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<P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:4px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>UNITED STATES </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>FORM 8-K
</B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>CURRENT REPORT </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>PURSUANT TO SECTION 13 OR 15(d) </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>OF THE SECURITIES EXCHANGE ACT OF 1934
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>Date of Report (date of earliest event reported): August&nbsp;29, 2013 </B></FONT></P>
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<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="6"><B>INTRA-CELLULAR THERAPIES, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>(Exact name of registrant as specified in its charter) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Delaware</B></FONT></TD>
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<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>000-54896</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>36-4742850</B></FONT></TD></TR>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(State or other jurisdiction</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>of incorporation)</B></FONT></P></TD>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Commission</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>File Number)</B></FONT></P></TD>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(IRS Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Identification No.)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>3960 Broadway </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>New York, New York 10032 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Address of principal executive offices) (Zip
Code) </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(212) 923-3344 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>(Registrant&#146;s telephone number, including area code) </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Oneida
Resources Corp. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>c/o Samir Masri CPA Firm P.C., 175 Great Neck Road, Suite 403, Great Neck, NY 11021 </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Former name or former address, if changed since last report) </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below): </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE>
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<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;1.01.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Entry into a Material Definitive Agreement. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The disclosures set forth in Item&nbsp;2.01 hereof are hereby incorporated by reference into this Item&nbsp;1.01. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;2.01.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Completion of Acquisition or Disposition of Assets. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Pursuant to an Agreement and Plan of Merger dated August&nbsp;23, 2013, or the Merger Agreement, by and among Oneida Resources Corp., which is referred to herein as the Company, we, our and us; ITI, Inc.,
a Delaware corporation and wholly-owned subsidiary of the Company, or Merger Sub; and Intra-Cellular Therapies, Inc., a Delaware corporation, which is referred to hereinafter as Intra-Cellular; Merger Sub merged with and into Intra-Cellular, with
Intra-Cellular remaining as the surviving entity and a wholly-owned operating subsidiary of the Company. This transaction is referred to throughout this report as the &#147;Merger.&#148; The Merger was effective as of August&nbsp;29, 2013, upon the
filing of a Certificate of Merger with the Secretary of State of the State of Delaware. As part of the Merger, Intra-Cellular changed its name to ITI, Inc. A copy of the Merger Agreement is filed herewith as Exhibit 2.1, and is incorporated herein
by reference. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Following the Merger, a newly organized wholly-owned subsidiary of the Company named &#147;Intra-Cellular
Therapies, Inc.&#148;, or Name Change Merger Sub, merged with and into the Company, leaving the Company as the surviving corporation. This transaction is referred to throughout this report as the &#147;Name Change Merger.&#148; In connection with
the Name Change Merger, we relinquished our corporate name &#147;Oneida Resources Corp.&#148; and assumed in its place the name &#147;Intra-Cellular Therapies, Inc.&#148; The Name Change Merger and name change became effective on August&nbsp;29,
2013, upon the filing of a Certificate of Ownership and Merger with the Secretary of State of the State of Delaware. The Certificate of Ownership and Merger is filed as Exhibit 3.4 hereto, and is incorporated herein by reference. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">At the effective time of the Merger, or the Effective Time, the legal existence of Merger Sub ceased and each share of Intra-Cellular
common stock and each share of Intra-Cellular preferred stock that was issued and outstanding immediately prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock, or the Exchange. We issued an aggregate of
22,134,647 shares of our common stock upon such exchange of the outstanding shares of Intra-Cellular common stock and preferred stock. In addition, at the Effective Time, we assumed Intra-Cellular&#146;s 2003 Equity Incentive Plan, as amended, or
the 2003 Equity Incentive Plan, and all options to purchase Intra-Cellular common stock then outstanding under the 2003 Equity Incentive Plan, and such options became exercisable for an aggregate of 1,462,380 shares of our common stock, subject to
the vesting and other terms of such options. The vesting of such options was not accelerated as a result of the Merger. At the Effective Time, we also assumed the outstanding warrant to purchase Intra-Cellular common stock, and such warrant became
exercisable for 1,822 shares of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Immediately following the Effective Time, pursuant to the terms of a
Redemption Agreement dated August&nbsp;29, 2013, or the Redemption Agreement, by and among the Company and its then-current sole stockholder, we completed the closing of a redemption of an aggregate 5,000,000 shares of our common stock, or the
Redemption, from our then-current sole stockholder in consideration of an aggregate of $60,000, plus professional costs related to the transaction, not to exceed $20,000. The 5,000,000 shares constituted all of the issued and outstanding shares of
our capital stock, on a fully-diluted basis, immediately prior to the Merger. A copy of the Redemption Agreement is filed herewith as Exhibit 10.17, and is incorporated herein by reference. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Upon completion of the Merger and the Redemption, the former stockholders of Intra-Cellular hold 100% of the outstanding shares of our
capital stock. Unless otherwise indicated in this Current Report on Form 8-K, or this report, all share and per share figures are after giving effect to the Merger. The share and per share numbers in the financial statements of Intra-Cellular filed
herewith as Exhibit 99.1 are not adjusted to give effect to the Merger. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As a condition to the Merger, we entered into an Indemnity Agreement with our former sole
officer and director, or the Indemnity Agreement, pursuant to which we agreed to indemnify such former officer and director for actions taken by him in his official capacities relating to the consideration, approval and consummation of the Merger
and certain related transactions. A copy of the Indemnity Agreement is filed herewith as Exhibit 10.18, and is incorporated herein by reference. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Merger is being accounted for as a capital transaction. Upon the effectiveness of the Merger, the Company&#146;s business became the operation of Intra-Cellular and its business. Immediately following
the Effective Time, our Board of Directors, or the Board, which immediately prior to the Effective Time consisted of Samir N. Masri as our sole director, appointed Sharon Mates, Ph.D., who was Chairman, President and Chief Executive Officer of
Intra-Cellular, as our Chairman, President and Chief Executive Officer, to serve on the Board with Mr.&nbsp;Masri. At the Effective Time, Mr.&nbsp;Masri resigned from all of his positions as an officer of the Company. In addition, immediately
following the Effective Time, the Board appointed Lawrence J. Hineline, who was the Vice President of Finance, Chief Financial Officer and Secretary of Intra-Cellular, as our Vice President of Finance, Chief Financial Officer and Secretary; Allen A.
Fienberg, Ph.D., who was the Vice President of Business Development of Intra-Cellular, as our Vice President of Business Development; Lawrence P. Wennogle, Ph.D., who was the Vice President, Drug Discovery of Intra-Cellular, as our Vice President,
Drug Discovery; and Kimberly E. Vanover, Ph.D., who was the Vice President, Clinical Development of Intra-Cellular, as our Vice President, Clinical Development. On September&nbsp;9, 2013, which is the eleventh day following the date that we filed
with the Securities and Exchange Commission, or SEC, and transmitted to our sole stockholder prior to the Merger, a Schedule 14f-1 reporting a change in the majority of our directors, or the New Board Effective Date, Christopher Alafi, Ph.D.,
Richard Lerner, M.D., Joel S. Marcus and Sir Michael Rawlins, M.D., FRCP, FMedSci, will be appointed to the Board to serve on the Board with Dr.&nbsp;Mates, and Mr.&nbsp;Masri will resign from the Board as of such date. Each of Dr.&nbsp;Mates,
Dr.&nbsp;Alafi, Dr.&nbsp;Lerner, Mr.&nbsp;Marcus, and Sir Michael were directors of Intra-Cellular immediately prior to the Merger. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Prior to the Merger, Intra-Cellular sold to accredited investors approximately $60.0 million of its shares of common stock, or 18,889,307 shares at a price of $3.1764 per share, which included $15.3
million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular&#146;s then outstanding convertible promissory notes, or Notes. We refer to this transaction as the Private Placement and the number of shares stated in
this paragraph do not reflect the Exchange in the Merger. The price per share in the Private Placement, as adjusted for the Exchange in the Merger, would be $6.3528 per share of our post-Merger common stock. Also, Intra-Cellular granted the
investors in the Private Placement registration rights requiring Intra-Cellular or any successor to register those shares of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


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Intra-Cellular common stock (which were exchanged for shares of our common stock, along with the rest of the outstanding shares of Intra-Cellular capital stock, except for dissenting shares, at
the Effective Time) for public resale, as described in more detail below. The then existing stockholders of Intra-Cellular who agreed to become parties to the registration rights agreement also became entitled to such registration rights, subject to
specified differences in the agreement between the rights of new investors and existing stockholders. The existing Second Amended and Restated Investor Rights Agreement, by and among Intra-Cellular and the investors listed therein, dated as of
October&nbsp;25, 2007, as amended, was terminated at the Effective Time. The Private Placement closed immediately prior to the filing of a Certificate of Merger with the Secretary of State of the State of Delaware, on August&nbsp;29, 2013.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Merger Agreement has been attached as Exhibit 2.1 to this Current Report on Form 8-K to provide investors and security
holders with information regarding its terms. It is not intended to provide any other factual information about the Company or Intra-Cellular. The representations, warranties and covenants contained in the Merger Agreement were made only for the
purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for
the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable
to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of
the Company, Intra-Cellular or any of their respective subsidiaries or affiliates. In addition, the assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in a confidential disclosure
schedule provided by Intra-Cellular, which is not being filed with this Current Report on Form 8-K as permitted by the SEC&#146;s rules and regulations. Accordingly, investors should not rely on the representations and warranties as
characterizations of the actual state of facts, since (i)&nbsp;they were made only as of the date of such agreement or a prior, specified date, (ii)&nbsp;in some cases they are subject to qualifications with respect to materiality, knowledge and/or
other matters, and (iii)&nbsp;they may be modified in important part by the underlying disclosure schedule. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in the Company&#146;s public disclosures. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Intra-Cellular
announced the Private Placement and the Merger in a press release dated September 3, 2013, which has been attached as Exhibit 99.3 to this Current Report on Form 8-K. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>DESCRIPTION OF THE BUSINESS OF INTRA-CELLULAR THERAPIES, INC. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We were
originally incorporated in the State of Delaware in August 2012 under the name &#147;Oneida Resources Corp.&#148; Oneida Resources Corp., or the Shell Company, was a &#147;shell&#148; company registered under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, with no specific business plan or purpose until it began operating the business of Intra-Cellular through the Merger transaction on August&nbsp;29, 2013. Intra-Cellular was incorporated in Delaware in May 2001 to focus
primarily on the development of novel drugs for the treatment of neuropsychiatric and neurologic diseases and other disorders of the central nervous system. Effective upon the Merger, a wholly-owned subsidiary of the Shell Company merged with and
into Intra-Cellular, and Intra-Cellular continues as the operating subsidiary of the Shell Company. As used herein, the words the &#147;Company,&#148; &#147;Intra-Cellular,&#148; &#147;we,&#148; &#147;us,&#148; and &#147;our&#148; refer to the
current Delaware corporation operating the business of Intra-Cellular as a wholly-owned subsidiary, which business will continue as the business of the Shell Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We are a biopharmaceutical company focused on the discovery and clinical development of innovative, small molecule drugs that address underserved medical needs in neuropsychiatric and neurological
disorders by targeting intracellular signaling mechanisms within the central nervous system, or CNS. Our lead product candidate, ITI-007, is in Phase 2 clinical trials as a first-in-class treatment for schizophrenia. Current medications available
for the treatment of schizophrenia do not adequately address the broad array of symptoms associated with this CNS disorder. Use of these current medications also is limited by their substantial side effects. ITI-007 is designed to be effective
across a wider range of symptoms, treating both the acute and residual phases of schizophrenia, with improved safety and tolerability. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">At the lowest doses, ITI-007 acts primarily as a potent 5-HT2A serotonin receptor antagonist. As the dose is increased, additional benefits are derived from the engagement of additional drug targets
including modest dopamine receptor modulation and modest inhibition of serotonin transporters. We believe that combined interactions at these receptors may provide additional benefits above and beyond selective 5-HT2A antagonism for treating
agitation, aggression and sleep disturbances while avoiding many of the side effects associated with more robust dopamine receptor antagonism. As the dose of ITI-007 is further increased, leading to moderate dopamine receptor modulation, inhibition
of serotonin transporters, and indirect glutamate modulation, these actions complement the complete blockade of 5-HT2A serotonin receptors. In this dose range, we believe that ITI-007 will be useful in treating the symptoms associated with
schizophrenia, bipolar disorder, major depressive disorder and other neuropsychiatric diseases. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Given the potential utility
for ITI-007 and follow-on compounds to treat these additional indications, we may investigate, either on our own or with a partner, aggression/anxiety disorders, major depressive disorder, intermittent explosive disorder, non-motor symptoms and
motor complications associated with Parkinson&#146;s disease, and post-traumatic stress disorder. We hold exclusive, worldwide commercialization rights to ITI-007 and a family of compounds from Bristol-Myers Squibb Company pursuant to an exclusive
license. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have a second major program that has yielded a portfolio of compounds that selectively
inhibits the enzyme phosphodiesterase 1, or PDE1. PDE1 helps regulate brain activity related to cognition, memory processes and movement/coordination. We have licensed the lead compound in this portfolio, ITI-214, and other compounds in this
portfolio, to Takeda Pharmaceutical Company Limited, or Takeda. ITI-214 is the first compound in its class to successfully advance into Phase 1 clinical trials and is being developed for the treatment of cognitive impairment associated with
schizophrenia, or CIAS, and other disorders. The results of our first Phase 1 clinical trial in 70 subjects in a randomized, double-blind, placebo-controlled study indicate that ITI-214 was safe and well-tolerated across a broad range of single oral
doses. Other compounds in the PDE1 portfolio outside the Takeda collaboration are being advanced for the treatment of other indications, including non-CNS therapeutic areas. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our pipeline also includes pre-clinical programs that are focused on advancing drugs for the treatment of cognitive dysfunction, in both schizophrenia and Alzheimer&#146;s disease, and for disease
modification and the treatment of neurodegenerative disorders, including Alzheimer&#146;s disease. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have assembled a
management team with significant industry experience to lead the discovery and development of our product candidates. We complement our management team with a group of scientific and clinical advisors that includes recognized experts in the fields
of schizophrenia and other central nervous system disorders, including Nobel Laureate, Dr.&nbsp;Paul Greengard, one of our co-founders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our corporate headquarters and laboratory are located at 3960 Broadway, New York, New York, and our telephone number is (212)&nbsp;923-3344. We also have an office in Towson, Maryland. We maintain a
website at www.intracellulartherapies.com, to which we regularly post copies of our press releases as well as additional information about us. Our filings with the Securities and Exchange Commission, or SEC, will be available free of charge through
the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Information contained in our website does not constitute a part of this report or our other filings with the SEC. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All brand names or trademarks appearing in this report are the property of their respective holders. Use or display by us of other
parties&#146; trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owners. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Our Strategy </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our goal
is to discover and develop novel small molecule therapeutics for the treatment of CNS diseases in order to improve the lives of people suffering from such illnesses. Using our key understanding of intracellular signaling, we seek to accomplish our
goal, using our in-house expert drug discovery and clinical development teams, in two ways: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we seek to have the capability to develop first-in-class medications with novel mechanisms that have the potential to treat CNS diseases for which
there are no previously marketed drugs; and </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we seek to develop drugs that can differentiate themselves in competitive markets by addressing aspects of CNS disease which are either not treated by
currently marketed drugs or can be effective with fewer side effects. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The key elements of our strategy are
to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">complete the development of ITI-007 for its lead indication, treatment of acute symptoms in schizophrenia, and for additional neuropsychiatric
indications, such as bipolar disorder and residual symptoms in schizophrenia; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">expand the commercial potential of ITI-007 by investigating its usefulness in neurological areas, such as behavioral disturbances in dementia,
including Alzheimer&#146;s disease and autism spectrum disorder, and in additional neuropsychiatric indications, such as sleep disorders associated with neuropsychiatric and neurological disorders and major depressive disorder;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">continue to develop with our collaboration partner, Takeda, PDE inhibitor compounds, such as ITI-214, for CNS indications such as CIAS; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">advance earlier stage product candidates in our pipeline. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Our Drug Discovery Platform and Capabilities </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">Based on
the pioneering efforts of Intra-Cellular co-founder and Nobel laureate, Dr.&nbsp;Paul Greengard, we have developed a detailed understanding of intracellular signaling pathways and intracellular targets. We have used that knowledge to develop several
state of the art technology platforms, including one called CNSProfile</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">TM</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">. This technology monitors the phosphoprotein changes elicited by major psychotropic drug classes and subclasses, and generates a unique molecular signature for drug compounds. By monitoring how the
levels of these phosphoproteins change <I>in vivo</I>, we identify intracellular signaling pathways through which several major drug classes operate. Along with what we believe to be state of the art drug discovery efforts, we have used, and may
continue to use, this information as a tool to validate our selection of preclinical candidate molecules. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the years
ended December&nbsp;31, 2012 and 2011, we incurred $15.5 million and $7.7 million in research and development expenses, respectively. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Disease and Market Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our programs for small molecule therapeutics are designed to address various CNS diseases that we believe are underserved or unmet by currently available therapies and that represent large potential
commercial market opportunities for us. Background information on the CNS diseases and related commercial markets that may be addressed by our programs is set forth below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Schizophrenia </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Schizophrenia is a disabling and chronic mental
illness that is characterized by multiple symptoms during an acute phase of the disorder that can include so-called &#147;positive&#148; symptoms, such as hearing voices, grandiose beliefs and suspiciousness or paranoia. These symptoms can be
accompanied by additional, harder to treat symptoms, such as social withdrawal, blunted emotional response and speech deficits, collectively referred to as &#147;negative&#148; symptoms, difficulty concentrating and disorganized thoughts, or
cognitive impairment, depression and insomnia. Such symptoms often persist even after the acute positive symptoms subside, and contribute substantially to the social and employment disability associated with schizophrenia. Current antipsychotic
medications provide some relief for the symptoms associated with the acute phase of the disorder, but they do not effectively treat the residual phase symptoms associated with chronic schizophrenia. Moreover, currently available medications used to
treat acute schizophrenia are limited in their use due to side effects that can include movement disorders, weight gain, metabolic disturbances, and cardiovascular disorders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">According to the National Institute of Mental Health, over 1% of the world&#146;s population suffers from schizophrenia, and more than 3&nbsp;million Americans suffer from the illness in any given year.
Worldwide sales of antipsychotic drugs used to treat schizophrenia and other CNS related disorders exceeded $40 billion in 2012. These drugs have been increasingly used by physicians to address a range of disorders in addition to schizophrenia,
including bipolar disorder and a variety of psychoses and related conditions in elderly patients. Despite their commercial success, current antipsychotic drugs have substantial limitations, including inadequate efficacy and severe side effects.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The first-generation, or typical, antipsychotics that were introduced in the late-1950s block dopamine receptors. While
typical antipsychotics are effective against positive symptoms of schizophrenia in many patients, these drugs often induce disabling motor disturbances, and they fail to address or worsen most of the negative symptoms and cognitive disturbances
associated with schizophrenia. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Most schizophrenia patients in the United States are treated today with second-generation, or
atypical, antipsychotics, which induce fewer motor disturbances than typical antipsychotics, but still fail to address most of the negative symptoms of schizophrenia. In addition, currently prescribed treatments do not effectively address or may
exacerbate cognitive disturbances associated with schizophrenia. It is believed that the efficacy of atypical antipsychotics is due to their interactions with dopamine and 5-HT2A receptors. The side effects induced by the atypical agents may include
weight gain, non-insulin dependent (type II) diabetes, cardiovascular side effects, sleep disturbances, and motor disturbances. We believe that these side effects generally arise either from non-essential receptor interactions or from excessive
dopamine blockade. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">8 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The limitations of currently available antipsychotics result in poor patient compliance. A
landmark study funded by the National Institute of Mental Health, the Clinical Antipsychotic Trials of Intervention Effectiveness, also referred to as CATIE, which was published in The New England Journal of Medicine in September 2005, found that
74% of patients taking typical or atypical antipsychotics discontinued treatment within 18 months because of side effects or lack of efficacy. We believe there is a large underserved medical need for new therapies that have improved side effect and
efficacy profiles. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Bipolar Disorder </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Bipolar disorder, commonly referred to as manic-depressive illness, is characterized by extreme shifts in mood. Individuals with bipolar disorder may experience intense feelings of over-excitement,
irritability, and impulsivity with grandiose beliefs and racing thoughts, referred to as a manic episode. Symptoms of depression may include feeling tired, hopeless and sad, with difficulty concentrating and thoughts of suicide. Some people
experience both types of symptoms in the same &#147;mixed&#148; episode. Severe symptoms of bipolar disorder can be associated with hallucinations or delusions, otherwise referred to as psychosis. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Bipolar disorder affects 4.4% of the adult United States population, or approximately 13&nbsp;million adults, with a worldwide prevalence
of 2.4%. In 2012, therapeutics used to treat bipolar disorder had global sales of approximately $6 billion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Bipolar disorder
is often treated with antipsychotic medications alone or in combination with mood stabilizers. The side effects and safety risks associated with antipsychotic drugs in patients with bipolar disorder are similar to those experienced by patients with
schizophrenia. Moreover, a large national research program conducted from 1998 to 2005 called the Systematic Treatment Enhancement Program for Bipolar Disorder, or STEP-BD, followed 4,360 patients with bipolar disorder long term and showed that
about half of patients who were treated for bipolar disorder still experienced lingering and recurrent symptoms, indicating a clear need for improved treatments. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Alzheimer&#146;s Disease </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alzheimer&#146;s disease is a progressive
neurodegenerative disorder that slowly destroys memory and thinking skills, and eventually even the ability to carry out simple tasks. Its symptoms include cognitive dysfunction, memory abnormalities, progressive impairment in activities of daily
living, and a host of behavioral and neuropsychiatric symptoms. Alzheimer&#146;s disease primarily affects older people and, in most cases, symptoms first appear after age 60. Alzheimer&#146;s disease gets worse over time and is fatal. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">The market for Alzheimer&#146;s disease therapeutics is categorized into two segments: acetylcholinesterase
inhibitors and NMDA receptor antagonists, which include Aricept<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, Namenda<FONT
STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, Exelon<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> and Ebixa<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>.
Acetylcholinesterase inhibitors, which account for 40% of the total worldwide market, had total sales of $4.1 billion in 2011. In 2012, global sales of CNS therapeutics for dementia and Alzheimer&#146;s disease reached $8 billion. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">9 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">According to the Alzheimer&#146;s Association, 5.2 million people in the United States are
living with Alzheimer&#146;s disease, and it is currently the fifth leading cause of death for people age 65 and older. It has been estimated that 35.6&nbsp;million people worldwide were living with dementia in 2010. This number is expected to
nearly double to 65.7&nbsp;million by 2030 and to 115.4&nbsp;million by 2050. While the diagnostic criteria for Alzheimer&#146;s disease mostly focus on the related cognitive deficits, it is often the behavioral and psychiatric symptoms that are
most troublesome for caregivers and lead to poor quality of life for patients. These symptoms include agitation, aggressive behaviors, and psychosis. Studies have suggested that approximately 20% to 51% of Alzheimer&#146;s disease patients may
develop psychosis, commonly consisting of hallucinations and delusions. The diagnosis of Alzheimer&#146;s disease psychosis is associated with more rapid cognitive and functional decline and institutionalization. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The U.S. Food and Drug Administration, or FDA, has not approved any drug to treat the behavioral symptoms of Alzheimer&#146;s disease. As
symptoms progress and become more severe, physicians often resort to off-label use of antipsychotic medications in these patients. Current antipsychotic drugs are associated with a number of side effects, which can be problematic for elderly
patients with Alzheimer&#146;s disease. In addition, antipsychotic drugs may exacerbate the cognitive disturbances associated with Alzheimer&#146;s disease. Current antipsychotic drugs also have a boxed warning for use in elderly patients with
dementia-related psychosis due to increased mortality and morbidity. There is a large unmet medical need for a safe and effective therapy to treat the behavioral symptoms in patients with Alzheimer&#146;s disease. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Parkinson&#146;s Disease </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Parkinson&#146;s disease is a chronic and progressive neurodegenerative disorder that involves malfunction and death of neurons in a region of the brain that controls movement. This neurodegeneration
creates a shortage of an important brain signaling chemical, or neurotransmitter, known as dopamine, thereby rendering patients unable to direct or control their movements in a normal manner. Parkinson&#146;s disease is characterized by well-known
motor symptoms, including tremors, limb stiffness, slowness of movements, and difficulties with posture and balance, as well as by non-motor symptoms, which include sleep disturbances, mood disorders, cognitive impairment and psychosis.
Parkinson&#146;s disease progresses slowly in most people and the severity of symptoms tends to worsen over time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Parkinson&#146;s disease is the second most common neurodegenerative disorder after Alzheimer&#146;s disease. According to the National
Parkinson Foundation, about 1&nbsp;million people in the United States and from approximately 4 to 6&nbsp;million people worldwide suffer from this disease. Parkinson&#146;s disease is more common in people over 60 years of age, and the prevalence
of this disease is expected to increase significantly as the average age of the population increases. Parkinson&#146;s disease patients are commonly treated with dopamine replacement therapies, such as levodopa, commonly referred to as L-DOPA, which
is metabolized to dopamine, and dopamine agonists, which are molecules that mimic the action of dopamine. Sales of therapeutics such as L-DOPA and dopamine agonists used to treat the motor symptoms of the disease reached $2.5 billion in 2012.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Non-motor symptoms can be particularly distressing and even more troublesome to patients
with Parkinson&#146;s disease than the primary motor disturbances. Non-motor symptoms substantially contribute to the burden of Parkinson&#146;s disease and deeply affect the quality of life of patients and their caregivers. Non-motor symptoms of
Parkinson&#146;s disease are associated with increased caregiver stress and burden, nursing home placement, and increased morbidity and mortality. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Treatment of non-motor symptoms associated with Parkinson&#146;s disease poses a challenge to physicians. Current dopamine replacement drugs used to treat the motor symptoms of Parkinson&#146;s disease do
not help, and sometimes worsen, the non-motor symptoms. No drugs are currently approved by the FDA for treating the broad non-motor symptoms associated with Parkinson&#146;s disease, and this remains a large unmet medical need. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Depression </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%;padding-bottom:0px; "><FONT
STYLE="font-family:Times New Roman" SIZE="2">Major depressive disorder, or MDD, is a brain disorder that can be associated with symptoms of sadness, hopelessness, helplessness, feelings of guilt, irritability, loss of interest in formerly
pleasurable activities, cognitive impairment, disturbed sleep patterns, and suicide ideation or behavior. Different people may experience different symptoms, but everyone with major depression experiences symptoms that are severe enough to interfere
with everyday functioning, such as the ability to concentrate at work or school, social interactions, eating and sleeping. Sometimes the depressive episode can be so severe it is accompanied by psychosis (hallucinations and delusions). According to
the National Institute of Mental Health, approximately 3% of teenagers and approximately 7% of adults experience MDD each year. Worldwide sales of antidepressant drugs reached $11.9 billion in 2011. The antidepressant market is primarily composed of
selective serotonin reuptake inhibitors such as Lexapro<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> (marketed by Forest Laboratories and Lundbeck) and
selective norepinephrine reuptake inhibitors, or SNRIs, such as Cymbalta<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> (marketed by Eli Lilly).
Antipsychotics such as Seroquel<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> (marketed by Astrazeneca) and Abilify<FONT
STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT> (marketed jointly by Bristol Myers Squibb and Otsuka Pharmaceutical) are also used as adjunctive treatments with
antidepressant treatment. The National Institute of Mental Health-funded Sequenced Treatment Alternatives to Relieve Depression, or STAR*D, study showed that only one-third of treated patients experience complete remission of depressive symptoms.
Nearly two-thirds of patients were considered treatment-resistant. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Our Clinical Programs </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our pipeline includes two product candidates in clinical development and two product candidates in advanced pre-clinical testing. We believe that our product candidates offer innovative therapeutic
approaches and may provide significant advantages relative to current therapies. The following table summarizes our product candidates and programs: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center">


