, a clinical hold, warning letters,
product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil
penalties or criminal prosecution. Any agency enforcement action
could have a material adverse effect on us.
The steps required before a drug or biologic may
be marketed in the United States include:
•
preclinical laboratory tests, animal studies and
    formulation studies under FDA's good laboratory practices
    regulations;
•
submission to the FDA of an Investigational New
    Drug application, or IND, for human clinical testing, which must
    become effective before human clinical trials may begin;
•
adequate and well-controlled clinical trials to
    establish the safety and efficacy of the product for each
    indication;
•
submission to the FDA of a New Drug Application,
    or NDA, or Biologics License Application, or BLA;
•
satisfactory completion of an FDA inspection of
    the manufacturing facility or facilities at which the product is
    produced to assess compliance with current good manufacturing
    practice, or cGMP; and
•
FDA review and approval of the NDA or BLA.
Preclinical tests include laboratory evaluations
of product chemistry, toxicity, and formulation, as well as
animal studies. An IND sponsor must submit the results of the
preclinical tests, together with manufacturing information and
analytical data, to the FDA as part of the IND. The IND must
become effective before human clinical trials may begin. An IND
will automatically become effective 30 days after receipt
by the FDA, unless before that time the FDA raises concerns or
questions about issues such as the conduct of the trials as
outlined in the IND. In that case, the IND sponsor and the FDA
must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Submission of an IND may not result
in the FDA allowing clinical trials to commence.
Clinical trials involve the administration of the
investigational product to human subjects under the supervision
of qualified investigators. Clinical trials are conducted under
protocols detailing, among other things, the objectives of the
study, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND.
Clinical trials typically are conducted in three
sequential phases, but the phases may overlap or be combined.
Each trial must be reviewed and approved by an independent
Institutional Review Board before it can begin. Phase 1 trials
usually involve the initial introduction of the investigational
drug into humans to evaluate the product's safety, dosage
tolerance and pharmacodynamics and, if possible, to gain an
early indication of its effectiveness.
Phase 2 trials usually involve controlled
trials in a limited patient population to:
•
evaluate dosage tolerance and appropriate dosage;
•
identify possible adverse effects and safety
    risks; and
•
evaluate preliminarily the efficacy of the drug
    for specific indications.
Phase 3 trials usually further evaluate
clinical efficacy and test further for safety in an expanded
patient population. Phase 1, Phase 2 and Phase 3
testing may not be completed successfully within any specified
period, if at all. Furthermore, the FDA or we may suspend or
terminate clinical trials at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
Assuming successful completion of the required
clinical testing, the results of the preclinical studies and of
the clinical studies, together with other detailed information,
including information on the manufacture and composition of the
product, are submitted to the FDA in the form of an NDA or BLA
requesting approval to
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market the product for one or more indications.
The FDA reviews an NDA to determine, among other things, whether
a product is safe and effective for its intended use. The FDA
reviews a BLA to determine, among other things, whether the
product is safe, pure and potent and the facility in which it is
manufactured, processed, packed or held meets standards designed
to assure the product's continued safety, purity and
potency.
Before approving an application, the FDA will
inspect the facility or the facilities at which the product is
manufactured. The FDA will not approve the product unless cGMP
compliance is satisfactory. The FDA will issue an approval
letter if it determines that the application, manufacturing
process and manufacturing facilities are acceptable. If the FDA
determines the application, manufacturing process or
manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria
for approval.
The testing and approval process requires
substantial time, effort and financial resources, and each may
take several years to complete. The FDA may not grant approval
on a timely basis, or at all. We may encounter difficulties or
unanticipated costs in our efforts to secure necessary
governmental approvals, which could delay or preclude us from
marketing our products. The FDA may limit the indications for
use or place other conditions on any approvals that could
restrict the commercial application of the products. After
approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes and additional
labeling claims, are subject to further FDA review and approval.
After regulatory approval of a product is
obtained, we are required to comply with a number of
post-approval requirements. For example, as a condition of
approval of an application, the FDA may require post marketing
testing and surveillance to monitor the product's safety or
efficacy.
In addition, holders of an approved NDA or BLA
are required to report certain adverse reactions and production
problems to the FDA, to provide updated safety and efficacy
information and to comply with requirements concerning
advertising and promotional labeling for their products. Also,
quality control and manufacturing procedures must continue to
conform to cGMP after approval. The FDA periodically inspects
manufacturing facilities to assess compliance with cGMP, which
imposes certain procedural and documentation requirements.
Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory
compliance.
We use, and will continue to use in at least the
near term, third party manufacturers to produce our products in
clinical and commercial quantities. Future FDA inspections may
identify compliance issues at our facilities or at the
facilities of our contract manufacturers that may disrupt
production or distribution, or require substantial resources to
correct. In addition, discovery of problems with a product or
the failure to comply with requirements may result in
restrictions on a product, manufacturer or holder of an approved
NDA or BLA, including withdrawal or recall of the product from
the market or other voluntary or FDA-initiated action that could
delay further marketing. Also, new government requirements may
be established that could delay or prevent regulatory approval
of our products under development.
Foreign Regulation
In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing
clinical trials and commercial sales and distribution of our
products, including Macugen. Whether or not we obtain FDA
approval for a product, we must obtain approval of a product by
the comparable regulatory authorities of foreign countries
before we can commence clinical trials or marketing of the
product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than
that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from country to country.
Under European Union regulatory systems, we may
submit marketing authorizations either under a centralized or
decentralized procedure. The centralized procedure provides for
the grant of a single marketing
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authorization that is valid for all European
Union member states. The decentralized procedure provides for
mutual recognition of national approval decisions. Under this
procedure, the holder of a national marketing authorization may
submit an application to the remaining member states. Within
90 days of receiving the applications and assessment
report, each member state must decide whether to recognize
approval.
Third Party Reimbursement and Pricing
Controls
General
In the United States and elsewhere, sales of
therapeutic and other pharmaceutical products depend in
significant part on the availability of reimbursement to the
consumer from third party payors, such as government and private
insurance plans. Third party payors are increasingly challenging
the prices charged for medical products and services. It will be
time consuming and expensive for us to go through the process of
seeking reimbursement from Medicare and private payors. Our
products may not be considered cost effective, and reimbursement
may not be available or sufficient to allow us to sell our
products on a competitive and profitable basis.
In many foreign markets, including the countries
in the European Union, pricing of pharmaceutical products is
subject to governmental control. In the United States, there
have been, and we expect that there will continue to be, a
number of federal and state proposals to implement similar
governmental pricing control. While we cannot predict whether
such legislative or regulatory proposals will be adopted, the
adoption of such proposals could have a material adverse effect
on our business, financial condition and profitability.
Medicare
Subject to obtaining required marketing
approvals, we plan to sell Macugen to physicians for use in the
treatment of conditions such as wet AMD and DME. We expect that
in the United States a majority of the patients who are treated
with Macugen for these indications will be Medicare
beneficiaries. The Centers for Medicare and Medicaid Services,
or CMS, is the agency within the Department of Health and Human
Services that administers Medicare and will be responsible for
reimbursement of the cost of Macugen when administered to
Medicare beneficiaries and for the cost of physician services
for administering the drug.
In general, Medicare makes separate payment for
drugs, such as Macugen, that meet statutorily covered
requirements, are not usually self-administered and are
furnished by physicians in the office setting. Medicare
currently pays for part of the cost of these
physician-administered drugs at the lower of the amount the
physician charges for the drug or 95% of the drug's
national "average wholesale price" as published by
certain data sources. Patients, or their secondary insurer, are
responsible for a coinsurance amount. Specifically, for
physician-administered drugs, Medicare pays 80% of 95% of the
average wholesale price, while patients, or their secondary
insurer, are responsible for the remaining 20%.
If Macugen is approved for marketing by the FDA,
it will be covered by Medicare when administered in the
physician office unless CMS or a local Medicare contractor
decides not to cover it. CMS has asserted the authority of
Medicare not to cover particular drugs if it determines that
they are not "reasonable and necessary" for Medicare
beneficiaries. CMS may create a national coverage determination
for a product, which establishes on a nationwide basis the
indications that will be covered and the frequency limits for
administration of the product. However, for most new drugs that
are eligible for payment, CMS does not create a national
coverage determination and we do not know whether or not we will
obtain a national coverage determination for Macugen or our
other potential products. In these cases, the local Medicare
contractors who are responsible for administering the program on
a state by state basis have the discretion to issue local
medical review policies. These policies can include both
coverage criteria for the drug and frequency limits for the
administration of the drug. The local contractors in different
areas of the country may establish varying coverage criteria and
frequency limits for Macugen. If Medicare does cover Macugen,
under the current law and regulations we expect Macugen to be
paid at 95% of the average wholesale price.
In addition to payment for the drug itself, CMS
also reimburses physicians for administering the product to
Medicare beneficiaries. Medicare payment for physician services
is determined according to a prospectively set payment rate,
determined by a procedure code established by the American
Medical Association. These
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codes, called Current Procedural Terminology, or
CPT, codes, describe the procedure performed, but generally are
not drug specific. We believe that there is an existing CPT code
to describe the procedure for administering Macugen and that
most physicians will find this code to be adequate to cover the
cost of administration. However, if it is determined that the
existing CPT code and associated payment amount are not
applicable to Macugen, it may affect the willingness of
physicians to perform the procedure.
CMS and Congress currently are considering
changes to Medicare reimbursement that could result in lower
payments for most drugs, including Macugen. CMS has formally
proposed various options that, if made final, would reduce the
Medicare payment for drugs effective as early as January 1,
2004. In Congress, the United States House of Representatives
and the Senate have each passed bills that, in different ways,
would reduce Medicare payment for drugs effective in 2004 or
2005. Some or all of the proposed changes could become law if
the House and Senate pass a common bill that is not vetoed by
the President. Some of the provisions in the CMS proposal and
the pending congressional bills may result in payment amounts
that would not cover the costs of the drugs to physicians and
other purchasers. It is uncertain whether CMS will finalize its
proposed changes in Medicare payment for drugs and whether the
currently pending legislation will become law. It is unclear how
reduced Medicare payments for drugs would affect the use of
Macugen, but especially if the Medicare payment amounts fail to
cover the planned cost of the product, the effect on Macugen
could be adverse and material.
Commercial Insurers' Payment for
    Physician-Administered Drugs
Commercial insurers usually offer two types of
benefits — medical benefits and pharmacy benefits. In
most private insurance plans, physician-administered injectable
drugs, such as Macugen, are provided under the medical benefit.
If private insurers decide to cover Macugen, they will reimburse
for the drug in a variety of ways depending on the particular
insurance plan and the contract that the plan has negotiated
with physicians. Like Medicare, commercial insurers have the
authority to place coverage and utilization limits on
physician-administered drugs. If CMS or Congress adopts the
pending proposals for reduced Medicare payment for drugs,
private insurers may adopt similar reduced payment amounts.
Employees
We believe that our success will depend greatly
on our ability to identify, attract and retain capable
employees. As of August 31, 2003, we had 122 full time
employees, including a total of 28 employees who hold M.D.
or Ph.D. degrees. Our employees are not represented by any
collective bargaining unit, and we believe our relations with
our employees are good.
Trademarks
Eyetech
TM
, Eyetech
Pharmaceuticals
TM
and Macugen are our trademarks. All
are covered by pending applications for registration in the
United States Patent and Trademark Office.
Facilities
As of June 30, 2003, we leased a total of
approximately 52,000 square feet of office and laboratory space.
Our leased properties are described below.
Approximate
Lease
Property Location
Square Feet
Use
Expiration Date
New York, New York
16,700
Corporate Headquarters
December 2010
Woburn, Massachusetts
10,600
Laboratory
July 2007
Cedar Knolls, New Jersey
25,000
Laboratory
April 2008
We expect to require additional corporate
headquarters space and believe that suitable space is available
to us on commercially acceptable terms.
Legal Proceedings
We are currently not a party to any material
legal proceedings.
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MANAGEMENT
Our executive officers, directors and other
significant employees and their respective ages as of
August 31, 2003 are as follows:
Name
Age
Position
Executive Officers and
    Directors
John McLaughlin(1)
51
Chairman of the Board of Directors
David R. Guyer, M.D.
43
Chief Executive Officer and Director
Paul G. Chaney
45
Chief Operating Officer
Glenn P. Sblendorio
47
Chief Financial Officer and Senior Vice
    President, Finance
Anthony P. Adamis, M.D.
44
Chief Scientific Officer and Senior Vice
    President, Research
Douglas H. Altschuler
47
Senior Vice President, Legal, General Counsel and
    Secretary
Srinivas Akkaraju, M.D., Ph.D.(2)
35
Director
Marty Glick(2)(3)
54
Director
Michael Mullen(3)
45
Director
Samir Patel, M.D.
42
Director
Ed Penhoet, Ph.D.(2)
62
Director
Henry Simon(1)(3)
73
Director
Damion E. Wicker, M.D.(1)
42
Director
Other Significant Employees
Denis O'Shaughnessy, Ph.D.
52
Senior Vice President, Clinical Development
Arda Ural
37
Senior Vice President, Marketing and Sales
Charles Williams
62
Senior Vice President, Manufacturing
(1)
Member of the Governance and Nominations Committee
(2)
Member of the Compensation Committee
(3)
Member of the Audit Committee
John McLaughlin
is a
co-founder of our company and has been our Chairman of the Board
and a director since February 2000. Mr. McLaughlin has
served as President and Chief Executive Officer of Corgentech,
Inc., a biopharmaceutical company, since January 2000. From
December 1997 to September 1999, Mr. McLaughlin was
president of Tularik, Inc., a biopharmaceutical company. From
September 1987 to December 1997, Mr. McLaughlin held a
number of senior management positions at Genentech, Inc., a
biopharmaceutical company, including Executive Vice President,
with responsibility for many commercial functions.
Mr. McLaughlin served as a counsel to the United States
House of Representatives committee responsible for drafting
several of the FDA laws, including those governing orphan drugs,
generic drug approvals, patent term extensions and export of
unapproved drugs from the United States, and previously
practiced law in Washington, D.C. Mr. McLaughlin received
his J.D. from Catholic University and B.A. from the University
of Notre Dame.
David R. Guyer, M.D.
is a co-founder of our company and has
been our Chief Executive Officer and a director since February
2000. Dr. Guyer is also currently a voluntary Clinical
Professor of Ophthalmology at the New York University School of
Medicine. From June 2000 to October 2002, he was also Professor
and Chairman of the Department of Ophthalmology at the New York
University School of Medicine. Dr. Guyer was Clinical
Associate Professor of Ophthalmology at Cornell University
Medical Center from July 1995 until June 2000, during which time
he also served as Director of Residency Training at Manhattan
Eye, Ear & Throat Hospital and was in private practice.
Dr. Guyer has also served as the chief medical editor of
Ophthalmology Times from July 1996 to the present. From 1992 to
2000, Dr. Guyer was the Study Co-chairman of the
Pharmacological Therapy for Macular Degeneration Study Group, a
45-center worldwide group of retinal specialists studying drug
therapy for AMD. Dr. Guyer received his M.D. from The Johns
Hopkins University School of Medicine and his undergraduate
degree from Yale College. He was an
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ophthalmology resident at The Wilmer Eye
Institute, The Johns Hopkins University School of Medicine and
completed his fellowship training in retinal surgery at the
Massachusetts Eye and Ear Infirmary, a teaching affiliate of
Harvard Medical School, where he was a Heed-Knapp Fellow.
Dr. Guyer is the author of more than 100 scientific
articles concerning ophthalmic diseases.
Paul G. Chaney
has
been our Chief Operating Officer since August 2003.
Mr. Chaney has more than 20 years of experience in the
pharmaceutical industry, including from 1996 to August 2003,
serving in various senior management positions at Pharmacia
Corporation, a pharmaceutical company acquired by Pfizer in
April 2003, where he was responsible for the launch of several
products, including Tecnis®, Xalatan and Xalcom®. More
specifically, from July 2002 to August 2003, Mr. Chaney
served as Vice President, Global Commercial Operations,
Ophthalmology Franchise; from May 2001 to June 2002, he served
as Vice President, Global Ophthalmology Business; from February
2000 to April 2001, he served as Vice President, Global
Pharmaceutical Ophthalmology; from February 1998 to February
2000, he served as Business Director, Ophthalmology, North
America; and from February 1996 to February 1998, he served as
Director, U.S. Ophthalmology Business. Mr. Chaney
received a double B.A. with honors in English and Biological
Sciences from the University of Delaware.
Glenn P. Sblendorio
has been our Chief Financial Officer and Senior Vice President,
Finance since February 2002. From July 2000 to February 2002,
Mr. Sblendorio served as Senior Vice President of Business
Development for The Medicines Company, a specialty
pharmaceutical company. From 1998 to July 2000,
Mr. Sblendorio was the Chief Executive Officer, Chief
Financial Officer and Managing Director of MPM Capital Advisors,
LLC, an investment bank specializing in healthcare related
transactions. Mr. Sblendorio's pharmaceutical
experience also includes 12 years at Hoffmann-La Roche,
Inc., a pharmaceutical company, in a variety of senior financial
positions, including Chief Financial Officer of Roche Molecular
Systems and Head of Finance-Controller for Amgen/ Roche Europe.
Mr. Sblendorio received his B.A. in Accounting from Pace
University and his M.B.A. in Finance from Fairleigh Dickinson
University.
Anthony P. Adamis,
M.D.
is a co-founder of our company
and has been our Chief Scientific Officer and Senior Vice
President, Research since July 2002. Dr. Adamis has served
as a member of our Scientific Advisory Board since February 2002
and was our Director of Preclinical Research from February 2000
to June 2002. From January 1998 to June 2002, Dr. Adamis
was an Associate Professor of Ophthalmology at Harvard Medical
School. From 1992 to June 2002, Dr. Adamis served as
Director of Residency Training in Ophthalmology at the
Massachusetts Eye and Ear Infirmary, a teaching affiliate of
Harvard Medical School. During this time, he also served as a
principal investigator and co-director of the Retina Research
Institute for Diabetic Retinopathy and Macular Degeneration at
the Massachusetts Eye and Ear Infirmary. From January 2001 to
December 2001, Dr. Adamis also served as President of the
Medical Staff and from January 2001 to December 2002 was a
member of the board of directors of the Massachusetts Eye and
Ear Infirmary. Dr. Adamis is a specialist in ocular
vascular disease and ocular drug delivery. He co-discovered the
role that VEGF plays in new blood vessel growth and blood vessel
leakage related to various diseases of the eye. Dr. Adamis
received his M.D. with Honors from the University of Chicago
Pritzker School of Medicine and his undergraduate degree from
the University of Illinois, Urbana. Dr. Adamis completed
his ophthalmology residency training at the University of
Michigan. Dr. Adamis is the author of more than 100
scientific articles concerning ophthalmic diseases.
Douglas H.
Altschuler
has been our Senior Vice
President, Legal, General Counsel and Secretary since May 2003.
From September 2001 to May 2003, Mr. Altschuler was the
General Counsel of Nektar Therapeutics, a provider of drug
delivery technology. From December 2000 through September 2001,
he was the General Counsel of Celera Genomics Group, a company
that researches and develops new therapeutics. From 1996 to
October 2000, Mr. Altschuler was the Vice President/
General Counsel and Compliance Officer of Mentor Corporation, a
medical device company. Mr. Altschuler received his J.D.
from the University of Arizona School of Law and a B.S. in
chemistry and biology from the University of Arizona.