<IMG SRC="g590040tx12.jpg" ALT="LOGO">
 </P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>ITI-007 (ITI-007 is the lead molecule in the ITI-007 program) </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our lead product candidate, ITI-007, possesses a mechanism of action targeting multiple brain systems and may allow a physician to fine
tune the drug&#146;s action in the brain by simple dose adjustments. At the lowest doses, ITI-007 acts primarily as a potent 5-HT2A receptor antagonist, blocking the activity of this receptor with minimal interaction with dopamine receptors and
serotonin transporters. As the dose is increased, ITI-007 interacts more robustly with these targets, including dopamine receptors, serotonin transporters and indirect modulation of glutamate signaling. The combination of ITI-007&#146;s high potency
blockade of 5-HT2A receptors, and the unique way in which ITI-007 interacts with the dopamine receptor, serotonin reuptake inhibition and enhancement of glutamate neurotransmission, may make it possible to select a clinical dose capable of treating
an array of symptoms associated with schizophrenia and other CNS disorders that is broader than that addressable by other antipsychotic drugs, yet without causing the side effects commonly experienced with use of such drugs. The differential
pharmacology of ITI-007 at different doses may allow physicians to customize dosing based on an individual patient&#146;s symptoms. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We believe these features of ITI-007 may be able to improve the quality of life of patients with schizophrenia to allow them to more fully integrate into their families and their workplace.
</FONT></P>
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In addition, ITI-007 can be used to treat disorders at either low-doses (<I>e.g.,</I> sleep, aggression and agitation) or high-doses (<I>e.g.</I>, acute exacerbated and residual schizophrenia,
bipolar disorders, and mood disorders). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>ITI-007 for the treatment of exacerbated and residual schizophrenia
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">ITI-007 has completed multiple Phase 1 and 2 clinical trials, and has demonstrated clinical signals consistent with
reductions in psychosis, depression and insomnia. Reductions in psychosis are consistent with the potential to treat acute schizophrenia, whereas reductions in depression and insomnia are consistent with the potential to treat residual phase
schizophrenia. ITI-007 has been shown to be safe and well-tolerated across a wide range of doses in these studies. Further, at doses that have demonstrated clinical activity, ITI-007 has caused fewer adverse effects than those typically associated
with antipsychotic drug treatment. These adverse side effects are a major cause of patient noncompliance with current antipsychotic therapies. Based on the successful completion of these studies, ITI-007 has advanced in development and is currently
being studied in a randomized, placebo and active controlled Phase 2 clinical trial for the treatment of acute exacerbated schizophrenia at multiple sites in the United States. We anticipate the results of this study will be available in the fourth
quarter of 2013. Additional clinical trials are planned to explore ITI-007&#146;s unique mechanism of action for addressing residual phase schizophrenia. We believe that ITI-007&#146;s pharmacological profile may expand its therapeutic use beyond
the treatment of acutely exacerbated schizophrenia to also include chronic residual schizophrenia by improving negative symptoms, mood, sleep and cognition. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>ITI-007 for the treatment of bipolar disorder </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The pharmacological profile
of ITI-007 offers the potential to treat bipolar mania, depression, and mixed symptoms at doses similar to those targeted for the treatment of schizophrenia. We believe that ITI-007 may be effective alone or in combination with mood stabilizers.
Given that many patients with bipolar disorder also experience disturbed sleep and cognitive impairment similar to that observed in schizophrenia, we believe that ITI-007 may treat a wide array of symptoms in patients with bipolar disorder,
including improvement of cognition and sleep. Phase 3 clinical trials to address the therapeutic utility of ITI-007 in bipolar disorder are planned to be conducted in parallel with the ITI-007 Phase 3 program for schizophrenia. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>ITI-007 for the treatment of sleep deficits associated with neurologic and psychiatric disorders </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In a Phase 2 clinical trial at low doses, ITI-007 improved sleep maintenance in patients with primary insomnia. This compound does not
induce sleep, but rather helps maintain sleep once sleep has been initiated. In addition, ITI-007 is not associated with next day cognitive impairment, or &#147;hang-over,&#148; effects. We believe that ITI-007 may be particularly useful in the
treatment of sleep disorders that accompany neuropsychiatric and neurologic disorders, including schizophrenia, autism spectrum disorder, Parkinson&#146;s disease and dementia. Previous work has suggested that selective 5-HT2A receptor antagonists
increase deep, slow wave sleep in both humans and animals. We believe, however, that other neuropharmacological mechanisms, in addition to 5-HT2A receptor antagonism, such as engaging some dopamine modulation, may be
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">13 </FONT></P>



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beneficial for a successful treatment of sleep maintenance insomnia in humans. ITI-007 represents a new approach to the treatment of sleep maintenance insomnia because of its unique pharmacology
and neuropharmacological interactions beyond selective 5-HT2A receptor antagonism. ITI-007 offers a potentially new approach to the treatment of sleep maintenance disorders, particularly in those disorders that accompany neuropsychiatric and
neurologic disorders. Many of these disorders are accompanied by profound sleep deficits, which impair day-time functioning including cognition, exacerbate disease symptoms and increase cost of care. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>ITI-007 for the treatment of behavioral disturbances associated with dementia, including Alzheimer&#146;s Disease </I></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Behavioral disturbances are common in dementia and Alzheimer&#146;s disease, and are a major component of the burden to caregivers, and
often lead to institutionalization. Although currently available treatments for patients with dementia mainly address cognitive disturbances, behavioral disturbances are considerably more problematic and likely more amenable to drug treatment.
Several behavioral symptoms are quite prevalent in patients with dementia, including patients with Alzheimer&#146;s disease. Rates of depression in Alzheimer&#146;s disease are estimated to be up to 87%, although most estimates are between 30% and
50%. Agitation and aggression are present in approximately 60% of patients. Sleep disturbances, particularly as an increased likelihood of day-night reversal, are present in up to approximately 60% of patients. In view of the potential multiple
beneficial effects of ITI-007 on aggression, agitation, sleep disorders and depression, and the lack of undesirable side effects, we believe that ITI-007 may provide a novel therapy for treating the behavioral disturbances accompanying dementia,
including Alzheimer&#146;s disease. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Overall, we believe ITI-007 represents a novel approach to treating neuropsychiatric and
neurological disorders, having different beneficial effects at different doses, and an excellent tolerability profile. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>ITI-002 (PDE1
Inhibitors) </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our ITI-002 portfolio of compounds modulate CNS pathways that are critical to controlling cognition and
motor behavior through the inhibition of an important intracellular enzyme, phosphodiesterase 1, or PDE1. In March 2011, we entered into a license and collaboration agreement with Takeda to develop and commercialize selected PDE1 inhibitors in our
ITI-002 program for the treatment of CIAS. Cognitive deficits are believed to underlie much of the significant functional impairments observed in patients with schizophrenia. One of these portfolio compounds, ITI-214, has advanced into Phase 1
clinical trials. The results of the initial Phase 1 study in 70 subjects in a randomized, double-blind, placebo-controlled study indicated that ITI-214 was safe and well-tolerated across a broad range of single oral doses. Moreover, ITI-214
demonstrates a favorable pharmacokinetic profile consistent with once-a-day dosing. This study represents a significant milestone as the first use of a potent and highly specific PDE1 inhibitor in humans. We have worked closely with Takeda over the
last two years to advance ITI-214 into clinical development and to optimize select backup/follow-on compounds for treating various other CNS diseases, including Parkinson&#146;s disease and attention deficit disorders. Inhibition of PDE1 may also be
beneficial in a number of therapeutic indications </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14 </FONT></P>



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outside of CNS diseases, such as pulmonary arterial hypertension, heart failure, muscular dystrophy and inflammatory disease. Additional ITI-002 PDE1 inhibitor compounds outside the scope of the
Takeda collaboration are being pursued for the treatment of cardiovascular and other disorders. With its scientific strength in the PDE1 field, Intra-Cellular is exploring the potential utility of PDE1 inhibitors across a broad array of therapeutic
indications. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Additional PDE Inhibitors </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">There are multiple forms and isoforms of PDE with distinct roles in intracellular signaling.&nbsp;We have developed strong internal expertise in the design and synthesis of inhibitors specific for
individual PDE isoforms.&nbsp;Based on our understanding of the expression and functions of these isoforms in the CNS, we have identified PDE2 and PDE9 as compelling targets for drug discovery. We believe that inhibitors of these PDEs may be useful
in treating neurodegeneration and bioenergetic failure in a variety of CNS diseases. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>ITI-012 (Casein Kinase 1 Inhibitors) and ITI-009
(GSAP Inhibitors) </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are pursuing early stage drug development programs targeting two different pathways thought to be
involved in the pathogenesis of Alzheimer&#146;s disease. The first program targets the enzyme casein kinase 1, the misregulation of which in Alzheimer&#146;s disease may provoke misfolding of a neuronal protein, tau, which has been linked to
cellular loss in the brains of patients with Alzheimer&#146;s disease. Our CK1 inhibitors are currently undergoing optimization before being advanced into preclinical development.&nbsp;We have a second program targeting the protein Gamma Secretase
Activating Protein, or GSAP. We have demonstrated in preclinical models that inhibiting GSAP lowers the level of a toxic protein located in the brain called Abeta. Scientists in the field of dementia and Alzheimer&#146;s disease believe that
inhibiting the accumulation of Abeta may slow the onset of Alzheimer&#146;s disease. The discovery of GSAP was made by Intra-Cellular in collaboration with Dr.&nbsp;Paul Greengard, Nobel Laureate and Intra-Cellular co-founder.&nbsp;The preclinical
characterization of this class of molecules is ongoing. We believe that these compounds have the potential to provide novel, disease-modifying treatments for Alzheimer&#146;s disease and related disorders. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Intellectual Property </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our Patent
Portfolio </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We own or control over 60 patent families filed in the United States and other major markets worldwide,
including approximately 27 issued U.S. patents, 45 pending U.S. patent applications, 40 issued foreign patents, and 326 foreign patent applications, directed to novel compounds, formulations, methods of treatment, synthetic methods, and platform
technologies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our ITI-007 program on novel compounds for neuropsychiatric and neurodegenerative diseases includes patents
exclusively in-licensed from Bristol Myers Squibb on families of compounds, including the ITI-007 lead molecule.&nbsp;We have extensively characterized this lead and filed additional patent applications on polymorphs, formulations, additional
indications, derivatives and additional compounds. The ITI-007 lead molecule has composition of matter protection through 2025 and additional Orange Book-listable protection to 2034. Additionally,
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">15 </FONT></P>



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we expect to have data exclusivity in the European Union for up to 11 years from launch. We also have a follow-on program, directed to compounds structurally related to the ITI-007 lead, but
having composition of matter protection beyond 2031. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our program on PDE1 inhibitors for cognition and dopamine-mediated
disorders, such as Parkinson&#146;s disease, includes patent protection for the lead, ITI-214, as well as a wide range of filings on other proprietary compounds and indications.&nbsp;Certain PDE1 inhibitors are being developed under a joint
development agreement with Takeda, under which we received an upfront cash payment and are eligible to receive payments for development and sales, as well as royalty payments. We also have an option to co-promote with Takeda in the U.S., and we
retain certain rights to PDE1 inhibitor compounds and uses outside the scope of that collaboration. The ITI-214 lead molecule has composition of matter protection to 2029, with possible extensions and additional Orange Book-listable protection to
2034. Additionally, we expect to have data exclusivity in the European Union for up to 11 years from commercial launch. We are also evaluating potential follow-on compounds for ITI-214 which would have patent protection beyond 2030. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have also filed patent applications on novel proprietary targets and lead compounds for Alzheimer&#146;s disease, which would provide
compound protection beyond 2028 or beyond 2034, depending on which compound is ultimately selected for development. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>License Agreement
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The Bristol-Myers Squibb License Agreement </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">On May&nbsp;31, 2005 we entered into a world-wide, exclusive License Agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we hold a license to certain patents and know-how of BMS
relating to ITI-007 and other specified compounds. The agreement was amended on November&nbsp;3, 2010. The licensed rights are exclusive, except BMS retains rights in specified compounds in the fields of obesity, diabetes, metabolic syndrome and
cardiovascular disease. However, BMS has no right to use, develop or commercialize ITI-007 and other specified compounds in any field of use. We have the right to grant sublicenses of the rights conveyed by BMS. We are obliged under the license to
use commercially reasonable efforts to develop and commercialize the licensed technology. We are also prohibited from engaging in the clinical development or commercialization of specified competitive compounds. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under the agreement, we made an upfront payment to BMS, and we may be obliged to make milestone payments for each licensed product. We
are also obliged to make royalty payments on sales of licensed products. We are obliged to pay to BMS a percentage of non-royalty payments made in consideration of any sublicense. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The agreement extends, and royalties are payable, on a country-by-country and product-by-product basis, through the later of ten years
after first commercial sale of a licensed product in such country, expiration of the last licensed patent covering a licensed product, its method of manufacture or use, or the expiration of other government grants providing market exclusivity,
subject to certain rights of the parties to terminate the agreement on the occurrence of certain events. On termination of the agreement, we may be obliged to convey to BMS rights in developments relating to a licensed compound or licensed product,
including regulatory filings, research results and other intellectual property rights. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">16 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Collaboration Agreement </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>The Takeda Pharmaceutical License and Collaboration Agreement </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On
February&nbsp;25, 2011, we entered into a license and collaboration agreement with Takeda Pharmaceutical Company Limited under which we agreed to collaborate to research, develop and commercialize our proprietary compound ITI-214 and other selected
compounds that selectively inhibit PDE1 for use in the prevention and treatment of human diseases. As part of the agreement, we assigned to Takeda certain patents owned by us that claim ITI-214 and granted Takeda an exclusive license to develop and
commercialize compounds identified in the conduct of the research program that satisfy specified criteria. However, we have retained rights to all compounds that do not meet the specified criteria and we continue to develop PDE1 inhibitors outside
the scope of the agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under the terms of the agreement, we are conducting a research program with an initial term of
three years to identify and characterize compounds that meet certain specified criteria sufficient for further development by Takeda. We are responsible for our expenses incurred in the conduct of certain research activities specified in the
research plan. Takeda has agreed to reimburse us for expenses we incur in conducting additional research activities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Takeda
is obliged to use commercially reasonable efforts to develop and commercialize licensed compounds at its expense, and has agreed to reimburse us for the costs and expenses of development activities we may perform. We have formed a joint steering
committee with Takeda to coordinate and oversee activities on which we collaborate under the agreement. We have the option to co-promote any licensed product in the United States by assuming responsibility for a certain percentage of the detailing
activity with respect to that product. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are responsible for supplying Takeda with ITI-214 for nonclinical activities and
phase 1 clinical trials at our expense. Takeda is responsible, at its expense, for the manufacture and supply of compounds that it develops and commercializes under the agreement for all other activities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Upon execution of the agreement, Takeda made a nonrefundable payment to us. We are eligible to receive payments of approximately
$500,000,000 in the aggregate upon achievement of certain development milestones and up to an additional $250,000,000 in the aggregate upon achievement of certain sales-based milestones, along with tiered royalty payments based on net sales by
Takeda. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The agreement extends, on a country-by-country and product-by-product basis, through the later of expiration of the
last licensed patent covering a licensed product, its method of manufacture or use, the expiration of other government grants providing market exclusivity or ten years after first commercial sale of a licensed product in such country, subject to
rights of the parties to sooner terminate the agreement on certain events and the right of Takeda to unilaterally terminate the agreement upon a specified number of days&#146; prior notice. Upon the termination of
</FONT></P>
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the agreement, Takeda is obliged to assign to us the patents covering ITI-214 assigned to Takeda upon the execution of the agreement, to grant us a license to develop and commercialize licensed
compounds developed by Takeda and to transfer to us certain materials, information and regulatory materials reasonably necessary for us to continue the development and commercialization of those compounds. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Manufacturing </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We do not
own or operate manufacturing facilities for the production of any of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on one third-party contract manufacturer for
all of our required raw materials, active pharmaceutical ingredient, or API, and finished product for our preclinical research and clinical trials, including the Phase 2 trial for ITI-007 for the treatment of schizophrenia. We believe that we would
be able to contract with another third-party contract manufacturer to obtain API if our existing source of API was no longer available, but there is no assurance that API would be available from another third-party manufacturer on acceptable terms,
on the timeframe that our business would require, or at all. We do not have long-term agreements with our existing third-party contract manufacturer. We also do not have any current contractual relationships for the manufacture of commercial
supplies of any of our product candidates if they are approved. As ITI-007 and any of our other product candidates continue to progress towards potential regulatory approval, we intend to enter into agreements with a third-party contract
manufacturer and one or more back-up manufacturers for the commercial production of those products. Development and commercial quantities of any products that we develop will need to be manufactured in facilities, and by processes, that comply with
the requirements of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval. We currently employ internal resources to manage our manufacturing contractors. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Sales and Marketing </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We
currently have no marketing, sales or distribution capabilities. In order to commercialize any of our product candidates, we must develop these capabilities internally or through collaboration with third parties. In selected therapeutic areas where
we feel that our product candidates can be commercialized by a specialty sales force that calls on a limited and focused group of physicians, we may plan to participate in the commercialization of our product candidates in the United States. In
therapeutic areas that require a large sales force selling to a large and diverse prescribing population, we may elect to commercialize through, or in collaboration with, strategic partners. We may choose to commercialize our products in markets
outside of the United States by establishing one or more strategic alliances in the future. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Competition </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and
research institutions and governmental agencies, both in the United States and abroad. We compete, or will compete, with existing and new products being developed by our competitors. Some of these competitors are pursuing the development of
pharmaceuticals that target the same diseases and conditions that our research and development programs target. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">Even if we are successful in developing our product candidates, the
resulting products would compete with a variety of established drugs in the areas of our targeted CNS therapeutic indications. Our potential products for the treatment of schizophrenia and bipolar disorder would compete with, among other branded
products, Abilify<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed jointly by Bristol-Myers Squibb and Otsuka Pharmaceutical; Fanapt<FONT
STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by Novartis Pharmaceuticals; Seroquel XR<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by AstraZeneca;
Invega<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by Janssen; and Latuda<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by Sunovion. In addition, our product candidates, if approved, will compete with, among other generic antipsychotic products, haloperidol, risperidone,
quetiapine, olanzapine and clozapine. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, the companies described above and other competitors may have a variety of
drugs in development or awaiting FDA approval that could reach the market and become established before we have a product to sell. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may
develop. Many of our competitors are using technologies or methods different or similar to ours to identify and validate drug targets and to discover novel small molecule drugs. Many of our competitors and their collaborators have significantly
greater experience than we do in the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">identifying and validating targets; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">screening compounds against targets; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">preclinical and clinical trials of potential pharmaceutical products; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">obtaining FDA and other regulatory clearances. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In addition, many of our competitors and their collaborators have substantially greater advantages in the following areas: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">capital resources; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">research and development resources; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">manufacturing capabilities; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">sales and marketing. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Smaller companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaborative arrangements with large pharmaceutical and established biotechnology
companies. Many of our competitors have products that have been approved by the FDA or are in advanced development. We face competition from other companies, academic institutions, governmental agencies and other public and private research
organizations for collaborative arrangements with pharmaceutical and biotechnology companies, in recruiting and retaining highly qualified scientific and management personnel and for licenses to additional technologies. Our competitors, either alone
or with their collaborators, may succeed in developing technologies or drugs that are more effective, safer, and more affordable or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us.
Developments by others may render our product candidates or our technologies obsolete. Our failure to compete effectively could have a material adverse effect on our business. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">19 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Government Regulation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>United States&#151;FDA Process </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The research, development, testing,
manufacture, labeling, promotion, advertising, import and export, distribution and marketing, among other things, of drug products are extensively regulated by governmental authorities in the United States and other countries. In the United States,
the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA
refusal to approve pending New Drug Applications, or NDAs, warning letters, fines, civil penalties, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Drug Approval Process.</I> None of our drug product candidates may be marketed in the United States until the drug has received FDA
approval. Such approval can take many years to obtain and may be rejected by the FDA at a number of steps. The steps required before a drug may be marketed in the United States generally include the following: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">completion of extensive pre-clinical laboratory tests, animal studies, and formulation studies in accordance with the FDA&#146;s Good Laboratory
Practice, or GLP, regulations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">submission to the FDA of an Investigational New Drug, or IND, for human clinical testing, which must become effective before human clinical trials may
begin; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each proposed indication;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">submission to the FDA of an NDA after completion of all clinical trials; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the active pharmaceutical ingredient, or
API, and finished drug product are produced and tested to assess compliance with current Good Manufacturing Practices, or cGMPs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">satisfactory completion of FDA inspections of clinical trial sites to assure that data supporting the safety and effectiveness of product candidates
has been generated in compliance with Good Clinical Practices; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The development and approval process requires substantial time, effort and financial resources, and we cannot be certain that any
approvals for our product candidates will be granted on a timely basis, if at all. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">20 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-clinical tests include laboratory evaluation of product chemistry, toxicity and
formulation, as well as animal studies. The conduct of the pre-clinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the pre-clinical tests, together with manufacturing
information and analytical data, are submitted to the FDA as part of an IND, which 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 the conduct of the trial, such as whether human research subjects will be exposed to an unreasonable health risk. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or
questions before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Clinical trials involve administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the
objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be provided to the FDA as part of a separate submission to the IND. Further, an Institutional Review Board, or
IRB, for each medical center proposing to conduct the clinical trial must review and approve the study protocol and informed consent information for study subjects for any clinical trial before it commences at that center, and the IRB must monitor
the study until it is completed. There are also requirements governing reporting of on-going clinical trials and clinical trial results to public registries. Study subjects must sign an informed consent form before participating in a clinical trial.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Clinical trials necessary for product approval typically are conducted in three sequential phases, but the phases may
overlap. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Phase 1 usually involves the initial introduction of the investigational drug into a limited population, typically healthy humans, to evaluate its
short-term safety, dosage tolerance, metabolism, pharmacokinetics and pharmacologic actions, and, if possible, to gain an early indication of its effectiveness. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Phase 2 usually involves trials in a limited patient population to (i)&nbsp;evaluate dosage tolerance and appropriate dosage; (ii)&nbsp;identify
possible adverse effects and safety risks; and (iii)&nbsp;evaluate preliminarily the efficacy of the drug for specific targeted indications. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning
larger and more expensive Phase 3 clinical trials. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Phase 3 trials, commonly referred to as pivotal studies, are undertaken in an expanded patient population at multiple, geographically dispersed
clinical trial centers to further evaluate clinical efficacy and test further for safety by using the drug in its final form. There can be no assurance that Phase 1, Phase 2 or Phase 3 testing will be completed successfully within any specified
period of time, if at all. Furthermore, we, the FDA or an IRB may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Moreover, the FDA may
approve an NDA for a product candidate, but require that the sponsor conduct additional clinical trials to further assess the drug after NDA approval under a post-approval commitment. Post-approval trials are typically referred to as Phase 4
clinical trials. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">21 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the development of a new drug, sponsors are given an opportunity to meet with the FDA
at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information
about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach an agreement on the next phase of development. Sponsors typically use the end of Phase 2 meeting to discuss their Phase 2 clinical results and
present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug. A sponsor may request a Special Protocol Assessment, or SPA, to reach an agreement with the FDA that the protocol design, clinical
endpoints, and statistical analyses are acceptable to support regulatory approval of the product candidate with respect to effectiveness in the indication studied. If such an agreement is reached, it will be documented and made part of the
administrative record, and it will be binding on the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue essential to determining the safety or effectiveness of the product after clinical studies begin,
or if the sponsor fails to follow the protocol that was agreed upon with the FDA. There is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information
about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug
candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug
candidate does not undergo unacceptable deterioration over its shelf life. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Assuming successful completion of the required
clinical testing, the results of pre-clinical studies and of clinical studies, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of an NDA requesting
approval to market the product for one or more indications. An NDA must be accompanied by a significant user fee, which is waived for the first NDA submitted by a qualifying small business. In July 2012, the Food and Drug Administration Safety and
Innovation Act, or FDASIA, was signed into law. Among other things, FDASIA reauthorizes the FDA&#146;s authority to collect user fees from industry participants to fund reviews of innovator drugs. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The testing and approval process requires substantial time, effort and financial resources. The FDA will review the NDA and may deem it
to be inadequate to support approval, and we cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to the appropriate advisory committee, typically a panel of clinicians, for review,
evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee, but it typically follows such recommendations. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">22 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Before approving an NDA, the FDA inspects the facility or the facilities at which the drug
and/or its active pharmaceutical ingredient is manufactured and will not approve the product unless the manufacturing is in compliance with cGMPs. If the FDA evaluates the NDA and the manufacturing facilities are deemed acceptable, the FDA may issue
an approval letter, or in some cases a Complete Response Letter. The approval letter authorizes commercial marketing of the drug for specific indications. As a condition of NDA approval, the FDA may require post-marketing testing and surveillance to
monitor the drug&#146;s safety or efficacy, or impose other conditions. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require
additional clinical data and/or additional clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. Even if such additional information is submitted,
the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials is not always conclusive and the FDA may interpret data differently than we or our collaborators interpret data. Alternatively, the FDA
could also approve the NDA with a Risk Evaluation and Mitigation Strategy to mitigate risks of the drug, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods,
patient registries or other risk minimization tools. Once the FDA approves a drug, the FDA may withdraw product approval if on-going regulatory requirements are not met or if safety problems occur after the product reaches the market. In addition,
the FDA may require testing, including Phase 4 clinical trials, and surveillance programs to monitor the safety effects of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product
based on the results of these post-marketing programs or other information. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Post-Approval Requirements.</I> After a drug
has been approved by the FDA for sale, the FDA may require that certain post-approval requirements be satisfied, including the conduct of additional clinical studies. In addition, certain changes to an approved product, such as adding new
indications, making certain manufacturing changes, or making certain additional labeling claims, are subject to further FDA review and approval. Before a company can market products for additional indications, it must obtain additional approvals
from the FDA, typically a new NDA. Obtaining approval for a new indication generally requires that additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for any product candidate will be
approved on a timely basis, or at all. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If post-approval conditions are not satisfied, the FDA may withdraw its approval of
the drug. In addition, holders of an approved NDA are required to (i)&nbsp;report certain adverse reactions to the FDA and maintain pharmacovigilance programs to proactively look for these adverse events; (ii)&nbsp;comply with certain requirements
concerning advertising and promotional labeling for their products; and (iii)&nbsp;continue to have quality control and manufacturing procedures conform to cGMPs after approval. The FDA periodically inspects the sponsor&#146;s records related to
safety reporting and/or manufacturing facilities, which includes assessment of on-going compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP
compliance. We intend to </FONT></P>
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use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may identify compliance issues 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 after approval may result in restrictions on a product, manufacturer or holder of an approved
NDA, including recall of the product from the market or withdrawal of approval of the NDA for that drug. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Patent Term
Restoration and Marketing Exclusivity.</I> Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and
Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory
review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product&#146;s approval date. The patent term restoration period is generally one-half the time between the effective
date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the extension must be
requested prior to expiration of the patent. The U.S. Patent and Trademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for
restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant
NDA. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Data and market exclusivity provisions under the FDCA also can delay the submission or the approval of certain
applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously
approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or
ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four
years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than
bioavailability studies, conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers
only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the
submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct, or obtain a right of reference to all of the pre-clinical studies, adequate and well-controlled clinical trials necessary to demonstrate
safety and effectiveness. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">24 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Foreign Regulation </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" 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. Whether or not we
obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials and approval of foreign countries or economic areas, such as the European Union, before
we may market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter
than that required for FDA approval. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the European Economic Area, or EEA, which is comprised of the 27 member states of the
European Union, or Member States, plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of MAs: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Community MAs &#150; These are issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal
Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and are valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products,
orphan medicinal products, and medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active
substance not yet authorized in the EEA; for products that constitute a significant therapeutic, scientific or technical innovation; or for products that are in the interest of public health in the European Union. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">National MAs &#150; These are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, and are
available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through
the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized
Procedure, an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State. The competent authority of the Reference
Member State prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for
their approval. If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling or packaging proposed by the Reference Member State, the product is subsequently granted a
National MA in all the Member States (i.e., in the Reference Member State and the Member States Concerned). </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">25 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under the above described procedures, before granting the MA, the EMA or the competent
authorities of the Member States of the EEA assess the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As in the United States, it may be possible in foreign countries to obtain a period of market and/or data exclusivity that would have the effect of postponing the entry into the marketplace of a
competitor&#146;s generic product. For example, if any of our products receive marketing approval in the EEA, we expect they will benefit from eight years of data exclusivity and ten years of marketing exclusivity. An additional non-cumulative
one-year period of marketing exclusivity is possible if during the data exclusivity period (the first eight years of the 10-year marketing exclusivity period), we obtain an authorization for one or more new therapeutic indications that are deemed to
bring a significant clinical benefit compared to existing therapies. The data exclusivity period begins on the date of the product&#146;s first marketing authorization in the European Union and prevents generics from relying on the marketing
authorization holder&#146;s pharmacological, toxicological and clinical data for a period of eight years. After eight years, a generic product application may be submitted and generic companies may rely on the marketing authorization holder&#146;s
data. However, a generic cannot launch until two years later (or a total of 10 years after the first marketing authorization in the European Union of the innovator product), or three years later (or a total of 11 years after the first marketing
authorization in the European Union of the innovator product) if the marketing authorization holder obtains marketing authorization for a new indication with significant clinical benefit within the eight-year data exclusivity period. In Japan, our
products may be eligible for eight years of data exclusivity. There can be no assurance that we will qualify for such regulatory exclusivity, or that such exclusivity will prevent competitors from seeking approval solely on the basis of their own
studies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">When conducting clinical trials in the European Union, we must adhere to the provisions of the European Union
Clinical Trials Directive and the laws and regulations of the European Union Member States implementing them. These provisions require, among other things, that the prior authorization of an Ethics Committee and the competent Member State authority
is obtained before commencing the clinical trial. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Pricing and Reimbursement </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the United States and internationally, sales of products that we market in the future, and our ability to generate revenues on such
sales, are dependent, in significant part, on the availability of adequate coverage and reimbursement from third-party payors, such as state and federal governments, managed care providers and private insurance plans. Private insurers, such as
health maintenance organizations and managed care providers, have implemented cost-cutting and reimbursement initiatives and likely will continue to do so in the future. These include establishing formularies that govern the drugs and biologics that
will be offered and the out-of-pocket obligations of member patients for such products. We may need to conduct pharmacoeconomic studies to demonstrate the cost-effectiveness of our products for formulary coverage and reimbursement. Even with such
studies, our products may be considered less safe, less effective or less cost-effective than existing products, and third-party payors may not provide coverage and reimbursement for our product candidates, in whole or in part. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, particularly in the United States and increasingly in other countries, we are required to provide discounts and pay rebates
to state and federal governments and agencies in connection with purchases of our products that are reimbursed by such entities. It is possible that future legislation in the United States and other jurisdictions could be enacted to potentially
impact reimbursement rates for the products we are developing and may develop in the future and could further impact the levels of discounts and rebates paid to federal and state government entities. Any legislation that impacts these areas could
impact, in a significant way, our ability to generate revenues from sales of products that, if successfully developed, we bring to market. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes. There have been, and we expect there will continue to be, legislative and
regulatory proposals to change the health care system in ways that could significantly affect our future business. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation
Act, or collectively, the PPACA, enacted in March 2010, substantially changes the way health care is financed by both governmental and private insurers. Among other cost containment measures, PPACA establishes: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer
discounts to eligible beneficiaries during their coverage gap period, or the donut hole; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. On August&nbsp;2,
2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select </FONT></P>
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Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby
triggering the legislation&#146;s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2%&nbsp;per fiscal year, starting in 2013. On January&nbsp;2, 2013, President Obama
signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA, among other things, also reduced
Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Sales and Marketing </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The FDA regulates all advertising and promotion activities for products under its jurisdiction prior to and after approval, including standards and regulations for direct-to-consumer advertising,
dissemination of off-label information, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the
approved label. Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new or supplemental NDA, which may
require us to collect additional data or conduct additional pre-clinical studies and clinical trials. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective
advertising, consent decrees and the full range of civil and criminal penalties available to the FDA. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Physicians may
prescribe legally available drugs for uses that are not described in the drug&#146;s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties, and often reflect a
physician&#146;s belief that the off-label use is the best treatment for the patient. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers&#146;
communications regarding off-label uses. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal
penalties available to the FDA. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Outside the United States, our ability to market a product is contingent upon obtaining
marketing authorization from the appropriate regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from country to country. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may also be subject to various federal and state laws pertaining to health care &#147;fraud and abuse,&#148; including anti-kickback
laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription
of a particular drug. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations and very few court decisions addressing industry practices, it is possible that
</FONT></P>
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our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment to
third-party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities
relating to the sale and marketing of our products may be subject to scrutiny under these laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Violations of fraud and abuse
laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal health care programs (including Medicare and Medicaid) and corporate integrity agreements, which
impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties also may be imposed upon executive officers and employees, including criminal sanctions against executive officers under the
so-called &#147;responsible corporate officer&#148; doctrine, even in situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing. Given the penalties that may be imposed on companies and individuals if
convicted, allegations of such violations often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and
corporate integrity agreements. If the government was to allege or convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals have the ability to bring similar actions. Our activities
could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Further, there are an increasing number of state laws that
require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, our reporting
actions could be subject to the penalty provisions of the pertinent state authorities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Employees </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As of the date of this report, we employ 21 employees, 20 of whom are full-time. To successfully develop our drug candidates, we must be
able to attract and retain highly skilled personnel. We anticipate hiring additional employees for research and development, clinical and regulatory affairs and general and administrative activities over the next few years. In addition, we intend to
use clinical research organizations and third parties to perform our clinical studies and manufacturing. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Properties </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our headquarters are located at 3960 Broadway, New York, New York 10032, where we occupy approximately 13,000 square feet of office and
laboratory space. The term of the lease expires September&nbsp;30, 2014, and we have the option to extend the term of the lease for one additional year, until September&nbsp;30, 2015. We also lease office space in Towson, Maryland on a month to
month basis. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Legal Proceedings </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We are not currently involved in any material legal proceedings. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CAUTIONARY STATEMENT REGARDING </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>FORWARD-LOOKING STATEMENTS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited
to, &#147;believe,&#148; &#147;expect,&#148; &#147;anticipate,&#148; &#147;estimate,&#148; &#147;intend,&#148; &#147;plan,&#148; &#147;targets,&#148; &#147;likely,&#148; &#147;will,&#148; &#147;would,&#148; &#147;could,&#148; and similar expressions
or phrases, or the negative of those expressions or phrases identify forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements
are based on our projections of the future that are subject to known and unknown risks and uncertainties and other factors that may cause our actual results, level of activity, performance or achievements expressed or implied by these
forward-looking statements, to differ. The sections in this report entitled &#147;Description of the Business of Intra-Cellular Therapies, Inc.,&#148; &#147;Risk Factors,&#148; and &#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; as well as other sections in this report, discuss some of the factors that could contribute to these differences. These forward-looking statements include, among other things, statements about: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the initiation, cost, timing, progress and results of our development activities, preclinical studies and clinical trials;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the timing of and our ability to obtain and maintain regulatory approval of our existing product candidates, any product candidates that we may
develop, and any related restrictions, limitations, and/or warnings in the label of any approved product candidates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our plans to research, develop and commercialize our future product candidates; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our collaborators&#146; election to pursue research, development and commercialization activities; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to attract collaborators with development, regulatory and commercialization expertise; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to obtain and maintain intellectual property protection for our product candidates; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to successfully commercialize our product candidates; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the size and growth of the markets for our product candidates and our ability to serve those markets; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the rate and degree of market acceptance of any future products; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the success of competing drugs that are or become available; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">31 </FONT></P>