Srinivas Akkaraju, M.D.,
Ph.D.
has been a director since July
2001. Since April 2001, Dr. Akkaraju has been a principal
of the Life Sciences team in the Healthcare Group at JPMorgan
Partners, LLC, formerly Chase Capital Partners, a global private
equity company affiliated with J.P. Morgan Chase &
Co. From
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October 1998 to April 2001, he was in the
Business and Corporate Development group at Genentech, Inc.,
most recently as senior manager, where he was responsible for
worldwide partnering activities including technology access
deals, in-licensing of early and late-stage therapeutics, and
out-licensing of Genentech development projects. In addition to
his business development role, he also served for the last year
as project team leader for one of Genentech's clinical
development products. During this time, Dr. Akkaraju was
also a founding member of BioStreet, an online marketplace for
biotech opportunities. Prior to joining Genentech in 1998,
Dr. Akkaraju was a graduate student at Stanford University.
Dr. Akkaraju received his undergraduate degrees in
Biochemistry and Computer Science from Rice University and his
M.D. and Ph.D. in Immunology from Stanford University.
Marty Glick
is a
co-founder of our company and has been a director since February
2000. Mr. Glick has served as Executive Vice President and
Chief Financial Officer of Theravance Inc, a biopharmaceutical
company, since July 1998. From 1988 to October 1997,
Mr. Glick held various positions at Genentech, Inc.,
including serving as Vice President of Finance from 1995 to
October 1997. Mr. Glick is the chair of the Biotechnology
Industry Organization's Tax and Finance Committee.
Mr. Glick received his M.B.A. in Finance from the Kellogg
School of Management at Northwestern University. Mr. Glick is
also a Certified Public Accountant and a Chartered Accountant
(Canada).
Michael G. Mullen,
CFA
has been a director since October
2002. Since 1999, Mr. Mullen has been a member of the
Bellevue Group of Switzerland, which focuses on investing in
public and private biotechnology companies in the United States
and Europe. He currently serves as President of Bellevue
Research, Inc., the United States research arm of the Bellevue
Group. From 1990 to September 1999, Mr. Mullen held various
positions at SG Cowen Securities, formerly Cowen & Co,
including partner, managing director and senior research analyst
in medical technology. Mr. Mullen is also a member of the
Board of Directors of Theravance Inc. Mr. Mullen received
his M.B.A. in Finance from the Kelley School of Business at
Indiana University, Bloomington. He is also a Chartered
Financial Analyst and a member of the Association for Investment
Management and Research.
Samir Patel, M.D.
is
a co-founder of our company and has been a director since
February 2000. From 1992 to June 2003, Dr. Patel served as
the Director of the Retina Service at the University of Chicago,
where he is an Associate Professor. Dr. Patel served as the
Residency Program Director at the University of Chicago from
1992 until July 2000. Dr. Patel received his M.D. from the
University of Massachusetts Medical School and was an
ophthalmology resident at the University of Chicago.
Dr. Patel completed his fellowship training in retinal
surgery at the Massachusetts Eye and Ear Infirmary, a teaching
affiliate of Harvard Medical School.
Edward Penhoet,
Ph.D.
has been a director since July
2001. Dr. Penhoet is the Chief Program Officer for Science
and Higher Education Programs at the Gordon and Betty Moore
Foundation and is a Professor of Health Policy and Management at
the School of Public Health at the University of California,
Berkeley. Dr. Penhoet was the Dean of the School of Public
Health and Professor of Public Health and of Molecular and Cell
Biology at University of California, Berkeley from 1999 until
June 2003. Since 1981, Dr. Penhoet has also served as a
director of Chiron Corporation, a biotechnology company.
Dr. Penhoet served as Chiron's President and Chief
Executive Officer from the time he co-founded the company in
1981 until April 1998. From March 1997 to December 1998,
Dr. Penhoet was a chairperson of the California Healthcare
Institute. He is a member of the Boards of Directors of the Bay
Area Council, the Oakland Museum Foundation, the UC System
Biotech Advisory Committee, Kaiser Permanente, and the Advisory
board for the Lester Center for Entrepreneurship and Innovation
at UC Berkeley. He is also a director of Alta Partners, a
venture capital firm, and a member of the boards of
ZymoGenetics, Inc., a biopharmaceutical company, and Chiron
Corporation.
Henry Simon
has been
a director since July 2001. Since 1987, Mr. Simon has held
various positions with Schroder Ventures in London, a global
private equity group, serving as the Chief Executive Officer of
the life sciences team until 1997, its Chairman from April 1997
to December 2001 and a Special Partner since January 2002.
Mr. Simon has been Chairman of Leica Microsystems AG since
1998, Chairman of Zarlink Semiconductors since 1994 and a
director of Gyros AB since September 2002. From 1988 to 1997, he
was the Chairman of Shire Pharmaceuticals and from 1993 to 1996
also served as the Chairman of Chiroscience. Prior
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to joining Schroder Ventures, Mr. Simon was
President of Technicon Corporation, a diagnostics manufacturer,
and prior to that Group Executive and Vice President of ITT
Europe. Mr. Simon started his career at Bell Laboratories
in 1959 after graduating from the Institute of Technology in
Munich, Germany and the Royal Institute of Technology in
Stockholm, Sweden.
Damion E. Wicker,
M.D.
has been a director since July
2001. Since December 1996, Dr. Wicker has been a partner
with JPMorgan Partners, LLC. Prior to joining JPMorgan Partners
in 1993, Dr. Wicker was President of Adams Scientific, a
medical diagnostics company, and held various positions with MBW
Venture Partners, a venture capital firm. Dr. Wicker was
also a Commonwealth Fund Medical Fellow for the National
Institute of Health. He is currently a member of the NVCA Life
Science Group Board and the Board of Trustees of the New York
Academy of Medicine. Dr. Wicker is also a Director of V.I.
Technologies, Inc., a biotechnology company. Dr. Wicker
received a B.S. with honors from M.I.T, an M.D. from The Johns
Hopkins University School of Medicine, and an M.B.A. from The
Wharton School of the University of Pennsylvania.
Denis O'Shaughnessy,
Ph.D.
has been our Senior Vice
President, Clinical Development since August 2000. From November
1990 to July 2000, Dr. O'Shaughnessy held various
clinical research and management roles with
Hoffman-La Roche Inc., including Senior Manager responsible
for overseeing global clinical research programs.
Dr. O'Shaughnessy received his Ph.D. from Royal
Post-Graduate Medical School in the United Kingdom and his
undergraduate degree from London University.
Arda Ural
has been
our Senior Vice President, Marketing and Sales since September
2002. From 1992 to August 2002, Mr. Ural held various
positions at Pfizer Inc. in which he had marketing, sales and
business development responsibilities in several therapeutic
areas. More specifically, from January 2002 until September
2002, Mr. Ural was a Director/Team Leader for Pfizer's
Celebrex® U.S. Team, from August 2000 until December
2001, Mr. Ural was a Director/Team Leader for Pfizer's
Cardura/XL Worldwide Team and from September 1998 until August
2000, Mr. Ural was a Marketing Director for Pfizer's
Viagra® U.S. team. Mr. Ural received B.Sc. and
M.Sc. degrees in mechanical engineering from Bosporus University
in Istanbul, Turkey. He has also received an M.B.A. from Marmara
University in Istanbul.
Charles Williams
has
been our Senior Vice President, Manufacturing since November
2002. From November 2001 to October 2002, Mr. Williams
served as Senior Project Manager at Amgen, Inc., a biotechnology
company. From February 1996 to March 2000, he served as Vice
President of Operations for Cohesion Technologies, Inc., a
developer of biomaterials and biosurgical products.
Mr. Williams received his B.S. in chemical engineering from
the University of Tennessee, and completed all but his
dissertation for a M.S. in biochemical engineering from Rutgers
University. He also completed the Executive M.B.A. program at
Stanford University.
Board Committees
Audit Committee.
The
members of our audit committee are Messrs. Simon, Glick and
Mullen. Mr. Simon chairs the committee. Our audit committee
assists our board of directors in its oversight of:
•
the integrity of our financial statements;
•
our independent auditors' qualifications and
    independence; and
•
the performance of our independent auditors.
The audit committee has the sole and direct
responsibility for appointing, evaluating and retaining our
independent auditors and for overseeing their work. All audit
services to be provided to us and all non-audit services, other
than de minimis non-audit services, to be provided to us by our
independent auditors must be approved in advance by our audit
committee.
Compensation Committee.
The members of our compensation
committee are Mr. Glick and Drs. Akkaraju and Penhoet.
Dr. Penhoet chairs the committee. The purpose of our
compensation committee
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is to discharge the responsibilities of our board
of directors relating to compensation of our executive officers.
Specific responsibilities of our compensation committee include:
•
reviewing and recommending approval of
    compensation of our executive officers;
•
administering our stock incentive and employee
    stock purchase plans; and
•
reviewing and making recommendations to our board
    with respect to incentive compensation and equity plans.
Governance and Nominations
Committee.
The members of our
governance and nominations committee are Messrs. McLaughlin
and Simon and Dr. Wicker. Mr. McLaughlin chairs the
committee. Our governance and nominations committee:
•
identifies and recommends nominees for election
    to our board of directors;
•
develops and recommends to our board our
    corporate governance principles; and
•
oversees the evaluation of our board and
    management.
Compensation Committee Interlocks and Insider
Participation
None of our executive officers serves as a member
of the board of directors or compensation committee, or other
committee serving an equivalent function, or of any other entity
that has one or more of its executive officers serving as a
member of our board of directors or compensation committee. None
of the members of our compensation committee has ever been our
employee.
Election of Directors
Following this offering, our board of directors
will be divided into three classes, each of whose members will
serve for staggered three year terms. Mr. McLaughlin,
Dr. Akkaraju and Mr. Mullen will serve in the class of
directors whose terms will expire at our 2004 annual meeting;
Drs. Patel, Penhoet and Wicker will serve in the class of
directors whose terms will expire at our 2005 annual meeting;
and Mr. Glick, Dr. Guyer and Mr. Simon will serve
in the class of directors whose terms will expire at our 2006
annual meeting. Upon expiration of the term of a class of
directors, directors in that class will be eligible to be
elected for a new three-year term at the annual meeting of
stockholders in the year in which their term expires.
Director Compensation
We reimburse each member of our board of
directors who is not a company employee for reasonable travel
and other expenses in connection with attending meetings of the
board of directors. In 2002, we granted to each of our board
members who is not our employee options to purchase
30,000 shares of our common stock at an exercise price of
$1.44 per share. These options are immediately exercisable.
However, the shares purchasable upon exercise of these options
are subject to our right of repurchase that, subject to the
director's continued service on our board, lapses monthly
over the four-year period from the date of grant.
In September 2003, our board of directors
approved a program under our 2003 stock incentive plan in which
each non-employee director is eligible to receive an option to
purchase 30,000 shares of our common stock upon his or her
appointment to our board of directors. One-quarter of these
options will vest on the first anniversary of the grant date and
then in 36 equal monthly installments, subject to the
recipient's continued service as a director. Each
non-employee director is also eligible to receive an annual
grant of an option to purchase 7,500 shares of our common
stock at each year's annual meeting after which he or she
will continue to serve as a director. These options will vest in
48 monthly installments beginning one month after the grant
date, subject to the recipient's continued service as a
director. Each non-employee director stock option will terminate
on the earlier of ten years from the date of grant and
90 days after the recipient ceases to serve as a director,
except in the case of death or disability, in which event the
option will terminate three months from the date of the
director's death or disability. The exercise price of all
of these options will equal the fair market value of our common
stock on the date of grant.
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Scientific Advisory Board
We have established a scientific advisory board
made up of leading experts in the field of retinal disease.
Members of our scientific advisory board consult with us
regularly on matters relating to:
•
our research and development programs;
•
the design and implementation of our clinical
    trials;
•
market opportunities from a clinical perspective;
•
new technologies relevant to our research and
    development programs; and
•
scientific and technical issues relevant to our
    business.
The current members of our scientific advisory
board are:
Name
Professional Affiliation
Anthony P. Adamis, M.D.
Senior Vice President, Research,
Eyetech Pharmaceuticals, Inc.
Mark Blumenkranz, M.D.
Professor and Chairman of Ophthalmology,
    Stanford University
Evangelos S. Gragoudas, M.D.
Professor of Ophthalmology,
Harvard Medical School;
Acting Chairman, Department of Ophthalmology,
Massachusetts Eye and Ear Infirmary
Morton F. Goldberg, M.D.
Professor and Chairman, Emeritus, of
    Ophthalmology, Johns Hopkins University School of Medicine
Dennis Henner, Ph.D.
General Partner, MPM Capital Partners
Joan W. Miller, M.D.
Professor of Ophthalmology, Harvard Medical School
Steven Schwartz, M.D.
Chief of Retina Division, Doris Stein Eye
    Research Center, University of California, Los Angeles Medical
    School
Lawrence Singerman, M.D.
Clinical Professor of Ophthalmology,
Case Western Reserve University School of Medicine;
    Ophthalmologist, Retina Associates of Cleveland;
Founder, Macula Society
Lawrence A. Yannuzzi, M.D.
Professor of Clinical Ophthalmology,
Columbia University
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Executive Compensation
The following table sets forth the compensation
paid or accrued during the year ended December 31, 2002 to
our chief executive officer and to our other most highly
compensated executive officers whose salary and bonus exceeded
$100,000 for the year ended December 31, 2002. We refer to
these officers collectively as our named executive officers.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation
Shares
Underlying
All Other
Name and Principal Position
Salary
Bonus
Options(#)
Compensation
David R. Guyer, M.D.
$
325,481
$
255,060
—
—
Chief Executive Officer
Glenn Sblendorio(1)
192,121
132,750
200,000
—
Chief Financial Officer
Anthony P. Adamis, M.D.(2)
137,710
91,250
(3)
225,000
$
87,500
(4)
Senior Vice President, Research
(1)
Mr. Sblendorio joined our company in
    February 2002.
(2)
Dr. Adamis joined our company in July 2002.
(3)
Includes a $50,000 signing bonus paid to
    Dr. Adamis in July 2002.
(4)
Represents consulting fees paid to
    Dr. Adamis during 2002 before he joined our company as an
    employee in July 2002.
Stock Options
The following table contains information
regarding grants of options to purchase shares of our common
stock to our named executive officers during the year ended
December 31, 2002.
Amounts in the following table represent
potential realizable gains that could be achieved for the
options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation
are calculated based on the requirements of the Securities and
Exchange Commission and do not represent an estimate or
projection of our future common stock prices. These amounts
represent certain assumed rates of appreciation in the value of
our common stock from the fair market value on the date of
grant. Actual gains, if any, on stock option exercises depend on
the future performance of the common stock and overall stock
market conditions. The amounts reflected in the following table
may not necessarily be achieved.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Number of
Percentage of
Annual Rates of Stock
Securities
Total Options
Price Appreciation for
Underlying
Granted to
Exercise
Option Term(2)
Options
Employees in
Price Per
Expiration
Name
Granted(#)(1)
Fiscal Year
Share
Date
5%($)
10%($)
David R. Guyer, M.D.
—
—
—
—
Glenn Sblendorio
200,000
11
%
$
1.36
2/22/2012
Anthony P. Adamis, M.D.
225,000
12
%
1.36
7/1/2012
(1)
To date, the options that we granted to our
    executive officers and other employees typically were
    exercisable as of the date of grant. However, the shares
    purchasable upon exercise of these options are
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subject to our right of repurchase that, subject
    to continued employment on the applicable dates, lapses with
    respect to 25% of the shares on the first anniversary of the
    date of grant and thereafter in thirty-six monthly installments.
(2)
The dollar amounts under these columns are the
    result of calculations at rates set by the Securities and
    Exchange Commission and, therefore, are not intended to forecast
    possible future appreciation, if any, in the price of the
    underlying common stock. The potential realizable values are
    calculated using an assumed initial public offering price of
    $          per
    share and assuming that the market price appreciates from this
    price at the indicated rate for the entire term of each option
    and that each option is exercised and sold on the last day of
    its term at the assumed appreciated price.
Option
Exercises and Year-End Option Values
The following table provides information about
the number of shares issued upon option exercises by our named
executive officers during the year ended December 31, 2002,
and the value realized by our named executive officers. The
table also provides information about the number and value of
options held by our named executive officers at
December 31, 2002.
Aggregated Option Exercises in Last Fiscal
Year and
Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Options
Value of Unexercised
at
In-the-Money Options at
Shares
December 31, 2002
December 31, 2002
Acquired on
Value
Name
Exercise(#)
Realized
Exercisable(1)
Unexercisable
Exercisable
Unexercisable
David R. Guyer, M.D.
—
—
—
—
—
—
Glenn Sblendorio
—
—
200,000
—
—
Anthony P. Adamis, M.D.
—
—
225,000
—
—
(1)
The options that we granted to our executive
    officers, including Mr. Sblendorio and Dr. Adamis,
    were exercisable as of the date of grant. However, the shares
    purchasable upon exercise of these options are subject to our
    right of repurchase that, subject to continued employment on the
    applicable dates, lapses with respect to 25% of the shares on
    the first anniversary of the date of grant and thereafter in
    thirty-six monthly installments. As of August 31, 2003, our
    right of repurchase had lapsed with respect to 75,000 of the
    shares underlying the options held by Mr. Sblendorio and
    60,937 of the shares underlying the options held by
    Dr. Adamis.
There was no public trading market for our common
stock as of December 31, 2002. Accordingly, as permitted by
the rules of the Securities and Exchange Commission, we have
calculated the value of unexercised in-the-money options at
fiscal year-end on the basis of the fair market value of our
common stock as of December 31, 2002 of
$          per
share, as determined by our board of directors, less the
aggregate exercise price.
Employment Agreements
Dr. Guyer.
Pursuant to an employment agreement
effective April 12, 2000 and amended August 25, 2003,
we are employing Dr. Guyer as our Chief Executive Officer.
Under the amended agreement, Dr. Guyer receives an annual
base salary of $308,275, subject to increases upon an annual
review by our board of directors. The amended agreement provides
for a discretionary annual bonus based on Dr. Guyer's
performance and our company's business results as
determined by our board of directors.
Under the amended agreement, either we or
Dr. Guyer may terminate his employment at any time, subject
to continuation of salary payment and benefits for
18 months if we terminate Dr. Guyer's employment
without cause or if Dr. Guyer terminates his employment for good
reason. If we terminate Dr. Guyer's employment without
cause or if he terminates his employment for good reason within
three months before or
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12 months following a change in control of
our company, we are obligated to pay Dr. Guyer a lump sum
payment equal to two years of his then current base salary and
reimburse Dr. Guyer for the costs of medical and dental
benefits for up to 18 months. The amended agreement also
provides that upon any change in control of our company, 50% of
all of Dr. Guyer's unvested equity rights in our
company will immediately vest, and if we terminate
Dr. Guyer's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Dr. Guyer's unvested equity rights in our company
will immediately vest.
Mr. Sblendorio.
Pursuant to an employment agreement
dated February 1, 2002 and
amended                           ,
2003, we are employing Mr. Sblendorio as our Chief
Financial Officer. Under the amended agreement,
Mr. Sblendorio receives an annual base salary of $225,000.
The amended agreement provides for:
•
a guaranteed bonus for Mr. Sblendorio's
    first year of employment with us equal to 20% of his base
    salary, which was paid in April 2003;
•
an additional discretionary annual bonus based on
    Mr. Sblendorio's performance and our business results
    as determined by our board of directors or our senior management
    upon the recommendation of our Chief Executive Officer; and
•
the grant of stock options to purchase 200,000
    shares of common stock, which grant was made in February 2002.