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<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">regulatory developments in the United States and other countries; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the performance of our third-party suppliers and manufacturers and our ability to obtain alternative sources of raw materials;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to obtain additional financing; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our use of the proceeds from our recently completed private placement; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the accuracy of our estimates regarding expenses, future revenues, capital requirements and the need for additional financing; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to attract and retain key scientific or management personnel. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Other unknown or unpredictable factors also could harm our results. Consequently, actual results or developments anticipated by us may
not be realized or, even if substantially realized, may not have the expected consequences to, or effects on, us. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Except
as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this report. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">32 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>RISK FACTORS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Investing in our common stock involves a high degree of risk. In addition to the other information set forth in this Current Report on Form 8-K, you should carefully consider the factors discussed
below when considering an investment in our common stock. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations and financial condition could suffer significantly. As a result, you
could lose some or all of your investment in our common stock. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business. </I></FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Risks Related to Our Business </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>We currently do not have, and may never have, any products that generate significant revenues. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We have a limited operating history on which to evaluate our business and prospects. To date, we have not generated any product revenues from our product candidates currently in development. We cannot
guarantee that any of our product candidates currently in development will ever become marketable products. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We must
demonstrate that our drug candidates satisfy rigorous standards of safety and efficacy for their intended uses before the FDA, and other regulatory authorities in the European Union and elsewhere will approve them for commercialization. Significant
additional research, preclinical testing and clinical testing is required before we can file applications with the FDA or other regulatory authorities for premarket approval of our drug candidates. In addition, to compete effectively, our drugs must
be easy to administer, cost-effective and economical to manufacture on a commercial scale. We may not achieve any of these objectives. ITI-007, our most advanced drug candidate, is currently in Phase 2 clinical trials and ITI-214 is currently in
Phase 1 clinical trials. We cannot be certain that the clinical development of these or any other drug candidates in preclinical testing or clinical development will be successful, that we will receive the regulatory approvals required to
commercialize them or that any of our other research and drug discovery programs will yield a drug candidate suitable for investigation through clinical trials. Our commercial revenues from our product candidates currently in development, if any,
will be derived from sales of drugs that will not become marketable for several years, if at all. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>There is no guarantee that our
currently ongoing Phase 2 or our other planned clinical trials for ITI-007 in acute schizophrenia or in other indications will be successful. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In our Phase 1 and initial Phase 2 clinical trials, our lead product candidate, ITI-007, has demonstrated improved sleep maintenance, and clinical signals consistent with reduction in psychosis,
depression and insomnia. We are currently evaluating ITI-007 in a randomized, placebo and active controlled Phase 2 clinical trial for the treatment of acute schizophrenia. We currently anticipate the results of this trial will be available in the
fourth quarter of 2013. Our preclinical studies and initial clinical trials demonstrate that ITI-007 has shown evidence of addressing the symptoms of schizophrenia without causing cardiovascular and metabolic abnormalities, or motor impairments.
Further, we believe ITI-007 may be effective at doses that </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">33 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
do not cause adverse effects displayed by existing antipsychotic drugs that tend to lead to high rates of noncompliance by the patients who most need these drugs. We are currently in the process
of attempting to prove our hypotheses in later-stage clinical trials. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The historical rate of failures for product candidates
in clinical development and late-stage clinical trials is high. While we are currently conducting our Phase 2 clinical trial in patients with acute schizophrenia and plan to conduct further clinical studies in patients with acute schizophrenia and
other indications, there is no guarantee that we will have the same level of success in these trials as we have had in our earlier clinical trials, or be successful at all. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In addition, although we believe that ITI-007 and follow-on compounds may also have clinical utility in indications other than acute schizophrenia, such as behavioral disturbances in dementia, bipolar
disorder, intermittent explosive disorder, non-motor disorders associated with Parkinson&#146;s disease, obsessive compulsive disorder and anxiety disorders and post-traumatic stress disorder, we have never tested ITI-007 in clinical trials for
these other indications. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we do not successfully complete clinical development of ITI-007, we will be unable to market and
sell products derived from it and to generate product revenues. Even if we do successfully complete clinical trials for ITI-007 in patients with acute schizophrenia, those results are not necessarily predictive of results of future pivotal trials
that may be needed before we may submit an NDA to the FDA for the initial or other future indications. Of the vast number of drugs in development, only a small percentage result in the submission of an NDA to the FDA, and even less result in the NDA
ultimately being approved by the FDA for commercialization. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Safety issues with our product candidates, or with product candidates or
approved products of third parties that are similar to our product candidates, could give rise to delays in the regulatory approval process, restrictions on labeling or product withdrawal after approval. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Problems with product candidates or approved products marketed by third parties that utilize the same therapeutic target or that belong
to the same therapeutic class as our product candidates could adversely affect the development, regulatory approval and commercialization of our product candidates. In 2012, the FDA released draft guidance recommending that prospective suicidality
assessments be performed in clinical trials of any drug being developed for a psychiatric indication. Our development programs are focused on psychiatric indications. Our PDE1 program is a novel target and may have unexpected safety effects that do
not appear until late in clinical development or after commercial approval. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Discovery of previously unknown class effect
problems may prevent or delay clinical development and commercial approval of product candidates or result in restrictions on permissible uses after their approval, including withdrawal of the medicine from the market. Many drugs acting on the CNS
include boxed warnings and precautions related to suicidal behavior or ideation, driving impairment, somnolence/sedation and dizziness, discontinuation, weight gain, non-insulin dependent (type II) diabetes, cardiovascular side effects, sleep
disturbances, and motor disturbances. If we or others later identify undesirable side effects caused by the mechanisms of action or classes of our product candidates or specific product candidates: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may be required to conduct additional clinical trials or implement a Risk Evaluation and Mitigation Strategies program prior to approval;
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">34 </FONT></P>



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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">regulatory authorities may not approve our product candidates or, as a condition of approval, require specific warnings and contraindications;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">regulatory authorities may withdraw their approval of the product and require us to take our drug off the market; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may have limitations on how we promote our drugs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">sales of products may decrease significantly; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may be subject to litigation or product liability claims; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our reputation may suffer. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase our commercialization costs and expenses, which, in turn, could
delay or prevent us from generating significant revenues from its sale. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Finally, if the FDA determines that a drug may
present a risk of substance abuse, it can recommend to the Drug Enforcement Administration that the drug be scheduled under the Controlled Substances Act. Any failure or delay in commencing or completing clinical trials or obtaining regulatory
approvals for our product candidates would delay commercialization of our product candidates, and severely harm our business and financial condition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>If we seek to enter into strategic alliances for our drug candidates, but fail to enter into and maintain successful strategic alliances, we may have to reduce or delay our drug candidate
development or increase our expenditures. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">An important element of a biotechnology company&#146;s strategy for
developing, manufacturing and commercializing its drug candidates may be to enter into strategic alliances with pharmaceutical companies or other industry participants to advance its programs and enable it to maintain its financial and operational
capacity. We may face significant competition in seeking appropriate alliances. If we seek such alliances, we may not be able to negotiate alliances on acceptable terms, if at all. In addition, these alliances may be unsuccessful. If we seek such
alliances and then fail to create and maintain suitable alliances, we may have to limit the size or scope of, or delay, one or more of our drug development or research programs. If we elect to fund drug development or research programs on our own,
we will have to increase our expenditures and will need to obtain additional funding, which may be unavailable or available only on unfavorable terms. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">35 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>To the extent we are able to enter into collaborative arrangements or strategic alliances, we will be
exposed to risks related to those collaborations and alliances. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are currently party to a license and collaboration
agreement with Takeda Pharmaceutical Company Limited. Biotechnology companies at our stage of development sometimes become dependent upon collaborative arrangements or strategic alliances to complete the development and commercialization of drug
candidates, particularly after the Phase 2 stage of clinical testing. If we elect to enter into collaborative arrangements or strategic alliances, these arrangements may place the development of our drug candidates outside our control, may require
us to relinquish important rights or may otherwise be on terms unfavorable to us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dependence on collaborative arrangements or
strategic alliances would subject us to a number of risks, including the risk that: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may not be able to control the amount and timing of resources that our collaborators may devote to the drug candidates;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our collaborators may experience financial difficulties; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may be required to relinquish important rights, such as marketing and distribution rights; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">business combinations or significant changes in a collaborator&#146;s business strategy may also adversely affect a collaborator&#146;s willingness or
ability to complete its obligations under any arrangement; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a collaborator could independently move forward with a competing drug candidate developed either independently or in collaboration with others,
including our competitors; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">collaborative arrangements are often terminated or allowed to expire, which would delay the development and may increase the cost of developing our
drug candidates. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We expect our net losses to continue for at least several years and are unable to predict the extent
of future losses or when we will become profitable, if ever. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have experienced significant net losses since our
inception. As of June&nbsp;30, 2013, we had an accumulated deficit of approximately $44.6 million. We expect to incur net losses over the next several years as we advance our programs and incur significant clinical development costs. We have not
received, and do not expect to receive for at least the next several years, any revenues from the commercialization of our product candidates. Substantially all of our revenues for the year ended December&nbsp;31, 2012 were from our license and
collaboration agreement with Takeda and our agreements with various U.S. governmental agencies and other parties, including our research and development grants. We anticipate that our collaborations, which provide us with research funding and
potential milestone payments will continue to be our primary sources of revenues for the next several years. We cannot be certain that the milestones required to trigger payments under our existing collaborations will be achieved or that we will
enter into additional collaboration agreements. To obtain revenues from our product candidates, we must succeed, either alone or with others, in developing, obtaining regulatory approval for, and manufacturing and marketing drugs with significant
market potential. We may never succeed in these activities, and may never generate revenues that are significant enough to achieve profitability. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">36 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>If we fail to obtain the capital necessary to fund our operations, we will be unable to successfully
develop our products. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have consumed substantial amounts of capital since our inception. Our cash, cash equivalents
and investment securities totaled $10.3 million at June&nbsp;30, 2013. On August&nbsp;29, 2013, immediately prior to the Merger, Intra-Cellular received proceeds of approximately $60.0 million from the closing of its private placement of
Intra-Cellular common stock, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular&#146;s then outstanding convertible promissory notes, and which resulted in net proceeds,
after expenses, of approximately $40.0 million. While we believe that our existing cash resources and anticipated payments from our existing collaborations will be sufficient to fund our cash requirements for the next 12 months, we will require
significant additional financing in the future to continue to fund our operations. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the progress in, and the costs of, our preclinical studies and clinical trials and other research and development programs;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the scope, prioritization and number of our research and development programs; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the ability of our collaborators and us to reach the milestones, and other events or developments, triggering payments under our collaboration
agreements or to otherwise make payments under these agreements; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to enter into new, and to maintain existing, collaboration and license agreements; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the extent to which our collaborators are obligated to reimburse us for clinical trial costs under our collaboration agreements;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the costs involved in filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the costs of securing manufacturing arrangements for clinical or commercial production; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the costs of preparing applications for regulatory approvals for our product candidates; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the costs of establishing, or contracting for, sales and marketing capabilities if we obtain regulatory clearances to market our product candidates;
and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the costs associated with litigation. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Until we can generate significant continuing revenues, we expect to satisfy our future cash needs through our existing cash, cash equivalents and investment securities, strategic
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">37 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
collaborations, private or public sales of our securities, debt financings, grant funding, or by licensing all or a portion of our product candidates or technology. Turmoil and volatility in the
financial markets have adversely affected the market capitalizations of many biotechnology companies, and generally made equity and debt financing more difficult to obtain. This, coupled with other factors, may limit our access to additional
financing over the near-term future. This could have a material adverse effect on our ability to access sufficient funding. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not
available, we will be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our management has broad discretion over the use of our cash and we may not use our cash effectively, which could adversely affect our results of operations. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our management has significant flexibility in applying our cash resources and could use these resources for corporate purposes that do
not increase our market value, or in ways with which our stockholders may not agree. We may use our cash resources for corporate purposes that do not yield a significant return or any return at all for our stockholders, which could adversely affect
our future growth prospects. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our lead product candidate, ITI-007, is only part way through the clinical trials we anticipate needing to
complete before we may be able to submit an NDA to the FDA. Clinical trials are long, expensive and unpredictable, and there is a high risk of failure. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Preclinical testing and clinical trials are long, expensive and unpredictable processes that can be subject to delays. It may take several years to complete the preclinical testing and clinical
development necessary to commercialize a drug, and delays or failure can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in preclinical testing and early clinical trials does not ensure
that later clinical trials will be successful. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In connection with clinical trials, we face risks that a product candidate may not prove to be efficacious; patients may die or suffer
other adverse effects for reasons that may or may not be related to the product candidate being tested; the results may not confirm the positive results of our earlier preclinical studies and clinical trials; and the results may not meet the level
of statistical significance required by the FDA or other regulatory agencies. If we do not successfully complete preclinical and clinical development, we will be unable to market and sell products derived from our product candidates and to generate
product revenues. Even if we do successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before an NDA may be submitted to the FDA or the FDA may approve the NDA.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">38 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Delays, suspensions and terminations in our clinical trials could result in increased costs to us,
delay our ability to generate product revenues and therefore may have a material adverse effect on our business, results of operations and future growth prospects. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The commencement of clinical trials can be delayed for a variety of reasons, including: delays in demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;
reaching agreement on acceptable terms with prospective contract research organizations and clinical trial sites; manufacturing sufficient quantities of a product candidate; obtaining clearance from the FDA to commence clinical trials pursuant to an
IND; obtaining institutional review board approval to conduct a clinical trial at a prospective clinical trial site; and patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the
protocol, the proximity of patients to clinical trial sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Once a clinical trial has begun, it may be delayed, suspended or terminated due to a number of factors, including: ongoing discussions
with regulatory authorities regarding the scope or design of our clinical trials or requests by them for supplemental information with respect to our clinical trial results; failure to conduct clinical trials in accordance with regulatory
requirements; lower than anticipated screening or retention rates of patients in clinical trials; serious adverse events or side effects experienced by participants; and insufficient supply or deficient quality of product candidates or other
materials necessary for the conduct of our clinical trials. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Many of these factors may also ultimately lead to denial of
regulatory approval of a current or potential product candidate. If we experience delays, suspensions or terminations in a clinical trial, the commercial prospects for the related product candidate will be harmed, and our ability to generate product
revenues will be delayed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may
result in costs and delays that prevent us from successfully commercializing our product candidates. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Although we
design and manage our current preclinical studies and clinical trials, we do not now have the ability to conduct clinical trials for our product candidates on our own. In addition to our collaborators, we rely on contract research organizations,
medical institutions, clinical investigators, and contract laboratories to perform data collection and analysis and other aspects of our clinical trials. In addition, we also rely on third parties to assist with our preclinical studies, including
studies regarding biological activity, safety, absorption, metabolism, and excretion of product candidates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our preclinical
activities or clinical trials may be delayed, suspended, or terminated if: the quality or accuracy of the data obtained by the third parties on whom we rely is compromised due to their failure to adhere to our clinical protocols or regulatory
requirements or if for other reasons, these third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines, or these third parties need to be replaced. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If the third parties on whom we rely fail to perform, our development costs may increase, our ability to obtain regulatory approval, and
consequently, to commercialize our product candidates may be delayed or prevented altogether. We currently use several contract research </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">39 </FONT></P>



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organizations to perform services for our preclinical studies and clinical trials. While we believe that there are numerous alternative sources to provide these services, in the event that we
seek such alternative sources, we may not be able to enter into replacement arrangements without delays or incurring additional expenses. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Even if we successfully complete the clinical trials of one or more of our product candidates, the product candidates may fail for other reasons.
</I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Even if we successfully complete the clinical trials for one or more of our product candidates, the product
candidates may fail for other reasons, including the possibility that the product candidates will: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">fail to receive the regulatory approvals required to market them as drugs; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">be subject to proprietary rights held by others requiring the negotiation of a license agreement prior to marketing; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">be difficult or expensive to manufacture on a commercial scale; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">have adverse side effects that make their use less desirable; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">fail to compete with product candidates or other treatments commercialized by our competitors. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we are unable to receive the required regulatory approvals, secure our intellectual property rights, minimize the incidence of any
adverse side effects or fail to compete with our competitors&#146; products, our business, financial condition, and results of operations could be materially and adversely affected. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Following regulatory approval of any of our drug candidates, we will be subject to ongoing regulatory obligations and restrictions, which may result in significant expense and limit our ability to
commercialize our potential products. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">With regard to our drug candidates, if any, approved by the FDA or by another
regulatory authority, we are held to extensive regulatory requirements over product manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping. Regulatory approvals may also be subject to
significant limitations on the indicated uses or marketing of the drug candidates. Potentially costly follow-up or post-marketing clinical studies may be required as a condition of approval to further substantiate safety or efficacy, or to
investigate specific issues of interest to the regulatory authority. Previously unknown problems with the drug candidate, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the drug, and
could include withdrawal of the drug from the market. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, the law or regulatory policies governing pharmaceuticals
may change. New statutory requirements may be enacted or additional regulations may be enacted that could prevent or delay regulatory approval of our drug candidates. We cannot predict the likelihood,
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">40 </FONT></P>



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nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or elsewhere. If we are not able to maintain
regulatory compliance, we might not be permitted to market our drugs and our business could suffer. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our product candidates may not gain
acceptance among physicians, patients, or the medical community, thereby limiting our potential to generate revenues, which will undermine our future growth prospects. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Even if our product candidates are approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any approved product candidate by physicians, health care
professionals and third-party payors, and our profitability and growth will depend on a number of factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the ability to provide acceptable evidence of safety and efficacy; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">pricing and cost effectiveness, which may be subject to regulatory control; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to obtain sufficient third-party insurance coverage or reimbursement; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">effectiveness of our or our collaborators&#146; sales and marketing strategy; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">relative convenience and ease of administration; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the prevalence and severity of any adverse side effects; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">availability of alternative treatments. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If any product candidate that we develop does not provide a treatment regimen that is at least as beneficial as the current standard of care or otherwise does not provide some additional patient benefit
over the current standard of care, that product will not achieve market acceptance and we will not generate sufficient revenues to achieve profitability. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>The failure to attract and retain skilled personnel and key relationships could impair our drug development and commercialization efforts. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are highly dependent on our senior management and key clinical development, scientific and technical personnel. Competition for these
types of personnel is intense. The loss of the services of any member of our senior management, clinical development, scientific or technical staff may significantly delay or prevent the achievement of drug development and other business objectives
and could have a material adverse effect on our business, operating results and financial condition. We also rely on consultants and advisors to assist us in formulating our strategy. All of our consultants and advisors are either self-employed or
employed by other organizations, and they may have conflicts of interest or other commitments, such as consulting or advisory contracts with other organizations, that may affect their ability to contribute to us. We intend to expand and develop new
drug candidates, and will need additional funding to grow our business. We will need to hire additional employees in order to continue our research and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">41 </FONT></P>



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clinical trials and to market our drugs when approved. This strategy will require us to recruit additional executive management and clinical development, regulatory, scientific, technical and
sales and marketing personnel. There is currently intense competition for skilled executives and employees with relevant clinical development, scientific, technical and sales and marketing expertise, and this competition is likely to continue. The
inability to attract and retain sufficient clinical development, scientific, technical and managerial personnel, due to intense competition and our limited resources, would limit or delay our product development efforts, which would adversely affect
the development of our drug candidates and commercialization of our potential drugs and growth of our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We may not be able to
continue or fully exploit our partnerships with outside scientific and clinical advisors, which could impair the progress of our clinical trials and our research and development efforts. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We work with scientific and clinical advisors at academic and other institutions who are experts in the field of CNS disorders. They
advise us with respect to our clinical trials. These advisors are not our employees and may have other commitments that would limit their future availability to us. If a conflict of interest arises between their work for us and their work for
another entity, we may lose their services, which may impair our reputation in the industry and delay the development or commercialization of our product candidates. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Relying on third-party manufacturers may result in delays in our clinical trials, regulatory approvals and product introductions. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have no manufacturing facilities and do not have extensive experience in the manufacturing of drugs or in designing drug-manufacturing
processes. We have contracted with third-party manufacturers to produce, in collaboration with us, our product candidates, including ITI-007, for clinical trials. If any of our product candidates are approved by the FDA or other regulatory agencies
for commercial sale, we may need to amend our contract with our current manufacturer or contract with another third party to manufacture them in larger quantities. While we believe that there are alternative sources available to manufacture our
product candidates, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without delays or additional expenditures. We cannot estimate these delays or costs with certainty but, if they were to
occur, they could cause a delay in our development and commercialization efforts. We have not entered into long-term agreements with our current third-party manufacturers or with any alternate suppliers. Although we intend to do so prior to any
commercial launch of a product that is approved by the FDA in order to ensure that we maintain adequate supplies of commercial drug product, we may be unable to enter into such agreements or do so on commercially reasonable terms, which could delay
a product launch or subject our commercialization efforts to significant supply risk. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The manufacturers of our product
candidates are obliged to operate in accordance with FDA-mandated current good manufacturing practices, or cGMPs. In addition, the facilities used by our contract manufacturers or other third party manufacturers to manufacture our product candidates
must be approved by the FDA pursuant to inspections that will be conducted after we request regulatory approval from the FDA. A failure of any of our current or future contract </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">42 </FONT></P>



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manufacturers to establish and follow cGMPs and to document their adherence to such practices may lead to significant delays in clinical trials or in obtaining regulatory approval of product
candidates or the ultimate launch of products based on our product candidates into the market. Failure by our current or future 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 the government to grant pre-market approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of products, operating restrictions, and criminal prosecutions.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We will need to continue to manage our organization and we may encounter difficulties with our staffing and any future transitions,
which could adversely affect our results of operations. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will need to effectively manage our operations and
facilities in order to advance our drug development programs (including ITI-007, ITI-214 and those compounds covered by our collaboration with Takeda), achieve milestones under our license and collaboration agreement with Takeda, facilitate
additional collaborations, and pursue other development activities. It is possible that our infrastructure may be inadequate to support our future efforts and growth. In particular, we may have to develop internal sales, marketing, and distribution
capabilities if we decide to market any drug that we may successfully develop. We may not successfully manage our operations and, accordingly, may not achieve our research, development, and commercialization goals. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our ability to generate product revenues will be diminished if our products do not receive coverage from payors or sell for inadequate prices, or
if patients are unable to obtain adequate levels of reimbursement. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patients who are prescribed medicine for the
treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental health care programs, such as Medicare and
Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already
available or subsequently become available. Even if we obtain coverage for any approved products, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely
to use any products we may market unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of those products. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In addition, the market for any products for which we may receive regulatory approval will depend significantly on access to third-party payors&#146; drug formularies, or lists of medications for which
third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular
branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">43 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Third-party payors, whether foreign or domestic, or governmental or commercial, are
developing increasingly sophisticated methods of controlling health care costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and
reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of
our products candidates to each payor separately, with no assurance that coverage will be obtained. If we are unable to obtain coverage of, and adequate payment levels for, our products from third-party payors, physicians may limit how much or under
what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our ability to successfully commercialize any approved products and thereby adversely impact our profitability, results of
operations, financial condition, and future success. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>In the future, if we have products that are approved, health care legislation may
make it more difficult to receive revenues from those products. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In both the United States and certain foreign
jurisdictions, there have been a number of legislative and regulatory proposals in recent years to change the health care system in ways that could impact our ability to sell our products profitably. In March 2010, the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, PPACA, became law in the United States. PPACA substantially changed the way health care is financed by both governmental and private
insurers and significantly affects the health care industry. Among the provisions of PPACA of importance to our potential product candidates are the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">imposition of an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government health care programs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January&nbsp;1, 2010, to
23% and 13% of the average manufacturer price for most branded and generic drugs, respectively; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and
enhanced penalties for noncompliance; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of
applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer&#146;s outpatient drugs to be covered under Medicare Part D; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">extension of manufacturers&#146; Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals
beginning in </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">44 </FONT></P>