Under the amended agreement, either we or
Mr. Sblendorio may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Mr. Sblendorio's employment
without cause or if Mr. Sblendorio terminates his
employment for good reason. If we terminate
Mr. Sblendorio's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following a change in control of our
company, we are obligated to pay Mr. Sblendorio a lump sum
payment equal to 15 months of his then current base salary
and reimburse Mr. Sblendorio for the costs of medical and
dental benefits for up to 15 months. The amended agreement
also provides that upon any change in control of our company,
50% of all of Mr. Sblendorio's unvested equity rights
in our company granted after the amendment of his employment
agreement will immediately vest, and if we terminate
Mr. Sblendorio's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Mr. Sblendorio's unvested equity rights in our
company granted after the amendment of his employment agreement
will immediately vest.
Dr. Adamis.
Pursuant to an employment agreement
dated April 12, 2002 and
amended                           ,
2003, we are employing Dr. Adamis as our Chief Scientific
Officer and Senior Vice President, Research. Under the amended
agreement, Dr. Adamis receives an annual base salary of
$275,000, subject to increases upon an annual review by our
board of directors. The amended agreement provides for:
•
a signing bonus of $50,000, which was paid in
    2002;
•
a guaranteed bonus equal to 30% of his base
    salary;
•
an additional discretionary annual bonus based on
    Dr. Adamis's performance and our company's
    business results as determined by our board of directors;
•
the grant of stock options to purchase 225,000
    shares of common stock, which grant was made in July 2002; and
•
the sale of an additional 75,000 shares of fully
    vested stock at a price of $1.36 per share, which shares were
    purchased by Dr. Adamis in February 2003.
Under the amended agreement, either we or
Dr. Adamis may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Dr. Adamis's employment without
cause or if Dr. Adamis terminates his employment for good
reason. If we terminate Dr. Adamis's employment
without cause or if he terminates his employment for good reason
within three months before or 12 months following a change
in control of our company, we are obligated to pay
Dr. Adamis a lump sum
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payment equal to 15 months of his then
current base salary and reimburse Dr. Adamis for the costs
of medical and dental benefits for up to 15 months. The
amended agreement also provides that upon any change in control
of our company, 50% of all of Dr. Adamis's unvested
equity rights in our company granted after the amendment of his
employment agreement will immediately vest, and if we terminate
Dr. Adamis's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Dr. Adamis's unvested equity rights in our company
granted after the amendment of his employment agreement will
immediately vest.
Stock Option and Other Compensation
Plans
2001 Stock Plan
Our 2001 stock plan, as amended, was adopted by
our board of directors and approved by our stockholders in 2001.
The plan provides for the grant of incentive stock options,
non-statutory stock options and restricted stock awards. A
maximum of 8,175,000 shares of common stock are authorized for
issuance under our 2001 stock plan.
In accordance with the terms of the 2001 stock
plan, our board of directors has authorized our compensation
committee to administer the 2001 stock plan.
If a change in control of our company occurs, an
option or other award under the 2001 stock plan will become
fully exercisable and fully vested if the option or award is not
assumed by the surviving corporation or its parent or if the
surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 2001 stock
plan. A change in control under the 2001 stock plan includes:
•
a merger or consolidation after which our
    stockholders own less than 50% of the surviving corporation or
    its parent company; or
•
the sale of all or substantially all of our
    assets.
This accelerated vesting provision shall not
apply, however, to a transaction if its sole purpose is to
change the jurisdiction of our incorporation or to create a
holding company owned by our stockholders in substantially the
same proportions in which they owned our shares prior to the
transaction.
If we become a party to a merger or
consolidation, the agreement of merger or consolidation shall
provide the following for our outstanding options:
•
continuation of the options by us, if we are the
    surviving corporation;
•
assumption of the options by the surviving
    corporation or its parent;
•
replacement of the options by comparable options
    by the surviving corporation or its parent;
•
accelerated vesting of the options, followed by
    their cancellation; or
•
cancellation for a cash payment.
As of August 31, 2003, there were options to
purchase 4,477,500 shares of common stock outstanding under the
2001 stock plan and options to purchase 1,465,111 shares of
common stock had been exercised. After the effective date of the
2003 stock incentive plan described below, we will grant no
further stock options or other awards under the 2001 stock plan.
2003 Stock Incentive Plan
Our 2003 stock incentive plan, which will become
effective on the date that the registration statement of which
this prospectus forms a part is declared effective, was adopted
by our board of directors on September 10, 2003 and
approved by our stockholders
on                     ,
2003. The plan provides for the grant of incentive stock
options, non-statutory stock options, restricted stock awards
and other stock-based awards. Upon effectiveness,
4,400,000 shares of common stock will be reserved for
issuance under the 2003 stock incentive plan. In addition, the
2003 stock incentive plan contains an "evergreen
provision" which allows for
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an annual increase in the number of shares
available for issuance under the plan on the first day of each
of our fiscal years during the period beginning in fiscal year
2005 and ending on the second day of fiscal year 2013. The
annual increase in the number of shares shall be equal to the
lowest of:
•
2,500,000 shares;
•
5% of our outstanding shares on the first day of
    the fiscal year; and
•
an amount determined by our board of directors.
Under this provision, no annual increase shall be
made to the extent that the number of shares of common stock
available for issuance under the 2003 stock incentive plan and
all other employee or director equity incentive plans, including
our 2003 employee stock purchase plan, would exceed 30% of our
outstanding shares on the first day of the applicable fiscal
year.
In accordance with the terms of the 2003 stock
incentive plan, our board of directors has authorized our
compensation committee to administer the 2003 stock incentive
plan. In accordance with the provisions of the 2003 stock
incentive plan, our compensation committee will select the
recipients of awards and determine:
•
the number of shares of common stock covered by
    options and the dates upon which the options become exercisable;
•
the exercise price of options;
•
the duration of options;
•
the method of payment of the exercise price; and
•
the number of shares of common stock subject to
    any restricted stock or other stock-based awards and the terms
    and conditions of such awards, including conditions for
    repurchase, issue price and repurchase price.
In addition our board of directors or any
committee to which the board of directors delegates authority
has the authority, with the consent of the affected plan
participants, to reprice or otherwise amend outstanding options.
Upon a merger or other reorganization event under
our 2003 stock incentive plan, our board of directors shall
provide that all of our outstanding options shall be assumed or
substituted by the successor corporation. However, if the
succeeding corporation does not agree to assume, or substitute
for, outstanding options, then our board of directors shall
provide that all unexercised options will become exercisable in
full prior to the completion of the reorganization event and
that these options will terminate upon the completion of the
reorganization event if not previously exercised. Our board of
directors may also provide for a cash payment equal to the value
of any outstanding options. If the reorganization event also
constitutes a change in control event under our 2003 stock
incentive plan, any assumed or substituted option will become
immediately exercisable in full if on or prior to the date that
is six months after the reorganization event an option
holder's employment with us or our succeeding corporation
is terminated by us or the succeeding corporation without cause,
as defined in our 2003 stock incentive plan. In addition, upon a
change in control event that is not also a reorganization event
under our 2003 stock incentive plan, each option will continue
to vest according to its original vesting schedule, except that
an option will become immediately exercisable in full if on or
prior to the date that is six months after the change in
control event an option holder's employment with us or the
succeeding corporation is terminated by us or the succeeding
corporation without cause. Our 2003 stock incentive plan
provides similar change in control vesting provisions for
restricted stock and other awards under the plan.
2003 Employee Stock Purchase
    Plan
Our 2003 employee stock purchase plan, which will
become effective on the date that the registration statement of
which this prospectus forms a part is declared effective, was
adopted by our board of directors on
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September 10, 2003 and approved by our
stockholders
on                     ,
2003. The plan provides for the issuance of up to
500,000 shares of our common stock to participating
employees.
All of our employees, including directors who are
employees, and all employees of any participating subsidiaries:
•
whose customary employment is more than
    20 hours per week for more than five months in a calendar
    year;
•
who were employed by us for at least 90 days
    prior to enrolling; and
• who are employed on the first day of
a designated payroll deduction offering period
are eligible to participate in the 2003 employee
stock purchase plan.
Employees who would immediately after the grant
of an option under the 2003 employee stock purchase plan own 5%
or more of the total combined voting power or value of our stock
or the stock of any of our subsidiaries are not eligible to
participate in the purchase plan.
We will make one or more offerings to our
employees to purchase stock under the 2003 employee stock
purchase plan. Offerings will begin on each February 1 and
August 1, except that our first offering commencement date
will begin on the date on which trading of our common stock
commences on the NASDAQ National Market in connection with this
offering. Each offering commencement date will begin a six-month
period during which payroll deductions will be made and held for
the purchase of our common stock at the end of the purchase plan
period.
On the first day of a designated payroll
deduction period, or offering period, we will grant to each
eligible employee who has elected to participate in the purchase
plan an option to purchase shares of our common stock as
follows: the employee may authorize up to 10% of his or her base
pay to be deducted by us during the offering period. On the last
day of the offering period, the employee is deemed to have
exercised the option, at the option exercise price, to the
extent of accumulated payroll deductions. Under the terms of the
purchase plan, the option exercise price is an amount equal to
85% of the lower of the closing price of our common stock on the
first day or the last day of the offering period. For purposes
of the first offering period under the purchase plan, the
closing price of our common stock on the first day of such
period is deemed to equal the initial public offering price per
share in this offering.
In no event may an employee purchase in any one
offering period a number of shares which exceeds the number of
shares determined by dividing:
•
the product of $2,083 and the number of full
    months in the offering period, by
•
the closing price of a share of our common stock
    on the commencement date of the offering period.
Our board of directors may, in its discretion,
choose a different offering period for each subsequent offering.
An employee who is not a participant on the last
day of the offering period is not entitled to exercise any
option, and the employee's accumulated payroll deductions
will be refunded. An employee's rights under the purchase
plan terminate upon voluntary withdrawal from the purchase plan
at any time, or when the employee ceases employment for any
reason, except that upon termination of employment because of
death, the balance in the employee's account will be paid
to the employee's beneficiary.
Because participation in the purchase plan is
voluntary, we cannot now determine the number of shares of our
common stock to be purchased by any particular current executive
officer, by all current executive officers as a group or by
non-executive employees as a group.
Limitation of Liability and Indemnification of
Officers and Directors
Our certificate of incorporation that will be in
effect upon completion of this offering limits the personal
liability of directors for breach of fiduciary duty to the
maximum extent permitted by the Delaware General
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Corporation Law. Our certificate of incorporation
provides that no director will have personal liability to us or
to our stockholders for monetary damages for breach of fiduciary
duty or other duty as a director. However, these provisions do
not eliminate or limit the liability of any of our directors:
•
for any breach of their duty of loyalty to us or
    our stockholders;
•
for acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
•
for voting or assenting to unlawful payments of
    dividends or other distributions; or
•
for any transaction from which the director
    derived an improper personal benefit.
Any amendment to or repeal of these provisions
will not eliminate or reduce the effect of these provisions in
respect of any act or failure to act, or any cause of action,
suit or claim that would accrue or arise prior to any amendment
or repeal or adoption of an inconsistent provision. If the
Delaware General Corporation Law is amended to provide for
further limitations on the personal liability of directors of
corporations, then the personal liability of our directors will
be further limited to the greatest extent permitted by the
Delaware General Corporation Law.
In addition, our certificate of incorporation
provides that we must indemnify our directors and officers and
we must advance expenses, including attorneys' fees, to our
directors and officers in connection with legal proceedings,
subject to very limited exceptions.
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CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Since our incorporation in February 2000, we have
engaged in the following transactions with our directors and
officers and holders of more than 5% of our voting
securities and affiliates of our directors, officers and
5% stockholders:
Stock Issuances
Issuance of Common Stock to
    Founders
In March 2000, in connection with our formation,
we issued common stock at a price per share of $0.01 to the
following directors:
Number of Shares of
Aggregate
Name
Common Stock
Purchase Price
David R. Guyer
1,500,000
$
15,000
Marty Glick
500,000
5,000
John McLaughlin
500,000
5,000
Samir Patel
500,000
5,000
Issuance of Series A Convertible
    Preferred Stock
In March 2000, we issued 120,000 shares of our
series A convertible preferred stock at a price per share of
$1.25 to the following directors:
Number of Shares of
Aggregate
Name
Series A Preferred Stock
Purchase Price
Marty Glick
40,000
$
50,000
John McLaughlin
40,000
50,000
Samir Patel
40,000
50,000
All shares of our series A convertible
preferred stock will automatically convert into an aggregate of
120,000 shares of our common stock upon the consummation of
this offering.
Issuance of Series B Convertible
    Preferred Stock
In April 2000 and January 2001, we issued an
aggregate of 5,786,998 shares of our series B convertible
preferred stock at a price per share of $6.00 for a total
purchase price of $34.7 million. We also issued warrants to
purchase an aggregate of 1,142,902 shares of series B
convertible preferred stock at an exercise price of
$6.00 per share in connection with our series B
financing. The following table sets forth the number of
series B shares and warrants sold to our
5% stockholders and their affiliates.
Number of Shares
Number of Shares
of Series B
Underlying
Aggregate
Name
Preferred Stock
Warrants
Purchase Price
Schroder Ventures Entities
1,666,667
333,334
$
10,000,002
Lakeview EyeTech, L.P.
1,500,000
300,000
9,000,000
Merrill Lynch Ventures Entities
833,333
166,667
4,999,998
All shares of our series B convertible
preferred stock will automatically convert into an aggregate of
5,786,998 shares of our common stock upon the consummation of
this offering. Any warrants issued as part of our series B
Financing that are not exercised prior to completion of this
offering will be cancelled.
Issuance of Series C Convertible
    Preferred Stock
In July and August 2001, we issued an aggregate
of 7,964,229 shares of our series C-1 convertible preferred
stock at a price per share of $6.80 for a total purchase price
of $54.2 million. We also issued warrants to purchase an
aggregate of 1,592,846 shares of series C-1 convertible
preferred stock at an exercise price of
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$6.80 per share in connection with this portion
of our series C financing. The following table sets forth
the number of series C-1 shares and warrants sold to our
5% stockholders and their affiliates.
Number of Shares
Number of Shares
of Series C-1
Underlying
Aggregate
Name
Preferred Stock
Warrants
Purchase Price
Schroder Ventures Entities
735,291
147,058
$
4,999,979
Lakeview EyeTech II, L.P.
257,352
51,470
1,749,994
Merrill Lynch Ventures Entities
735,294
147,059
4,999,999
JPMorgan Partners (BHCA), LP
1,838,235
367,647
12,499,998
Biotech Growth SA
1,470,580
294,117
9,999,944
MPM Capital Entities
1,176,468
235,293
7,999,982
All shares of our series C-1 convertible
preferred stock will automatically convert into an aggregate of
7,964,229 shares of common stock upon the consummation of this
offering. Any warrants that are not exercised prior to
completion of this offering will be cancelled.
In August 2002, we issued an aggregate of
7,521,777 shares of our series C-2 convertible preferred
stock at a price per share of $7.20 for a total purchase price
of $54.2 million. We also issued warrants to purchase an
aggregate of 1,504,354 shares of series C-2 convertible
preferred stock at an exercise price of $7.20 per share in
connection with this portion of our series C financing. The
following table sets forth the number of series C-2 shares
and warrants sold to our 5% stockholders and their
affiliates.
Number of Shares
Number of Shares
of Series C-2
Underlying
Aggregate
Name
Preferred Stock
Warrants
Purchase Price
Schroder Ventures Entities
694,444
138,889
$
4,999,997
Lakeview EyeTech II, L.P.
243,056
48,611
1,750,003
Merrill Lynch Ventures Entities
694,444
138,889
4,999,997
JPMorgan Partners (BHCA), LP
1,736,111
347,222
12,499,999
Biotech Growth SA
1,388,888
277,777
9,999,994
MPM Capital Entities
1,111,111
222,223
7,999,999
All shares of our series C-2 convertible
preferred stock will automatically convert into an aggregate of
7,521,777 shares of common stock upon the consummation of this
offering. Any warrants that are not exercised prior to
completion of this offering will be cancelled.
Issuance of Series D Convertible
    Preferred Stock
In February 2003, in connection with our Pfizer
collaboration, we issued an aggregate of 2,747,253 shares
of our series D convertible preferred stock to an affiliate
of Pfizer at a price per share of $9.10 for a total purchase
price of $25.0 million. All shares of our series D
convertible preferred stock will automatically convert into an
aggregate of 2,747,253 shares of common stock upon the
consummation of this offering.
Certain Relationships
Pfizer Collaboration
In February 2003, we entered into collaboration,
license and related agreements with Pfizer to collaboratively
develop, manufacture and commercialize Macugen for the
prevention and treatment of diseases of the eye and related
conditions. These agreements are discussed above under the
heading "Business — Collaboration with
Pfizer."
Consulting Agreement with Samir
    Patel
In October 2001, we entered into a consulting
agreement with Samir Patel, one of our founders and a member of
our board of directors, under which Dr. Patel provides
consulting services to us relating to our
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development, clinical investigation and
commercialization of Macugen. The consulting agreement
terminates on December 31, 2003, unless extended by mutual
agreement of us and Dr. Patel. Under the terms of the
agreement, Dr. Patel provides at least 40 hours per
month of consulting services to us in exchange for annual
compensation of $85,000.
Loan to Executive Officer
On July 1, 2002, we provided a loan to Anthony P.
Adamis, our Chief Scientific Officer and Senior Vice President,
Research, that is evidenced by a promissory note in the
aggregate principal amount of $102,000. The note bears interest
at a fixed annual rate of 4.71%, with the interest payable at
maturity, and matures in July 2008. Dr. Adamis used the
proceeds from the loan to acquire 75,000 shares of our
common stock. Dr. Adamis has pledged those shares to secure
the loan. As of June 30, 2003, the total amount outstanding
under the loan was approximately $106,000 including accrued
interest.
Director Compensation
Please see "Management — Director
Compensation" for a discussion of options granted to our
non-employee directors.
Executive Compensation and Employment
    Agreements
Please see "Management — Executive
Compensation" and "— Stock Options" for
additional information on compensation of our executive
officers. Information regarding employment agreements with
several of our executive officers is set forth under
"Management — Employment Agreements."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with
respect to the beneficial ownership of our common stock as of
August 31, 2003, by:
•
each of our directors;
•
each of our named executive officers;
•
each person, or group of affiliated persons, who
    is known by us to beneficially own more than 5% of our common
    stock; and
•
all of our directors and executive officers as a
    group.
The column entitled "Percentage of Shares
Beneficially Owned — Before Offering" is based on
28,180,368 shares of common stock outstanding as of
August 31, 2003, assuming conversion of all outstanding
shares of convertible preferred stock, but assuming no exercise
of outstanding warrants or options. The column entitled
"Percentage of Shares Beneficially Owned — After
Offering" is based
on                      shares
of common stock to be outstanding after this offering, including
the                      shares
that we are selling in this offering and
the                      shares
that we are selling to Pfizer in a concurrent private sale at an
assumed initial public offering price of
$           per
share, but not including any shares issuable upon exercise of
warrants or options.
For purposes of the table below, we deem shares
subject to options or warrants that are currently exercisable or
exercisable within 60 days of August 31, 2003 to be
outstanding and to be beneficially owned by the person holding
the options for the purpose of computing the percentage
ownership of that person but we do not treat them as outstanding
for the purpose of computing the percentage ownership of any
other person. Except as otherwise noted, the persons or entities
in this table have sole voting and investing power with respect
to all of the shares of common stock beneficially owned by them,
subject to community property laws, where applicable. Except as
otherwise set forth below, the street address of the beneficial
owner is c/o Eyetech Pharmaceuticals, Inc., 500 Seventh
Avenue, 18th Floor, New York, New York 10018.