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<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
2014 and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers&#146;
Medicaid rebate liability; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">new requirements to report certain financial arrangements with physicians and teaching hospitals, as defined in PPACA and its implementing regulations,
including reporting any &#147;payments or transfers of value&#148; made or distributed to prescribers, teaching hospitals and other health care providers and reporting any ownership and investment interests held by physicians and their immediate
family members and applicable group purchasing organizations during the preceding calendar year, with data collection to be required beginning August&nbsp;1, 2013 and reporting to the Centers for Medicare&nbsp;&amp; Medicaid Services, or CMS, to be
required by March&nbsp;31, 2014 and by the 90th day of each subsequent calendar year; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along
with funding for such research. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Many of the details regarding the implementation of PPACA are yet to be
determined and, at this time, it remains unclear what the full effect that PPACA would have on our business. On June&nbsp;28, 2012, the U.S. Supreme Court upheld the constitutionality of PPACA, excepting certain provisions that would have required
each state to expand its Medicaid programs or risk losing all of the state&#146;s Medicaid funding. At this time, it remains unclear whether there will be any further changes made to PPACA, whether in part or in its entirety. Some states have
indicated that they intend not to implement certain sections of PPACA, and some members of the U.S. Congress are still working to repeal PPACA. We cannot predict whether these challenges will continue or other proposals will be made or adopted, or
what impact these efforts may have on us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, in many foreign countries, particularly the countries of the European
Union, the pricing of prescription drugs is subject to government control. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from
country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal
products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. We may
face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there may be importation of foreign products that compete with any products we may market, which could
negatively impact our profitability. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">45 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We expect that PPACA, as well as other health care reform measures that may be adopted in
the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other health care reforms may prevent us from being able to generate revenue, attain profitability, or commercialize any products for which we
receive regulatory approval. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>If we are unable to establish sales and marketing capabilities or enter into agreements with third parties
to sell and market any products we may develop, we may not be able to generate product revenue. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We do not currently
have an organization for the sales, marketing or distribution of pharmaceutical products. In order to market any products that may be approved by the FDA, we must build our sales, marketing, managerial, and related capabilities or make arrangements
with third parties to perform these critical commercial services. If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and
may not become profitable. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Risks Related to Our Intellectual Property </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our ability to compete may be undermined if we do not adequately protect our proprietary rights. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our commercial success depends on obtaining and maintaining proprietary rights to our product candidates and technologies and their uses,
as well as successfully defending these rights against third-party challenges. We will only be able to protect our product candidates, proprietary technologies, and their uses from unauthorized use by third parties to the extent that valid and
enforceable patents, or effectively protected trade secrets, cover them. We have patent rights under issued patents in many cases covering our ITI-007 and ITI-002 development programs. Nonetheless, the issued patents and patent applications covering
our primary technology programs remain subject to uncertainty and continuous monitoring and action by us due to a number of factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may not have been the first to make the inventions covered by our pending patent applications or issued patents; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may not have been the first to file patent applications for our product candidates or the technologies we rely upon; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">others may independently develop similar or alternative technologies or duplicate any of our technologies; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">46 </FONT></P>



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<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any or all of our pending patent applications may not result in issued patents; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we may not seek or obtain patent protection in all countries that will eventually provide a significant business opportunity;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any patents issued to us or our collaborators may not provide a basis for commercially viable products, may not provide us with any competitive
advantages or may be challenged by third parties; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our proprietary technologies may not be patentable; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">others may design around our patent claims to produce competitive products which fall outside of the scope of our patents;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">others may identify prior art which could invalidate our patents; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes to patent laws that limit the exclusivity rights of patent holders. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Even if we have or obtain patents covering our product candidates or technologies, we may still be barred from making, using and selling
our product candidates or technologies because of the patent rights of others. Others have or may have filed, and in the future are likely to file, patent applications covering compounds, assays, genes, gene products or therapeutic products that are
similar or identical to ours. There are many issued U.S. and foreign patents relating to genes, nucleic acids, polypeptides, chemical compounds or therapeutic products, and some of these may encompass reagents utilized in the identification of
candidate drug compounds or compounds that we desire to commercialize. Numerous U.S. and foreign issued patents and pending patent applications owned by others exist in the area of central nervous system disorders and the other fields in which we
are developing products. These could materially affect our ability to develop our product candidates or sell our products. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may
later result in issued patents that our product candidates or technologies may infringe. These patent applications may have priority over patent applications filed by us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We regularly conduct searches to identify patents or patent applications that may prevent us from obtaining patent protection for our proprietary compounds or that could limit the rights we have claimed
in our patents and patent applications. Disputes may arise regarding the ownership or inventorship of our inventions. It is difficult to determine how such disputes would be resolved. Others may challenge the validity of our patents. If our patents
are found to be invalid, we will lose the ability to exclude others from making, using or selling the inventions claimed therein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Some of our academic institutional licensors, research collaborators and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality
of our technology and other confidential information in connection with our collaborations, then our ability to receive patent protection or protect our proprietary information will be impaired. Additionally, any employee whose employment with us
terminates, whether voluntarily by the employee or by us in connection with restructurings or </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">47 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
otherwise, may seek future employment with our competitors. Although each of our employees is required to sign a confidentiality agreement with us at the time of hire, we cannot guarantee that
the confidential nature of our proprietary information will be maintained in the course of such future employment. In addition, technology that we may license-in may become important to some aspects of our business. We generally will not control the
patent prosecution, maintenance or enforcement of in-licensed technology. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Confidentiality agreements with employees and others may not
adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Because we operate in the highly technical field of drug discovery and development of small molecule drugs, we rely in part on trade
secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality and intellectual property assignment agreements with our corporate partners, employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party
or made known to the party by us during the course of the party&#146;s relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property.
However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the
outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain trade secret protection could adversely affect our competitive position. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and
costly, and an unfavorable outcome could harm our business. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">There is significant litigation in our industry regarding
patent and other intellectual property rights. While we are not currently subject to any pending intellectual property litigation, and are not aware of any such threatened litigation, we may be exposed to future litigation by third parties based on
claims that our product candidates, technologies or activities infringe the intellectual property rights of others. If our drug development activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to
such patents. We may need to resort to litigation to enforce a patent issued to us, protect our trade secrets or determine the scope and validity of third-party proprietary rights. From time to time, we may hire scientific personnel formerly
employed by other companies involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of their prior
affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We also may not be able to afford the costs of litigation. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">48 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>The patent applications of pharmaceutical and biotechnology companies involve highly complex legal and
factual questions, which, if determined adversely to us, could negatively impact our patent position. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The patent
positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. The USPTO&#146;s standards are uncertain and could change in the future. Consequently, the issuance and scope of patents
cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination
proceedings in the USPTO (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss
or reduction in the scope of one or more of the claims of the patent or patent application. Similarly, opposition or invalidity proceedings could result in loss of rights or reduction in the scope of one or more claims of a patent in foreign
jurisdictions. In addition, such interference, reexamination and opposition proceedings may be costly. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, changes in or different interpretations of patent laws in the United States and foreign countries may permit others to use
our discoveries or to develop and commercialize our technology and products without providing any compensation to us or may limit the number of patents or claims we can obtain. In particular, there have been proposals to shorten the exclusivity
periods available under U.S. patent law that, if adopted, could substantially harm our business. The product candidates that we are developing are protected by intellectual property rights, including patents and patent applications. If any of our
product candidates becomes a marketable product, we will rely on our exclusivity under patents to sell the compound and recoup our investments in the research and development of the compound. If the exclusivity period for patents is shortened, then
our ability to generate revenues without competition will be reduced and our business could be materially adversely impacted. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws, and those countries
may lack adequate rules and procedures for defending our intellectual property rights. For example, some countries, including many in Europe, do not grant patent claims directed to methods of treating humans and, in these countries, patent
protection may not be available at all to protect our product candidates. In addition, U.S. patent laws may change, which could prevent or limit us from filing patent applications or patent claims to protect our products and/or technologies or limit
the exclusivity periods that are available to patent holders. For example, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was recently signed into law and includes a number of significant changes to U.S. patent law. These include
changes to transition from a &#147;first-to-invent&#148; system to a &#147;first-to-file&#148; system and to the way issued patents are challenged. These changes may favor larger and more established companies that have more resources to devote to
patent application filing and prosecution. The USPTO has been in the process of implementing regulations and procedures to administer the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act may
affect our ability to obtain, enforce or defend our patents. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will ultimately have on the cost of prosecuting our patent applications, our ability to obtain patents based on our
discoveries and our ability to enforce or defend our issued patents. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">49 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we fail to obtain and maintain patent protection and trade secret protection of our
product candidates, proprietary technologies and their uses, we could lose our competitive advantage and competition we face would increase, reducing our potential revenues and adversely affecting our ability to attain or maintain profitability.
</FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Risks Related to Our Industry </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>We will be subject to stringent regulation in connection with the marketing of any products derived from our product candidates, which could delay the development and commercialization of our
products. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The pharmaceutical industry is subject to stringent regulation by the FDA and other regulatory agencies in
the United States and by comparable authorities in other countries. Neither we nor our collaborators can market a pharmaceutical product in the United States until it has completed rigorous preclinical testing and clinical trials and an extensive
regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product, and requires substantial resources. Even if regulatory approval is
obtained, it may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, and/or marketing of such products, and requirements for post-approval studies, including additional research and
development and clinical trials. These limitations may limit the size of the market for the product or result in the incurrence of additional costs. Any delay or failure in obtaining required approvals could have a material adverse effect on our
ability to generate revenues and continue our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Outside the United States, the ability to market a product is
contingent upon receiving approval from the appropriate regulatory authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing, and reimbursement vary widely from country to country. Only after the
appropriate regulatory authority is satisfied that adequate evidence of safety, quality, and efficacy has been presented will it grant a marketing authorization. Approval by the FDA does not automatically lead to the approval by regulatory
authorities outside the United States and, similarly, approval by regulatory authorities outside the United States will not automatically lead to FDA approval. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Many of our competitors have greater resources and capital than us, putting us at a competitive disadvantage. If our competitors develop and market products that are more effective than our product
candidates, they may reduce or eliminate our commercial opportunity. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Competition in the pharmaceutical and
biotechnology industries is intense and increasing. We face competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United States and abroad. Some of
these competitors have products or are pursuing the development of drugs that target the same diseases and conditions that are the focus of our drug development programs. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">50 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">For example, our potential products for the treatment of acute
schizophrenia would compete with, among other branded products, Abilify<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed jointly by Bristol-Myers
Squibb and Otsuka Pharmaceutical, Fanapt<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by Novartis Pharmaceuticals, Seroquel XR<FONT
STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by AstraZeneca, Invega<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by Janssen, and
Latuda<FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">&reg;</SUP></FONT>, marketed by Sunovion. In addition, our products will compete with, among other generic antipsychotic
drugs, haloperidol, risperidone, quetiapine, olanzapine and clozapine. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Many of our competitors and their collaborators have
significantly greater experience than we do in the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">identifying and validating targets; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">screening compounds against targets; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">preclinical studies and clinical trials of potential pharmaceutical products; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">obtaining FDA and other regulatory approvals. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In addition, many of our competitors and their collaborators have substantially greater capital and research and development resources, manufacturing, sales and marketing capabilities, and production
facilities. Smaller companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaboration arrangements with large pharmaceutical and established biotechnology companies. Many of our
competitors have products that have been approved or are in advanced development and may develop superior technologies or methods to identify and validate drug targets and to discover novel small molecule drugs. Our competitors, either alone or with
their collaborators, may succeed in developing drugs that are more effective, safer, more affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us. Our competitors may also develop
alternative therapies that could further limit the market for any drugs that we may develop. Our failure to compete effectively could have a material adverse effect on our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Any claims relating to improper handling, storage, or disposal of biological, hazardous, and radioactive materials used in our business could be costly and delay our research and development
efforts. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our research and development activities involve the controlled use of potentially harmful hazardous
materials, including volatile solvents, biological materials such as blood from patients that have the potential to transmit disease, chemicals that cause cancer, and various radioactive compounds. Our operations also produce hazardous waste
products. We face the risk of contamination or injury from the use, storage, handling or disposal of these materials. We are subject to federal, state and local laws and regulations governing the use, storage, handling, and disposal of these
materials and specified waste products. The cost of compliance with these laws </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">51 </FONT></P>



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and regulations could be significant, and current or future environmental regulations may impair our research, development, or production efforts. If one of our employees were accidentally
injured from the use, storage, handling, or disposal of these materials, the medical costs related to his or her treatment would be covered by our workers&#146; compensation insurance policy. However, we do not carry specific biological or hazardous
waste insurance coverage and our general liability insurance policy specifically excludes coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we
could be subject to criminal sanctions or fines or be held liable for damages, our operating licenses could be revoked, or we could be required to suspend or modify our operations and our research and development efforts. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Consumers may sue us for product liability, which could result in substantial liabilities that exceed our available resources and damage our
reputation. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Researching, developing, and commercializing drug products entail significant product liability risks.
Liability claims may arise from our and our collaborators&#146; use of products in clinical trials and the commercial sale of those products. Consumers may make these claims directly and our collaborators or others selling these products may seek
contribution from us if they receive claims from consumers. Although we currently have product liability insurance that covers our clinical trials, we will need to increase and expand this coverage as we commence larger scale trials and if our
product candidates are approved for commercial sale. This insurance may be prohibitively expensive or may not fully cover our potential liabilities. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect
against potential product liability claims could prevent or inhibit the commercialization of products that we or our collaborators develop. Product liability claims could have a material adverse effect on our business and results of operations. Our
liability could exceed our total assets if we do not prevail in a lawsuit from any injury caused by our drug products. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Risks Relating to Owning Our Common Stock </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>There is currently no market for our common stock and there can be no assurance that any market will ever develop. You may therefore be unable to re-sell shares of our common stock at times and
prices that you believe are appropriate. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our common stock is not listed on a national securities exchange, an
over-the-counter market or any other exchange. Therefore, there is no trading market, active or otherwise, for our common stock and our common stock may never be included for trading on any stock exchange, automated quotation system or any
over-the-counter market. Accordingly, our common stock is highly illiquid and you will likely experience difficulty in re-selling such shares at times and prices that you may desire. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Our common stock may not be eligible for listing or quotation on any securities exchange. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We do not currently meet the initial listing standards of any national securities exchange or over-the-counter trading system. We cannot assure you that we will be able to meet the initial listing
standards of any national securities exchange, or, if we do meet </FONT></P>
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such initial listing standards, that we will be able to maintain any such listing. Further, the national securities exchanges have adopted so-called &#147;seasoning&#148; rules that require that
we meet certain requirements, including prescribed periods of time trading over-the-counter and minimum filings of periodic reports with the SEC, before we are eligible to apply for listing on such national securities exchanges. We intend to contact
an authorized market maker for an over-the-counter quotation system for sponsorship of our common stock, but we cannot guarantee that such sponsorship will be approved and our common stock listed and quoted for sale. Even if our common stock is
quoted for sale on an over-the-counter quotation system, buyers may be insufficient in numbers to allow for a robust market and it may prove impossible to sell your shares. In addition, an investor may find it difficult to obtain accurate quotations
as to the market value of our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers
and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>The price of our common stock could be subject to volatility related or unrelated to our operations. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If a market for our common stock develops, its market price could fluctuate substantially due to a variety of factors, including market
perception of our ability to meet our growth projections and expectations, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial
markets or other developments affecting our business and the business of others in our industry. In addition, the stock market itself is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons related and unrelated to their operating performance and could have the same effect on our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>The designation of our common stock as a &#147;penny stock&#148; would limit the liquidity of our common stock. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our common stock may be deemed a &#147;penny stock&#148; (as that term is defined under Rule 3a51-1 of the Exchange Act) in any market that may develop in the future. Generally, a &#147;penny stock&#148;
is a common stock that is not listed on a securities exchange and trades for less than $5.00 per share. Prices often are not available to buyers and sellers and the market may be very limited. Penny stocks in start-up companies are among the
riskiest equity investments. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level
of risks involved in investing in the penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that the penny stock is a
suitable investment for the purchaser and obtain the purchaser&#146;s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there may be less trading activity in
penny stocks in any market that develops for our common stock in the future and stockholders are likely to have difficulty selling their shares. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">53 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Management and certain members of our board of directors beneficially own a substantial amount of our
outstanding equity securities and will be able to exert substantial control over us. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our executive officers and
directors beneficially own a substantial percentage of the outstanding equity securities of the Company. Accordingly, if they act as a group, the executive officers and directors of the Company will be able to make all business decisions, including
with respect to such matters as amendments to the Company&#146;s charter, other fundamental corporate transactions, such as mergers, asset sales and the sale of the Company, and otherwise will be able to direct the Company&#146;s business and
affairs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting
public companies, which could harm our operating results. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As a public company, we will incur significant legal,
accounting and other expenses, including costs associated with public company reporting requirements. We will also incur substantial expenses in connection with the preparation and filing of the registration statement for resale of our common stock
that we expect to file, and responding to SEC comments in connection with its review of such registration statement. We will also incur costs associated with current corporate governance requirements, including requirements under Section&nbsp;404
and other provisions of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC or any stock exchange or inter-dealer quotations system on which our common stock may be listed in the future. The
expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically in recent years. We expect these rules and regulations to substantially increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. We are unable currently to estimate these costs with any degree of certainty. We also expect that these new rules and regulations may make it difficult and expensive for us to obtain director and
officer liability insurance, and if we are able to obtain such insurance, we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage available to privately-held
companies. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability
to operate our business and investors&#146; views of us. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will be required to comply with Section&nbsp;404 of the
Sarbanes-Oxley Act. Section&nbsp;404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and attestations of the effectiveness of internal controls by independent auditors.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is </FONT></P>
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a costly and time-consuming effort that will need to be evaluated frequently. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the
Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition,
if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against
us and our business may be harmed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>The shares of common stock issued in the Merger are &#147;restricted securities&#148; and, as such,
may not be sold except in limited circumstances. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">None of the shares of common stock that we issued in the Merger,
which constitute all of our outstanding shares of common stock as of the date of this Current Report on Form 8-K, have been registered under the Securities Act of 1933, as amended, or the Securities Act, or registered or qualified under any state
securities laws. The shares of common stock that we issued in the Merger were issued pursuant to exemptions contained in and under those laws. Accordingly, such shares of common stock are &#147;restricted securities&#148; as defined in Rule 144
under the Securities Act, or Rule 144, and must, therefore, be held indefinitely unless registered under applicable federal and state securities laws, or an exemption is available from the registration requirements of those laws. The certificates
representing the shares of common stock issued in the Merger will reflect their restricted status. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have agreed to register
the shares of common stock issued in the Merger. There can be no assurance, however, that the SEC will declare the registration statement effective, thereby enabling the shares of common stock issued in the Merger to be freely tradable. In addition,
Rule 144 under the Securities Act, which permits the resale, subject to various terms and conditions, of limited amounts of restricted securities after they have been held for six months, will not immediately apply to our common stock because we
were at one time designated as a &#147;shell company&#148; under SEC regulations. Pursuant to Rule 144(i), securities issued by a current or former shell company that otherwise meet the holding period and other requirements of Rule 144 nevertheless
cannot be sold in reliance on Rule 144 until one year after the date on which the issuer filed current &#147;Form 10 information&#148; (as defined in Rule 144(i)) with the SEC reflecting that it ceased being a shell company and, provided that at the
time of a proposed sale pursuant to Rule 144, the issuer has satisfied certain reporting requirements under the Exchange Act. We believe this requirement to file Form 10 information has been satisfied by the filing of this Current Report on Form
8-K. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply regardless of holding period, the restrictive legends on certificates for the shares of common stock issued in the Merger cannot be removed except in
connection with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Securities Act. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">55 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>If we are unable to register in a timely manner the shares of common stock that we issued to
stockholders in the Merger, then the ability to re-sell shares of our common stock will be delayed. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We expect to
prepare and file a registration statement with the SEC registering the resale of the shares of our common stock issued in connection with the Merger. There are many reasons, including some over which we have little or no control, which could keep
the registration statement from being declared effective by the SEC, including delays resulting from the SEC review process and comments raised by the SEC during that process. Accordingly, in the event that the registration statement is not declared
effective within these timeframes, the shares of common stock proposed to be covered by such registration statement will not be eligible for resale until the registration statement is effective or an exemption from registration, such as Rule 144,
becomes available. In addition, we have agreed to pay damages to the investors in the Private Placement if we do not satisfy certain deadlines and requirements in connection with the registration statement, as specified in the Registration Rights
Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Because we became a reporting company under the Exchange Act by means other than a traditional underwritten initial public
offering, we may not be able to attract the attention of research analysts at major brokerage firms. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Because we did
not become a reporting company by conducting an underwritten initial public offering, or IPO, of our common stock, and because we will not be listed on a national securities exchange, security analysts of brokerage firms may not provide coverage of
our company. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we were to become a public reporting company by means of an IPO because they may be less familiar with our
company as a result of more limited coverage by analysts and the media, and because we became public at an early stage in our development. The failure to receive research coverage or support in the market for our shares will have an adverse effect
on our ability to develop a liquid market for our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Because the Merger was a reverse merger, the registration statement we
expect to file with respect to the shares of common stock received by stockholders in the Merger might be subject to heightened scrutiny by the SEC, and we may not be able to attract the attention of major brokerage firms. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Additional risks may exist as a result of our becoming a public reporting company through a &#147;reverse merger.&#148; Certain SEC rules
are more restrictive when applied to reverse merger companies, such as the ability of stockholders to re-sell their shares of common stock pursuant to Rule 144, and the SEC may subject the registration statement we expect to file with respect to the
shares of our common stock received by stockholders in the Merger to heightened scrutiny. In addition, securities analysts of major brokerage firms may not provide coverage of our capital stock or business. Because we became a public reporting
operating company through a reverse merger, there is no incentive for brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will want to provide analyst coverage of our capital stock or business in
the future. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>The resale of shares covered by a registration statement could adversely affect the market price of our common stock in the
public market, should one develop, which result would in turn negatively affect our ability to raise additional equity capital. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The sale, or availability for sale, of our common stock in the public market may adversely affect the prevailing market price of our common stock and may impair our ability to
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">56 </FONT></P>



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raise additional capital by selling equity or equity-linked securities. We expect to prepare and file a registration statement with the SEC registering the resale of the shares of our common
stock issued in connection with the Merger. Once effective, the registration statement will permit the resale of these shares at any time. The resale of a substantial number of shares of our common stock in the public market could adversely affect
the market price for our common stock and make it more difficult for you to sell shares of our common stock at times and prices that you feel are appropriate. Furthermore, we expect that, because there will be a large number of shares registered
pursuant to a registration statement, selling stockholders will continue to offer shares covered by such registration statement for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and
price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time and continued negative pressure on the market price of our common stock could have a material adverse effect on our ability
to raise additional equity capital. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>If securities or industry analysts do not publish, or cease publishing, research or reports about
us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If a trading market for our common stock develops, the trading market for our common stock will be influenced by whether industry or securities analysts publish research and reports about us, our
business, our market or our competitors and, if any analysts do publish such reports, what they publish in those reports. We may not obtain analyst coverage in the future. Any analysts that do cover us may make adverse recommendations regarding our
stock, adversely change their recommendations from time to time, and/or provide more favorable relative recommendations about our competitors. If any analyst who may cover us in the future were to cease coverage of our company or fail to regularly
publish reports on us, or if analysts fail to cover us or publish reports about us at all, we could lose, or never gain, visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We do not anticipate paying cash dividends in the foreseeable future. </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in the foreseeable
future. As a result, you should not rely on an investment in our securities if you require dividend income. Capital appreciation, if any, of our shares may be your sole source of gain for the foreseeable future. Moreover, you may not be able to
re-sell your shares at or above the price you paid for them. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">57 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>The following discussion of the financial condition and results of operations of Intra-Cellular Therapies, Inc. and its wholly-owned subsidiary should be read in conjunction with the financial
statements and the notes to those statements attached as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K. This discussion includes forward-looking statements that involve risk and uncertainties. As a result of many factors, such as those
set forth above under &#147;Risk Factors,&#148; actual results may differ materially from those anticipated in these forward-looking statements. </I></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective as of August&nbsp;29, 2013, we consummated the Merger
and changed our name from &#147;Oneida Resources Corp.&#148; to &#147;Intra-Cellular Therapies, Inc.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are a
biopharmaceutical company focused on the discovery and clinical development of innovative, small molecule drugs that address underserved medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms
within the central nervous system. Our lead product candidate, ITI-007, is in Phase 2 clinical trials as a first-in-class treatment for schizophrenia. We believe that ITI-007 and follow-on compounds have utility to treat additional indications,
which we may investigate, either on our own or with a partner. We hold exclusive, worldwide commercialization rights to ITI-007 and a family of related compounds from Bristol-Myers Squibb Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have a second major program called ITI-002 that has yielded a portfolio of compounds that selectively inhibits the enzyme PDE1. We
have licensed the lead compound in the ITI-002 portfolio, ITI-214, and other compounds in that portfolio, to Takeda. ITI-214 is the first compound in its class to successfully advance into Phase 1 clinical trials and is being developed for the
treatment of cognitive impairment associated with schizophrenia and other disorders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our pipeline also includes preclinical
programs that are focused on advancing drugs for the treatment of cognitive dysfunction, in both schizophrenia and Alzheimer&#146;s disease, and for disease modification and the treatment of neurodegenerative disorders, including Alzheimer&#146;s
disease. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Since inception, we have devoted all of our efforts and resources to our research and development activities. We
have incurred significant net losses since inception. As of June&nbsp;30, 2013, our accumulated deficit was $44.6 million. We expect to continue incurring substantial losses for the next several years as we continue to develop our clinical and
pre-clinical drug candidates and programs. Our operating expenses are comprised of research and development expenses and general and administrative expenses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We have not generated any revenue from product sales to date and we do not expect to generate revenues from product sales for at least the next several years. Our revenues for the fiscal years ended
December&nbsp;31, 2012 and 2011 have been primarily from a license and collaboration agreement with Takeda, and, to a much lesser extent, from grants from U.S. government agencies and foundations. Prior to 2011, our revenue was entirely from grants
from these agencies and foundations. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our corporate headquarters and research facility are located in New York, New York.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Recent Developments </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Private Placement </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Prior to the Merger, Intra-Cellular sold to accredited investors approximately $60.0 million of its shares of common stock, or 18,889,307
shares, at a price of $3.1764 per share, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular&#146;s then outstanding convertible promissory notes, or Notes. We refer to
this transaction as the Private Placement. Also, Intra-Cellular granted the investors in the Private Placement registration rights requiring Intra-Cellular or any successor to register those shares of Intra-Cellular common stock (which were
exchanged for shares of our common stock, along with the rest of the outstanding shares of Intra-Cellular capital stock, except for dissenting shares, at the Effective Time) for public resale, as described in more detail below. The then existing
stockholders of Intra-Cellular who agreed to become parties to the registration rights agreement also became entitled to such registration rights, subject to specified differences in the agreement between the rights of new investors and existing
stockholders. The existing Second Amended and Restated Investor Rights Agreement, by and among Intra-Cellular and the investors listed therein, dated as of October&nbsp;25, 2007, as amended, was terminated at the Effective Time. The Private
Placement closed immediately prior to the filing of a Certificate of Merger with the Secretary of State of the State of Delaware, on August&nbsp;29, 2013. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Reverse Merger </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On August&nbsp;29, 2013, pursuant to the Merger
Agreement, Merger Sub merged with and into Intra-Cellular, with Intra-Cellular remaining as the surviving entity and a wholly-owned operating subsidiary of the Company. The Merger was effective as of August&nbsp;29, 2013, upon the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware. As part of the Merger, Intra-Cellular changed its name to ITI, Inc. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">At the Effective Time, the legal existence of Merger Sub ceased and each share of Intra-Cellular common stock and each share of Intra-Cellular preferred stock that was issued and outstanding immediately
prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock. We issued an aggregate of 22,134,647 shares of our common stock upon such exchange of the outstanding shares of Intra-Cellular common stock and preferred
stock. In addition, at the Effective Time, we assumed Intra-Cellular&#146;s 2003 Equity Incentive Plan, as amended, or the 2003 Equity Incentive Plan, and all options to purchase Intra-Cellular common stock then outstanding under the 2003 Equity
Incentive Plan, and such options became exercisable for an aggregate of 1,462,380 shares of our common stock, subject to the vesting and other terms of such options. The vesting of such options was not accelerated as a result of the Merger. At the
Effective Time, we also assumed the outstanding warrant to purchase Intra-Cellular common stock, and such warrant became exercisable for 1,822 shares of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Immediately following the Effective Time, pursuant to the terms of the Redemption Agreement, we completed the closing of a redemption of an aggregate 5,000,000 shares of our
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">59 </FONT></P>