Percentage of Shares
Beneficially Owned —
Number of Shares
Before
After
Name and Address of Beneficial Owner
Beneficially Owned
Offering
Offering
J.P. Morgan Partners (BHCA), L.P.
4,289,215
(1)
14.8
%
%
1221 Avenue of the Americas
New York, NY 10020
Schroder Ventures Entities
3,715,683
(2)
12.9
%
%
22 Church Street
Hamilton, Bermuda HM 11
Biotech Growth N.V.
3,431,362
(3)
11.9
%
%
One Cambridge Center
Cambridge, MA 02142
Pfizer Inc.
2,747,253
(4)
9.8
%
%
(5)
235 E. 42nd Street
New York, NY 10017
MPM Capital Entities
2,745,095
(6)
9.6
%
%
111 Huntington Avenue, 31st Floor
Boston, MA 02199
Merrill Lynch Ventures Entities
2,715,686
(7)
9.5
%
%
95 Greene Street, 7th Floor
Jersey City, NJ 07302
Lakeview EyeTech
2,400,489
(8)
8.4
%
%
125 S. Wacker Drive, Suite 1675
Chicago, IL 60606
John McLaughlin
645,000
(9)
2.3
%
%
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Table of Contents
Percentage of Shares
Beneficially Owned —
Number of Shares
Before
After
Name and Address of Beneficial Owner
Beneficially Owned
Offering
Offering
David R. Guyer
1,500,000
5.3
%
%
Glenn P. Sblendorio
200,000
(10)
*
%
Anthony P. Adamis
300,000
(11)
1.1
%
%
Srinivas Akkaraju
30,000
(12)
*
%
Marty Glick
638,625
(13)
2.3
%
%
Michael Mullen
3,461,362
(14)
12.0
%
%
Samir Patel
570,000
(15)
2.0
%
%
Ed Penhoet
30,000
(16)
*
%
Henry Simon
30,000
(17)
*
%
Damion E. Wicker
4,319,215
(18)
14.9
%
%
All directors and executive officers as a group
    (13 persons)
12,199,202
(19)
41.5
%
%
*
Less than 1%.
(1)
Includes 3,574,346 shares and warrants to
    purchase 714,869 shares. Dr. Wicker, a member of our
    board of directors, is a Partner with J.P. Morgan Partners,
    LLC, an affiliate of J.P. Morgan Partners (BHCA), L.P., and may
    be deemed to hold voting and dispositive power for these shares.
(2)
Includes 1,395,364 shares and warrants to
    purchase 279,072 shares held by Schroder Ventures
    International Life Sciences Fund II, LP1;
    594,278 shares and warrants to purchase 118,856 shares
    held by Schroder Ventures International Life Science
    Fund II, LP2; 158,371 shares and warrants to purchase
    31,675 shares held by Schroder Ventures International Life
    Sciences Fund II, LP3; 21,526 shares and warrants to
    purchase 4,306 shares held by Schroder Ventures
    International Life Sciences Fund II Strategic Partners LP;
    warrants to purchase 5,617 shares held by Schroder Ventures
    International Life Sciences Fund Co-Investment Scheme;
    40,128 shares and warrants to purchase 2,409 shares
    held by Schroder Ventures International Life Sciences
    Fund II Group Co-Investment Scheme; 171,866 shares and
    warrants to purchase 34,373 shares held by Schroder
    Ventures Investment Limited; and 714,869 shares and
    warrants to purchase 142,973 shares held by International
    Biotechnology Trust plc.
(3)
Includes 2,859,468 shares and warrants to
    purchase 571,894 shares held by Biotech Growth, N.V., an
    affiliate of BB Biotech AG. Mr. Mullen, a member of
    our board of directors, is President of Bellevue Research, Inc.,
    a wholly owned subsidiary of Asset Management N.V., which
    is the asset manager for BB Biotech's portfolios, and holds
    voting and dispositive power for these shares.
(4)
Shares are held by Pfizer Ireland
    Pharmaceuticals, an affiliate of Pfizer.
(5)
Based
    on                    shares
    of common stock to be beneficially owned after this offering,
    which includes the 2,747,253 shares owned prior to this
    offering
    and                      shares
    of common stock to be purchased from us concurrently with the
    closing of this offering, assuming an initial public offering
    price of
    $           per
    share.
(6)
Includes 138,284 shares and warrants to
    purchase 27,656 shares held by MPM BioVentures II, LP;
    1,253,108 shares and warrants to purchase
    250,622 shares held by MPM Bioventures II-QP, LP;
    441,245 shares and warrants to purchase 88,249 shares
    held by MPM BioVentures GmbH & Co.; 26,021 shares
    and warrants to purchase 5,204 shares held by MPM Asset
    Management Investors; and 428,921 shares and warrants to
    purchase 85,785 shares held by MPM BioEquities Master
    Fund, LP.
(7)
Includes 613,333 shares and warrants to
    purchase 122,667 shares held by Merrill Lynch KECALP L.P.
    1999; 53,333 shares and warrants to purchase
    10,667 shares held by Merrill Lynch KECALP International
    L.P. 1999; and 1,596,405 shares and warrants to purchase
    319,281 shares held by Merrill Lynch Ventures
    L.P. 2001.
(8)
Includes 1,500,000 shares and warrants to
    purchase 300,000 shares held by Lakeview EyeTech, L.P.; and
    500,408 shares and warrants to purchase 100,081 shares
    held by Lakeview EyeTech II, L.P.
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(9)
Includes 105,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 71,875 shares will have lapsed within
    60 days of August 31, 2003.
(10)
Includes 200,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 83,333 shares will have lapsed within 60 days of
    August 31, 2003.
(11)
Includes 225,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 70,312 shares will have lapsed within 60 days of
    August 31, 2003.
(12)
Consists of 30,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60 days of
    August 31, 2003.
(13)
Includes 30,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60 days of
    August 31, 2003; also includes 15,625 shares of common
    stock that we have a right to repurchase.
(14)
Includes 30,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60 days of
    August 31, 2003; also includes the shares and warrants
    described in Note (3) above. Mr. Mullen disclaims
    beneficial ownership of the shares held by Biotech Growth N.V.,
    except to the extent of his pecuniary interest therein.
(15)
Includes 30,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60 days of
    August 31, 2003.
(16)
Consists of 30,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60 days of
    August 31, 2003.
(17)
Consists of 30,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 6,250 shares will have lapsed within 60 days of
    August 31, 2003.
(18)
Includes 30,000 shares of common stock issuable
    upon exercise of stock options exercisable within 60 days
    of August 31, 2003, of which our right to repurchase 6,250
    shares will have lapsed within 60 days of August 31,
    2003; also includes the shares and warrants described in
    Note (1) above. Dr. Wicker disclaims beneficial
    ownership of the shares held by J.P. Morgan Partners (BHCA),
    L.P., except to the extent of his pecuniary interest therein.
(19)
Includes 1,215,000 shares of common stock
    issuable upon exercise of stock options exercisable within
    60 days of August 31, 2003, of which our right to
    repurchase 269,270 shares will have lapsed within 60 days
    of August 31, 2003; also includes the shares and warrants
    described in Notes (1) and (3) above.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock
and provisions of our certificate of incorporation and bylaws
are summaries and are qualified by reference to the certificate
of incorporation and the bylaws that will be in effect upon the
completion of this offering. Copies of these documents have been
filed with the Securities and Exchange Commission as exhibits to
our registration statement, of which this prospectus forms a
part. The descriptions of the common stock and preferred stock
reflect changes to our capital structure that will occur upon
the completion of this offering.
Upon the completion of this offering, our
authorized capital stock will consist of 125,000,000 shares of
common stock, par value $0.01 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share, all of which
preferred stock will remain undesignated.
As of August 31, 2003, we had issued and
outstanding:
•
4,040,111 shares of common stock, held by 18
    stockholders of record;
•
120,000 shares of series A convertible
    preferred stock;
•
5,786,998 shares of series B convertible
    preferred stock;
•
7,964,229 shares of series C-1 convertible
    preferred stock;
•
7,521,777 shares of series C-2 convertible
    preferred stock; and
•
2,747,253 shares of series D convertible
    preferred stock.
As of August 31, 2003, we also had
outstanding:
•
warrants to purchase 1,976,235 shares of
    series B preferred stock at an exercise price of $6.00 per
    share;
•
warrants to purchase 1,592,846 shares of
    series C-1 preferred stock at an exercise price of $6.80
    per share; and
•
warrants to purchase 1,504,354 shares of
    series C-2 preferred stock at an exercise price of $7.20
    per share.
Upon the completion of this offering, all of the
outstanding shares of our preferred stock will automatically
convert into a total of 24,140,257 shares of our common stock.
In addition, upon completion of this offering, warrants to
purchase an aggregate of 833,333 shares of series B
preferred stock will remain outstanding and will be exercisable
for 833,333 shares of common stock at an exercise price of $6.00
per share. All other warrants that are not exercised prior to
the completion of this offering will be cancelled. If all of the
cancellable warrants are exercised on a cashless basis, assuming
an initial public offering price of
$          per
share, we will issue an aggregate
of                 shares
of common stock and receive no cash proceeds. If all of these
warrants are exercised for cash, we will issue an aggregate of
4,240,102 shares of common stock for cash proceeds of
approximately $28.5 million.
Common Stock
Holders of common stock are entitled to one vote
for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are
entitled to receive proportionately any dividends as may be
declared by our board of directors, subject to any preferential
dividend rights of outstanding preferred stock.
In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to receive
proportionately our net assets available after the payment of
all debts and other liabilities and subject to the prior rights
of any outstanding preferred stock. Holders of common stock have
no preemptive, subscription, redemption or conversion rights.
Our outstanding shares of common stock are and the shares
offered by us in this offering will be, when issued and paid
for, validly issued, fully paid and nonassessable. The
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rights, preferences and privileges of holders of
common stock are subject to and may be adversely affected by,
the rights of the holders of shares of any series of preferred
stock that we may designate and issue in the future.
Preferred Stock
Under the terms of our certificate of
incorporation, our board of directors is authorized to issue
shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion
to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation
preferences of each series of preferred stock.
The purpose of authorizing our board of directors
to issue preferred stock and determine its rights and
preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock,
while providing flexibility in connection with possible
acquisitions, future financings and other corporate purposes,
could have the effect of making it more difficult for a third
party to acquire, or could discourage a third party from seeking
to acquire, a majority of our outstanding voting stock. Upon
completion of this offering, there will be no shares of
preferred stock outstanding and we have no present plans to
issue any shares of preferred stock.
Warrants
Upon completion of this offering, we will have
outstanding warrants to purchase 833,333 shares of our common
stock at an exercise price of $6.00 per share. The warrants
expire on March 30, 2005 and provide for adjustments in the
event of specified mergers, reorganizations, reclassifications,
stock dividends, stock splits or other changes in our corporate
structure.
Options
As of August 31, 2003, options to purchase
4,477,500 shares of common stock at a weighted average exercise
price of $1.64 per share were outstanding. Options to purchase
an aggregate of 1,465,111 shares of common stock have been
exercised under our stock option plan as of August 31, 2003.
Antitakeover Provisions
We are subject to Section 203 of the General
Corporation Law of the State of Delaware. Subject to certain
exceptions, Section 203 prevents a publicly held Delaware
corporation from engaging in a "business combination"
with any "interested stockholder" for three years
following the date that the person became an interested
stockholder, unless the interested stockholder attained such
status with the approval of our board of directors or unless the
business combination is approved in a prescribed manner. A
"business combination" includes, among other things, a
merger or consolidation involving us, and the interested
stockholder and the sale of more than 10% of our assets. In
general, an "interested stockholder" is any entity or
person beneficially owning 15% or more of our outstanding voting
stock and any entity or person affiliated with or controlling or
controlled by such entity or person. The restrictions contained
in Section 203 are not applicable to any of our existing
stockholders.
Our certificate of incorporation and our bylaws
divide our board of directors into three classes with staggered
three-year terms. In addition, our certificate of incorporation
and our bylaws provide that directors may be removed only for
cause and only by the affirmative vote of the holders of 75% of
our shares of capital stock present in person or by proxy and
entitled to vote. Under our certificate of incorporation and
bylaws, any vacancy on our board of directors, including a
vacancy resulting from an enlargement of our board of directors,
may be filled only by vote of a majority of our directors then
in office. The classification of our board of directors and the
limitations on the ability of our stockholders to remove
directors and fill vacancies could make it more difficult for a
third party to acquire, or discourage a third party from seeking
to acquire, control of our company.
Our certificate of incorporation and our bylaws
provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of
stockholders may only be taken if it is properly
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brought before such meeting and may not be taken
by written action in lieu of a meeting. Our certificate of
incorporation and our bylaws also provide that, except as
otherwise required by law, special meetings of the stockholders
can only be called by our chairman of the board, our chief
executive officer or our board of directors. In addition, our
bylaws establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of
stockholders, including proposed nominations of candidates for
election to our board of directors. Stockholders at an annual
meeting may only consider proposals or nominations specified in
the notice of meeting or brought before the meeting by or at the
direction of our board of directors or by a stockholder of
record on the record date for the meeting, who is entitled to
vote at the meeting and who has delivered timely written notice
in proper form to our secretary of the stockholder's
intention to bring such business before the meeting. These
provisions could have the effect of delaying until the next
stockholder meeting stockholder actions that are favored by the
holders of a majority of our outstanding voting securities.
The General Corporation Law of the State of
Delaware provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of
incorporation or bylaws, unless a corporation's certificate
of incorporation or bylaws, as the case may be, requires a
greater percentage. Our bylaws may be amended or repealed by a
majority vote of our board of directors or by the affirmative
vote of the holders of at least 75% of the votes which all our
stockholders would be entitled to cast in any annual election of
directors. In addition, the affirmative vote of the holders of
at least 75% of the votes which all our stockholders would be
entitled to cast in any election of directors is required to
amend or repeal or to adopt any provisions inconsistent with any
of the provisions of our certificate of incorporation described
in the prior two paragraphs.
Registration Rights
Upon the completion of this offering, holders of
an aggregate
of                 shares
of our common stock, including shares of common stock underlying
outstanding options and warrants, will have the right to require
us to register these shares under the Securities Act under
specific circumstances.
Demand Registration
Rights.
Beginning six months after the
completion of this offering, subject to specified limitations,
holders
of                     shares
of common stock, including shares of common stock underlying
outstanding options and warrants, may require that we register
all or part of these securities for sale under the Securities
Act. Until we are entitled to register our shares on
Form S-3, a short form registration statement, these
holders may only make three demands for registration of their
securities. Once we are entitled to use Form S-3, holders
of these shares may make demands for registrations on
Form S-3 on up to two occasions during any 12-month period.
Incidental Registration
Rights.
If we register any of our
common stock, either for our own account or for the account of
other security holders, the holders of an aggregate
of                     shares
of common stock, including shares of common stock underlying
outstanding options and warrants, are entitled to notice of the
registration and to include their shares of common stock in the
registration.
Limitations and
Expenses.
Other than in a demand
registration, with specified exceptions, a holder's right
to include shares in a registration is subject to the right of
the underwriters to limit the number of shares included in the
offering. We will pay all fees, costs and expenses of any demand
or incidental registrations, and the holders of the securities
being registered will pay all selling expenses.
Transfer Agent and Registrar
The transfer agent and registrar for our common
stock
is                     .
NASDAQ National Market
We have applied for the quotation of our common
stock on the NASDAQ National Market under the symbol
"EYET."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market
for our common stock, and we cannot assure you that a liquid
trading market for our common stock will develop or be sustained
after this offering. Future sales of substantial amounts of
common stock, including shares issued upon exercise of options
and warrants, in the public market after this offering, or the
anticipation of those sales, could adversely affect market
prices prevailing from time to time and could impair our ability
to raise capital through sales of our equity securities.
Upon completion of this offering, we will have
outstanding                      shares
of common stock, after giving effect to:
•
the automatic conversion of all outstanding
    shares of our convertible preferred stock into an aggregate of
    24,140,259 shares of common stock;
•
our sale
    of                      shares
    of common stock to Pfizer, assuming an initial public offering
    price of
    $           per
    share; and
•
our issuance
    of                      shares
    of common stock upon exercise of outstanding warrants that will
    be cancelled if not exercised prior to completion of this
    offering, assuming that all warrants are exercised on a cashless
    basis based on an assumed initial public offering price of
    $           per
    share.
Of these shares,
the                      shares
sold in this offering will be freely tradable without
restriction under the Securities Act unless purchased by our
"affiliates," as that term is defined in Rule 144
under the Securities Act. The
remaining                      shares
of common stock to be outstanding after this offering are
"restricted securities" under Rule 144. All of
these restricted securities will be subject to the 180-day
lock-up period described below. After the 180-day
period,                      shares
will be freely tradeable under Rule 144(k)
and                      shares
will be eligible for resale under Rule 144, subject to
volume limitations. An
additional                      shares
will become freely tradeable under Rule 144(k) in
August 2004.
Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule 144 or 701 under the
Securities Act, which rules are summarized below.
Rule 144
In general, under Rule 144, beginning
90 days after the date of this prospectus, 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:
•
1% of the number of shares of common stock then
    outstanding, which will equal
    approximately                      shares
    immediately after this offering; and
•
the average weekly trading volume of the 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)
Subject to the lock-up agreements described
below, shares of our common stock eligible for sale under
Rule 144(k) may be sold immediately upon the completion of
this offering. In general, under Rule 144(k), a person may
sell shares of common stock acquired from us immediately upon
completion of this offering, without regard to manner of sale,
the availability of public information or volume, if:
•
the person is not our affiliate and has not been
    our affiliate at any time during the three months preceding such
    a sale; and
•
the person 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.
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Rule 701
In general, under Rule 701 of the Securities
Act, any of our employees, consultants or advisors who purchased
shares from us in connection with a qualified compensatory stock
plan or other written agreement is eligible to resell those
shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with various
restrictions, including the holding period, contained in
Rule 144.
Lock-up Agreements
The holders of substantially all of our currently
outstanding stock have agreed that, subject to the exceptions
described in the "Underwriters" section, without the
prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Morgan Stanley & Co. Incorporated on
behalf of the underwriters, they will not, during the period
ending 180 days after the date of this prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise.
Furthermore, stockholders who purchased shares
from us upon exercise of stock options have agreed with us that
they will not sell any of their shares for a period of
180 days after the date of this prospectus.
Registration Rights
Upon the completion of this offering, the holders
of an aggregate
of                      shares
of our common stock will have the right to require us to
register these shares under the Securities Act under certain
circumstances. After registration pursuant to these rights,
these shares will become freely tradable without restriction
under the Securities Act. For more information regarding these
registration rights, see "Description of Capital
Stock — Registration Rights."
Stock Options
As of August 31, 2003, we had outstanding
options to purchase 4,477,500 shares of common stock. Following
this offering, we intend to file registration statements on
Form S-8 under the Securities Act to register all of the
shares of common stock subject to outstanding stock options and
options and other awards issuable pursuant to our 2003 stock
incentive plan and 2003 employee stock purchase plan.
Warrants
Upon completion of this offering, there will be
warrants outstanding to purchase 833,333 shares of common stock
at an exercise price of $6.00 per share. Any shares purchased
pursuant to the "cashless exercise" feature of these
warrants will be freely tradeable under Rule 144(k),
subject to the 180-day look-up period described above.
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UNDERWRITERS
Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley
& Co. Incorporated, Credit Suisse First Boston LLC and Bear,
Stearns & Co. Inc. are acting as representatives, have
severally agreed to purchase, and we have agreed to sell to
them, severally, the number of shares indicated below:
Number of
Shares
Underwriter
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston LLC
Bear, Stearns & Co. Inc.
Total
The underwriters are offering the shares of
common stock subject to their acceptance of the shares from us
and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and
accept delivery of the shares of common stock offered by this
prospectus are subject to the approval of specified legal
matters by their counsel and to other conditions. The
underwriters are obligated to take and pay for all of the shares
of common stock offered by this prospectus if any such shares
are taken. However, the underwriters are not required to take or
pay for the shares covered by the underwriters'
over-allotment option described below.
The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$                    a
share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$                    a
share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering
price and other selling terms may from time to time be varied by
the representatives.
We have granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus,
to purchase up to an aggregate
of                     additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the
additional shares of common stock as the number listed next to
the underwriter's name in the preceding table bears to the
total number of shares of common stock listed next to the names
of all underwriters in the preceding table. If the
underwriters' option is exercised in full, the total price
to the public would be
$               ,
the total underwriters' discounts and commissions would be
$               and
the total proceeds to us would be
$               .
As Joint Book-Running Managers on behalf of the
underwriting syndicate, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Morgan Stanley & Co. Incorporated
will be responsible for recording a list of potential investors
that have expressed an interest in purchasing shares of common
stock as part of this offering.
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The underwriters have informed us that they do
not intend sales to discretionary accounts to exceed five
percent of the total number of shares of common stock offered by
them.
We, each of our directors and officers and
holders of substantially all of our outstanding stock have
agreed that, without the prior written consent of Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley &
Co. Incorporated on behalf of the underwriters, we and they will
not, during the period ending 180 days after the date of
this prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
•
the sale of shares to the underwriters;
•
the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus that is
    described in this prospectus or of which the underwriters have
    been advised in writing;
•
the issuance by us of shares or options to
    purchase shares of common stock pursuant to our stock incentive
    and employee stock purchase plans, provided that the recipient
    of the shares agrees to be subject to the restrictions described
    in this paragraph;
•
the issuance by us of shares of common stock in
    connection with acquisition, licensing, collaboration or similar
    strategic arrangements, provided that the recipient of the
    shares agrees to be subject to the restrictions described in
    this paragraph;
•
transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares; or
•
transfers by any person other than us by gift,
    will or intestacy, or to immediate family members, provided that
    the transferee agrees to be bound by such restrictions and the
    transfer does not require a filing under the Exchange Act other
    than filing a Form 5 after the termination of the 180-day
    period.
The following table shows the underwriting
discounts and commissions that we are to pay to the underwriters
in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of our
common stock.
Paid by Eyetech
No Exercise
Full Exercise
Per share
$
$
Total
$
$
In order to facilitate the offering of the common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be
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created if the underwriters are concerned that
there may be downward pressure on the price of the common stock
in the open market after pricing that could adversely affect
investors who purchase in this offering. In addition, to
stabilize the price of the common stock, the underwriters may
bid for, and purchase, shares of common stock in the open
market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for
distributing the common stock in this offering, if the syndicate
repurchases previously distributed common stock in transactions
to cover syndicate short positions or to stabilize the price of
the common stock. Any of these activities may stabilize or
maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any
time.
Merrill Lynch KECALP L.P. 1999, Merrill Lynch
KECALP International L.P. 1999 and Merrill Lynch Ventures L.P.
2001, each of which is an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, one of the underwriters,
beneficially own in the aggregate 2,715,686 shares, or 9.5%, of
our common stock, assuming conversion of all of our outstanding
convertible preferred stock.
We have applied for quotation of our common stock
on the NASDAQ National Market under the symbol "EYET."
We and the underwriters have agreed to indemnify
each other against certain liabilities, including liabilities
under the Securities Act.
Directed Share Program
At our request, the underwriters have reserved
for sale, at the initial public offering price, up
to                 shares
offered in this prospectus for directors, officers, employees,
business associates and other persons with whom we have a
relationship. The number of shares of common stock available for
sale to the general public will be reduced to the extent these
persons purchase reserved shares. Any reserved shares which are
not purchased will be offered by the underwriters to the general
public on the same basis as the other shares offered by this
prospectus.
Pricing of the Offering
Prior to this offering, there has been no public
market for our common stock. The initial public offering price
will be determined by negotiations between us and the
representatives. Among the factors to be considered in
determining the initial public offering price will be our future
prospects and those of our industry in general, our revenues,
earnings and other financial operating information in recent
periods, and the price-earnings ratios, price-sales ratios,
market prices of securities and financial and operating
information of companies engaged in activities similar to ours.
The estimated initial public offering price range set forth on
the cover page of this preliminary prospectus is subject to
change as a result of market conditions and other factors.
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LEGAL MATTERS
Certain legal matters with respect to the
validity of the shares of common stock offered hereby will be
passed upon for us by Hale and Dorr LLP, New York, New York.
Ropes & Gray LLP has acted as counsel for the underwriters
in connection with certain legal matters related to this
offering.
EXPERTS
Ernst & Young LLP, independent auditors, have
audited our consolidated financial statements at
December 31, 2001 and 2002 and at June 30, 2003, and
for the period from February 9, 2000 (date of inception)
through December 31, 2000, for each of the two years in the
period ended December 31, 2002 and for the six months ended
June 30, 2003, as set forth in their report. We have
included our financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst
& Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange
Commission a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock we are
offering to sell. This prospectus, which constitutes part of the
registration statement, does not include all of the information
contained in the registration statement. You should refer to the
registration statement and its exhibits for additional
information. Whenever we make reference in this prospectus to
any of our contracts, agreements or other documents, the
references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for copies
of the actual contract, agreement or other document. When we
complete this offering, we will also be required to file annual,
quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. We
anticipate making these documents publicly available, free of
charge, on our website at
www.eyetech.com
as soon as
reasonably practicable after filing such documents with the
Securities and Exchange Commission.
You can read the registration statement and our
future filings with the Securities and Exchange Commission, over
the Internet at the Securities and Exchange Commission's
web site at
http://www.sec.gov
. You may also read and
copy any document that we file with the Securities and Exchange
Commission at its public reference room at 450 Fifth Street,
N.W., Washington, DC 20549.
You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, DC 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the
operation of the public reference room.
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EYETECH PHARMACEUTICALS, INC.
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
Report of Independent Auditors
F-2
Consolidated Balance Sheets as of
    December 31, 2001 and 2002 and June 30, 2003
F-3
Consolidated Statements of Operations for the
    Period from February 9, 2000 (Date of Inception) to
    December 31, 2000 and Years Ended December 31, 2001
    and 2002 and for the Six Months Ended June 30, 2002
    (Unaudited) and 2003
F-4
Consolidated Statements of Stockholders'
    Deficit for the Period from February 9, 2000 (Date of
    Inception) to December 31, 2000 and Years Ended
    December 31, 2001 and 2002 and for the Six Months
    Ended June 30, 2003
F-5
Consolidated Statements of Cash Flows for the
    Period from February 9, 2000 (Date of Inception) to
    December 31, 2000 and Years Ended December 31, 2001
    and 2002 and for the Six Months Ended June 30, 2002
    (Unaudited) and 2003
F-6
Notes to Consolidated Financial Statements
F-7
F-1
Table of Contents
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Eyetech Pharmaceuticals, Inc.
We have audited the accompanying consolidated
balance sheets of Eyetech Pharmaceuticals, Inc. as of
December 31, 2001 and 2002, and June 30, 2003, and the
related consolidated statements of operations,
stockholders' deficit, and cash flows for the period from
February 9, 2000 (date of inception) to December 31,
2000, the years ended December 31, 2001 and 2002 and the
six months ended June 30, 2003. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Eyetech Pharmaceuticals, Inc.
at December 31, 2001 and 2002 and June 30, 2003, and
the consolidated results of its operations and its cash flows
for the period from February 9, 2000 (date of inception) to
December 31, 2000, the years ended December 31, 2001
and 2002 and the six months ended June 30, 2003, in
conformity with accounting principles generally accepted in the
United States.
/s/ ERNST & YOUNG LLP
Metropark, New Jersey
August 19, 2003
F-2
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
June 30,
December 31,
2003
June 30,
Pro Forma
2001
2002
2003
(Note 2)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
3,522,357
$
5,791,845
$
42,916,741
$
42,916,741
Marketable securities
53,496,160
63,359,128
94,616,770
94,616,770
Collaboration receivable
—
—
15,472,000
15,472,000
Prepaid expenses and other current assets
663,396
971,007
1,108,146
1,108,146
Total current assets
57,681,913
70,121,980
154,113,657
154,113,657
Property and equipment, net
402,458
3,012,001
4,021,072
4,021,072
Restricted cash
1,581,097
2,665,640
2,665,640
2,665,640
Other assets
425,000
789,395
1,293,008
1,293,008
Total assets
$
60,090,468
$
76,589,016
$
162,093,377
$
162,093,377
LIABILITIES AND STOCKHOLDERS'
    (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
5,815,864
$
7,442,478
$
8,911,311
$
8,911,311
Deferred license fee revenue, current portion
—
—
5,000,000
5,000,000
Capital lease obligations, current portion
—
560,128
588,517
588,517
Deferred rent liability, current portion
—
149,840
134,258
134,258
Total current liabilities
5,815,864
8,152,446
14,634,086
14,634,086
Deferred license fee revenue, net of current
    portion
—
—
67,916,665
67,916,665
Capital lease obligations, net of current portion
—
1,656,629
1,355,098
1,355,098
Other liabilities, net of current portion
144,264
492,636
423,430
423,430
Redeemable convertible preferred
    stock — $.01 par value; 29,093,695 shares authorized;
    13,751,227, 21,273,004 and 24,020,257 and no shares issued and
    outstanding at December 31, 2001 and 2002, June 30,
    2003, and pro forma
88,457,698
144,323,381
173,578,252
—
Stockholders' (deficit) equity:
Convertible preferred stock — $.01 par
    value; 120,000 shares authorized, issued and outstanding at
    December 31, 2001 and 2002 and June 30, 2003 and no
    shares pro forma
150,000
150,000
150,000
—
Common stock — $.01 par value;
    60,000,000 shares authorized; 4,152,000 issued and 3,652,000
    outstanding at December 31, 2001; 4,162,000 issued and
    3,737,000 outstanding at December 31, 2002; 4,419,916
    issued and 3,994,916 outstanding at June 30, 2003; and
    28,560,173 issued and 28,135,173 outstanding pro forma
41,520
41,620
44,199
285,602
Additional paid-in capital
5,294,812
11,125,808
12,900,670
186,387,519
Loans to stockholders
(300,000
)
(397,000
)
(430,666
)
(430,666
)
Deferred compensation
(203,000
)
(1,299,163
)
(1,929,320
)
(1,929,320
)
Treasury stock, at cost
(300,000
)
(255,000
)
(255,000
)
(255,000
)
Accumulated other comprehensive income
354,695
232,788
227,737
227,737
Accumulated deficit
(39,365,385
)
(87,635,129
)
(106,521,774
)
(106,521,774
)
Total stockholders' (deficit) equity
(34,327,358
)
(78,036,076
)
(95,814,154
)
77,764,098
Total liabilities and stockholders'
    (deficit) equity
$
60,090,468
$
76,589,016
$
162,093,377
$
162,093,377
See accompanying notes.
F-3
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Period from
February 9,
2000 (date of
inception) to
Year Ended December 31,
Six Months Ended June 30,
December 31,
2000
2001
2002
2002
2003
(Unaudited)
Collaboration revenue:
License fees
$
—
$
—
$
—
$
—
$
2,083,335
Reimbursement of development costs
—
—
—
—
16,549,829
Total collaboration revenue
—
—
—
—
18,633,164
Operating expenses:
Research and development
10,878,499
22,156,808
39,663,303
17,282,380
31,337,975
Sales and marketing
—
—
—
—
1,311,351
General and administrative
1,413,356
4,338,401
5,318,886
1,916,799
1,999,868
Total operating expenses
12,291,855
26,495,209
44,982,189
19,199,179
34,649,194
Loss from operations
(12,291,855
)
(26,495,209
)
(44,982,189
)
(19,199,179
)
(16,016,030
)
Interest income
1,180,550
1,815,279
1,808,727
819,606
1,647,312
Net loss
(11,111,305
)
(24,679,930
)
(43,173,462
)
(18,379,573
)
(14,368,718
)
Preferred stock accretion
(1,079,838
)
(2,494,312
)
(5,096,282
)
(2,171,598
)
(4,517,927
)
Net loss attributable to common stockholders
$
(12,191,143
)
$
(27,174,242
)
$
(48,269,744
)
$
(20,551,171
)
$
(18,886,645
)
Basic and diluted net loss attributable to common
    stockholders per share
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(5.62
)
$
(4.98
)
Weighted average shares outstanding —
    basic and diluted
2,219,178
3,659,422
3,697,192
3,654,548
3,791,401
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
$
(1.73
)
$
(0.68
)
Unaudited pro forma weighted average shares
    outstanding — basic and diluted
27,837,449
27,931,658
See accompanying notes.
F-4
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
Period from February 9, 2000 (date of
inception) to December 31, 2000,
years ended December 31, 2001 and 2002
and the six months ended June 30, 2003
Series A Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Loans to
Deferred
Shares
Amount
Shares
Amount
Capital
Stockholders
Compensation
Balance at February 9, 2000 (date of
    inception)
–
$
–
–
$
–
$
–
$
–
$
–
Issuance of common stock in exchange for cash
3,000,000
30,000
Issuance of Series A convertible preferred
    stock
120,000
150,000
Warrants issued in connection with the issuance
    of Series B
1,040,041
Warrant issued in exchange for technology
758,333
Options granted to non-employees
97,344
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized appreciation on marketable securities
Comprehensive loss
Balance at December 31, 2000
120,000
150,000
3,000,000
30,000
1,895,718
–
–
Warrants issued in connection with the issuance
    of Series C-1
2,134,414
Deferred compensation related to stock options,
    net of cancellations
321,000
(321,000
)
Amortization of deferred compensation
118,000
Exercise of stock options
1,152,000
11,520
679,680
(600,000
)
Options granted to nonemployees
264,000
Repurchase of common stock
300,000
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized appreciation on marketable securities
Comprehensive loss
Balance at December 31, 2001
120,000
150,000
4,152,000
41,520
5,294,812
(300,000
)
(203,000
)
Warrants issued in connection with the issuance
    of Series C-2
3,384,794
Deferred compensation related to stock options,
    net of cancellations
1,334,763
(1,334,763
)
Amortization of deferred compensation
238,600
Exercise of stock options
10,000
100
5,900
Loan to purchase restricted stock
57,000
(102,000
)
Repayment of loan to purchase restricted stock
5,000
Options granted to nonemployees
1,048,539
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized depreciation on marketable securities
Comprehensive loss
Balance at December 31, 2002
120,000
150,000
4,162,000
41,620
11,125,808
(397,000
)
(1,299,163
)
Deferred compensation related to stock options,
    net of cancellations
915,993
(915,993
)
Amortization of deferred compensation
285,836
Exercise of stock options
257,916
2,579
154,070
(34,416
)
Repayment of loan to purchase restricted stock
750
Options granted to nonemployees
704,799
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized depreciation on marketable securities
Comprehensive loss
Balance at June 30, 2003
120,000
$
150,000
4,419,916
$
44,199
$
12,900,670
$
(430,666
)
$
(1,929,320
)
[Additional columns below]
[Continued from above table, first column(s) repeated]
Other
Treasury Stock
Comprehensive
Total
Income
Accumulated
Stockholders'
Shares
Amount
(Loss)
Deficit
Deficit
Balance at February 9, 2000 (date of
    inception)
–
$
–
$
–
$
–
$
–
Issuance of common stock in exchange for cash
30,000
Issuance of Series A convertible preferred
    stock
150,000
Warrants issued in connection with the issuance
    of Series B
1,040,041
Warrant issued in exchange for technology
758,333
Options granted to non-employees
97,344
Preferred stock accretion
(1,079,838
)
(1,079,838
)
Net loss
(11,111,305
)
(11,111,305
)
Other comprehensive loss:
Unrealized appreciation on marketable securities
54,035
54,035
Comprehensive loss
(11,057,270
)
Balance at December 31, 2000
–
–
54,035
(12,191,143
)
(10,061,390
)
Warrants issued in connection with the issuance
    of Series C-1
2,134,414
Deferred compensation related to stock options,
    net of cancellations
–
Amortization of deferred compensation
118,000
Exercise of stock options
91,200
Options granted to nonemployees
264,000
Repurchase of common stock
500,000
(300,000
)
–
Preferred stock accretion
(2,494,312
)
(2,494,312
)
Net loss
(24,679,930
)
(24,679,930
)
Other comprehensive loss:
Unrealized appreciation on marketable securities
300,660
300,660
Comprehensive loss
(24,379,270
)
Balance at December 31, 2001
500,000
(300,000
)
354,695
(39,365,385
)
(34,327,358
)
Warrants issued in connection with the issuance
    of Series C-2
3,384,794
Deferred compensation related to stock options,
    net of cancellations
–
Amortization of deferred compensation
238,600
Exercise of stock options
6,000
Loan to purchase restricted stock
(75,000
)
45,000
–
Repayment of loan to purchase restricted stock
5,000
Options granted to nonemployees
1,048,539
Preferred stock accretion
(5,096,282
)
(5,096,282
)
Net loss
(43,173,462
)
(43,173,462
)
Other comprehensive loss:
Unrealized depreciation on marketable securities
(121,907
)
(121,907
)
Comprehensive loss
(43,295,369
)
Balance at December 31, 2002
425,000
(255,000
)
232,788
(87,635,129
)
(78,036,076
)
Deferred compensation related to stock options,
    net of cancellations
–
Amortization of deferred compensation
285,836
Exercise of stock options
122,233
Repayment of loan to purchase restricted stock
750
Options granted to nonemployees
704,799
Preferred stock accretion
(4,517,927
)
(4,517,927
)
Net loss
(14,368,718
)
(14,368,718
)
Other comprehensive loss:
Unrealized depreciation on marketable securities
(5,051
)
(5,051
)
Comprehensive loss
(14,373,769
)
Balance at June 30, 2003
425,000
$
(255,000
)
$
227,737
$
(106,521,774
)
$
(95,814,154
)
See accompanying notes.