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common stock from our then-current sole stockholder in consideration of an aggregate of $60,000, plus professional costs related to the transaction, not to exceed $20,000. The 5,000,000 shares
constituted all of the issued and outstanding shares of our capital stock, on a fully-diluted basis, immediately prior to the Merger. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, section 805 entitled, &#147;<I>Business Combinations</I>,&#148; Intra-Cellular is considered
the accounting acquirer in the Merger. Intra-Cellular is considered the acquirer for accounting purposes, and will account for the transaction as a reverse business combination, because Intra-Cellular&#146;s former stockholders received 100% of the
voting rights in the combined entity and Intra-Cellular&#146;s senior management represents all of the senior management of the combined entity. Consequently, the assets and liabilities and the historical operations that will be reflected in our
consolidated financial statements will be those of Intra-Cellular and will be recorded at the historical cost basis of the Company. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Results of Operations </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Revenues
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following discussion summarizes the key factors our management believes are necessary for an understanding of our
financial statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have not generated any revenue from product sales to date and we do not expect to generate revenues
from product sales for at least the next several years. Our revenues for the last two years have been primarily from the license and collaboration agreement with Takeda, and, to a much lesser extent, grants from U.S. government agencies and
foundations. Prior to 2011, our revenue was entirely from grants from these agencies and foundations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The revenue from Takeda
has been comprised primarily of an upfront payment, a milestone payment and reimbursements for costs incurred in the development of and patent prosecutions for compounds subject to the collaboration. The upfront payment was evaluated and it was
determined that there were separate units of accounting for the deliverables that are provided for in the license and collaboration agreement. A larger portion of the upfront payment was considered a license fee, and the remaining portion was deemed
to be related to the performance of agreed upon activities under the collaboration component of the license and collaboration agreement. We determined this amount in accordance with ASC Topic 605-25, using best estimate of selling price, for the
work that we would be required to perform. We considered multiple factors in estimating this amount, including, but not limited to, direct external expenses and internal costs for salary and related fringes, among others. The straight line method of
amortization with a three-year schedule was used and revenue was and will be recognized equally for the years 2011 through 2013. Revenue from the license payment was recognized as earned when received. Revenue from milestone payments is recognized
when all of the following conditions are met: (1)&nbsp;the milestone payments are non-refundable, (2)&nbsp;the achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement,
(3)&nbsp;substantive effort on our part is involved in achieving the milestone, (4)&nbsp;the amount of the milestone payment is reasonable in relation to the effort </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">60 </FONT></P>



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expended or the risk associated with achievement of the milestone, and (5)&nbsp;a reasonable amount of time passes between the up-front license payment and the first milestone payment.
Reimbursement revenue is recognized when the costs are incurred and the services have been performed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We expect our revenues
for the next several years to consist of limited reimbursable costs incurred for patent prosecutions, amortized revenue in 2013 related to the upfront payment made by Takeda, and reimbursements related to our collaboration with Takeda under the
license and collaboration agreement. In addition, we expect to receive possible milestone payments under the license and collaboration agreement, but these are not assured at this time and would not be significant enough to fund operations for a
meaningful period of time. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Expenses </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The process of researching and developing drugs for human use is lengthy, unpredictable and subject to many risks. We are unable with any certainty to estimate either the costs or the timelines in which
those costs will be incurred. We have one project, ITI-007 for the treatment of schizophrenia, which consumes a large proportion of our current, as well as projected, resources. We intend to pursue other disease indications that ITI-007 may address,
but there are large costs associated with pursuing FDA approval for those indications, which would include the cost of additional clinical trials. Our other projects, exclusive of the Takeda collaboration, are still in the preclinical stages, and
will require extensive funding not only to complete preclinical testing, but to enter into and complete clinical trials. Expenditures that we incur on these projects will be subject to availability of funding in addition to the funding required for
the advancement of ITI-007. Any failure or delay in the advancement of ITI-007 could require us to re-allocate resources from our other projects to the advancement of ITI-007, which could have a significant material adverse impact on the advancement
of these other projects and on our operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our operating expenses are comprised of (i)&nbsp;research and development
expenses and (ii)&nbsp;general and administrative expenses. Our research and development costs are comprised of: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">internal recurring costs, such as labor and fringe benefits, materials and supplies, facilities and maintenance costs; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">fees paid to external parties who provide us with contract services, such as preclinical testing, manufacturing and related testing, and clinical trial
activities. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">General and administrative expenses are incurred in three major categories: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">salaries and related benefit costs; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">patent, legal and professional costs; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">office and facilities overhead. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">61 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table sets forth our revenues and operating expenses for the fiscal years
ended December&nbsp;31, 2012 and 2011, and for the three and six month periods ended June&nbsp;30, 2013 and 2012: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD></TD>
<TD></TD>
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<TD VALIGN="bottom" WIDTH="2%"></TD>
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<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>For&nbsp;the&nbsp;Year&nbsp;Ended&nbsp;December&nbsp;31</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Three&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Six&nbsp;Months&nbsp;Ended&nbsp;June&nbsp;30</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2011</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2013</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2013</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>2012</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B></B><B><I>(Audited)</I></B><B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B></B><B><I>(Unaudited)</I></B><B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B></B><B><I>(Unaudited)</I></B><B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="22" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(in thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Revenues</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>$</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>3,118</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23,362</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>$</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>643</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,495</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>$</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>1,242</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,071</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Expenses</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Research and Development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>15,486</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,655</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>7,788</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9,439</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>12,740</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13,133</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">General and Administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>4,035</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,612</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>903</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,115</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>1,950</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,112</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>19,521</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,267</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>8,691</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,554</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>14,690</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,245</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Net Income (Loss)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>$</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(16,591</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>)&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11,092</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>$</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(8,277</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>)&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(9,056</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>$</B></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>(13,916</B></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>)&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">(13,167</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Comparison of Years Ended December&nbsp;31, 2012 and December&nbsp;31, 2011 </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Research and Development Expenses </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Total research and development expenses were approximately $15.5 million for the fiscal year ended December&nbsp;31, 2012, as compared to $7.7 million for the fiscal year ended December&nbsp;31, 2011.
This increase of $7.8 million in total research and development expenses is due primarily to an increase of $9.1 million in direct costs for clinical trials. Clinical trial costs for the fiscal year ended December&nbsp;31, 2011 were $1.5 million.
This increase in clinical trial costs was offset in part by lower costs during the fiscal year ended December&nbsp;31, 2012 to manufacture drug product required for clinical trials and testing, and by lower costs associated with non-clinical drug
testing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The research and development expenses incurred for amounts payable to external parties started to become a larger
component of our research and development costs during the fiscal year ended December&nbsp;31, 2011, and comprise a significant portion of our research and development spending during the fiscal year ended December&nbsp;31, 2012, due primarily to
the preparation for and commencement of our Phase 2 clinical trial for ITI-007. We incurred expenses of approximately $12.2 million and $4.2 million during the years ended December&nbsp;31, 2012 and 2011, respectively, for amounts payable to
external parties who manufactured, tested and performed clinical trial activities for all of our projects. During the same periods, our internal research and development expenses were approximately $3.3 million and $3.5 million during the years
ended December&nbsp;31, 2012 and 2011, respectively. We currently employ 15 full time personnel in our research and development group. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The clinical development work related to ITI-007 requires the largest portion of our resources and, consequently, comprises the majority of our spending. We spent approximately $11.3 and $2.9 million on
direct external costs for the development of ITI-007, exclusive of internal labor and fringes, during the periods ended December&nbsp;31, 2012 and 2011, respectively. As development of ITI-007 progresses, we anticipate costs for ITI-007 to increase
considerably in the next several years as we complete the ongoing Phase 2 clinical trial for ITI-007 and begin other clinical trials. We are also required to complete non-clinical testing to obtain FDA approval and manufacture material needed for
clinical trial use, which includes non-clinical testing of the drug product and the creation of an inventory of drug product in anticipation of possible FDA approval. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">62 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We currently have several projects in addition to ITI-007 that are in the research and
development stages. These are in the areas of cognitive dysfunction and the treatment of neurodegenerative diseases, including Alzheimer&#146;s disease, among others. We have used internal resources and incurred expenses not only in relation to the
development of ITI-007 but on these additional projects as well. We have not, however, reported these costs on a project by project basis, as they are broadly spread among these projects. The external costs for these projects have been minimal and
are reflected in the amounts discussed in this section &#147; &#150; Research and Development Expenses.&#148; During the years ended December&nbsp;31, 2012 and 2011, we also incurred costs that were both reimbursable and non-reimbursable under the
license and collaboration agreement with Takeda. We incurred approximately $700,000 and $320,000 on direct costs that were billable to Takeda for the years ended December&nbsp;31, 2012 and 2011, respectively. We anticipate that these costs will be
reduced significantly as the research portion of the license and collaboration agreement concludes in February 2014. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>General and Administrative Expenses </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Salaries and related benefit costs for our executive, finance and administrative functions for 2012 and 2011 constituted slightly less than half of the total general and administrative costs. The next
major categories of expenses are patent costs, some of which are reimbursed by Takeda, legal, accounting and other professional fees and, to a lesser extent, facilities and general office-related overhead. We expect all of these costs to increase
significantly as we expand our operations and become subject to the reporting requirements of a public company. General and administrative expenses were $4.0 million for the fiscal year ended December&nbsp;31, 2012 compared to $4.6 million for the
fiscal year ended December&nbsp;31, 2011. The decrease is the result of higher legal, patent and personnel costs in 2011 related to consummating the license and collaboration agreement, offset in part by a decrease in patent costs for other
non-Takeda related products. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Comparison of Three and Six Month Periods Ended June&nbsp;30, 2013 and June&nbsp;30, 2012
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Research and Development Expenses </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Research and development expenses decreased for both the three and six month periods ended June&nbsp;30, 2013 as compared to the three and six month periods ended June&nbsp;30, 2012 by approximately $1.7
million and $393,000, respectively. The decrease in the three month period ended June&nbsp;30, 2013 as compared to the three month period ended June&nbsp;30, 2012 is due almost exclusively to lower costs of manufacturing of compounds, outside
clinical testing and non-clinical testing. The decrease in the six month period ended June&nbsp;30, 2013 as compared to the six month period ended June&nbsp;30, 2012 is due to approximately $1.1 million of lower manufacturing costs of compounds and
approximately $100,000 of lower non-clinical testing offset in part by approximately $900,000 of higher clinical testing costs. The variations in the above costs are primarily related to the timing of these expenses from period to period. We were
conducting comparable levels of clinical testing for our ITI-007 compound in the periods under comparison. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">63 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The increase in clinical testing costs for the six month period ended June&nbsp;30, 2013 as compared to the
six month period ended June&nbsp;30, 2012 is also the result of a slight increase in the number of clinical trial subjects being tested in 2013. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>General and Administrative Expenses </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">General and administrative expenses
decreased slightly for both the three and six month periods ended June&nbsp;30, 2013 as compared to the three and six month periods ended June&nbsp;30, 2012 by approximately $212,000 and $162,000, respectively. The decrease of $212,000 for the three
month period ended June&nbsp;30, 2013 as compared to the three month period ended June&nbsp;30, 2012 is primarily the result of approximately $97,000 of lower patent filing costs, with the remainder comprised primarily of lower professional fees.
The $162,000 decrease for the six month period ended June&nbsp;30, 2013 as compared to the six month period ended June&nbsp;30, 2012 is due to lower professional fees of approximately $36,000, and the rest is due to minor increases and decreases in
other expense category items. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Liquidity and Capital Resources </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Through June&nbsp;30, 2013, we have funded our operations with approximately $109.0 million of cash that has been obtained from the following main sources: $25.4 million from sales of equity; $0.2 million
from the exercise of stock options; $15.3 million in sales of convertible promissory notes; $40.6 million from grants from government agencies and foundations; and $27.5 million in total payments received under the license and collaboration
agreement with Takeda, including approximately $1.7 million for reimbursement of development costs incurred in 2011 and 2012 and $1.4 million for patent costs incurred during the same time period. During the fiscal year ended December&nbsp;31, 2012,
we did not receive any funding through grants. We do not believe that grant revenue will be a significant source of funding in the near future. We expect that reimbursements of our development costs by Takeda will decline going forward, and we do
not expect such reimbursements to be a significant source of funding in the future. We also expect the reimbursements for patent filing costs will remain at the same level, but because reimbursements will be offset by the actual expenditures
incurred, reimbursements do not represent a net source of funding for us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In October and November 2012, we issued convertible
promissory notes, or Notes, having an aggregate principal amount of approximately $15.2 million. We issued additional Notes having an aggregate principal amount of $0.1 million in March 2013. The Notes were unsecured and accrued interest at a rate
of 6%&nbsp;per year, were originally scheduled to mature on April&nbsp;25, 2013, but were extended until October&nbsp;25, 2013. The principal amount of the Notes, together with the accrued interest thereon, converted into shares of Intra-Cellular
common stock at the closing of the private placement described above under &#147;Recent Developments &#150; Private Placement.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As of December&nbsp;31, 2012, we had a total of $19.1 million in cash, cash equivalents and certificates of deposit, or CDs, and approximately $18.2 million of short term liabilities consisting of $3.0
million of short term liabilities from operations and $15.2 million in principal amount of Notes. As of June&nbsp;30, 2013, we had a total of $10.3 million in cash, cash equivalents </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">64 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
and CDs, and approximately $22.7 million of short term liabilities consisting of $7.4 million of short term liabilities from operations and $15.3 million in principal amount of Notes. This
reduction in working capital of $12.4 million for the six month period ended June&nbsp;30, 2013 is primarily due to the funding of the Phase 2 clinical trial for ITI-007, our lead drug candidate. Working capital used to fund recurring operations
during this period was approximately $4.5 million. We expect to consume working capital of approximately $11.0 to $12.0 million for the second half of 2013. This will be due primarily to expenses incurred for the completion of the Phase 2 clinical
trial and, to a lesser extent, the preparations for additional trials and non-clinical testing related to the development of ITI-007. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Prior to the Merger, on August&nbsp;29, 2013, Intra-Cellular closed the Private Placement in which it sold to accredited investors approximately $60.0 million of its shares of common stock, which included
approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of the Notes. All of the shares issued in the Private Placement, along with the other shares of Intra-Cellular that were outstanding immediately prior
to the Merger, were exchanged for shares of our common stock at the Effective Time. For a more detailed discussion of the Private Placement and the Merger, see &#147;Recent Developments &#150; Reverse Merger&#148; above. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our cash, cash equivalents and investment securities totaled $10.3 million at June&nbsp;30, 2013. On August&nbsp;29, 2013, immediately
prior to the Merger, Intra-Cellular sold approximately $60.0 million of its common stock, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular&#146;s then outstanding
convertible promissory notes, and which resulted in net proceeds, after expenses, of approximately $40.0 million. While we believe that our existing cash resources and anticipated payments from our existing collaborations will be sufficient to fund
our cash requirements for the next 12 months, we will require significant additional financing in the future to continue to fund our operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We have incurred losses in every year since inception with the exception of the fiscal year ended December&nbsp;31, 2011. These losses have resulted in significant cash used in operations. During the
fiscal year ended December&nbsp;31, 2012, our cash used in operations was approximately $18.9 million. During the fiscal year ended December&nbsp;31, 2011, if we exclude the upfront fee and milestone payments from Takeda, our cash used in operations
would have been $7.8 million. This increase of cash used during calendar 2012 is primarily due to the clinical development and clinical trial activities for ITI-007. While we have several research and development programs underway, the ITI-007
program has advanced the furthest and will continue to consume increasing amounts of cash for conducting clinical trials and the testing and manufacturing of product material. As we continue to conduct these activities necessary to pursue FDA
approval of ITI-007 and our other product candidates, we expect the cash needed to fund operations to increase significantly over the next several years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Until we can generate significant revenues from operations, we will need to satisfy our future cash needs through public or private sales of our equity securities, sales of debt securities, strategic
collaborations, licensing a portion or all of our product candidates and technology and, to a lesser extent, grant funding. We cannot be sure that future funding will be available to us on acceptable terms, or at all. Due to the recent volatile
nature of the financial markets and, in particular, the adverse impact on market capitalization and valuation of biotechnology companies, equity and debt financing may be difficult to obtain. In addition, any unfavorable development or delay in the
progress for our ITI-007 program could have a material adverse impact on our ability to raise additional capital. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">65 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we cannot raise adequate capital in the future, we will be required to delay and possibly
eliminate the research and development work not only of our lead drug candidate ITI-007, but also our other preclinical stage product candidates. In this case, we could be required to relinquish greater or all rights to our product candidates at an
earlier stage of development and on less favorable terms than we would otherwise agree. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our cash is maintained in money
market accounts and, to a lesser extent, in CDs at major financial institutions. Due to the current low interest rates available for these instruments, we are earning limited interest income. Our investment portfolio has not been adversely impacted
by the problems in the credit markets that have existed over the last several years, but there can be no assurance that our investment portfolio will not be adversely affected in the future. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Off-Balance Sheet Arrangements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We do not have any off-balance sheet
arrangements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Critical Accounting Policies and Estimates </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The discussion and analysis of our financial condition and results of operations set forth below are based on our financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States, or GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and
reported amounts of revenues and expenses for the periods presented.&nbsp;Judgments must also be made about the disclosure of contingent liabilities.&nbsp;We base our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management makes estimates
and exercises judgment in revenue recognition and stock-based compensation. Actual results may differ from those estimates and under different assumptions or conditions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We believe that the following critical accounting policies affect management&#146;s more significant judgments and estimates used in the preparation of our financial statements: </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Revenue Recognition </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Revenue is recognized when all terms and conditions of the agreements have been met, including persuasive evidence of an arrangement, delivery has occurred or services have been rendered, price is fixed
or determinable and collectability is reasonably assured. We are reimbursed for certain costs incurred on specified research projects under the terms and conditions of grants, collaboration agreements, and awards. We record the amount of
reimbursement as revenues on a gross basis in accordance with ASC 605-45, &#147;<I>Revenue Recognition/Principal Agent Considerations</I>.&#148; We are the primary obligor with respect to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">66 </FONT></P>



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purchasing goods and services from third-party suppliers, are obligated to compensate the service provider for the work performed, and have discretion in selecting the supplier. Provisions for
estimated losses on research grant projects and any other contracts are made in the period such losses are determined. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective January&nbsp;1, 2011, we adopted a new accounting standard that amends the guidance on the accounting for arrangements
involving the delivery of more than one element. Pursuant to the new standard, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting. For us, this determination is generally based on whether the
deliverable has &#147;stand-alone value&#148; to the customer. We adopted this new accounting standard on a prospective basis for all Multiple-Deliverable Revenue Arrangements, or MDRAs, entered into on or after January&nbsp;1, 2011, and for any
MDRAs that were entered into prior to January&nbsp;1, 2011, but materially modified on or after that date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For MDRAs entered
into prior to January&nbsp;1, 2011 (pre-2011 arrangements) and not materially modified thereafter, we continue to apply our prior accounting policy with respect to such arrangements. Under this policy, in general, revenue from non-refundable,
up-front fees related to intellectual property rights/licenses, where we have continuing involvement and where standalone value could not be determined under the previous guidance, is recognized ratably over the estimated period of ongoing
involvement. In general, the consideration with respect to the other deliverables is recognized when the goods or services are delivered. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The adoption of this accounting standard did not have a material impact on our results of operations for the years ended December&nbsp;31, 2012 and 2011, or on our financial positions as of
December&nbsp;31, 2012 and 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In January 2011, we adopted ASC Topic 605-28, &#147;<I>Milestone Method</I>.&#148; Under
this guidance, we recognize revenue contingent upon the achievement of a substantive milestone in its entirety in the period the milestone is achieved. Substantive milestone payments are recognized upon achievement of the milestone only if all of
the following conditions are met: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the milestone payments are non-refundable; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">substantive effort on our part is involved in achieving the milestone; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the amount of the milestone payment is reasonable in relation to the effort expended or the risk associated with achievement of the milestone; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a reasonable amount of time passes between the up-front license payment and the first milestone payment, as well as between each subsequent milestone
payment. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Determination as to whether a payment meets the aforementioned conditions involves
management&#146;s judgment. If any of these conditions are not met, the resulting payment would not </FONT></P>
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be considered a substantive milestone, and therefore, the resulting payment would be considered part of the consideration for the single unit of accounting and be recognized as revenue as such
performance obligations are performed under either the proportional performance or straight-line methods, as applicable. In addition, the determination that one such payment was not a substantive milestone could prevent us from concluding that
subsequent milestone payments were substantive milestones and, as a result, any additional milestone payments could also be considered part of the consideration for the single unit of accounting and would be recognized as revenue as such performance
obligations are performed under either the proportional performance or straight-line methods, as applicable. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Stock-Based Compensation
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stock-based payments are accounted for in accordance with the provisions of ASC 718, &#147;<I>Compensation &#150;
Stock Compensation</I>.&#148; The fair value of share-based payments is estimated, on the date of grant, using the Black-Scholes-Merton option-pricing model (the Black-Scholes model). The resulting fair value is recognized ratably over the requisite
service period, which is generally the vesting period of the option. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For all time vesting awards granted, expense is
amortized using the straight-line attribution method. For awards that contain a performance condition, expense is amortized using the accelerated attribution method. As stock-based compensation expense recognized in the statements of operations for
the fiscal years ended December&nbsp;31, 2012 and 2011, is based on share-based awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures are based on our historical experience for the fiscal years ended December&nbsp;31, 2012 and 2011, and have not been material. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We utilize the Black-Scholes model for estimating fair value of its stock options granted. Option valuation models, including
Black-Scholes model, require the input of subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield,
expected volatility and the expected life of the award. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Expected volatility rates are based on historical volatility of the
common stock of comparable publicly traded entities and other factors due to the lack of historic information of our common stock. The expected life of stock-based options is the period of time for which the stock-based options are expected to be
outstanding. Given the lack of historic exercise data, the expected life is determined using the &#147;simplified method&#148; which is defined as the midpoint between the vesting date and the end of the contractual term. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect
at the time of the grant. We have not paid dividends to its stockholders since its inception and do not plan to pay cash dividends in the foreseeable future. Therefore, we have assumed an expected dividend rate of zero. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">68 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Given the absence of an active market for our common stock, the exercise price of the stock
options on the date of grant was determined and approved by the board of directors using several factors, including progress and milestones achieved in our business development and performance, the price per share of our convertible preferred stock
offerings and general industry and economic trends. In establishing the estimated fair value of our common stock, we considered the guidance set forth in American Institute of Certified Public Accountants Practice Guide, &#147;<I>Valuation of
Privately-Held-Company Equity Securities Issued as Compensation</I>.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under ASC 718, the cumulative amount of
compensation cost recognized for instruments classified as equity that ordinarily would result in a future tax deduction under existing tax law shall be considered to be a deductible difference in applying ASC 740, &#147;<I>Income Taxes</I>.&#148;
The deductible temporary difference is based on the compensation cost recognized for financial reporting purposes; however, these provisions currently do not impact us, as all the deferred tax assets have a full valuation allowance. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Since we had net operating loss carry-forwards as of December&nbsp;31, 2012 and 2011, no excess tax benefits for the tax deductions
related to share-based awards were recognized in the statements of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Equity instruments issued to non-employees are
accounted for under the provisions of ASC 718 and ASC 505-50, &#147;<I>Equity/Equity-Based Payments to Non-Employees</I>.&#148; Accordingly, the estimated fair value of the equity instrument is recorded on the earlier of the performance commitment
date or the date the services required are completed and are marked to market during the service period. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Recently Issued Accounting
Pronouncements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We review new accounting standards to determine the expected financial impact, if any, that the adoption of
each such standard will have. For the recently issued accounting standards that we believe may have an impact on our financial statements, see Exhibit 99.1, &#147;Notes to Financial Statements &#150; Note 2 &#150; Summary of Significant Accounting
Policies.&#148; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">69 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SECURITY OWNERSHIP OF </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CERTAIN BENEFICIAL OWNERS AND MANAGEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The following table sets forth the number of shares of our common stock beneficially owned as of August&nbsp;29, 2013, following the completion of the Private Placement and Merger, by (i)&nbsp;each of our
current directors, directors-elect and named executive officers, (ii)&nbsp;all executive officers, directors and directors-elect as a group, and (iii)&nbsp;each person known by us to be the beneficial owner of more than 5% of the outstanding shares
of our common stock. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based
on information provided to us by these stockholders, subject to community property laws, where applicable. Percentage of ownership is based on 22,134,647 shares of common stock outstanding on August&nbsp;29, 2013, after giving effect to the Private
Placement and Merger. Unless otherwise noted below, the address of each stockholder below is c/o Intra-Cellular Therapies, Inc., 3960 Broadway, New York, New York 10032. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="38%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD WIDTH="35%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Beneficial Owner</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Title</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Shares
of</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Common&nbsp;Stock<BR>Beneficially&nbsp;Owned<BR>(#)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Percentage&nbsp;of</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Common&nbsp;
Stock<BR>Beneficially&nbsp;Owned<BR>(%)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Directors, Directors-Elect and</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Named Executive Officers</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chairman, President and Chief Executive Officer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,341,433</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.0</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President of Finance, Chief Financial Officer and Secretary</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">154,999</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President of Business Development</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">342,499</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.5</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Samir N. Masri</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Christopher Alafi, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,046,638</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">18.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard Lerner, M.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">116,250</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,383,348</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.2</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sir Michael Rawlins, M.D., FRCP, FMedSci</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">*&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>All current executive officers, directors and directors-elect as a group (10 persons)<FONT
STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(9)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,631,583</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">33.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Other 5% or More Stockholders</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alafi Capital Company, LLC and Moshe Alafi</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(10)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,558,627</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alexandria Real Estate Equities, Inc.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(11)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,283,856</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.8</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Entities affiliated with Fidelity Investments</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(12)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,999,120</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.0</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Paul Greengard, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(13)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,131,250</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.1</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Morton I. Sosland</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(14)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,388,389</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.3</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">70 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Represents beneficial ownership of less than 1% of the shares of common stock. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Beneficial ownership is determined in accordance with SEC rules, and includes any shares as to which the stockholder has sole or shared voting power or investment
power, and also any shares which the stockholder has the right to acquire within 60 days of August&nbsp;29, 2013, whether through the exercise or conversion of any stock option, convertible security, warrant or other right. The indication herein
that shares are beneficially owned is not an admission on the part of the stockholder that he, she or it is a direct or indirect beneficial owner of those shares. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 1,053,935 shares of common stock and options to purchase 287,498 shares of common stock which are exercisable within 60 days of August&nbsp;29, 2013.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 50,000 shares of common stock and options to purchase 104,999 shares of common stock which are exercisable within 60 days of August&nbsp;29, 2013.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 237,500 shares of common stock and options to purchase 104,999 shares of common stock which are exercisable within 60 days of August&nbsp;29, 2013. Does not
include: (i)&nbsp;208,023 shares of common stock held by J.D.F. Holdings Ltd., in which Dr.&nbsp;Fienberg holds a 20% ownership interest; and (ii)&nbsp;50,000 shares of common stock held by two trusts for the benefit of members of
Dr.&nbsp;Fienberg&#146;s family. Dr.&nbsp;Fienberg has no voting or investment control with respect to any of the shares owned by J.D.F. Holdings Ltd. or held in the trusts. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">In connection with the Merger, Mr.&nbsp;Masri executed a letter of resignation to be effective on the New Board Effective Date. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Alafi has been appointed a director to be effective on the New Board Effective Date. Consists of 3,542,885 shares of common stock held by Alafi Capital
Company, LLC, or Alafi Capital, and 503,753 shares of common stock held by a trust for the benefit of members of the Alafi family. Dr.&nbsp;Alafi is a managing partner of Alafi Capital and has shared voting and investment power with respect to the
shares owned by Alafi Capital and full voting and investment power with respect to shares owned by the trust. Does not include 503,776 shares held by two other trusts for the benefit of members of the Alafi family for which Dr.&nbsp;Alafi does not
have voting or investment control. The address for Dr.&nbsp;Alafi is c/o Alafi Capital Company, LLC, 8 Admiral Drive, Suite 324, Emeryville, CA 94608. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(7)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Lerner has been appointed a director to be effective on the New Board Effective Date. Consists of options to purchase 78,750 shares of common stock held by
Dr.&nbsp;Lerner which are exercisable within 60 days of August&nbsp;29, 2013, and 37,500 shares of common stock held by the Lerner Family Trust UAD 11/14/94, or the Lerner Family Trust. Dr.&nbsp;Lerner shares voting and investment control with
respect to the shares held by the Lerner Family Trust. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(8)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr.&nbsp;Marcus has been appointed a director to be effective on the New Board Effective Date. Consists of (i)&nbsp;1,283,856 shares of common stock held by Alexandria
Equities, LLC and (ii)&nbsp;15,742 shares of common stock and options to purchase 83,750 shares of common stock held by Mr.&nbsp;Marcus, which are exercisable within 60 days of August&nbsp;29, 2013. Mr.&nbsp;Marcus is the Chairman, CEO and Founder
of Alexandria Real Estate Equities, Inc., which is the managing member of Alexandria Equities, LLC, which has full voting and investment power with respect to the shares owned by Alexandria Equities, LLC. As an officer of Alexandria Real Estate
Equities, Inc., Mr.&nbsp;Marcus may be deemed to have voting and investment power with respect to the shares owned by Alexandria Equities, LLC. Mr.&nbsp;Marcus disclaims beneficial ownership of the shares held by Alexandria Equities, LLC, except to
the extent of his underlying pecuniary interest therein. The address for Mr.&nbsp;Marcus is c/o Alexandria Real Estate Equities, Inc., 385 East Colorado Boulevard, Suite 299, Pasadena, CA 91101. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(9)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">See footnotes 2 through 8. Also includes 100,000 shares of common stock and options to purchase 115,833 shares of common stock held by Lawrence P. Wennogle, Ph.D., Vice
President, Drug Discovery, which are exercisable within 60 days of August&nbsp;29, 2013, and options to purchase 30,583 shares of common stock, which are exercisable within 60 days of August&nbsp;29, 2013, held by Kimberly E. Vanover, Ph.D., Vice
President, Clinical Development. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">71 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(10)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 3,542,885 shares of common stock held by Alafi Capital and 15,742 shares of common stock held by Moshe Alafi. Christopher Alafi, Ph.D., who will be
appointed a director to be effective on the New Board Effective Date, and Moshe Alafi are each managing partners of Alafi Capital and share voting and investment power with respect to the shares owned by Alafi Capital. The address for Moshe Alafi
and Alafi Capital is 8 Admiral Drive, Suite 324, Emeryville, CA 94608. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(11)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 1,283,856 shares of common stock held by Alexandria Equities, LLC. Joel S. Marcus, who will be appointed a director to be effective on the New Board
Effective Date, is the Chairman, CEO and Founder of Alexandria Real Estate Equities, Inc., which is the managing member of Alexandria Equities, LLC, which has full voting and investment power with respect to the shares owned by Alexandria Equities,
LLC. As an officer of Alexandria Real Estate Equities, Inc., Mr.&nbsp;Marcus may be deemed to have voting and investment power with respect to the shares owned by Alexandria Equities, LLC. Mr.&nbsp;Marcus disclaims beneficial ownership of the shares
held by Alexandria Equities, LLC, except to the extent of his underlying pecuniary interest therein. The address for Alexandria Equities, LLC is c/o Alexandria Real Estate Equities, Inc., 385 East Colorado Boulevard, Suite 299, Pasadena, CA 91101.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(12)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fidelity Management&nbsp;&amp; Research Company, or Fidelity, 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR LLC and an investment
adviser registered under Section&nbsp;203 of the Investment Advisers Act of 1940, is the beneficial owner of 1,999,120 shares of common stock as a result of acting as investment adviser to various investment companies registered under Section&nbsp;8
of the Investment Company Act of 1940. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 1,999,120 shares of common stock owned by the Funds. Members of the family of Edward C.
Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have
entered into a shareholders&#146; voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and
the execution of the shareholders&#146; voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d, Chairman
of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds&#146; Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines
established by the Funds&#146; Boards of Trustees. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(13)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 1,131,250 shares of common stock held by Dr.&nbsp;Greengard. Does not include 1,500,000 shares of common stock held by six trusts for the benefit of members
of Dr.&nbsp;Greengard&#146;s family, as the trustee of these trusts, Ursula von Rydingsvard, has sole voting and investment control over the shares held by the trusts. The address for Dr.&nbsp;Greengard and the trusts is Dr.&nbsp;Paul Greengard, c/o
TAG Associates, 75 Rockefeller Plaza, 9th Floor, New York, NY 10019. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(14)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of 707,287 shares of common stock held by David N. Sosland Trust A; 1,948,554 shares of common stock held by The Sosland Family Trust B Partnership; and
732,548 shares of common stock held by The Sosland Foundation. Morton I. Sosland is Trustee of the David N. Sosland Trust A, Managing Partner of The Sosland Family Trust B Partnership and Vice Chairman of The Sosland Foundation, which we refer to
collectively as the Sosland Holders. As such, Mr.&nbsp;Sosland has sole voting and investment power with respect to the shares held by the Sosland Holders. The address for Mr.&nbsp;Sosland and the Sosland Holders is 4800 Main Street, Suite 100,
Kansas City, MO 64112. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">72 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>MANAGEMENT AND DIRECTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective immediately following the Merger, Sharon Mates, Ph.D. was appointed to our board of directors, and together with the sole
director of the Shell Company, Samir N. Masri, constitute our board of directors as of August&nbsp;29, 2013. Effective upon the eleventh day after the Company files with the SEC and mails to our sole stockholder prior to the Merger a Schedule 14f-1
reporting a change in the majority of our directors, the board of directors will be reconstituted by the appointment of Christopher Alafi, Ph.D., Richard Lerner, M.D., Joel S. Marcus and Sir Michael Rawlins, M.D., FRCP, FMedSci, to serve with
Dr.&nbsp;Mates as directors, and the resignation of Mr.&nbsp;Masri as a director. Our executive management team was also reconstituted upon the closing of the Merger by the appointment of Dr.&nbsp;Mates as our President and Chief Executive Officer,
Allen A. Fienberg, Ph.D. as our Vice President of Business Development, Lawrence J. Hineline as our Vice President of Finance, Chief Financial Officer and Secretary, Lawrence P. Wennogle, Ph.D. as our Vice President, Drug Discovery and Kimberly E.
Vanover, Ph.D. as our Vice President, Clinical Development, and the resignation of Samir N. Masri as our Chief Executive Officer, Chief Financial Officer, President and Secretary. The following table sets forth the name and positions of each of our
directors, directors-elect and executive officers after the Merger. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Executive Officers and Directors </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table sets forth certain information concerning our executive officers, directors and directors-elect as of August&nbsp;29,
2013: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="25%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="2%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="69%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:13pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Age</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:27pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Position</B></FONT></P></TD></TR>