F-5
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Period from
February 9, 2000
(date of inception)
Year Ended December 31,
Six Months Ended June 30,
to December 31,
2000
2001
2002
2002
2003
(Unaudited)
Operating activities
Net loss
$
(11,111,305
)
$
(24,679,930
)
$
(43,173,462
)
$
(18,379,573
)
$
(14,368,718
)
Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
Depreciation and amortization
30,693
92,743
316,728
89,179
398,572
Loss on disposal of assets
—
—
—
—
19,627
Noncash stock-based compensation
97,344
382,000
1,287,134
406,364
990,635
Noncash license expense
758,333
—
—
—
—
Gain on sale of marketable securities
—
(142,803
)
(333,235
)
(92,327
)
(31,957
)
Changes in operating assets and liabilities:
Collaboration receivable
—
—
—
—
(15,472,000
)
Prepaid expenses and other current assets
(212,710
)
(79,907
)
(43,073
)
479,884
141,100
Other assets
—
—
—
—
(503,613
)
Accounts payable and accrued expenses
710,768
5,105,096
1,626,614
(1,654,508
)
1,468,833
Deferred license fee revenue
—
—
—
—
72,916,665
Other liabilities
90,239
54,025
498,212
(47,649
)
(84,788
)
Net cash provided by (used in) operating
    activities
(9,636,638
)
(19,268,776
)
(39,821,082
)
(19,198,630
)
45,474,356
Investing activities
Purchases of property and equipment
(333,056
)
(192,840
)
(582,330
)
(593,154
)
(1,427,270
)
Purchase of marketable securities
(113,675,065
)
(289,359,394
)
(136,447,734
)
(62,214,897
)
(186,729,577
)
Proceeds from sale of marketable securities
95,018,585
255,017,214
126,796,094
81,027,829
155,498,841
Increase in restricted cash
(600,536
)
(980,561
)
(1,084,543
)
(635,187
)
—
Repayment of loan
—
—
255,000
5,000
750
Interest receivable
—
(370,779
)
(39,538
)
(220,361
)
(278,239
)
Increase in other assets
(125,000
)
(300,000
)
(839,395
)
(351,309
)
—
Net cash (used in) provided by investing
    activities
(19,715,072
)
(36,186,360
)
(11,942,446
)
17,017,921
(32,935,495
)
Financing activities
Proceeds from issuance of common stock
30,000
91,200
6,000
100
122,233
Proceeds from issuance of Series A
    convertible preferred stock and warrants, net
150,000
—
—
—
—
Proceeds from issuance of redeemable convertible
    preferred stock and warrants, net
34,472,953
53,585,050
54,154,200
—
24,736,944
Repayment of capital leases
—
—
(127,184
)
(954
)
(273,142
)
Net cash provided by (used in) financing
    activities
34,652,953
53,676,250
54,033,016
(854
)
24,586,035
Net increase (decrease) in cash and cash
    equivalents
5,301,243
(1,778,886
)
2,269,488
(2,181,563
)
37,124,896
Cash and cash equivalents at beginning of period
—
5,301,243
3,522,357
3,522,357
5,791,845
Cash and cash equivalents at end of period
$
5,301,243
$
3,522,357
$
5,791,845
$
1,340,794
$
42,916,741
Noncash financing and investing
    activities
Repurchase of restricted common stock
$
—
$
300,000
$
—
$
—
$
—
Fixed assets capitalized using capital leases
$
—
$
—
$
2,355,686
$
—
$
—
Loans to stockholders in connection with exercise
    of stock options and stock purchase
$
—
$
600,000
$
102,000
$
—
$
34,416
Supplemental disclosures of cash flow
    information
Cash paid during the period for:
Interest
$
—
$
—
$
32,179
$
112
$
104,982
Income taxes paid
$
—
$
—
$
—
$
—
$
579,495
See accompanying notes.
F-6
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2003
(Information as of June 30, 2002 and the
six months then ended is unaudited)
1.
Organization and Description of
    Business
Eyetech Pharmaceuticals, Inc. and its wholly
owned subsidiary (collectively, "Eyetech" or the
"Company"), is a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. The Company's
initial focus is on diseases affecting the back of the eye,
particularly the retina. The Company's most advanced
product candidate is Macugen™ (pegaptanib sodium), which it
is developing for the treatment of both the wet form of
age-related macular degeneration, known as AMD, and for the
treatment of diabetic macular edema, known as DME, which is a
complication of diabetic retinopathy. In the second half of
2001, the Company initiated two phase 2/3 pivotal clinical
trials of Macugen for the treatment of wet AMD. The Company is
also currently conducting a phase 2 clinical trial for the
use of Macugen in the treatment of DME.
The Company formed a wholly owned subsidiary in
Ireland in 2002. There has been no activity in this company
since inception in 2002. The Company operates in a single
business segment.
Prior to February 2003, the Company operated as a
development-stage company and did not generate any revenue.
Effective February 2003, the Company exited the development
stage when it entered into several concurrent agreements with
Pfizer Inc. ("Pfizer") (see Note 11).
2.
Basis of Presentation and Significant
    Accounting Policies
Interim Financial Statements
The financial statements for the six months ended
June 30, 2002 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present
fairly the results of operations and cash flows for the six
months ended June 30, 2002 have been made. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States have been
condensed or eliminated.
Consolidation
The accompanying consolidated financial
statements include the accounts of Eyetech Pharmaceuticals, Inc.
and its wholly owned subsidiary. All intercompany significant
account balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less to
be cash equivalents. At June 30, 2003 the Company has
substantially all of its cash and cash equivalents deposited
with one financial institution.
F-7
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Marketable Securities
Marketable securities are classified as
"available-for-sale" and are carried at market value
with unrealized gains and losses reported as other comprehensive
income or loss, which is a separate component of
stockholders' deficit.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
equivalents and marketable securities. The Company has
established guidelines relating to diversification and
maturities that allows the Company to manage risk.
Fair Value of Financial
    Instruments
The carrying amounts of the Company's
financial instruments, which include cash and cash equivalents,
accounts payable and accrued expenses, approximate their fair
values. The estimated fair value of the redeemable convertible
preferred stock at June 30, 2003, is approximately
$219,000,000, based on the February 2003 preferred stock sales
price of $9.10 per share.
Property and Equipment
Property and equipment is stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which range from three to
seven years. Leasehold improvements are amortized over the
estimated useful lives of the assets or related lease terms,
whichever is shorter.
Long-Lived Assets
In August 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standard ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), which addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," and the accounting
and reporting provisions of Accounting Principles Board
("APB") Opinion No. 30, "Reporting the
Results of Operations," for a disposal of a segment of a
business. The adoption of SFAS 144 as of January 1,
2002 did not have any significant impact on the Company's
consolidated financial position, results of operations or cash
flows.
Revenue Recognition
Revenues associated with the Company's
collaboration with Pfizer consist of non-refundable, up-front
license fees and reimbursement of development expenses.
The Company uses revenue recognition criteria
outlined in Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" and
Emerging Issues Task Force ("EITF") Issue 00-21
"Revenue Arrangements with Multiple Deliverables"
("EITF 00-21"). Accordingly, revenues from
licensing agreements are recognized based on the performance
requirements of the agreement. Non-refundable up-front fees,
where the Company has an ongoing involvement or performance
obligation, are generally recorded as deferred revenue in the
balance sheet and amortized into license fees in the statement
of operations over the term of the performance obligation.
Revenues derived from reimbursements of costs
associated with the development of Macugen are recorded in
compliance with EITF Issue 99-19 "Reporting Revenue Gross
as a Principal Versus Net as an Agent"
("EITF 99-19"), and EITF Issue 01-14
"Income Statement Characterization of Reimbursements
F-8
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Received For "Out-of-Pocket" Expenses
Incurred" ("EITF 01-14"). According to the
criteria established by these EITF Issues, in transactions where
the Company acts as a principal, with discretion to choose
suppliers, bears credit risk and performs part of the services
required in the transaction, the Company has met the criteria to
record revenue for the gross amount of the reimbursements.
Research and Development
    Costs
Research and development costs are expensed as
incurred.
Stock-Based Compensation
In December 2002, SFAS No. 148,
"Accounting for Stock-Based Compensation —
Transition and Disclosure — an amendment of FASB
Statement No. 123" ("SFAS 148") was
issued. SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation from the
intrinsic value-based method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). In addition, SFAS 148
amends the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS
123"). The Company adopted the disclosure requirements of
SFAS 148 effective December 31, 2002. As allowed by
SFAS 123, the Company has elected to continue to apply the
intrinsic value-based method of accounting prescribed in
APB 25 and, accordingly, does not recognize compensation
expense for stock option grants made at an exercise price equal
to or in excess of the fair market value of the stock at the
date of grant.
F-9
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Had compensation cost for the Company's
outstanding employee stock options been determined based on the
fair value at the grant dates for those options consistent with
SFAS 123, the Company's net loss and basic and diluted
net loss per share, would have been changed to the following pro
forma amounts:
Period from
February 9, 2000
(date of inception)
Year Ended December 31,
Six Months Ended June 30,
to December 31,
2000
2001
2002
2002
2003
Net loss attributable to common stockholders, as
    reported
$
(12,191,143
)
$
(27,174,242
)
$
(48,269,744
)
$
(20,551,171
)
$
(18,886,645
)
Add: Non-cash employee compensation as reported
—
118,000
238,600
89,308
285,836
Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards
(12,624
)
(216,155
)
(350,877
)
(107,871
)
(667,069
)
SFAS 123 pro forma net loss
$
(12,203,767
)
$
(27,272,397
)
$
(48,382,021
)
$
(20,569,734
)
$
(19,267,878
)
Basic and diluted loss attributable to common
    stockholders per share, as reported
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(5.62
)
$
(4.98
)
Basic and diluted loss attributable to common
    stockholders per share, SFAS 123 pro forma
$
(5.50
)
$
(7.45
)
$
(13.09
)
$
(5.63
)
$
(5.08
)
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note 2),
    SFAS 123 pro forma
$
(1.74
)
$
(0.69
)
SFAS 123 pro forma information regarding net
loss is required by SFAS 123, and has been determined as if
the Company had accounted for its stock-based employee
compensation under the fair value method prescribed in
SFAS 123. The fair value of the options was estimated at
the date of grant using the minimum value pricing model with the
following assumptions:
Period from
February 9, 2000
(date of inception)
Year Ended December 31,
Six Months Ended June 30,
to December 31,
2000
2001
2002
2002
2003
Risk-free interest rate
5.5%
5.0%
3.5%-5.0%
4.8%-5.0%
2.8%-2.87%
Dividend yield
0%
0%
0%
0%
0%
Expected life
7 years
7 years
7 years
7 years
5 years
F-10
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
The effects of applying SFAS 123 in this pro
forma disclosure are not indicative of future amounts. Stock
option grants are expensed over their respective vesting periods.
The Company accounts for options issued to
nonemployees under SFAS 123 and EITF Issue 96-18
"Accounting for Equity Investments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling
Goods or Services" ("EITF 96-18"). As such,
the value of such options is periodically remeasured and income
or expense is recognized during their vesting terms.
Comprehensive Loss
The Company reports comprehensive loss in
accordance with SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes
rules for the reporting and display of comprehensive loss and
its components. SFAS 130 requires unrealized gains on
available-for-sale securities to be included in other
comprehensive loss.
Income Taxes
The Company utilizes the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets
and liabilities and are measured using enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. A valuation allowance is provided when it is more
likely than not that some portion or all of a deferred tax asset
will not be realized.
Net Loss Per Share
The Company computes net loss per share in
accordance with Statement of Financial Accounting
Standards 128, "Earnings per Share" ("SFAS
No. 128"). Under the provisions of SFAS 128,
basic net loss per common share ("Basic EPS") is
computed by dividing net loss by the weighted-average number of
common shares outstanding. Diluted net loss per common share
("Diluted EPS") is computed by dividing net loss by
the weighted-average number of common shares and dilutive common
shares equivalents then outstanding. Common equivalent shares
consist of the incremental common shares issuable upon the
conversion of preferred stock, shares issuable upon the exercise
of stock options and the conversion of preferred stock upon the
exercise of warrants. Diluted EPS is identical to Basic EPS
since common equivalent shares are excluded from the
calculation, as their effect is anti-dilutive.
Unaudited Pro Forma
    Information
The unaudited pro forma balance sheet as of
June 30, 2003 reflects the automatic conversion of all
outstanding shares of the Company's convertible preferred
stock into an aggregate of 24,140,257 shares of common stock
upon completion of the Company's initial public offering.
The unaudited pro forma balance sheet as of June 30, 2003
does not include the exercise of 4,240,102 outstanding warrants
exercisable for shares of the Company's redeemable
convertible preferred stock, which in turn automatically convert
into shares of the Company's common stock effective upon
the assumed closing of the Company's initial public
offering. Any of these warrants that are not exercised prior to
the completion of the assumed closing of the Company's
initial public offering will be cancelled. The warrants may be
exercised by paying the exercise price in cash or pursuant to a
cashless exercise feature based on the initial public offering
price. If all of these warrants are exercised for cash, the
Company will issue an aggregate of 4,240,102 shares of
redeemable convertible preferred stock for cash proceeds of
approximately $28.5 million. The unaudited pro forma
balance sheet as of June 30, 2003 also does not include the
exercise of outstanding warrants to purchase 833,333 shares of
the Company's redeemable convertible preferred stock which
will become exercisable into the Company's common stock
effective upon the assumed closing of the Company's initial
public offering.
F-11
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Unaudited pro forma net loss per share is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock, into
shares of the Company's common stock effective upon the
assumed closing of the Company's proposed initial public
offering, as if such conversion had occurred at the date of the
original issuance.
Reclassification
Certain prior period amounts have been
reclassified to conform to current year presentation.
Recently Issued Accounting
    Pronouncements
In January 2003, the Financial Accounting
Standards Board, issued Interpretation No. 46,
"Consolidation of Variable Interest Entities"
("FIN 46"), which is an interpretation of
Accounting Research Bulletin No. 51, "Consolidated
Financial Statements." FIN 46 requires that if an
entity has a controlling interest in a variable interest entity,
the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated
financial statements of the entity. 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 in the first interim or
annual period beginning after June 15, 2003. The Company
believes that the adoption of FIN 46 will not have a
material effect on the financial position or results of
operation.
In May 2003, SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS 150") was
issued. This statement establishes how a company classifies and
measures certain financial instruments with characteristics of
both liabilities and equity, including redeemable convertible
preferred stock. This statement is effective for financial
instruments entered into or modified after May 31, 2003,
and otherwise effective at the beginning of the interim period
commencing July 1, 2003, except for mandatory redeemable
financial instruments of nonpublic companies. The Company
believes that the adoption of SFAS 150 will not have a
material effect on the financial position or results of
operations.
3.
Available for Sale Investments
Available for sale investments consist primarily
of federal agency notes, asset backed securities, mortgage
backed securities, corporate debt, and United States treasury
notes at December 31, 2001 and 2002 and June 30, 2003.
The following is a summary of available for sale
investments as of December 31, 2001 and 2002 and
June 30, 2003:
Gross
Gross
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
December 31, 2001
Maturities within one year:
Corporate notes
$
6,047,521
$
34,148
$
(1,879
)
$
6,079,790
Asset backed securities
248,459
1,528
—
249,987
6,295,980
35,676
(1,879
)
6,329,777
Maturities between one to five years:
Corporate notes
23,141,687
143,098
(3,353
)
23,281,432
Federal agency notes
4,999,212
14,993
—
5,014,205
Asset backed securities
16,516,780
149,334
—
16,666,114
United States treasury notes
2,187,806
16,829
(3
)
2,204,632
46,845,485
324,254
(3,356
)
47,166,383
Total
$
53,141,465
$
359,930
$
(5,235
)
$
53,496,160
F-12
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Gross
Gross
Unrealized
Unrealized
Cost
Gains
Losses
Fair Value
December 31, 2002
Maturities within one year:
Corporate notes
$
6,143,763
$
25,819
$
(600
)
$
6,168,982
Federal agency notes
27,621,016
44,137
—
27,665,153
Mortgage backed securities
639,453
—
(1,738
)
637,715
Asset backed securities
11,953,435
51,860
(37
)
12,005,258
46,357,667
121,816
(2,375
)
46,477,108
Maturities between one to five years:
Federal agency notes
10,909,462
61,094
—
10,970,556
Mortgage backed securities
2,937,396
24,356
—
2,961,752
Asset backed securities
1,423,950
13,341
—
1,437,291
United States treasury notes
1,497,865
14,556
—
1,512,421
16,768,673
113,347
—
16,882,020
Total
$
63,126,340
$
235,163
$
(2,375
)
$
63,359,128
June 30, 2003
Maturities within one year:
Corporate notes
$
5,677,074
$
19,911
$
(607
)
$
5,696,378
Federal agency notes
24,557,170
48,394
—
24,605,564
Mortgage backed securities
—
—
—
—
Asset backed securities
28,192,780
91,888
(4,049
)
28,280,619
58,427,024
160,193
(4,656
)
58,582,561
Maturities between one to five years:
Corporate notes
1,892,505
2,804
—
1,895,309
Federal agency notes
26,682,200
49,731
(16,231
)
26,715,700
Mortgage backed securities
5,573,359
27,427
—
5,600,786
Asset backed securities
1,813,945
8,469
—
1,822,414
35,962,009
88,431
(16,231
)
36,034,209
Total
$
94,389,033
$
248,624
$
(20,887
)
$
94,616,770
F-13
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
4.     Property and
Equipment
Property and equipment consists of the following:
December 31,
June 30,
2001
2002
2003
Furniture and office equipment
$
185,801
$
479,660
$
550,429
Computer equipment
219,457
688,877
1,003,494
Laboratory equipment
50,440
1,828,771
2,756,647
Leasehold improvements
70,196
454,857
537,597
525,894
3,452,165
4,848,167
Accumulated depreciation and amortization
(123,436
)
(440,164
)
(827,095
)
$
402,458
$
3,012,001
$
4,021,072
Included in property and equipment are assets
recorded under capital leases with a cost of approximately
$2,355,686 at December 31, 2002 and June 30, 2003.
There were no assets under capital leases prior to 2002.
Amortization of the assets recorded under capital leases is
included with depreciation expense. The accumulated amortization
related to these assets under capital leases was approximately
$196,000 and $237,000 at December 31, 2002 and
June 30, 2003, respectively.
5.     Accounts
Payable and Accrued Expenses
Accounts payable and accrued expenses consist of
the following:
December 31,
June 30,
2001
2002
2003
Clinical development expenses
$
2,106,487
$
3,696,767
$
3,374,053
License fee
2,000,000
—
—
Payroll and related expenses
1,204,000
1,438,809
1,131,359
Professional fees
302,901
825,424
1,036,414
Other expenses
202,476
1,481,478
3,369,485
$
5,815,864
$
7,442,478
$
8,911,311
6.     Redeemable
Convertible Preferred Stock and Stockholders'
Deficit
Common
Stock
As of June 30, 2003, the Company is
authorized to issue 60,000,000 shares of common stock. Each
holder of common stock is entitled to one vote for each share of
common stock held of record on all matters on which stockholders
generally are entitled to vote.
F-14
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
As of June 30, 2003, the Company had
reserved shares of common stock for issuance as follows:
Common stock options
9,157,070
Conversion of Series A preferred stock
120,000
Conversion of Series B preferred stock
5,786,998
Conversion of Series C-1 and C-2 preferred
    stock
15,486,006
Conversion of Series D preferred stock
2,747,253
Exercise of warrants to purchase Series B,
    C-1 and C-2 preferred stock
5,073,435
38,370,762
During 2001, employees and non-employees
exercised options to purchase 1,152,000 shares of the
Company's common stock for total consideration of $691,200.
Of this amount, the Company loaned $600,000 to one of the
purchasers of the stock pursuant to a full recourse note (see
Note 10). Of those shares, 1,075,000 were restricted, and
generally vest over a four-year period. At June 30, 2003,
31,771 shares remain restricted. Unvested shares are subject to
the Company's repurchase at the option's exercise
price. During 2002, one non-employee exercised an option to
purchase 10,000 shares of the Company's common stock
in exchange for $6,000 in cash. During the six months ended
June 30, 2003 employees and non-employees exercised options
to purchase 257,916 shares of the Company's common
stock in exchange for cash of $122,000 and a full recourse note
of $34,000.
Convertible
Preferred Stock
During March 2000, the Company sold 120,000
shares of Series A convertible preferred stock
("Series A") for $150,000. During April 2000, the
Company sold 5,766,332 shares of Series B redeemable
convertible preferred stock ("Series B") and
warrants to purchase 1,142,902 shares of Series B for
approximately $34,473,000, net of issuance costs. The
Company's estimate of the fair value of the warrants was
determined to be $1,040,000. The warrants have an exercise price
of $6.00.
During January 2001, the Company sold
20,666 shares of Series B for $124,000.
During July and August 2001, the Company sold
7,964,229 shares of Series C-1 redeemable convertible
preferred stock ("Series C-1") and warrants to
purchase 1,592,846 shares of Series C-1 for
approximately $53,461,000, net of issuance costs. The
Company's estimate of the fair value of the warrants was
determined to be approximately $2,134,000. The warrants have an
exercise price of $6.80.
Upon the completion of certain defined events,
the Company sold and issued to the purchasers of the
Series C-1, 7,521,777 shares of Series C-2
redeemable convertible preferred stock
("Series C-2") and warrants to purchase
1,504,354 shares of Series C-2 for approximately
$54,157,000, net of issuance costs, in August 2002. The
Company's estimate of the fair value of the warrants was
determined to be approximately $3,385,000. The warrants have an
exercise price of $7.20.
In 2002, the Company authorized the issuance of
2,747,253 shares of Series D convertible preferred
stock ("Series D"). Concurrent with the closing
in February 2003 of the agreements with Pfizer to jointly
develop and commercialize Macugen, the Company sold
2,747,253 shares of Series D to Pfizer for
$24,736,944, net of issuance costs.
In connection with the Pfizer agreements, the
Company has also agreed to sell, and Pfizer has agreed to
purchase, up to $25,000,000 worth of additional capital stock
upon the completion of certain milestones at the then current
market price (see Note 11).
F-15
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Preferred Stock
Warrants
Warrants issued in connection with the
Series B and Series C-1 and C-2 are exercisable over
periods ranging from 2 to 6 years at the option of the
holder. Of the 5,073,435 outstanding warrants to purchase
redeemable preferred stock, 4,240,102 will automatically expire
upon an initial public offering of the Company stock,
dissolution or merger of the Company, as defined. The remaining
833,333 warrants do not expire upon the completion of an initial
public offering. The Company is required to give the warrant
holder notice of such transaction at least fifteen days
prior to consummation. In addition, the warrants expire if the
Company completes certain milestones in connection with its
development of Macugen.
Voting
Preferred stockholders are entitled to the number
of votes equal to the number of shares of common stock into
which each share of preferred stock is convertible.
Dividends
The holders of Series A, Series B,
Series C-1, Series C-2 and Series D are entitled
to annual non-cumulative dividends when, and if, declared, prior
and in preference to any dividends payable on common stock, at a
rate of $0.10 per share, $0.48 per share, $0.54 per share, $0.58
per share and $0.73 per share, respectively. As of June 30,
2003, no dividends had been declared.
Liquidation
In the event of a defined liquidation event
("Liquidation Event"), which includes a liquidation,
dissolution, winding up of the Company or a merger,
consolidation or reorganization of the Company that results in
the transfer of 50% or more of the outstanding voting power of
the Company or a sale of substantially all the assets of the
Company, the Series A, Series B, Series C-1,
Series C-2 and Series D preferred stockholders are
entitled to, prior and in preference to any other stockholders,
a liquidation preference distribution of the sum of
1.5 times the original per share purchase price paid to the
Company, plus all declared and unpaid dividends, or if greater,
the amount per share as would have been payable had each share
of preferred stock been converted into the Company's common
stock prior to such Liquidation Event. The Series B,
Series C-1, Series C-2 and Series D preferred
stockholders rank senior in preference to the Series A
preferred stockholders, and share ratably on a pari passu basis
in the event of a liquidation. After payment of full
preferential amount to Series A, Series B,
Series C-1, Series C-2 and Series D preferred
stockholders, the remaining assets shall be distributed ratably
among the holders of common stock.
The following table summarizes convertible
preferred stock issued and outstanding (excluding preferred
stock warrants of 5,073,435), with liquidation preferences for
each series at June 30, 2003:
Issued and
Liquidation
Authorized Shares
Outstanding
Preference
Series A
120,000
120,000
$
225,000
Series B
7,763,233
5,786,998
52,082,982
Series C-1
9,557,077
7,964,229
81,235,136
Series C-2
9,026,132
7,521,777
81,235,192
Series D
2,747,253
2,747,253
37,500,000
29,213,695
24,140,257
$
252,278,310
F-16
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
Conversion
Each holder of Series A, Series B,
Series C-1, Series C-2 and Series D may convert
at any time, at its option, shares of preferred into common
stock on a one-for-one basis subject to certain adjustments
including dilutive issuances and splits, as defined. Conversion
will occur automatically concurrent with a firm underwritten
public offering of not less than $40,000,000 ($25,000,000 for
Series A and Series B) with a per share price of not
less than $12.00 per share. Convertible preferred stock will
also automatically convert upon the vote of the holders of at
least 66 2/3% of the then outstanding shares for
Series B, Series C-1 and Series C-2 or the
majority of the then outstanding shares of Series D and
Series A. In addition, the Series D will automatically
convert upon the conversion of all Series B and
Series C into common stock and either the occurrence of a
$10,000,000 equity capital investment or a public offering not
less than $20,000,000.
Redemption
At any time on or after July 20, 2010, at
the request of the holders of not less than 66 2/3% of the
then outstanding Series C-1, Series C-2 and a majority
of the Series D and Series B or upon a liquidation
event as defined above, the Company shall redeem for cash such
convertible preferred stock at the greater of the sum of 1.5
times the original series issue price plus declared but unpaid
dividends or the amount per share as would have been payable had
each share been converted into common stock. Accordingly, the
Company is recording and accreting the Series B,
Series C-1, Series C-2 and Series D to its
defined redemption value through July 20, 2010.
Series A is not redeemable at the option of the holder.
7.     Stock
Options
The Company has reserved a maximum of
8,175,000 shares under the Company's 2001 Stock Option
Plan (the "2001 Plan") and 2,747,500 shares
for stock options granted prior to the adoption of the 2001
Plan. Stock options may be granted to employees and consultants.
Granted stock options are immediately exercisable into
restricted shares and generally vest over a four-year period and
expire ten years from date of grant. Additionally, options that
are exercised into restricted shares of common stock continue to
vest under the original terms of the related options.
F-17
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
The following table summarizes option activity
for the Company:
Weighted-
Common Stock
Average
Options
Exercise Price
Outstanding at February 9, 2000
—
$
—
Granted
1,147,500
0.60
Exercised
—
—
Cancelled
—
—
Outstanding at December 31, 2000
1,147,500
0.60
Granted
2,253,000
1.36
Exercised
(1,152,000
)
0.60
Cancelled
(265,000
)
5.74
Outstanding at December 31, 2001
1,983,500
1.24
Granted
1,885,000
1.38
Exercised
(10,000
)
0.60
Cancelled
(105,084
)
0.89
Outstanding at December 31, 2002
3,753,416
0.98
Granted
267,000
2.91
Exercised
(257,916
)
0.61
Cancelled
(135,305
)
0.89
Outstanding at June 30, 2003
3,627,195
$
1.17
The following table summarizes information about
vested stock options outstanding:
December 31,
June 30,
2000
2001
2002
2003
Vested stock options
107,291
581,250
1,210,891
1,336,288
Weighted average exercise price
$
0.60
$
0.60
$
0.60
$
0.66
The following table summarizes information about
stock options outstanding at June 30, 2003:
Options
Outstanding
Weighted-Average
and
Remaining
Exercise Price
Exercisable
Options Vested
Contractual Life
$0.60
1,523,633
1,060,299
7.5
1.00
60,000
27,916
8.4
1.36
999,062
208,125
8.9
1.44
780,000
36,250
9.4
2.91
264,500
3,698
9.8
3,627,195
1,336,288
8.4
In connection with the granting of employee stock
options in 2001, 2002 and the six months ended June 30,
2003, the Company recorded deferred compensation of
approximately $321,000, $1,335,000 and $916,000, respectively.
Deferred compensation is being amortized over the vesting period
of the options
F-18
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
resulting in non-cash stock-based compensation
expense of approximately $118,000, $239,000 and $285,000 for the
years ended December 31, 2001 and 2002 and the six months
ended June 30, 2003, respectively.
For the period February 9, 2000 (date of
inception) to December 31, 2000, the years ended
December 31, 2001 and 2002, and the six months ended
June 30, 2003, the Company granted a total of 452,500,
345,500, 137,500 and 5,000, respectively, in stock options to
certain consultants and Scientific Advisory Board members. The
Company has accounted for these options in accordance with EITF
96-18 and, accordingly, recorded non-cash expense of $97,000,
$264,000, $1,049,000 and $705,000 for the period February 9,
2000 (date of inception) to December 31, 2000, the years
ended December 31, 2001 and 2002, and the six months ended
June 30, 2003, respectively. The Company will continue to
remeasure the fair value of unvested stock options to these
consultants and Scientific Advisory Board members until vesting
is complete.
F-19
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
8.     Loss Per
Share
The following table sets forth the computation of
basic and diluted net loss attributable to common stockholders
per share.
Period from
February 9, 2000
(date of inception)
Year Ended December 31,
Six Months Ended June 30,
to December 31,
2000
2001
2002
2002
2003
Numerator:
Net Loss
$
(11,111,305
)
$
(24,679,930
)
$
(43,173,462
)
$
(18,379,573
)
$
(14,368,718
)
Preferred stock accretion
(1,079,838
)
(2,494,312
)
(5,096,282
)
(2,171,598
)
(4,517,927
)
Numerator for basic and diluted net loss
    attributable to common stockholders per share—net loss
    attributable for common stockholders
$
(12,191,143
)
$
(27,174,242
)
$
(48,269,744
)
$
(20,551,171
)
$
(18,886,645
)
Denominator:
Denominator for basic and dilutive net loss
    attributable to common stockholders per
    share—weighted-average shares
2,219,178
3,659,422
3,697,192
3,654,548
3,791,401
Basic and diluted net loss attributable to common
    stockholders per share
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(5.62
)
$
(4.98
)
Denominator for unaudited pro forma basic and
    diluted net loss attributable to common stockholders per
    share—weighted average shares (Note 2)
27,837,449
27,931,658
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note 2)
$
(1.73
)
$
(0.68
)
F-20
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
The following table shows dilutive common share
equivalents outstanding, which are not included in the above
historical calculations, as the effect of their inclusion is
anti-dilutive during each period:
Period from
February 9, 2000
Year Ended December 31,
Six Months Ended June 30,
(date of inception) to
December 31, 2000
2001
2002
2002
2003
Preferred stock
5,886,332
13,871,227
21,393,004
13,871,227
24,140,257
Options
1,147,500
1,983,500
3,753,416
2,873,416
3,627,195
Warrants
1,976,235
3,569,081
5,073,435
5,073,435
5,073,435
9,010,067
19,423,808
30,219,855
21,818,078
32,840,887
9.
Income Taxes
At December 31, 2002, the Company has a net
operating loss for federal income tax purposes of approximately
$74,660,000, which begins to expire in 2020.
Deferred income taxes reflect the net effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The Company's deferred tax
assets relate primarily to net operating loss carryforwards and
non-cash stock-based compensation. For the years ended
December 31, 2001 and 2002 the change in valuation
allowance was approximately $9,582,000 and $17,249,000,
respectively. At December 31, 2001, 2002, and June 30,
2003, a valuation allowance was recorded to fully offset the net
deferred tax asset. The change in the valuation allowance for
the six months ended June 30, 2003 was approximately
$5,712,000. Significant components of the Company's
deferred tax assets are as follows:
December 31,
June 30,
2001
2002
2003
Deferred tax assets:
Net operating loss carryforwards
$
13,599,000
$
29,864,000
$
6,738,000
Accrued bonus
—
505,000
311,000
Stock-based compensation
192,000
707,000
1,103,000
Depreciation
15,000
—
—
Start-up costs, net of amortization
349,000
236,000
179,000
Deferred license fee revenue
—
—
29,167,000
Other
—
62,000
176,000
Total gross deferred tax assets
14,155,000
31,374,000
37,674,000
Deferred tax liabilities:
Depreciation
—
(112,000
)
(700,000
)
Unrealized gain on securities
(142,000
)
—
—
Total gross deferred tax liabilities
(142,000
)
(112,000
)
(700,000
)
Valuation allowance
(14,013,000
)
(31,262,000
)
(36,974,000
)
Net deferred tax assets
$
—
$
—
$
—
F-21
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
A reconciliation of the statutory tax rates and
the effective tax rates for the period February 9, 2000
(date of inception) to December 31, 2000, the years ended
December 31, 2002 and 2001, and the six months ended
June 30, 2003 is as follows:
Period from
February 9, 2000
(date of inception)
Year Ended December 31,
Six Months Ended June 30,
to December 31,
2000
2001
2002
2002
2003
Statutory rate
(34
)%
(34
)%
(34
)%
(34
)%
(34
)%
State and local income taxes (net of federal tax
    benefit)
(6
)
(6
)
(6
)
(6
)
(6
)
Change in valuation allowance
40
40
40
40
40
0
%
0
%
0
%
0
%
0
%
10.
Loans to Stockholders
On January 15, 2001, the Company hired a new
President and Chief Operating Officer (the
"Executive"). The employment agreement with the
Executive provided for a $600,000 loan the proceeds of which was
used to exercise 1,000,000 stock options at a per share exercise
price of $0.60. The 1,000,000 restricted common shares were to
vest over a four-year period. The loan was a full-recourse note
and was non-interest bearing. Additionally, the Company loaned
the Executive an additional $500,000. This loan was also
non-interest bearing.
On November 8, 2001, the Company and the
Executive mutually agreed to terminate the employment of the
Executive. In connection with the termination agreement, 500,000
of the 1,000,000 restricted common shares were immediately
vested, and the Company exercised its right to repurchase the
remaining 500,000 unvested shares at the original exercise price
of $0.60 or $300,000, which was credited to the $600,000 loan
principal due from the Executive. The Executive repaid $5,000 of
the loan principal during 2002. The remaining loan balance of
$295,000 is due in January 2007 and is collateralized by 500,000
restricted common shares. Additionally, the Company forgave
$250,000 of the $500,000 loan principal which was included as
additional expense. The remaining $250,000 of the loan principal
was repaid during 2002.
11.     Collaboration
Agreements
In March 2000, the Company licensed the rights to
certain technology from a corporate licensor in exchange for
$7,000,000 and a warrant to purchase 833,333 shares of
Series B Convertible Preferred Stock at an exercise price
of $6.00 per share. The warrant is exercisable at any time
through March 30, 2005. The Company's estimate of the
fair value of the warrant was determined to be $758,333. In
addition, the Company may be required to make additional
payments upon the achievement of certain specified events, as
defined, in the licensing agreement. During the period from
February 9, 2000 (date of inception) to December 31,
2000, the Company recorded an expense of $7,758,333 which has
been classified as a research and development expense, related
to the licensed technology.
In December 2001, the Company signed a license
agreement for the nonexclusive rights to certain technology from
a corporate licensor in exchange for an initial irrevocable and
nonrefundable license fee of
F-22
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
$2,000,000 which was paid in 2002. Additionally,
the Company may be required to make additional payments upon the
achievement of certain specified events, as defined in the
license agreement. For the year ended December 31, 2001,
the Company recorded the $2,000,000 license fee as a research
and development expense.
In December 2001, the Company entered into a
two-year research agreement under which the Company pays a
collaborator for the development of a delivery device to be used
in conjunction with Macugen. Such payments are included as
research and development expense.
In February 2002, the Company entered into a
license, manufacturing and supply agreement for the use of
certain technology rights to certain patents of a component of
Macugen. The contract calls for specified pricing based on
quantities purchased. The Company may be required to make
additional payments upon the achievement of certain specified
events, as defined in the license agreement.
In April 2002, the Company licensed the rights
for a certain delivery technology for $500,000. The Company may
be required to make additional payments upon the achievement of
certain specified events, as defined in the license agreement.
Such payments are included as research and development expense.
In December 2002, Pfizer and the Company entered
into several concurrent agreements to jointly develop and
commercialize Macugen. Under the terms of the agreement, which
became effective February 3, 2003 when government approval
was obtained, Pfizer made initial payments of $100,000,000 which
included the purchase of 2,747,253 shares of the
Company's Series D preferred stock for $24,736,944,
net of issuance costs and a $75,000,000 initial license fee
which is being amortized over the expected term of the agreement
(estimated at 15 years). In addition, the Company has
agreed to sell to Pfizer and Pfizer has agreed to purchase from
the Company, up to an additional $25,000,000 of the
Company's capital stock at the then current market price
upon the completion of certain events, including $10,000,000 of
the Company's common stock at the initial public offering
price concurrently with the successful completion of an initial
public offering.
Based on the achievement of certain specified
worldwide regulatory submission and approvals, the Company would
be eligible to receive up to an additional $195,500,000 in
milestone payments. The Company also has the potential to
receive up to an additional $450,000,000 in milestone payments,
which are contingent upon successful commercialization of
Macugen and which are based on attainment of agreed-upon sales
levels. Pfizer may terminate the collaboration relationship upon
six to twelve months' prior notice, depending on when such
notice is given.
If approved, Macugen will be co-promoted by the
Company and Pfizer in the United States where Eyetech will have
an ophthalmology sales force, maintain the inventory, book all
United States product sales and each will share in profits and
losses from the sale of Macugen products in the United States.
Outside the United States, Pfizer will market the product
exclusively under a license, for which the Company will receive
royalty income. As part of the agreement, the Company will begin
to assemble a sales force prior to commercial launch of Macugen
which also allows for the detailing Pfizer's Xalatan®
ophthalmologic treatment in exchange for specified royalties.
Under the terms of the agreement, both parties
will expend funds related to the co-promotion and development of
Macugen. Pfizer will generally fund a majority of the ongoing
development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. In certain instances, the Company will reimburse
Pfizer for the Company's share of costs that Pfizer incurs.
This funding resulted in the recognition by the Company of
$16,549,829 in revenue and $1,077,829 in research and
development expense during the six months ended June 30,
2003. In addition, the Company recognized $2,083,335 in
connection with the amortization of the $75,000,000 initial
license fee paid by Pfizer.
F-23
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
12.     Capital
Leases
The Company leases laboratory equipment and other
equipment under capital leases that bear interest from 9.6% to
10.1% and expire in 2006. The following is a schedule of the
future minimum lease payments under these capital leases as of
June 30, 2003:
Remainder of 2003
$
378,000
2004
756,000
2005
694,000
2006
438,000
Total
2,266,000
Less amount representing interest
322,000
Present value of the minimum lease payments
1,944,000
Less current portion of capital lease obligations
589,000
$
1,355,000
13.     Commitments
The Company leases office and laboratory space in
New York, New York, Cedar Knolls, New Jersey and Woburn,
Massachusetts. During 2002, the Company leased certain office
space in New York, New York, which expires on July 31,
2007. Under the lease agreements, the Company has secured bank
letters of credit totaling approximately $2,666,000 which are
fully cash collateralized and the cash is categorized as
restricted cash in the balance sheet.
Rent expense for the period February 9, 2000
(date of inception) to December 31, 2000, the years ended
December 31, 2001 and 2002 and the six months ended
June 30, 2003 was approximately $332,000, $482,000,
$1,380,000 and $722,000, respectively. Future minimum lease
commitments, net of sublease income, are as follows:
Remainder of 2003
$
762,000
2004
1,543,000
2005
1,551,000
2006
1,564,000
2007
1,231,000
2008
876,000
Thereafter
1,504,000
$
9,031,000
Under the Company's agreements with Gilead,
Nektar and Isis, it is obligated to make specified payments upon
achieving specified milestones relating to the development and
regulatory approval of Macugen. These contingent payment
obligations are not included in the above table.