<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Executive Officers</I></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">60</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chairman, President and Chief Executive Officer</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">53</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President of Business Development</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">57</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President of Finance, Chief Financial Officer and Secretary</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence P. Wennogle, Ph.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">63</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President, Drug Discovery</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kimberly E. Vanover, Ph.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">47</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Vice President, Clinical Development</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="5"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="5"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Non-Employee Directors and Directors-Elect</I></FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Samir N. Masri</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">68</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Christopher Alafi, Ph.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">49</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard Lerner, M.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">75</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">65</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sir Michael Rawlins, M.D.,<BR>&nbsp;&nbsp;&nbsp;&nbsp;FRCP, FMedSci</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">72</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director-Elect</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Executive Officers </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Sharon Mates, Ph.D. </I>Dr.&nbsp;Mates has been the Chairman of the board of directors, President and Chief Executive Officer of Intra-Cellular since June 2002. Dr.&nbsp;Mates co-founded Intra-Cellular
in May 2002. Prior to co-founding Intra-Cellular, Dr.&nbsp;Mates was a co-founder of Functional Genetics, and served as its Chairman and Chief Executive Officer from December 2000 until August 2003. From 1989-1998 Dr.&nbsp;Mates was the President
and a board member of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">73 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
North American Vaccine Inc. and its predecessor companies. She has served on several boards, and recently completed a board membership and a two-year chairmanship of the Board of the New York
Biotechnology Association. Dr.&nbsp;Mates has also served on the Advisory Council of the Center for Society and Health at the Harvard School of Public Health, the Board of Visitors of the Biotechnology Institute of the University of Maryland and the
board of directors of Gilda&#146;s Club of New York. Earlier in her career, Dr.&nbsp;Mates spent several years as a research analyst and investment banker, and as an advisor to the life sciences industry. Dr.&nbsp;Mates received her B.S. from the
Ohio State University and her Ph.D. from the University of Washington, and completed her postdoctoral fellowships at The Massachusetts General Hospital and Harvard Medical School. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We believe that Dr.&nbsp;Mates possesses specific attributes that qualify her to serve as chairman of our board of directors, including
the perspective and experience she brings as the co-founder, President and Chief Executive of Intra-Cellular, which brings historic knowledge, operational expertise and continuity to our board of directors,&nbsp;and her industry expertise, including
over 24 years of experience leading both private and public companies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Allen A. Fienberg, Ph.D.</I> Dr.&nbsp;Fienberg has
served as Vice President of Business Development of Intra-Cellular since June 2002. He co-founded Intra-Cellular in May 2002. Dr.&nbsp;Fienberg received his A.B. degree in Genetics from the University of California, Berkeley and his Ph.D. in Human
Genetics from Yale University. He completed post-doctoral studies at The Rockefeller University under the direction of Dr.&nbsp;Paul Greengard from 1991-1999. From 1999-2001, Dr.&nbsp;Fienberg was a staff scientist at the Genomics Institute of the
Novartis Research Foundation and was appointed a Research Assistant Professor at The Rockefeller University from 2001-2002. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Lawrence J. Hineline</I>,<I> CPA.</I>&nbsp;Mr.&nbsp;Hineline has served as Vice President of Finance, Chief Financial Officer and
Secretary of Intra-Cellular since June 2002.&nbsp;From December 2000 to November 2003, Mr.&nbsp;Hineline was the Vice-President of Finance and Chief Financial Officer of Functional Genetics, Inc. Prior to that, Mr.&nbsp;Hineline served as the Vice
President of Finance of North American Vaccine, Inc. and its predecessor companies from 1993 to 2000, and he served as Corporate Controller from 1989 to 1993.&nbsp;During this time, Mr.&nbsp;Hineline oversaw the growth of the accounting function and
its systems for the company that emerged as a start-up and was later acquired by Baxter Health Care. Mr.&nbsp;Hineline is a licensed CPA in the State of Maryland and received his Bachelor&#146;s Degree from the University of Maryland Baltimore
County. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Lawrence P. Wennogle, Ph.D. </I>Dr.&nbsp;Wennogle has served as Vice President, Drug Discovery of Intra-Cellular
since January 2003.&nbsp;For the past 33 years, Dr.&nbsp;Wennogle has been involved in research and development in the pharmaceutical industry aimed at the discovery of novel pharmaceutical entities for human diseases.&nbsp;He was a Staff Scientist
and Principal Research Fellow at Ciba-Geigy and Novartis Pharmaceutical Corporation for 19 years, where he led drug discovery programs for CNS disorders, cardiovascular diseases, diabetes and inflammation. Dr.&nbsp;Wennogle received his B.A. from
Ithaca College and his Ph.D. in Biochemistry from the University of Colorado, Boulder. He then completed two post-doctoral positions, one at the University of Colorado and the second at the Pasteur Institute in Paris, France, working under
Jean-Pierre Changeux on the structure-function of the nicotinic acetylcholine receptor. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">74 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Kimberly E. Vanover, Ph.D</I>.&nbsp;Dr.&nbsp;Vanover joined Intra-Cellular in March 2007
and has been Vice President, Clinical Development of Intra-Cellular since January 2011.&nbsp;Previously, she was Executive Director, Clinical Development of Intra-Cellular from January 2008 to December 2010 and Senior Director, Clinical Development
of Intra-Cellular from March 2007 to December 2007. She has spent over 20 years on the discovery and development of small molecule drugs for the treatment of neuropsychiatric and neurodegenerative diseases.&nbsp;Dr.&nbsp;Vanover was Postdoctoral
Research Scientist at Lederle Laboratories from 1992 to 1994, Postdoctoral Research Trainee in the Department of Psychiatry at the University of California San Diego from 1994 to 1995, Senior Scientist and Group Leader at CoCensys from 1995 to 2000
and held positions as Group Leader and Director at ACADIA Pharmaceuticals from 2000 to 2007.&nbsp;In these positions, Dr.&nbsp;Vanover participated in the discovery and development of a broad range of new CNS therapeutics, including drugs to treat
psychosis, insomnia, cognitive impairment, movement disorders, acute and neuropathic pain, anxiety, epilepsy, and drug abuse.&nbsp;Dr.&nbsp;Vanover received her B.A. in Psychology from the University of Missouri and her Ph.D. in Biopsychology from
the University of Chicago. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Non-Employee Directors and Directors-Elect </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Samir N. Masri</I>. Mr.&nbsp;Masri was the Chief Executive Officer, Chief Financial Officer, President and Secretary of the Shell
Company from October 2012 until the closing of the Merger. In addition, he continues to serve as director, but has agreed to resign as a director effective upon the eleventh day following the date the Company files with the SEC and mails to its sole
stockholder prior to the Merger a Schedule 14f-1 reporting a change in the majority of our directors, or the New Board Effective Date. Mr.&nbsp;Masri is the founder and has been the President of Samir Masri CPA Firm P.C. since 2006. Mr.&nbsp;Masri
has also served as President and a director of Iron Sands Corp. and Putnam Hills Corp. since May&nbsp;26, 2011 and Chief Executive Officer, Chief Financial Officer, President, Secretary and director of Dutchess Holdings Corp. and Fern Holdings Corp.
since October&nbsp;15, 2012. Mr.&nbsp;Masri served as an executive officer and a director of China Display Technologies, Inc. (formerly Lincoln International Corp.), a publicly reporting and non-trading shell company, from 2004 until a share
exchange with an operating company was completed in 2007. Mr.&nbsp;Masri received a B.A. in 1967 and a M.A. in 1970 in Politics, Philosophy and Economics from St. Catherine&#146;s College in Oxford, England. Mr.&nbsp;Masri is a fellow of the
Institute of Chartered Accountants in England and Wales and a CPA licensed in New York. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr.&nbsp;Masri&#146;s past experience
as executive officer and director of a shell company which has completed a business combination will be beneficial to the Company until the directors-elect take office. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Christopher Alafi, Ph.D.</I> Dr.&nbsp;Alafi has served on the board of directors of Intra-Cellular since January 2013. Dr.&nbsp;Alafi has been a General Partner of Alafi Capital Company, LLC, a venture
capital firm, since 1995. He was previously a Physiology and Anatomy teacher at Santa Monica College, a visiting scholar in the Department of Chemistry at Stanford University and a researcher at DNAX. Dr.&nbsp;Alafi currently serves as a director of
ISTO Technologies, Inc. and has previously served as a director of Coley Pharmaceutical Group, Inc., CyberGold, Inc. and Stereotaxis, Inc. Dr.&nbsp;Alafi received a B.A. in Biology from Pomona College and a D.Phil. in Biochemistry from the
University of Oxford. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">75 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We believe that Dr.&nbsp;Alafi possesses specific attributes that qualify him to serve as a
member of our board of directors, including the perspective and experience he brings as a General Partner of Alafi Capital Company, LLC. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Richard Lerner, M.D.</I> Dr.&nbsp;Lerner has served on the board of directors of Intra-Cellular since 2002. Dr.&nbsp;Lerner served as President of the Scripps Research Institute, a private, non-profit
biomedical research organization from 1986 to January 2012, and since then has served and continues to serve as Institute Professor. Dr.&nbsp;Lerner received the Wolf Prize in Chemistry in 1994, the California Scientist of the Year Award in 1996,
the Paul Ehrlich and Ludwig Darmstaedter Prize in 2003, and the Prince of Asturias Award in 2012 for his achievements in the development of catalytic antibodies and combinatorial antibody libraries. Dr.&nbsp;Lerner is a member of the National
Academy of Sciences and the Royal Swedish Academy of Sciences. Dr.&nbsp;Lerner served as a director of Kraft Foods, Inc. from 2005 to March 2012 and currently serves as a director of Opko Health, Inc., Teva Pharmaceutical Industries Ltd., and
Sequenom, Inc. Dr.&nbsp;Lerner received his M.D. from Stanford Medical School. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We believe that Dr.&nbsp;Lerner possesses
specific attributes that qualify him to serve as a member of our board of directors, including his service as a director of other public companies, combined with his business acumen and judgment provide our board of directors with valuable
scientific and operational expertise and leadership skills. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Joel S. Marcus</I> <I>J.D., CPA.</I>&nbsp;Mr.&nbsp;Marcus has
served on the board of directors of Intra-Cellular since April 2006.&nbsp;Mr.&nbsp;Marcus co-founded Alexandria Real Estate Equities, Inc. in 1994, Alexandria Venture Investments in 1996, and the annual Alexandria Summit in 2011. He has served as
Chairman of the Board of Directors of Alexandria Real Estate Equities, Inc. since May 2007, Chief Executive Officer since March 1997, President since February 2009, and a director since the company&#146;s inception in 1994. From 1986 to 1994,
Mr.&nbsp;Marcus was a partner at the law firm of Brobeck, Phleger&nbsp;&amp; Harrison LLP, specializing in corporate finance and capital markets, venture capital, and mergers and acquisitions. From 1984 to 1994, he also served as General Counsel and
Secretary of Kirin-Amgen, Inc., a joint venture that financed the development of, and owned patents to, two multi-billion dollar genetically engineered biopharmaceutical products. Mr.&nbsp;Marcus was formerly a practicing certified public accountant
and tax manager with Arthur Young&nbsp;&amp; Co. specializing in the financing and taxation of REITs. He received his undergraduate and Juris Doctor degrees from the University of California, Los Angeles. In addition to Intra-Cellular,
Mr.&nbsp;Marcus serves on the boards of the Accelerator Corporation, of which he was one of the original architects and co-founders, Foundation for the National Institutes of Health (FNIH), Multiple Myeloma Research Foundation (MMRF), and the
Partnership for New York City. Mr.&nbsp;Marcus also served on the Board of Trustees of PennyMac Mortgage Investment Trust, a publicly traded mortgage REIT, from August 2009 to August 2012. Mr.&nbsp;Marcus received the Ernst&nbsp;&amp; Young 1999
Entrepreneur of the Year Award (Los Angeles &#150; Real Estate). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We believe that Mr.&nbsp;Marcus possesses specific
attributes that qualify him to serve as a member of our board of directors, including his many years of experience in the life sciences industry and his extensive experience serving as a director and an executive officer of other public companies.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">76 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Sir Michael Rawlins, M.D., FRCP, FMedSci</I>. Sir Michael has served on the board of
directors of Intra-Cellular since May 2013. Sir Michael is known for his long standing leadership of the United Kingdom&#146;s National Institute for Clinical Excellence, or NICE, which he led from its inception in 1999 through March 2013. Recently
in July 2012, Sir Michael was appointed as the President of the United Kingdom&#146;s Royal Society of Medicine, a center for education and scholarship both in the UK and globally. Sir Michael was a professor of clinical pharmacology and a general
physician at the University of Newcastle upon Tyne from 1973 to 2006. He received the Prince Mahidol Award for Medicine in 2012, the Galen Medal in 2010, and the Hutchinson Medal in 2003. Sir Michael was appointed Knight Bachelor in 1999.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We believe that Sir Michael possesses specific attributes that qualify him to serve as a member of our board of directors,
including his extensive experience in areas of health policy and economics. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Scientific Advisory Board </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have a Scientific Advisory Board which is chaired by Paul Greengard, Ph.D., one of our founders. Dr.&nbsp;Greengard received his Ph.D.
in biophysics from Johns Hopkins University in 1953. After postgraduate work in England, he served for nine years as director of biochemical research at the Geigy Research Laboratories. In 1968, he was appointed Professor of Pharmacology at Yale
University. In 1983, he was appointed the Vincent Astor Professor at The Rockefeller University, where he founded the Laboratory of Molecular and Cellular Neuroscience. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Greengard is a pioneer in the field of neuronal signal transduction and his seminal discoveries over the years have provided a framework by which to understand the complexity of how
neurotransmitters function in the brain. Dr.&nbsp;Greengard&#146;s many awards and honors include the CIBA-Geigy Drew Award in Biomedical Research (1979), the New York Academy of Sciences Award in Biological and Medical Sciences (1980), the Andrew
D. White Professorship-at-Large of Cornell University (1981-87), the Pfizer Biomedical Research Award (1987), the Ralph W. Gerard Prize in Neuroscience, Society for Neuroscience (1994), the Charles A. Dana Award for Pioneering Achievements in Health
(1997), and the Nobel Prize in Physiology or Medicine (2000). Dr.&nbsp;Greengard has also been a consultant to major pharmaceutical companies and a Chairman and member of the scientific advisory boards of numerous biotechnology companies.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have additional members of our Scientific Advisory Board who change from time to time, with whom we consult on an
as-needed basis. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Medical Advisory Board </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Carol A. Tamminga, M.D. is the Chair of our Medical Advisory Board. Dr.&nbsp;Tamminga is the Chair of the Psychiatry Department at the University of Texas Southwestern School of Medicine. She holds the
McKenzie Foundation Chair in Psychiatry, the Communities Foundation of Texas, Inc. Chair in Brain Science and is the Chief of Translational Neuroscience Research in Schizophrenia. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">77 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jeffrey Lieberman, M.D. is the Lawrence C. Kolb Professor and Chairman of Psychiatry, at the
Columbia University College of Physicians and Surgeons; and Director, of the New York State Psychiatric Institute; Psychiatrist-in-Chief, New York Presbyterian Hospital-Columbia University Medical Center. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">John M. Kane, M.D. is Professor and Chairman of Psychiatry at The Hofstra North Shore-LIJ School of Medicine and Vice President for
Behavioral Health Services at The North Shore-LIJ Health System. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Christoph U. Correll, M.D. is Professor of Psychiatry and
Molecular Medicine, Hofstra North Shore LIJ School of Medicine; Medical Director, Recognition and Prevention (RAP) Program, The Zucker Hillside Hospital, North Shore Long Island Jewish Health System. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Donald Goff, M.D. is Professor and Vice Chair for Research in the Department of Psychiatry at New York University Langone Medical Center
(NYULMC) and Director of the Nathan S. Kline&nbsp;Institute for Psychiatric&nbsp;Research. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Compensation Committee Interlocks and Insider
Participation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We currently do not have a compensation committee. While Intra-Cellular had a compensation committee
comprised of all directors serving on the Intra-Cellular board of directors, no member of Intra-Cellular&#146;s compensation committee has at any time been an employee of ours or Intra-Cellular other than Dr. Mates, who did not vote on her own
compensation. None of our executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board of Directors or compensation committee.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Board Composition and Election of Directors </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Terms of Office </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our restated certificate of incorporation, which we
expect to file on or about the date that is 20 calendar days from the date we expect to file with the SEC and mail to our sole stockholder prior to the Merger a Schedule 14C reporting the adoption of the restated certificate of incorporation by our
sole stockholder prior to the Merger, and our restated bylaws, which became effective upon the Merger, provided that, subject to any applicable rights of holders of any preferred stock then outstanding, the authorized number of directors may be
changed only by resolution of the Board. We currently have authorized two directors and will have five directors effective on the New Board Effective Date. In accordance with our restated certificate of incorporation and restated bylaws, the Board
will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders commencing with the meeting in 2014, the successors to the directors whose terms then expire will be elected to serve until the third annual
meeting following the election. Our directors will be divided among the three classes as follows: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Class I directors will be Richard Lerner, M.D. and Sir Michael Rawlins, M.D., FRCP, FMedSci, and their terms will expire at the annual meeting of
stockholders to be held in 2014; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">78 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Class II directors will be Christopher Alafi, Ph.D. and Joel S. Marcus, and their terms will expire at the annual meeting of stockholders to be
held in 2015; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Class III director will be Sharon Mates, Ph.D. and her term will expire at the annual meeting of stockholders to be held in 2016.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any additional directorships resulting from an increase in the number of directors will be distributed
among the three classes so that each class will consist of approximately one-third of the directors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Director Independence
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our securities are not listed on a national securities exchange or on any inter-dealer quotation system which has a
requirement that a majority of directors be independent. We evaluate independence, however, by the standards for director independence set forth in the NASDAQ Marketplace Rules. Under Rules 5605 and 5615 of the NASDAQ Marketplace Rules, a majority
of a listed company&#146;s board of directors must be comprised of independent directors, subject to certain phase-in exceptions. In addition, NASDAQ Marketplace Rules require that, subject to specified exceptions, each member of a listed
company&#146;s audit, compensation and governance and nominating committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Rule 5605(a)(2) of the NASDAQ
Marketplace Rules, a director will only qualify as an &#147;independent director&#148; if, in the opinion of that company&#146;s board of directors, that person does not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Based upon information requested from and provided by each
director concerning their background, employment and affiliations, including family relationships, our Board of Directors has determined that none of Dr.&nbsp;Alafi, Dr.&nbsp;Lerner, Mr.&nbsp;Marcus or Sir Michael, representing four out of five
directors who will serve on the board on the New Board Effective Date, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is
&#147;independent&#148; as that term is defined under Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Dr.&nbsp;Mates and Mr.&nbsp;Masri, our current directors, are or have been employed by the Company during 2013 and are therefore not independent
under NASDAQ Marketplace Rules. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Board of Directors&#146; Meetings </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the fiscal year ended December&nbsp;31, 2012, there were five meetings of Intra-Cellular&#146;s board of directors, and the
compensation committee, which was the only standing </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">79 </FONT></P>



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committee of Intra-Cellular&#146;s board of directors, met one time. No director of Intra-Cellular attended fewer than 75% of the total number of meetings of Intra-Cellular&#146;s board of
directors and of committees of its board of directors on which he or she served during fiscal 2012, except for David Kipnis, M.D., a former director of Intra-Cellular, who attended three of the six meetings of Intra-Cellular&#146;s board of
directors and committees of its board of directors during fiscal 2012. In addition, Christopher Alafi, Ph.D. was not elected a director of Intra-Cellular until 2013. Our Board of Directors intends to adopt a policy under which each member of the
Board is strongly encouraged but not required to attend each annual meeting of our stockholders. Neither we nor Intra-Cellular held an annual meeting of stockholders in 2012. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Committees of the Board of Directors </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Board of Directors does
not currently have an audit committee, a compensation committee or a nominating and governance committee. Our Board of Directors intends to establish an audit committee, a compensation committee and a nominating and corporate governance committee.
Each committee will operate under a charter to be approved by our Board of Directors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Section&nbsp;16(a) Beneficial Ownership Reporting
Compliance </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Section&nbsp;16(a) of the Exchange Act requires our directors and executive officers, and persons who own more
than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with copies of all Section&nbsp;16(a) forms they file. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">To our
knowledge, based solely on a review of the copies of such reports furnished to us and written representations regarding the filing of required reports, we believe that all Section&nbsp;16(a) filing requirements applicable to our directors, executive
officers and greater-than-ten-percent beneficial owners with respect to fiscal 2012 were met, as our directors, executive officers and greater-than-ten percent beneficial owners were not required by file reports under Section&nbsp;16(a) before the
Company became an Exchange Act reporting company in fiscal 2013. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Code of Ethics </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Prior to the Merger, the Shell Company had adopted a code of conduct and ethics. We intend to adopt an amended and restated code of
conduct and ethics that will apply to all of our employees, including our principal executive officer and our principal financial and accounting officer, and plan to post a copy of such code of conduct and ethics on our website at
www.intracellulartherapies.com. Once we adopt the amended and restated code of conduct and ethics, disclosure regarding any amendments to, or waivers from, provisions of the amended and restated code of conduct and ethics that we intend to adopt
that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting or the issuance of a press
release of such amendments or waivers is then permitted by the rules of The NASDAQ Stock Market. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">80 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Board Leadership Structure and Role on Risk Oversight </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board,
as the Board believes it is in the best interest of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board has determined that having an employee director serve as
Chairman is in the best interest of the Company&#146;s stockholders at this time because of the efficiencies achieved in having the role of Chief Executive Officer and Chairman combined, and because the detailed knowledge of our day-to-day
operations and business that the Chief Executive Officer possesses greatly enhances the decision-making processes of the Board as a whole. We have a strong governance structure in place, including independent directors who will join the Board on the
New Board Effective Date, to ensure the powers and duties of the dual role are handled responsibly. We do not have a lead independent director. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Chairman of the Board of Directors and the other members of the Board work in concert to provide oversight of our management and affairs. Our Board encourages communication among its members and
between management and the Board to facilitate productive working relationships. Working with the other members of the Board, Dr.&nbsp;Mates also strives to ensure that there is an appropriate balance and focus among key Board responsibilities such
as strategic development, review of operations and risk oversight. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Indemnification of Directors and Officers </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our pending restated certificate of incorporation and our restated by-laws effective upon consummation of the Merger provide that each
person who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director, officer, or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving as a director, officer or trustee, shall be indemnified and
held harmless by us to the fullest extent authorized by the Delaware General Corporation Law against all expense, liability and loss (including attorneys&#146; fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Section&nbsp;145 of the Delaware General Corporation Law permits a corporation to
indemnify any director or officer of the corporation against expenses (including attorneys&#146; fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or proceeding brought by
reason of the fact that such person is or was a director or officer of the corporation, if such person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe his or her conduct was unlawful. In a derivative action (i.e., one brought by or on behalf of the corporation), indemnification may be provided only
for expenses actually and reasonably incurred by any director or officer in connection with the defense or settlement of such an action or suit if such person acted in good faith and in a manner that he or she reasonably believed to be
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">81 </FONT></P>