14.     401(k)
Plan
The Company maintains a defined contribution
401(k) plan available to eligible employees. Employee
contributions are voluntary and are determined on an individual
basis, limited by the maximum amounts
F-24
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
allowable under federal tax regulations. The
Company has discretion to make contributions to the plan.
However, to date no contributions have been made.
15.     Selected
Quarterly Financial Data (Unaudited)
Quarter Ended
March 31
June 30
September 30
December 31
2001
Net loss
$
(4,581,212
)
$
(6,041,233
)
$
(4,816,970
)
$
(9,240,515
)
Net loss attributable to common stockholders
(4,958,852
)
(6,419,327
)
(5,588,020
)
(10,208,043
)
Basic and diluted net (loss) per common share*
$
(1.65
)
$
(2.02
)
$
(1.62
)
$
(2.79
)
2002
Net loss
$
(8,747,753
)
$
(9,631,821
)
$
(10,697,851
)
$
(14,096,037
)
Net loss attributable to common stockholders
(9,833,552
)
(10,717,620
)
(11,971,922
)
(15,746,650
)
Basic and diluted net (loss) per common
    share*
$
(2.69
)
$
(2.93
)
$
(3.26
)
$
(4.26
)
2003
License fees
$
833,334
$
1,250,001
Reimbursement of development costs
5,631,540
10,918,289
Net loss
(6,266,462
)
(8,102,256
)
Net loss attributable to common stockholders
(8,525,425
)
(10,361,220
)
Basic and diluted net (loss) per common
    share*
$
(2.28
)
$
(2.73
)
*
Per common share amounts for the quarters and
    full years have been calculated separately. Accordingly,
    quarterly amounts do not add to the annual amount because of
    differences in the weighted average common shares outstanding
    during each period principally due to the effect of the
    Company's issuing shares of its common stock during the
    year.
Diluted EPS is identical to Basic EPS since
    common equivalent shares are excluded from the calculation, as
    their effect is anti-dilutive.
16.     Events
(unaudited) Subsequent to Date of Independent Auditors
Report
On September 10, 2003, the Company's
Board of Directors approved the Company's 2003 Stock
Incentive Plan (the "2003 Incentive Plan"). The 2003
Incentive Plan, which remains subject to stockholder approval,
will become effective on the date that the registration
statement relating to the Company's initial public offering
is declared effective. Under the 2003 Incentive Plan, 4,400,000
shares of common stock will be authorized for issuance, subject
to annual increases beginning in 2005 in accordance with the
terms of the 2003 Incentive Plan. Upon the effectiveness of the
2003 Incentive Plan, the Company will grant no further stock
options or other awards under the Company's 2001 Plan.
On September 10, 2003, the Company's
Board of Directors approved the Company's 2003 Employee
Stock Purchase Plan (the "2003 Purchase Plan"). The
2003 Purchase Plan, which remains subject to
F-25
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
(Information as of June 30, 2002 and the
six months then ended is unaudited)
stockholder approval, will become effective on
the date that the registration statement relating to the
Company's initial public offering is declared effective.
Under the 2003 Purchase Plan, 500,000 shares of common stock
will be reserved for sale to participating employees.
On September 10, 2003, the Company's
Board of Directors approved a Restated Certificate of
Incorporation. The Restated Certificate of Incorporation, which
remains subject to stockholder approval, will become effective
upon the consummation of the Company's initial public
offering, will increase the Company's authorized common
stock to 125,000,000 shares and will authorize 5,000,000 shares
of preferred stock, issuable in one or more series to be
designated by the Company's Board of Directors.
F-26
Table of Contents
Table of Contents
PART II
Item 13.
Other Expenses of Issuance and
    Distribution
Securities and Exchange Commission registration
    fee
$
8,090
National Association of Securities Dealers Inc.
    fee
10,500
NASDAQ Stock Market listing fee
100,000
Accountants' fees and expenses
*
Legal fees and expenses
*
Blue Sky fees and expenses
*
Transfer Agent's fees and expenses
*
Printing and engraving expenses
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
Item 14.
Indemnification of Directors and
    Officers
Section 102 of the General Corporation Law
of the State of Delaware permits a corporation to eliminate the
personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an
improper personal benefit. The Registrant's certificate of
incorporation provides that no director of the Registrant shall
be personally liable to it or its stockholders for monetary
damages for any breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability,
except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of
liability of directors for breaches of fiduciary duty.
Section 145 of the General Corporation Law
of the State of Delaware provides that a corporation has the
power to indemnify a director, officer, employee, or agent of
the corporation and certain other persons serving at the request
of the corporation in related capacities against expenses
(including attorneys' fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which
he is or is threatened to be made a party by reason of such
position, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful, except that, in the case of actions brought by or in
the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or
other adjudicating court determines that, despite the
adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The Registrant's certificate of
incorporation provides that the Registrant will indemnify each
person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Registrant) by
reason of the fact that he or she is or was, or has agreed to
become, a director or officer of the Registrant, or is or was
serving, or has agreed to serve, at the Registrant's
request as a director, officer, partner, employee or trustee of,
or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise(all such persons being
referred to as an "Indemnitee"), or by reason of any
action alleged to have been taken or omitted in such capacity,
against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding and any appeal therefrom, if such
II-1
Table of Contents
Indedmnitee acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the
Registrant's best interests, and, with respect to any
criminal action or proceeding, he or she had no reasonable cause
to believe his or her conduct was unlawful. The
Registrant's certificate of incorporation provides that the
Registrant will indemnify any Indemnitee who was or in a party
to an action or suit by or in the right of the Registrant to
procure a judgment in its favor by reason of the fact that the
Indemnitee is or was, or has agreed to become, a director or
officer of the Registrant, or is or was serving, or has agreed
to serve, at the Registrant's request as a director,
officer, partner, employee or trustee of, or in a similar
capacity with, another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent
permitted by law, amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding, and any appeal therefrom, if the Indemnitee acted in
good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the Registrant,
except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant, unless a court
determines that, despite such adjudication but in view of all of
the circumstances, he or she is entitled to indemnification of
such expenses. Notwithstanding the foregoing, to the extent that
any Indemnitee has been successful, on the merits or otherwise,
he or she will be indemnified by the Registrant against all
expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith. Expenses must be
advanced to an Indemnitee under certain circumstances.
Item 15.
Recent Sales of Unregistered
    Securities
Set forth below in chronological order is a
description of the Registrant's sales of unregistered
securities since incorporation. The sales made to investors were
made in accordance with Section 4(2) or Regulation D
of the Securities Act. Sales to the Registrant's employees,
consultants, directors and officers were deemed to be exempt
from registration under the Securities Act in reliance on
Rule 701 promulgated Section 3(b) of the Securities
Act as transactions under compensatory benefit plans and
contracts related to compensation under Rule 701. No
underwriters were used for any of the following transactions.
In March 2000, in connection with the
Registrant's formation, the Registrant issued an aggregate
of 3,000,000 shares of common stock for aggregate cash
consideration of $30,000 to the Registrant's founders,
David A. Guyer, Marty Glick, John McLaughlin and Samir
Patel.
In March 2000, the Registrant issued an aggregate
of 120,000 shares of series A convertible preferred stock
for aggregate cash consideration of $150,000 to Marty Glick,
John McLaughlin and Samir Patel.
On March 30, 2000, the Registrant issued to
Gilead Sciences, Inc. a warrant to purchase 833,333 shares
of series B convertible preferred stock at an exercise
price of $6.00 per share in partial consideration for the
Registrant entering into a license agreement whereby Gilead
Sciences, Inc. licensed to the Registrant rights to a certain
drug.
In April, August, October and November 2000, and
January and February 2001, the Registrant issued an aggregate of
5,786,998 shares of series B convertible preferred stock at a
price per share of $6.00, together with warrants to purchase an
aggregate of 1,142,902 shares of series B convertible
preferred stock at an exercise price of $6.00 per share to
a group of investors, including Merrill Lynch Ventures Entities,
Lakeview EyeTech, L.P. and Schroder Ventures Entities.
In July and August 2001, the Registrant issued an
aggregate of 7,964,229 shares of series C-1 convertible
preferred stock at a price per share of $6.80, together with
warrants to purchase an aggregate of 1,592,846 shares of
series C-1 convertible preferred stock at an exercise price
of $6.80 per share to a group of investors, including
J.P. Morgan Partners (BHCA), L.P., Biotech Growth, S.A.
(BB Biotech), MPM Entities, Merrill Lynch Ventures
Entities, Lakeview EyeTech II, L.P. and Schroder Ventures
Entities.
In August 2002, the Registrant issued an
aggregate of 7,521,777 shares of series C-2
convertible preferred stock at a price per share of $7.20,
together with warrants to purchase an aggregate of 1,504,354
shares of series C-2 convertible preferred stock at an
exercise price of $7.20 per share to existing investors,
including
II-2
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J.P. Morgan Partners (BHCA), L.P., Biotech
Growth, S.A. (BB Biotech), MPM Entities, Merrill Lynch
Ventures Entities, Lakeview EyeTech II, L.P. and Schroder
Ventures Entities.
In February 2003, the Registrant issued 2,747,253
shares of series D convertible preferred stock to an
affiliate of Pfizer Inc. at a price per share of $9.10.
As of August 31, 2003, the Registrant had
issued to employees, directors and consultants 1,465,111 shares
of common stock upon the exercise of stock options at a weighted
average exercise price of $0.60 per share and
75,000 shares of restricted common stock at a purchase
price of $1.36 per share. In addition, options to purchase
3,420,000 shares of common stock were outstanding under the
Registrant's 2001 Stock Plan, and options to purchase
1,057,500 shares of common stock were outstanding outside
the Registrant's 2001 Stock Plan.
Item 16.
Exhibits
Exhibit
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1
Second Amended and Restated Certificate of
    Incorporation of the Registrant
3
.2
Form of Restated Certificate of Incorporation of
    the Registrant to be effective upon closing of the offering
3
.3
Amended and Restated Bylaws of the Registrant
3
.4
Form of Second Amended and Restated Bylaws of the
    Registrant to be effective upon the closing of the offering
4
.1*
Specimen Certificate evidencing shares of common
    stock
4
.2
Warrant Agreement, dated as of March 31,
    2000, by and between the Registrant and Gilead Sciences, Inc.
4
.3
Warrant Agreement Amendment, dated as of
    September 4, 2003, by and among the Registrant, Gilead
    Sciences, Inc. and University License Equity Holdings, Inc.
4
.4†
Series D Preferred Stock Purchase Agreement,
    dated as of December 17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
4
.5
Amended and Restated Investors' Rights
    Agreement, dated as of February 7, 2003, by and among the
    Registrant and the parties listed therein
5
.1*
Opinion of Hale and Dorr LLP
10
.1
2001 Stock Plan, as amended
10
.2
2003 Stock Incentive Plan
10
.3
2003 Employee Stock Purchase Plan
10
.4†
License Agreement, dated as of December 17,
    2002, by and between Pfizer Inc. and the Registrant
10
.5†
Collaboration Agreement, dated as of
    December 17, 2002, by and between Pfizer Inc. and the
    Registrant
10
.6†
License, Manufacturing and Supply Agreement,
    dated February 5, 2002, by and between Shearwater
    Corporation and the Registrant
10
.7†
Licensing Agreement, dated as of March 30,
    2000 and amended on May 9, 2000, December 4, 2001 and
    April 12, 2002, by and between Gilead Sciences, Inc. and
    the Registrant
10
.8†
License Agreement, dated as of December 31,
    2001, by and between Isis Pharmaceuticals, Inc. and the
    Registrant
10
.9
Consulting Agreement, dated as of
    October 30, 2001, by and between the Registrant and Samir
    Patel
10
.10
Executive Employment Agreement, dated as of
    April 12, 2000, by and between the Registrant and
    David R. Guyer
10
.11
Amendment to Executive Employment Agreement,
    dated as of August 25, 2003, by and between the Registrant
    and David R. Guyer
II-3
Table of Contents
Exhibit
Number
Description
10
.12
Employment Agreement, dated as of August 25,
    2003, by and between Paul Chaney and the Registrant
10
.13
Employment Agreement, dated as of
    February 1, 2002, by and between the Registrant and Glenn
    Sblendorio
10
.14*
Amendment to Employment Agreement, dated as
    of           ,
    2003, by and between the Registrant and Glenn Sblendorio
10
.15
Employment Agreement, dated as of April 12,
    2002, by and between the Registrant and Anthony P. Adamis
10
.16*
Amendment to Employment Agreement, dated as
    of           ,
    2003, by and between the Registrant and Anthony P. Adamis
10
.17
Employment Agreement, dated as of August 25,
    2003, by and between Douglas H. Altschuler and the
    Registrant
10
.18
Restricted Stock Purchase Promissory Note, dated
    July 1, 2002, issued by Anthony P. Adamis to the
    Registrant
10
.19
Stock Pledge Agreement, dated July 1, 2002,
    by and between Anthony P. Adamis and the Registrant
10
.20
Sublease Agreement, dated as of December 19,
    2001 and amended as of February 22, 2002, by and between
    AnswerThink, Inc., successor in interest to AnswerThink
    Consulting Group, Inc., and the Registrant
10
.21
Lease Agreement, dated March 14, 2002, by
    and between First Industrial, L.P. and the Registrant
10
.22
Commercial Lease, dated March 27, 2002, by
    and between Cummings Properties, LLC and the Registrant
21
.1
List of Subsidiaries
23
.1
Consent of Ernst & Young LLP
23
.2*
Consent of Hale and Dorr LLP (included in
    Exhibit 5.1)
24
.1
Powers of Attorney (included on signature page)
*
To be filed by amendment.
†
Confidential treatment requested as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
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.
II-4
Table of Contents
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any
    liability under the Securities Act, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance upon Rule 430A and contained in the
    form of prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities Act
    shall be deemed to be part of the registration statement as of
    the time it was declared effective.
(2) For purposes of determining any
    liability under the Securities Act, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York,
New York on the 12th day of September, 2003.
EYETECH PHARMACEUTICALS, INC.
By:
/s/ DAVID R. GUYER
David R. Guyer, M.D.
Chief Executive Officer, Director
POWER OF ATTORNEY
We, the undersigned directors and officers of
Eyetech Pharmaceuticals, Inc. hereby severally constitute and
appoint David A Guyer, Glenn P. Sblendorio and
Douglas H. Altschuler, and each of them, his/her true and
lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution for him/her and in his/her
name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
Registration Statement, and any subsequent registration
statements pursuant to Rule 462 of the Securities Act of
1933, as amended and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming all that each of said
attorney-in-fact or his/her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
Signature
Title
Date
/s/ DAVID R. GUYER
David R. Guyer, M.D.
Chief Executive Officer, Director
(Principal Executive Officer)
September 12, 2003
/s/ GLENN P. SBLENDORIO
Glenn P. Sblendorio
Chief Financial Officer (Principal Financial and
    Accounting Officer)
September 12, 2003
/s/ JOHN MCLAUGHLIN
John McLaughlin
Chairman of the Board of Directors
September 12, 2003
/s/ SRINIVAS AKKARAJU
Srinivas Akkaraju, M.D., Ph.D.
Director
September 12, 2003
/s/ MARTY GLICK
Marty Glick
Director
September 12, 2003
/s/ MICHAEL G. MULLEN
Michael G. Mullen, CFA
Director
September 12, 2003
/s/ SAMIR PATEL
Samir Patel, M.D.
Director
September 12, 2003
/s/ EDWARD PENHOET
Edward Penhoet, Ph.D.
Director
September 12, 2003
/s/ HENRY SIMON
Henry Simon
Director
September 12, 2003
/s/ DAMION E. WICKER
Damion E. Wicker, M.D.
Director
September 12, 2003
II-6
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1
Second Amended and Restated Certificate of
    Incorporation of the Registrant
3
.2
Form of Restated Certificate of Incorporation of
    the Registrant to be effective upon closing of the offering
3
.3
Amended and Restated Bylaws of the Registrant
3
.4
Form of Second Amended and Restated Bylaws of the
    Registrant to be effective upon the closing of the offering
4
.1*
Specimen Certificate evidencing shares of common
    stock
4
.2
Warrant Agreement, dated as of March 31,
    2000, by and between the Registrant and Gilead Sciences, Inc.
4
.3
Warrant Agreement Amendment, dated as of
    September 4, 2003, by and among the Registrant, Gilead
    Sciences, Inc. and University License Equity Holdings, Inc.
4
.4†
Series D Preferred Stock Purchase Agreement,
    dated as of December 17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
4
.5
Amended and Restated Investors' Rights
    Agreement, dated as of February 7, 2003, by and among the
    Registrant and the parties listed therein
5
.1*
Opinion of Hale and Dorr LLP
10
.1
2001 Stock Plan, as amended
10
.2
2003 Stock Incentive Plan
10
.3
2003 Employee Stock Purchase Plan
10
.4†
License Agreement, dated as of December 17,
    2002, by and between Pfizer Inc. and the Registrant
10
.5†
Collaboration Agreement, dated as of
    December 17, 2002, by and between Pfizer Inc. and the
    Registrant
10
.6†
License, Manufacturing and Supply Agreement,
    dated February 5, 2002, by and between Shearwater
    Corporation and the Registrant
10
.7†
Licensing Agreement, dated as of March 30,
    2000 and amended on May 9, 2000, December 4, 2001 and
    April 12, 2002, by and between Gilead Sciences, Inc. and
    the Registrant
10
.8†
License Agreement, dated as of December 31,
    2001, by and between Isis Pharmaceuticals, Inc. and the
    Registrant
10
.9
Consulting Agreement, dated as of
    October 30, 2001, by and between the Registrant and Samir
    Patel
10
.10
Executive Employment Agreement, dated as of
    April 12, 2000, by and between the Registrant and
    David R. Guyer
10
.11
Amendment to Executive Employment Agreement,
    dated as of August 25, 2003, by and between the Registrant
    and David R. Guyer
10
.12
Employment Agreement, dated as of August 25,
    2003, by and between Paul Chaney and the Registrant
10
.13
Employment Agreement, dated as of
    February 1, 2002, by and between the Registrant and Glenn
    Sblendorio
10
.14*
Amendment to Employment Agreement, dated as
    of           ,
    2003, by and between the Registrant and Glenn Sblendorio
10
.15
Employment Agreement, dated as of April 12,
    2002, by and between the Registrant and Anthony P. Adamis
10
.16*
Amendment to Employment Agreement, dated as
    of           ,
    2003, by and between the Registrant and Anthony P. Adamis
10
.17
Employment Agreement, dated as of August 25,
    2003, by and between Douglas H. Altschuler and the
    Registrant
10
.18
Restricted Stock Purchase Promissory Note, dated
    July 1, 2002, issued by Anthony P. Adamis to the
    Registrant
Table of Contents
Exhibit
Number
Description
10
.19
Stock Pledge Agreement, dated July 1, 2002,
    by and between Anthony P. Adamis and the Registrant
10
.20
Sublease Agreement, dated as of December 19,
    2001 and amended as of February 22, 2002, by and between
    AnswerThink, Inc., successor in interest to AnswerThink
    Consulting Group, Inc., and the Registrant
10
.21
Lease Agreement, dated March 14, 2002, by
    and between First Industrial, L.P. and the Registrant
10
.22
Commercial Lease, dated March 27, 2002, by
    and between Cummings Properties, LLC and the Registrant
21
.1
List of Subsidiaries
23
.1
Consent of Ernst & Young LLP
23
.2*
Consent of Hale and Dorr LLP (included in
    Exhibit 5.1)
24
.1
Powers of Attorney (included on signature page)
*
To be filed by amendment.
†
Confidential treatment requested as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.