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in, or not opposed to, the best interests of the corporation, except that no indemnification shall be provided if such person shall have been adjudged to be liable to the corporation, unless and
only to the extent that the Delaware Chancery Court or the court in which the action or suit was brought shall determine that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pursuant to Section&nbsp;102(b)(7) of the Delaware General Corporation Law, Article Eighth of our pending restated
certificate of incorporation eliminates the liability of a director to us or our stockholders for monetary damages for such a breach of fiduciary duty as a director, except for liabilities arising: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">from any breach of the director&#146;s duty of loyalty to us or our stockholders; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">under Section&nbsp;174 of the Delaware General Corporation Law; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">from any transaction from which the director derived an improper personal benefit. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will enter into indemnification agreements with our directors (other than Mr.&nbsp;Masri), directors-elect and certain officers, in
addition to the indemnification to be provided in our pending restated certificate of incorporation and provided for in our restated by-laws, and intend to enter into indemnification agreements with any new directors and executive officers in the
future. We have purchased and intend to maintain insurance on behalf of any person who is or was a director or officer against any loss arising from any claim asserted against him or her and incurred by him or her in any such capacity, subject to
certain exclusions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, as a condition to the Merger, we also entered into an indemnity agreement with the former
officer and director of the Public Shell pursuant to which we agreed to indemnify such former officer and director for actions taken by him in his official capacity relating to the consideration, approval and consummation of the Merger and certain
related transactions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The foregoing discussion of our pending restated certificate of incorporation, restated by-laws,
indemnification agreements, indemnity agreement, and Delaware law is not intended to be exhaustive and is qualified in its entirety by such restated certificate of incorporation, restated by-laws, indemnification agreements indemnity agreement, or
law. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Provisions of Delaware Law Governing Business Combinations </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are subject to the &#147;business combination&#148; provisions of Section&nbsp;203 of the Delaware General Corporation Law. In general,
such provisions prohibit a publicly held Delaware corporation from engaging in any &#147;business combination&#148; transactions with any &#147;interested stockholder&#148; for a period of three years after the date on which the person became an
&#147;interested stockholder,&#148; unless: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">prior to such date, the board of directors approved either the &#147;business combination&#148; or the transaction which resulted in the
&#147;interested stockholder&#148; obtaining such status; or </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">82 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">upon consummation of the transaction which resulted in the stockholder becoming an &#147;interested stockholder,&#148; the &#147;interested
stockholder&#148; owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the
&#147;interested stockholder&#148;) those shares owned by (a)&nbsp;persons who are directors and also officers and (b)&nbsp;employee stock plans in which employee participants do not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">at or subsequent to such time the &#147;business combination&#148; is approved by the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the &#147;interested stockholder.&#148; </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A &#147;business combination&#148; is defined to include mergers, asset sales and other transactions resulting in financial benefit to a
stockholder. In general, an &#147;interested stockholder&#148; is a person who, together with affiliates and associates, owns 15% or more of a corporation&#146;s voting stock or within three years did own 15% or more of a corporation&#146;s voting
stock. The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">83 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXECUTIVE OFFICER AND DIRECTOR COMPENSATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unless we specifically indicate otherwise, all share and per share numbers included in this &#147;Executive Officer and Director
Compensation&#148; section have been adjusted as necessary to reflect the exchange of shares in the Merger. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Summary Compensation Table
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table shows the total compensation paid or accrued during the last two fiscal years ended December&nbsp;31,
2012 and 2011 to (1)&nbsp;our President and Chief Executive Officer and (2)&nbsp;our two next most highly compensated executive officers who earned more than $100,000 during the fiscal year ended December&nbsp;31, 2012 and were serving as executive
officers as of such date. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="59%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:97pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name and Principal Position</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Year</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Salary</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Bonus</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Option<BR>Awards</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)<SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></B><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)<B></B></SUP><B></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>All Other<BR>Compensation<BR>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top" ROWSPAN="2"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.<BR><I>Chairman, President&nbsp;and Chief Executive Officer</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">588,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">117,700</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,750</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">813,850</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">565,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">313,200</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,600</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">886,600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top" ROWSPAN="2"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline<BR><I>Vice President of Finance, Chief Financial Officer and Secretary</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">250,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,750</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">295,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">237,600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,900</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,378</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">275,878</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" ROWSPAN="2"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.<BR><I>Vice President of Business Development</I></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">250,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8,800</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,750</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">286,950</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">243,100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,543</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">267,643</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">These amounts represent the aggregate grant date fair value for option awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718.
See Note 5 to our audited financial statements for the fiscal years ended December&nbsp;31, 2012 and 2011 attached as Exhibit 99.1 to this Current Report on Form 8-K for details as to the assumptions used to calculate the fair value of the option
awards. See also our discussion of stock-based compensation under &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations &#150; Critical Accounting Policies and Estimates.&#148; </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of $7,500 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr.&nbsp;Mates with a face value of $150,000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Mates received a bonus of $113,200 for her performance during the fiscal year ended December&nbsp;31, 2011 plus an additional bonus of $200,000 for her
performance in connection with our entering into the license and collaboration agreement with Takeda Pharmaceutical Company Limited. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of $7,350 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr.&nbsp;Mates with a face value of $150,000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of $7,500 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Mr.&nbsp;Hineline with a face value of $150,000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of $7,128 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Mr.&nbsp;Hineline with a face value of $150,000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(7)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of $7,500 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr.&nbsp;Fienberg with a face value of $150,000. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(8)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consists of $7,293 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr.&nbsp;Fienberg with a face value of $150,000. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">84 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>2012 Fiscal Year Grants of Plan-Based Awards </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table shows information regarding grants of equity awards that we made during the fiscal year ended December&nbsp;31, 2012
to each of our executive officers named in the Summary Compensation Table. We did not grant any non-equity incentive plan awards during the fiscal year ended December&nbsp;31, 2012. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Compensation<BR>Committee<BR>Approval<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)
</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Grant<BR>Date<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>All&nbsp;Other&nbsp;Option<BR>Awards:&nbsp;Number<BR>of Securities<BR>Underlying<BR>Options (#)<SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exercise&nbsp;or&nbsp;Base</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Price
of Option</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Awards ($/Sh)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Grant&nbsp;Date&nbsp;Fair<BR>Value&nbsp;of&nbsp;Stock&nbsp;and<BR>Option Awards<BR>($)<SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/20/2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5/1/2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/20/2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5/1/2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/20/2011</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5/1/2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">On December&nbsp;20, 2011, the Compensation Committee of Intra-Cellular approved these option grants to be granted following the completion of a valuation of
Intra-Cellular&#146;s common stock. Following the completion of the valuation of Intra-Cellular&#146;s common stock, on May&nbsp;1, 2012 the board of directors of Intra-Cellular approved these grants at an exercise price of $2.84 per share. In
addition, on December&nbsp;20, 2012, the Compensation Committee approved grants of 50,000 options to Dr.&nbsp;Mates, 10,000 options to Mr.&nbsp;Hineline and 7,500 options to Dr.&nbsp;Fienberg (the &#147;Additional Grants&#148;) to be granted
following the completion of a valuation of Intra-Cellular&#146;s common stock and an increase in the number of shares reserved under Intra-Cellular&#146;s 2003 Equity Incentive Plan. Following the completion of the valuation of Intra-Cellular&#146;s
common stock and the increase in the number of shares reserved under Intra-Cellular&#146;s 2003 Equity Incentive Plan, on May&nbsp;31, 2013 the board of directors of Intra-Cellular approved the Additional Grants at an exercise price of $3.26 per
share. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">These awards are subject to vesting, as described in detail under &#147; &#150; Outstanding Equity Awards at 2012 Fiscal Year-End&#148; below. </FONT></TD></TR></TABLE>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The 2003 Equity Incentive Plan provides that the exercise price shall be determined by using the fair market value of our common stock, which is defined under the 2003
Equity Incentive Plan as the value of our common stock determined in good faith by our board of directors. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">These amounts represent the aggregate grant date fair value for option awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718.
See Note 5 to our audited financial statements for the fiscal years ended December&nbsp;31, 2012 and 2011 attached as Exhibit 99.1 to this Current Report on Form 8-K for details as to the assumptions used to calculate the fair value of the option
awards. See also our discussion of stock-based compensation under &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations &#150; Critical Accounting Policies and Estimates.&#148; </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Sharon Mates, Ph.D. </I>We entered into an employment agreement with Dr.&nbsp;Mates in February 2008, who has been our President and
Chief Executive Officer since 2003. The agreement provides for a salary of $503,000 effective in February 2008, subject to our annual review and adjustment in the discretion of the Board, and that Dr.&nbsp;Mates is eligible for bonus payments and
stock options as may be awarded by the Board. The most recent adjustment, effective on January&nbsp;1, 2013, increased Dr.&nbsp;Mates&#146; salary to $611,900. In 2012, she was awarded a bonus of $117,700, which represented a bonus of 20% of her
then current base salary of $588,400. In addition, her employment agreement provides that we will pay the premium on a life insurance policy in an amount equal to one and one half times her base salary; however, we paid a premium in the amount of
$250 on a life insurance policy with a face value of $150,000, to which she assented. For 2012, we also paid $7,500 in matching contributions under our 401(k) plan. The employment agreement also provides that Dr.&nbsp;Mates is entitled to
participate in </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">85 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
our benefit plans on the same basis as other executive level employees as well as long-term disability insurance and reimbursement for reasonable business expenses. The initial term of the
agreement was three years and will be renewed for successive one year terms, unless we or Dr.&nbsp;Mates provides notice that we or she, as the case may be, does not wish to renew the agreement or wishes to renew the agreement on different terms
than those contained in the agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If Dr.&nbsp;Mates&#146; employment is terminated for any reason, she will be entitled
to compensation and benefits through the last day of her employment, including accrued but untaken vacation. If her employment is terminated due to her death or disability, we will also pay her or her estate the compensation which would otherwise
have been payable to her through the end of the month in which such termination occurs as well as payment for any accrued but untaken vacation. If her employment is terminated without cause by us or she terminates her employment for good reason, she
will receive the following severance benefits following her employment termination, on condition that she executes a general release in our favor: (a)&nbsp;payment of 12 months of her then current base salary and the pro rata portion of an amount
equal to the bonus she was awarded for the previous year, if any, which severance payments will be paid in one lump sum on the date the general release she executes becomes effective; (b)&nbsp;payment for 12 months of the portion of the COBRA
premiums that we paid prior to her termination; and (c)&nbsp;all of her unvested stock options will become fully vested and exercisable. Dr.&nbsp;Mates will also be entitled to such severance benefits if we elect not to renew her employment
agreement for reasons other than death, disability or cause, but (i)&nbsp;such severance benefits are conditioned on Dr.&nbsp;Mates executing a general release in favor of us, returning all our property, and complying with her employment agreement,
proprietary information, inventions, and non-competition agreement, and the general release and (ii)&nbsp;Dr.&nbsp;Mates will not be eligible for such severance benefits if she or we wish to renew the agreement on different terms than those
contained in her employment agreement. In the event of a change of control, all of her unvested stock options and restricted stock will immediately vest. If her employment is terminated for reasons other than death or disability within three months
before or 12 months following a change of control, she terminates her employment for good reason during such period, or she terminates her employment for any reason within one month following a change of control, she will be eligible for the
following severance benefits following her employment termination: (a)&nbsp;payment of 18 months of her then current base salary and the pro rata portion of an amount equal to the bonus she was awarded for the previous year, which severance payments
will be paid in one lump sum on the eighth day following the effective date of the general release, and (b)&nbsp;payment for 18 months of the portion of the COBRA premiums that we paid prior to her termination. Such severance benefits following a
change of control are payable on condition that she executes a general release in favor of us, returns all our property and complies with her post-termination obligations under her employment agreement, her proprietary information, inventions, and
non-competition agreement, and her general release. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pursuant to her proprietary information, inventions, and non-competition
agreement, Dr.&nbsp;Mates has agreed to not (i)&nbsp;solicit customers, consultants, contractors or employees of ours for a period of one year after the termination of her employment or (ii)&nbsp;compete with us for a period of one year after the
later of the termination of her employment or the date a court of competent jurisdiction enters an order enforcing the non-competition provision. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">86 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Lawrence J. Hineline. </I>We entered into an employment agreement with Mr.&nbsp;Hineline
in February 2008, who has been our Vice President of Finance, Chief Financial Officer and Secretary since 2002. The agreement provides for a salary of $216,400 effective in February 2008, subject to our annual review and adjustment in the discretion
of the Board, and that Mr.&nbsp;Hineline is eligible for bonus payments and stock options as may be awarded by the Board. The most recent adjustment, effective on January&nbsp;1, 2013, increased Mr.&nbsp;Hineline&#146;s salary to $257,500. In 2012,
he was awarded a bonus of $17,500, which represented a bonus of 7% of his then current base salary of $250,000. In addition, his employment agreement provides that we will pay the premium on a life insurance policy in an amount equal to one and one
half times his base salary; however, we paid a premium in the amount of $250 on a life insurance policy with a face value of $150,000, to which he assented. For 2012, we also paid $7,500 in matching contributions under our 401(k) plan. The
employment agreement also provides that Mr.&nbsp;Hineline is entitled to participate in our benefit plans on the same basis as other executive level employees as well as long-term disability insurance and reimbursement for reasonable business
expenses. The initial term of the agreement was three years and will be renewed for successive one year terms, unless we or Mr.&nbsp;Hineline provides notice that we or he, as the case may be, does not wish to renew the agreement or wishes to renew
the agreement on different terms than those contained in the agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If Mr.&nbsp;Hineline&#146;s employment is terminated
for any reason, he will be entitled to compensation and benefits through the last day of his employment, including accrued but untaken vacation. If his employment is terminated due to his death or disability, we will also pay him or his estate the
compensation which would otherwise have been payable to him through the end of the month in which such termination occurs as well as payment for any accrued but untaken vacation. If his employment is terminated without cause by us or he terminates
his employment for good reason, he will receive the following severance benefits following his employment termination, on condition that he executes a general release in our favor: (a)&nbsp;payment of 12 months of his then current base salary and
the pro rata portion of an amount equal to the bonus he was awarded for the previous year, if any, which severance payments will be paid in one lump sum on the date the general release he executes becomes effective; (b)&nbsp;payment for 12 months of
the portion of the COBRA premiums that we paid prior to his termination; and (c)&nbsp;all of his unvested stock options will become fully vested and exercisable. Mr.&nbsp;Hineline will also be entitled to such severance benefits if we elect not to
renew his employment agreement for reasons other than death, disability or cause, but (i)&nbsp;such severance benefits are conditioned on Mr.&nbsp;Hineline executing a general release in our favor, returning all our property, and complying with his
employment agreement, proprietary information, inventions, and non-competition agreement, and the general release and (ii)&nbsp;Mr.&nbsp;Hineline will not be eligible for such severance benefits if he or we wish to renew the agreement on different
terms than those contained in his employment agreement. In the event of a change of control, all of his unvested stock options and restricted stock will immediately vest. If his employment is terminated for reasons other than death or disability
within three months before or 12 months following a change of control, he terminates his employment for good reason during such period, or he terminates his employment for any reason within one month following a change of control, he will be
eligible for the following severance benefits following his employment termination: (a)&nbsp;payment of 18 months of his then current base salary and the pro rata portion of an amount equal to the bonus he was awarded for the previous year, which
severance payments will be paid in one lump sum on the eighth day following the effective date of the general release, and (b)&nbsp;payment for 18 months of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">87 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
the portion of the COBRA premiums that we paid prior to his termination. Such severance benefits following a change of control are payable on condition that he executes a general release in favor
of us, returns all our property and complies with his post-termination obligations under his employment agreement, his proprietary information, inventions, and non-competition agreement, and his general release. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pursuant to his proprietary information, inventions, and non-competition agreement, Mr.&nbsp;Hineline has agreed to not (i)&nbsp;solicit
customers, consultants, contractors or employees of ours for a period of one year after the termination of his employment or (ii)&nbsp;compete with us for a period of one year after the later of the termination of his employment or the date a court
of competent jurisdiction enters an order enforcing the non-competition provision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Allen A. Fienberg, Ph.D. </I>We entered
into an employment agreement with Dr.&nbsp;Fienberg in February 2008, who has been our Vice President of Business Development since 2002. The agreement provides for a salary of $221,400 effective in February 2008, subject to our annual review and
adjustment in the discretion of the Board, and that Dr.&nbsp;Fienberg is eligible for bonus payments and stock options as may be awarded by the Board. The most recent adjustment, effective on January&nbsp;1, 2013, increased Dr.&nbsp;Fienberg&#146;s
salary to $257,900. In 2012, he was awarded a bonus of $8,800, which represented a bonus of 3.5% of his then current base salary of $250,400. In addition, his employment agreement provides that we will pay the premium on a life insurance policy in
an amount equal to one and one half times his base salary; however, we paid a premium in the amount of $250 on a life insurance policy with a face value of $150,000, to which he assented. For 2012, we also paid $7,500 in matching contributions under
our 401(k) plan. The employment agreement also provides that Dr.&nbsp;Fienberg is entitled to participate in our benefit plans on the same basis as other executive level employees as well as long-term disability insurance and reimbursement for
reasonable business expenses. The initial term of the agreement was three years and will be renewed for successive one year terms, unless we or Dr.&nbsp;Fienberg provides notice that we or he, as the case may be, does not wish to renew the agreement
or wishes to renew the agreement on different terms than those contained in the agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If Dr.&nbsp;Fienberg&#146;s
employment is terminated for any reason, he will be entitled to compensation and benefits through the last day of his employment, including accrued but untaken vacation. If his employment is terminated due to his death or disability, we will also
pay him or his estate the compensation which would otherwise have been payable to him through the end of the month in which such termination occurs as well as payment for any accrued but untaken vacation. If his employment is terminated without
cause by us or he terminates his employment for good reason, he will receive the following severance benefits following his employment termination, on condition that he executes a general release in our favor: (a)&nbsp;payment of 12 months of his
then current base salary and the pro rata portion of an amount equal to the bonus he was awarded for the previous year, if any, which severance payments will be paid in one lump sum on the date the general release he executes becomes effective;
(b)&nbsp;payment for 12 months of the portion of the COBRA premiums that we paid prior to his termination; and (c)&nbsp;all of his unvested stock options will become fully vested and exercisable. Dr.&nbsp;Fienberg will also be entitled to such
severance benefits if we elect not to renew his employment agreement for reasons other than death, disability or cause, but (i)&nbsp;such severance benefits are conditioned on Dr.&nbsp;Fienberg executing a general release in our favor, returning all
our property, and complying with his employment agreement, proprietary information, inventions, and non-competition </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">88 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
agreement, and the general release and (ii)&nbsp;Dr.&nbsp;Fienberg will not be eligible for such severance benefits if he or we wish to renew the agreement on different terms than those contained
in his employment agreement. In the event of a change of control, 75% of his unvested stock options and restricted stock will immediately vest. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Pursuant to his proprietary information, inventions, and non-competition agreement, Dr.&nbsp;Fienberg has agreed to not (i)&nbsp;solicit customers, consultants, contractors or employees of ours for a
period of one year after the termination of his employment or (ii)&nbsp;compete with us for a period of one year after the later of the termination of his employment or the date a court of competent jurisdiction enters an order enforcing the
non-competition provision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The meanings of the terms &#147;cause,&#148; &#147;good reason,&#148; &#147;disability&#148; and
&#147;change of control&#148; for purposes of these employment agreements are described below under &#147;Potential Payments upon Termination or Change in Control.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Outstanding Equity Awards at 2012 Fiscal Year-End </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table
shows grants of stock options and grants of unvested stock awards outstanding on the last day of the fiscal year ended December&nbsp;31, 2012, including both awards subject to performance conditions and non-performance-based awards, to each of the
executive officers named in the Summary Compensation Table. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="42%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:26pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number of<BR>Securities<BR>Underlying<BR>Unexercised&nbsp;Options</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>(#)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exercisable</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number of<BR>Securities<BR>Underlying<BR>Unexercised&nbsp;Options</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>(#)<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Unexercisable</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Option<BR>Exercise&nbsp;
Price</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Option<BR>Expiration&nbsp;Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/16/2013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/19/2014</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">25,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/14/2015</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">25,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/5/2016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/12/2017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/18/2018</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6/10/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">33,333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,667</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/21/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">16,666</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">33,334</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4/30/2022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/16/2013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/19/2014</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/14/2015</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/5/2016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/12/2017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/18/2018</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6/10/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,666</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,334</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/21/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,667</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4/30/2022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/16/2013</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/19/2014</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.60</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/14/2015</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/5/2016</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/12/2017</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.50</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/18/2018</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6/10/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,666</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,334</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.74</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12/21/2020</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,333</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,667</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.84</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4/30/2022</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">89 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">On December&nbsp;20, 2012, the Compensation Committee of Intra-Cellular approved grants of 50,000 options to Dr.&nbsp;Mates, 10,000 options to Mr.&nbsp;Hineline and
7,500 options to Dr.&nbsp;Fienberg (the &#147;Additional Grants&#148;) to be granted following the completion of a valuation of Intra-Cellular&#146;s common stock and an increase in the number of shares reserved under Intra-Cellular&#146;s 2003
Equity Incentive Plan. Following the completion of the valuation of Intra-Cellular&#146;s common stock and the increase in the number of shares reserved under Intra-Cellular&#146;s 2003 Equity Incentive Plan, on May&nbsp;31, 2013 the board of
directors of Intra-Cellular approved the Additional Grants at an exercise price of $3.26 per share, which are not reflected in this table. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unless otherwise indicated, each option to purchase our common stock vests as to 1/3 of the shares on the first anniversary of the grant date, 1/3 of the shares on the
second anniversary of the grant date, and 1/3 of the shares on the third anniversary of the grant date. Each of these options has a ten year term from the date of grant. </FONT></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Option Exercises and Stock Vested in 2012 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the fiscal year ended
December&nbsp;31, 2012, none of our named executive officers exercised any options. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Pension Benefits </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We do not have any qualified or non-qualified defined benefit plans. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Nonqualified Deferred Compensation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We do not have any nonqualified defined
contribution plans or other deferred compensation plans. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Potential Payments upon Termination or Change in Control </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Upon termination of employment without cause or a resignation for good reason, each as defined below, our named executive officers are
entitled to receive severance payments. Severance for termination without cause or termination for good reason, each as defined below, for named executive officers is 12 months of base salary plus the pro rata portion of an amount equal to the bonus
awarded to such named executive officer for the previous year, if any. In addition, each named executive officer is entitled to payment of 12 months of the portion of the premiums for medical insurance coverage under COBRA that we paid prior to such
named executive officer&#146;s termination. Payment of these severance benefits is conditioned on the named executive officer signing a general release in our favor. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">90 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The table below summarizes the potential payments and benefits to each of our named
executive officers assuming a termination without cause or resignation for good reason had occurred as of December&nbsp;31, 2012. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="57%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Severance<BR>Payments(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Bonus<BR>Payments(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B><FONT STYLE="white-space:nowrap">Post-Termination</FONT><BR>Benefits(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total<BR>Benefits</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">588,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">113,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">14,976</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">716,576</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">250,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,900</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">14,976</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">295,876</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">250,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">14,976</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">282,376</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The severance agreements for our named executive officers are set forth in their respective employment agreements. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reflects a pro rata portion of the named executive officer&#146;s 2011 bonus based on the period from January&nbsp;1, 2012 through December&nbsp;31, 2012, which equals
the full amount of the named executive officer&#146;s 2011 bonus. However, the 2012 bonus had already been paid to such named executive officers prior to December&nbsp;31, 2012 in the amounts set forth in the &#147;Summary Compensation Table&#148;
above, so we would not have paid the amounts set forth in this column at December&nbsp;31, 2012 in addition to the 2012 bonus payments already made. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Represents premiums that would be payable by us for continuation of the executive&#146;s medical and dental insurance coverage, assuming a termination without cause or
resignation for good reason had occurred as of December&nbsp;31, 2012. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The table below summarizes the potential
payments and benefits to each of our named executive officers assuming a termination following a change in control had occurred at December&nbsp;31, 2012. Each of our named executive officers has agreed in writing that the Merger does not constitute
a change in control under their respective employment agreements. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="56%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Severance<BR>Payments(1)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Bonus<BR>Payments(1)(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Value of<BR>Additional<BR>Vested<BR>Option<BR>Awards(1)(3)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Post-<BR>Termination<BR>Benefits(1)(4)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total<BR>Benefits</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">882,600</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">113,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,668</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,464</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,040,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">375,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30,900</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,533</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,464</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">432,897</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Each of our named executive officers, except for Dr.&nbsp;Fienberg, shall, if the executive&#146;s employment is terminated for reasons other than death or disability
within three months before or 12 months following a change of control, the executive terminates his or her employment for good reason during such period, or the executive terminates his or her employment for any reason within one month following a
change of control, be entitled to (a)&nbsp;payment of 18 months of the executive&#146;s then current base salary and the pro rata portion of an amount equal to the bonus the executive was awarded for the previous year, if any, and (b)&nbsp;payment
by us of 18 months of the portion of the premiums for medical insurance coverage under COBRA that we paid prior to such executive&#146;s termination. Such severance benefits following a change of control are payable on condition that the executive
executes a general release in favor of us, returns all our property and complies with his or her post-termination obligations under his or her employment agreement, proprietary information, inventions, and non-competition agreement, and general
release. In addition, in the event of a change of control, any unvested stock options or restricted stock awarded to Dr.&nbsp;Mates or Mr.&nbsp;Hineline will immediately vest and become exercisable and 75% of any unvested stock options or restricted
stock awarded to Dr.&nbsp;Fienberg will immediately vest and become exercisable. </FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">91 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reflects a pro rata portion of the named executive officer&#146;s 2011 bonus based on the period from January&nbsp;1, 2012 through December&nbsp;31, 2012, which equals
the full amount of the named executive officer&#146;s 2011 bonus. However, the 2012 bonus had already been paid to such named executive officers prior to December&nbsp;31, 2012 in the amounts set forth in the &#147;Summary Compensation Table&#148;
above, so we would not have paid the amounts set forth in this column at December&nbsp;31, 2012 in addition to the 2012 bonus payments already made. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This represents the intrinsic value of the number of option shares that would vest, assuming a change of control termination had occurred at December&nbsp;31, 2012.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Represents premiums that would be payable by us for continuation of the executive&#146;s medical and dental insurance coverage, assuming a change of control termination
had occurred at December&nbsp;31, 2012. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The table below summarizes the potential payments and benefits to each
of our named executive officers assuming a change in control without termination had occurred at December&nbsp;31, 2012. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="62%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Severance<BR>Payments</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Bonus<BR>Payments</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Value of<BR>Additional<BR>Vested<BR>Option<BR>Awards(1)(2)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Post-<BR>Termination<BR>Benefits</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total<BR>Benefits</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,668</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22,668</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,533</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,533</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the event of a change of control, any unvested stock options or restricted stock awarded to Dr.&nbsp;Mates or Mr.&nbsp;Hineline will immediately vest and become
exercisable and 75% of any unvested stock options or restricted stock awarded to Dr.&nbsp;Fienberg will immediately vest and become exercisable. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This represents the intrinsic value of the number of option shares that would vest, assuming a change of control without termination had occurred at December&nbsp;31,
2012. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of severance payments, &#147;good reason&#148; is defined as an executive resigning after
the occurrence of one of the following events without the executive&#146;s written consent: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">The assignment to the executive of any duties or responsibilities which result in the material diminution of the executive&#146;s position;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a reduction by the Company in the executive&#146;s annual base salary of 5% or greater with respect to Dr.&nbsp;Mates and Mr.&nbsp;Hineline, and of
greater than 5% with respect to Dr.&nbsp;Fienberg; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a material change in the geographic location at which the executive is required to perform services; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">material breach by the Company of any material provision of the executive&#146;s employment agreement. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The executive must provide us with written notice within 60 days after the occurrence of a good reason event, and we have 30 days to
correct the event after receipt of the notice. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">92 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of severance payments, &#147;cause&#148; is defined as a termination by us
after the occurrence of one of the following events: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a good faith finding by the Company that the executive has engaged in gross negligence or gross misconduct that is materially injurious to the Company;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the executive&#146;s conviction of a felony or crime involving fraud or embezzlement of Company property; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the executive&#146;s material breach of the executive&#146;s employment agreement which, if curable, has not been cured by the executive within 60 days
after he or she receives written notice from the Company stating with reasonable specificity the nature of the breach; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">material breach of fiduciary duty; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">refusal to following or implement a clear and reasonable directive of the Board as a whole (or an officer of the Company, in the case of
Mr.&nbsp;Hineline and Dr.&nbsp;Fienberg), provided that such directive is ethical and legal and which, if curable, has not been cured by the executive within 60 days after he or she receives written notice from the Company stating with reasonable
specificity the nature of such refusal. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of severance payments, the determination of
&#147;disability&#148; will occur when the executive is unable due to a physical or mental condition to perform the essential functions of his or her position with or without reasonable accommodation for 90 consecutive days, or 180 days in the
aggregate whether or not consecutive, during any 360-day period, or based on the written certification by a licensed physician of the likely continuation of such condition for such period. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of severance payments, a &#147;change in control&#148; means: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a sale, lease or other disposition of all or substantially all of the assets of the Company; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which
the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the outstanding voting power of the surviving entity (and its parent) following the consolidation, merger or reorganization; or
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any transaction (or series of related transactions involving a person or entity, or a group of affiliated persons or entities) in which in excess of
50% of the Company&#146;s outstanding voting power is transferred. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">93 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Notwithstanding the foregoing, a &#147;change in control&#148; will not be deemed to occur on account of the
sale or acquisition of the Company&#146;s capital stock by institutional investors or venture capital firms for the primary purpose of obtaining financing for the Company. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Director Compensation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table shows the total compensation
paid or accrued during the fiscal year ended December&nbsp;31, 2012 to each of our directors, other than Dr.&nbsp;Mates who does not receive compensation for her service as a director. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="43%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Fees<BR>Earned&nbsp;or</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Paid&nbsp;in</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Cash</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Stock</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Awards</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" NOWRAP ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Option</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Awards<SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Non-Equity</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Incentive Plan</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Compensation</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Change&nbsp;in&nbsp;Pension</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Value
and<BR>Nonqualified<BR>Deferred</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Compensation</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Earnings</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>All Other</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Compensation</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Total</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>($)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David Kipnis, M.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)(3)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard Lerner, M.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N/A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">These amounts represent the aggregate grant date fair value for option awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718.
See Note 5 to our audited financial statements for the fiscal years ended December&nbsp;31, 2012 and 2011 attached as Exhibit 99.1 to this Current Report on Form 8-K for details as to the assumptions used to calculate the fair value of the option
awards. See also our discussion of stock-based compensation under &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations &#150; Critical Accounting Policies and Estimates.&#148; </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Kipnis resigned from the Board effective December&nbsp;31, 2012. Effective January&nbsp;1, 2013, the Board appointed Christopher Alafi, Ph.D. as a director,
and effective May&nbsp;10, 2013, the Board appointed Sir Michael Rawlins as a director. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">As of December&nbsp;31, 2012, Dr.&nbsp;Kipnis held 102,500 options to purchase shares of our common stock, of which 96,250 options were vested.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">As of December&nbsp;31, 2012, Dr.&nbsp;Lerner held 110,000 options to purchase shares of our common stock, of which 103,750 options were vested.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">As of December&nbsp;31, 2012, Mr.&nbsp;Marcus held 77,500 options to purchase shares of our common stock, of which 71,250 options were vested. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Director Compensation Policy </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As compensation to our non-employee directors for the year ending December&nbsp;31, 2013 and the years ended December&nbsp;31, 2012 and 2011, we granted options to purchase 20,000 shares, 12,500 shares
and 12,500 shares of our common stock, respectively, to each of our non-employee directors serving during such years. We granted any non-employee director who resigned from or joined the Intra-Cellular board of directors during such years the pro
rata portion of the annual option grant representing the portion of such year during which such non-employee director served. We intend to adopt a non-employee director compensation policy designed to ensure that the compensation aligns the
directors&#146; interests with the long-term interests of the stockholders, that the structure of the compensation is simple, transparent and easy for stockholders to understand and that our directors are fairly compensated. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">94 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EQUITY COMPENSATION PLAN INFORMATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of
December&nbsp;31, 2012. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="42%"></TD>
<TD VALIGN="bottom" WIDTH="15%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="15%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="15%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:46pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Plan category</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;securities&nbsp;to&nbsp;be</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>issued&nbsp;upon&nbsp;exercise&nbsp;of</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>outstanding&nbsp;
options,</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>warrants and rights</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B><FONT STYLE="white-space:nowrap">Weighted-average</FONT><BR>exercise</B></FONT><br><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>price&nbsp;of&nbsp;outstanding<BR>options,</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>warrants and rights</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number&nbsp;of&nbsp;
securities</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>remaining&nbsp;available&nbsp;for</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>future&nbsp;issuance&nbsp;under<BR>equity
compensation<BR>plans</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(excluding securities</B></FONT><br><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>reflected in column (a))</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Equity compensation plans approved by security holders</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1) (2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,707,113</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">44,867</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Equity compensation plans not approved by security holders</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,707,113</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.38</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">44,867</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"></FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">This plan consists of the 2003 Equity Incentive Plan. The 2003 Equity Incentive Plan terminated by its terms in July 2013. As a result of such termination, no
additional awards may be granted under the 2003 Equity Incentive Plan, but equity awards previously granted under the 2003 Equity Incentive Plan will remain outstanding and continue to be governed by the terms of the 2003 Equity Incentive Plan.
</FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The table above does not include shares that are reserved for issuance under the 2013 Equity Incentive Plan, which was adopted in connection with the Merger, which
consists of 799,934 shares reserved plus up to an additional 1,462,380 shares reserved solely after the cancellation or expiration of any unexercised stock options that we assumed in the Merger, subject to adjustment as provided in the plan.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Intra-Cellular 2003 Equity Incentive Plan, as amended, was adopted by the board of directors of
Intra-Cellular in July 2003 and by the stockholders of Intra-Cellular in September 2003. The 2003 Equity Incentive Plan was subsequently amended in January 2006,&nbsp;February 2010 and December 2012, and expired by its terms in July 2013. As a
result of such expiration, no additional awards may be granted under the 2003 Equity Incentive Plan, but equity awards previously granted under the 2003 Equity Incentive Plan will remain outstanding and continue to be governed by the terms of the
2003 Equity Incentive Plan. In connection with the Merger, we assumed the options then outstanding under the 2003 Equity Incentive Plan, and immediately following the Merger on August&nbsp;29, 2013, the only outstanding awards under the 2003 Equity
Incentive Plan were options to purchase 1,462,380 shares of our common stock. The 2003 Equity Incentive Plan is administered by our board of directors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If we are acquired, the surviving or acquiring company may assume or continue the outstanding options by substituting either (a)&nbsp;the consideration payable with respect to the outstanding shares of
common stock in connection with the acquisition or (b)&nbsp;shares of stock of the successor or acquiring company. If the surviving or acquiring company does not assume or continue the outstanding options, the outstanding options will be accelerated
in full prior to the effective time of the acquisition and will terminate if not exercised at or prior to such effective time. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">95 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>2013 Equity Incentive Plan </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In August 2013, the Board approved the 2013 Equity Incentive Plan. The 2013 Equity Incentive Plan will be effective upon twenty days after the mailing of the information statement on Schedule 14C to our
sole stockholder prior to the Merger or such later date as required by the Exchange Act or other applicable law. Unless sooner terminated by our board of directors or our stockholders, the 2013 Equity Incentive Plan will expire 10 years from its
date of effectiveness. Under our 2013 Equity Incentive Plan, we may grant incentive stock options, non-qualified stock options, restricted and unrestricted stock awards and other stock based awards. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The maximum number of shares of our common stock that may be delivered in satisfaction of awards under the 2013 Equity Incentive Plan is
799,934 shares, plus up to an additional 1,462,380 shares solely after the cancellation or expiration of any unexercised stock options that we assumed in the Merger. This number is subject to additional adjustment in the event of a stock split,
stock dividend or other change in our capitalization. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, the 2013 Equity Incentive Plan contains an
&#147;evergreen&#148; provision, which allows for an annual increase in the number of shares of our common stock available for issuance under the 2013 Equity Incentive Plan on January&nbsp;1 of each year during the period beginning on
January&nbsp;1, 2014 and ending upon expiration of the Plan. The annual increase in the number of shares shall be equal to the lesser of: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">800,000 shares of our common stock; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4% of the number of shares of our common stock outstanding as of such date; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">such lesser number of shares as determined by our board of directors. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Shares of our common stock to be issued under the 2013 Equity Incentive Plan may be authorized but unissued shares of our common stock or
previously issued shares acquired by us. Any shares of our common stock underlying awards that otherwise expire, terminate, or are forfeited prior to the issuance of stock will again be available for issuance under the 2013 Equity Incentive Plan.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The 2013 Equity Incentive Plan will be administered by our board of directors until we establish a compensation committee.
Our board of directors, or compensation committee once established, will have full power and authority to determine the terms of awards granted pursuant to this plan, including: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">which employees, directors and consultants shall be granted options and other awards; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">96 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the exercise price of each option, which generally shall not be less than fair market value of our common stock on the date of grant;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the schedule upon which options become exercisable; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the termination or cancellation provisions applicable to options; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the terms and conditions of other awards, including conditions for repurchase or forfeiture, termination or cancellation, issue price and repurchase
price; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">all other terms and conditions upon which each award may be granted in accordance with the 2013 Equity Incentive Plan. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">However, a maximum of 200,000 shares of our common stock subject to options, stock appreciation rights and other awards whose value is
determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value on the date the award is granted may be granted to any one participant during any one calendar year. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Board may amend or discontinue the 2013 Equity Incentive Plan at any time and may amend any outstanding award. No such amendment may
adversely affect the rights under any outstanding award without the holder&#146;s consent. Stockholder approval will be required for any amendment to the 2013 Equity Incentive Plan to the extent such approval is required by law, including the
Internal Revenue Code of 1986, as amended, or applicable stock exchange requirements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we are acquired, our board of
directors (or compensation committee, once established) will (i)&nbsp;arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation&#146;s parent company) to assume or continue the award or to substitute a
similar award for the award; (ii)&nbsp;cancel or arrange for the cancellation of the award, to the extent not vested or not exercised prior to the effective time of the transaction, in exchange for such cash consideration, if any, as our board of
directors in its sole discretion, may consider appropriate; and (iii)&nbsp;make a payment, in such form as may be determined by our board of directors equal to the excess, if any, of (A)&nbsp;the value of the property the holder would have received
upon the exercise of the award immediately prior to the effective time of the transaction, over (B)&nbsp;any exercise price payable by such holder in connection with such exercise. In addition in connection with such transaction, our board of
directors may accelerate the vesting, in whole or in part, of the award (and, if applicable, the time at which the award may be exercised) to a date prior to the effective time of such transaction and may arrange for the lapse, in whole or in part,
of any reacquisition or repurchase rights held by the Company with respect to an award. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CERTAIN RELATIONSHIPS AND RELATED
PERSON TRANSACTIONS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Since January&nbsp;1, 2011, Intra-Cellular has engaged in the following transactions with its
directors, directors-elect, executive officers and holders of more than 5% of our voting securities, which we refer to as our principal stockholders, and affiliates or immediate family members of
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">97 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
our directors, directors-elect, executive officers and principal stockholders. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated
third parties. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As described above, the following executive officers and directors held the following positions at
Intra-Cellular prior to the Merger: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D., our President, Chief Executive Officer and Chairman of the Board, was the President, Chief Executive Officer and Chairman of the
board of directors of Intra-Cellular prior to the Merger. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline, our Vice President of Finance, Chief Financial Officer and Secretary, was the Vice President of Finance, Chief Financial Officer
and Secretary of Intra-Cellular prior to the Merger. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D., our Vice President of Business Development, was the Vice President of Business Development of Intra-Cellular prior to the
Merger. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence P. Wennogle, Ph.D., our Vice President, Drug Discovery, was the Vice President, Drug Discovery of Intra-Cellular prior to the Merger.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kimberly E. Vanover, Ph.D., our Vice President, Clinical Development, was the Vice President, Clinical Development of Intra-Cellular prior to the
Merger. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our directors-elect who will join the Board on the New Board Effective Date, Christopher Alafi, Ph.D., Richard Lerner, M.D., Joel S. Marcus and Sir
Michael Rawlins, M.D., FRCP, FMedSci, were each directors of Intra-Cellular prior to the Merger. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Some of
our directors are affiliated with our principal stockholders as indicated in the table below: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="51%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="47%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:28pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Director</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:128pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Affiliation with Principal Stockholder</B></FONT></P></TD></TR>


<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Christopher Alafi, Ph.D.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr. Alafi is a General Partner of Alafi Capital Company, LLC.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr. Marcus is co-founder, Chairman of the board of directors, Chief Executive Officer, President and a director of Alexandria Real Estate Equities, Inc., which is the managing
member of Alexandria Equities, LLC.</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The directors of Intra-Cellular were previously selected as directors of Intra-Cellular in accordance
with the terms of Intra-Cellular&#146;s then existing Restated Certificate of Incorporation, which is no longer effective following the Merger, and Intra-Cellular&#146;s Second Amended and Restated Voting Agreement effective as of October&nbsp;25,
2007, as amended, which was terminated immediately prior to the Effective Time. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">98 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Convertible Promissory Notes Issued in 2012 and 2013 </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In October 2012, Intra-Cellular entered into a convertible note purchase agreement with certain investors pursuant to which Intra-Cellular
issued convertible promissory notes having an aggregate principal amount of approximately $15.3 million, which were issued on October&nbsp;25, 2012,&nbsp;November&nbsp;14, 2012 and March&nbsp;20, 2013. Certain of these convertible promissory notes
were purchased by our principal stockholders and by an entity related to one of our executive officers in the following amounts and on the following dates: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="57%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:96pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name of Beneficial Owner<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></B><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex"></SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)<B></B></SUP><B></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Original&nbsp;Principal&nbsp;Amount<BR>of Convertible Notes</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Issuance&nbsp;Date</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alafi Capital Company, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,423,419</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">October&nbsp;25,&nbsp;2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alexandria Equities, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,812,307</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">October&nbsp;25,&nbsp;2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sosland Family Trust B Partnership</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,783,094</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">October&nbsp;25,&nbsp;2012</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Does not include the convertible promissory note having a principal amount of $124,975 held by J.D.F. Holdings Ltd., in which Allen A. Fienberg, Ph.D., our Vice
President of Business Development, holds a 20% ownership interest. Dr.&nbsp;Fienberg has no voting or investment control with respect to any of the securities owned by J.D.F. Holdings Ltd. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The convertible promissory notes were unsecured, accrued interest at the rate of 6%&nbsp;per year and had a maturity date of
October&nbsp;25, 2013. The convertible promissory notes converted into shares of Intra-Cellular common stock in connection with the Private Placement discussed in &#147; &#150; Common Stock Issued in Private Placement in 2013&#148; below. In
addition, Intra-Cellular paid $7,200 to the purchasers&#146; legal counsel for fees and expenses of purchasers&#146; legal counsel incurred in connection with the convertible promissory note financing. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Common Stock Issued in Private Placement in 2013 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The following table summarizes Intra-Cellular&#146;s sales of its common stock on August&nbsp;29, 2013 in the Private Placement to our officers, directors and beneficial owners of more than five percent
of any class of our voting securities. The purchase price of $3.1764 per share (as adjusted to $6.3528 after giving effect to the Merger) was the fair market value as determined by arms-length negotiations between sophisticated investors and
Intra-Cellular&#146;s management and board of directors. In addition, the holders of the convertible promissory notes elected to convert the aggregate principal amount plus accrued interest on all of the Company&#146;s outstanding convertible
promissory notes into shares of Intra-Cellular common stock at the purchase price of $3.1764 per share (as adjusted to $6.3528 after giving effect to the Merger). Intra-Cellular received no additional consideration from the conversion of the
convertible promissory notes. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="54%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:96pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name of Beneficial
Owner<SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Purchase&nbsp;Price<BR>of&nbsp;Common<BR>Stock</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Principal Plus<BR>Accrued&nbsp;Interest&nbsp;of<BR>Convertible Notes<BR>Through Date
of<BR>Conversion</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Shares&nbsp;of&nbsp;Common<BR>Stock&nbsp;Issued<SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24,998</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7,870</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">100,006</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">31,484</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alafi Capital Company, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4,747,498</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6,748,637</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,619,234</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Moshe Alafi</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">100,006</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">31,484</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alexandria Equities, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,339,462</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,904,064</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,021,133</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Entities affiliated with Fidelity Investments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12,700,003</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,998,238</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David N. Sosland Trust A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">900,004</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">283,341</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sosland Family Trust B Partnership</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">400,006</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,025,263</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,707,993</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Sosland Foundation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,235,128</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">703,667</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">99 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Does not include 104,301 shares of Intra-Cellular common stock issued to J.D.F Holdings Ltd., in which Allen A. Fienberg, Ph.D., our Vice President of Business
Development, holds a 20% ownership interest. Dr. Fienberg has no voting or investment control with respect to any of the shares owned by J.D.F. Holdings Ltd. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Mates is our Chairman, President and Chief Executive Officer. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr.&nbsp;Marcus is one of our directors-elect. Mr.&nbsp;Marcus may also be deemed to beneficially own the shares held by Alexandria Equities, LLC set forth in the
table. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Moshe Alafi may also be deemed to beneficially own the shares held by Alafi Capital Company, LLC set forth in the table. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Does not reflect the adjustment in the number of shares as a result of the Merger. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">At the Effective Time of the Merger, on August&nbsp;29, 2013, each share of Intra-Cellular preferred stock and Intra-Cellular common
stock outstanding immediately prior to the Effective Time was exchanged for 0.5 shares of the Company&#146;s common stock. The following table summarizes the exchange of the outstanding shares of Intra-Cellular preferred stock and common stock at
the Effective Time by our officers, directors, directors-elect and beneficial owners of more than five percent of any class of our voting securities. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="64%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:89pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name of Beneficial Owner</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number of<BR>Shares of<BR><FONT STYLE="white-space:nowrap">Intra-Cellular</FONT><BR>Preferred<BR>Stock
Held<BR>Immediately<BR>Prior to<BR>Exchange</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number of<BR>Shares of<BR><FONT STYLE="white-space:nowrap">Intra-Cellular</FONT><BR>Common<BR>Stock
Held<BR>Immediately<BR>Prior to<BR>Exchange</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number of<BR>Shares of<BR>Company<BR>Common<BR>Stock
Held<BR>Immediately<BR>Following<BR>Exchange</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(1)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,107,870</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,053,935</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(2)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">50,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(3)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">475,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">237,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence P. Wennogle</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(4)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">200,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">100,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Christopher Alafi, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(5)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,007,505</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">503,753</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard Lerner, M.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(6)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">75,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(7)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">31,484</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,742</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alafi Capital Company, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,466,535</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,619,234</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,542,885</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Moshe Alafi</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(8)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">31,484</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">15,742</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Alexandria Equities, LLC</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,546,579</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,021,133</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,283,856</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Entities affiliated with Fidelity Investments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3,998,238</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,999,120</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Paul Greengard, Ph.D.</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">(9)</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,262,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,131,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">David N. Sosland Trust A</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,131,233</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">283,341</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">707,287</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Sosland Family Trust B Partnership</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2,189,115</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,707,993</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,948,554</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Sosland Foundation</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">761,429</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">703,667</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">732,548</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Mates is our Chairman, President and Chief Executive Officer. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr.&nbsp;Hineline is our Vice President of Finance, Chief Financial Officer and Secretary. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Fienberg is our Vice President of Business Development. Does not include: (i)&nbsp;311,745 shares of Intra-Cellular preferred stock and 104,301 shares of
Intra-Cellular common stock held by J.D.F. Holdings Ltd., in which Dr.&nbsp;Fienberg holds a 20% ownership interest; or (ii)&nbsp;100,000 shares of Intra-Cellular common stock held by two trusts for the benefit of members of Dr.&nbsp;Fienberg&#146;s
family, which were exchanged for an aggregate of 258,023 shares of our common stock at the Effective Time. Dr.&nbsp;Fienberg has no voting or investment control with respect to any of the shares owned by J.D.F. Holdings Ltd. or held in the trusts.
</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">100
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Wennogle is our Vice President, Drug Discovery. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Alafi is one of our directors-elect. Consists of shares held by a trust for the benefit of members of Dr.&nbsp;Alafi&#146;s family. Dr.&nbsp;Alafi may also be
deemed to beneficially own the shares held by Alafi Capital Company, LLC set forth in the table. Does not include 1,007,550 shares of Intra-Cellular preferred stock, which were exchanged for 503,776 shares of our common stock at the Effective Time,
held by two other trusts for the benefit of members of Dr. Alafi&#146;s family, as Dr. Alafi does not have voting or investment control over the shares held by those trusts. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dr.&nbsp;Lerner is one of our directors-elect. Consists of shares held by the Lerner Family Trust UAD 11/14/94, or the Lerner Family Trust. Dr.&nbsp;Lerner shares
voting and investment control with respect to the shares held by the Lerner Family Trust. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(7)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mr.&nbsp;Marcus is one of our directors-elect. Mr.&nbsp;Marcus may also be deemed to beneficially own the shares held by Alexandria Equities, LLC set forth in the
table. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(8)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Moshe Alafi may also be deemed to beneficially own the shares held by Alafi Capital Company, LLC set forth in the table. </FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(9)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Does not include 3,000,000 shares of Intra-Cellular common stock, which were exchanged for 1,500,000 shares of our common stock at the Effective Time, held by six
trusts for the benefit of members of Dr.&nbsp;Greengard&#146;s family, as the trustee of these trusts, Ursula von Rydingsvard, has sole voting and investment control over the shares held by the trusts. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Assumption of Outstanding Stock Options in Merger </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">At the Effective Time, on August&nbsp;29, 2013, the Company assumed all options to purchase Intra-Cellular common stock then outstanding under the Intra-Cellular 2003 Equity Incentive Plan, and such
options became exercisable for an aggregate of 1,462,380 shares of Company common stock, subject to the vesting and other terms of such options. The vesting of such options was not accelerated as a result of the Merger. The following table provides
the number of outstanding options and the weighted average exercise price of such options under the 2003 Equity Incentive Plan held by our officers, directors, directors-elect and beneficial owners of more than five percent of any class of our
voting securities that the Company assumed from Intra-Cellular in connection with the Merger, as adjusted for the exchange ratio in the Merger: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="72%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:89pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name of Beneficial Owner</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number
of<BR>Shares&nbsp;of&nbsp;the<BR>Company&#146;s<BR>Common<BR>Stock<BR>Underlying<BR>Outstanding<BR>Options</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Weighted<BR>Average<BR>Exercise&nbsp;Price<BR>Per Share</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">387,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.02</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence J. Hineline</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">125,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.54</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Allen A. Fienberg, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">122,500</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.51</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Lawrence P. Wennogle, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">130,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kimberly E. Vanover, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">49,750</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Christopher Alafi, Ph.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">29,375</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Richard Lerner, M.D.</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">105,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Joel S. Marcus</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">110,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sir Michael Rawlins, M.D., FRCP, FMedSci</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">101
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>The Redemption </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Immediately following the Effective Time, pursuant to the terms of a Redemption Agreement dated August&nbsp;29, 2013 by and among the Company and its then-current sole stockholder, we completed the
closing of a redemption of an aggregate 5,000,000 shares of Company common stock from our then-current sole stockholder in consideration of an aggregate of $60,000, plus professional costs related to the transaction, not to exceed $20,000. The
5,000,000 shares constituted all of the issued and outstanding shares of the Company&#146;s capital stock, on a fully-diluted basis, immediately prior to the Merger. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Agreements with Stockholders </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Termination of Existing Stockholder Agreements
</I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In connection with Intra-Cellular&#146;s Series C preferred stock financing in 2007 and 2010, Intra-Cellular entered
into various stockholder agreements with the holders of its common stock and preferred stock relating to voting rights, information rights and registration rights, among other things. The stockholder agreements terminated immediately prior to the
Effective Time. Parties to the existing registration rights agreement, however, as well as our directors and executive officers and all of our other stockholders, were provided with an opportunity to become parties to the registration rights
agreement that Intra-Cellular entered into in connection the private placement, as discussed below under &#147; &#150; Registration Rights Agreement.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Registration Rights Agreement </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">At the closing of the Private
Placement, Intra-Cellular entered into a registration rights agreement with the investors in the Private Placement and also the existing stockholders of Intra-Cellular who agreed to become parties to certain provisions of the agreement or who choose
to become parties in the future, which covers substantially all of our outstanding shares of common stock as of the date of this filing. We assumed the registration rights agreement in connection with the Merger. Pursuant to the registration rights
agreement and subject to the rules and regulations of the SEC, we have agreed to file a shelf registration statement covering the resale of the shares of our common stock held by the investors in the Private Placement and the shares of our common
stock held by the former stockholders of Intra-Cellular who are parties to the agreement. We are required to file the shelf registration statement within 45 days of the date of the registration rights agreement (October 13, 2013). In the event fewer
than all of our outstanding shares of common stock can be registered pursuant to the so-called Rule 415 doctrine, priority will be given to the shares issued in the Private Placement, but in such event at least 25% of the shares registered shall be
those held by Intra-Cellular&#146;s existing stockholders prior to the Private Placement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will be liable to each investor
in the Private Placement (but not to the former stockholders of Intra-Cellular who are parties to the agreement) for liquidated damages, on a 30-day basis, equal to 1.0% of the aggregate purchase price paid by the investor for the registrable shares
of our common stock then held by the investor , subject to an overall cap of 5%, (i)&nbsp;if we fail to file the registration statement on time, (ii)&nbsp;if the registration statement is not declared effective within 150 days from the date of the
registration rights agreement (January 26, 2014), (iii)&nbsp;if we suspend (subject to limited blackout periods described below) or terminate the registration statement prior to the date which is the earlier of (x)&nbsp;the third anniversary of its
effectiveness (or the third </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">102
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
anniversary of the date on which all registrable shares are included therein, if later) and (y)&nbsp;the date on which all of the registrable shares cease to be registrable shares, or
(iv)&nbsp;in the event one or more suspensions of the effectiveness of the registration statement exceeds 60 days in the aggregate during any 12-month period. We will be permitted to suspend the registration statement one or more times during any
12-month period provided such suspensions do not exceed 30 consecutive days or 60 days in the aggregate in any 12-month period. Any suspension associated with our filing of an annual, periodic or current report, as required by the Exchange Act, will
be permitted and will not be counted against the 60 day limitation. Any shares not registered due to the Rule 415 doctrine will not be subject to liquidated damages. Expenses with respect to the filing and effectiveness of such registration
statement (but not selling expenses, or underwriter or agent compensation) will be paid by us, including expenses of one counsel for the selling stockholders. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Lock-Up Provisions in Registration Rights Agreement </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">One of the
provisions of the registration rights agreement that is applicable to the former stockholders of Intra-Cellular who are parties to the agreement, other than the investors in the Private Placement, is a lock-up provision pursuant to which these
stockholders agreed, subject to specified exceptions, not to sell, transfer, dispose of, contract to sell, sell any option or contract to purchase, or otherwise transfer or dispose of, directly or indirectly, without the written consent of Leerink
Swann LLC or, in certain circumstances, the two lead institutional investors in the Private Placement, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock until the earlier
of (a)&nbsp;up to 180 days (as requested by the lead underwriter) after the date on which our shares of common stock are listed for trading on a national securities exchange in connection with a firm commitment underwritten public offering by us
with gross proceeds to us of at least $40 million, or (b)&nbsp;the date that is 18 months following the date of the Merger (February 28, 2015). These lock-up provisions will not apply to, among other things, shares of common stock acquired in
connection with any follow-on securities offerings by us or in open market transactions, or upon the exercise of stock options granted pursuant to our equity incentive plans, so long as the shares acquired upon exercise remain subject to the lock-up
provisions in the agreement, or certain gifts and other transfers for estate-planning purposes or by stockholders who are entities to their limited partners, members or stockholders, as specified in the agreement. In the event that a former
stockholder of Intra-Cellular was also an investor in the Private Placement, then these lock-up provisions in the agreement will only apply with respect to the shares held by such stockholder that were not purchased in the Private Placement. Under
the registration rights agreement, we did not enter into any lock-up agreement or other restriction on the transfer or registration of the shares of our common stock acquired by the investors in the Private Placement (other than those imposed by
non-disclosure agreements and the requirement that each investor continue to hold 200 shares of Intra-Cellular common stock (which were exchanged for 100 shares of our common stock in the Merger) until the earlier of (y)&nbsp;the date on which our
shares are listed on a national securities exchange or (z)&nbsp;the date 18 months after the closing of the Private Placement (February 28, 2015)). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Indemnification Agreements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will enter into indemnification agreements
with each of our directors and certain of our officers. The indemnification agreements, our </FONT></P>
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pending restated certificate of incorporation and our restated by-laws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, as a
condition to the Merger, we also entered into an indemnity agreement with the former sole officer and director of the Shell Company pursuant to which we agreed to indemnify him for actions taken by him in his official capacities relating to the
consideration, approval and consummation of the Merger and certain related transactions. See &#147;Indemnification of Directors and Officers.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Indemnity Agreement </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As a condition to the Merger, we entered into an
Indemnity Agreement with our former sole officer and director pursuant to which we agreed to indemnify such former officer and director for actions taken by him in his official capacities relating to the consideration, approval and consummation of
the Merger and certain related transactions. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Policy for Approval of Related Person Transactions </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We do not currently have a policy for the review and approval of related person transactions. We intend to adopt such a policy when we
adopt an audit committee charter and establish an audit committee, which we expect will be responsible for reviewing and approving all transactions in which we are a participant and in which any parties related to us, including our executive
officers, our directors, beneficial owners of more than 5% of our securities, immediate family members of the foregoing persons and any other persons whom our board of directors determines may be considered related parties under Item&nbsp;404 of
Regulation S-K, has or will have a direct or indirect material interest. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Legal Proceedings </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are not aware of any material proceedings in which any of our directors, executive officers or affiliates, any owner of record or
beneficially of more than 5% of our common stock, or any associate of any such director, officer, affiliate or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Stockholder Communication with the Board of Directors </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Stockholders may send communications to our Board of Directors by writing to Intra-Cellular Therapies, Inc., 3960 Broadway New York, New York 10032, Attention: Board of Directors. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Other Information </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We
are required to file periodic reports, proxy statements and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of these reports by accessing the SEC&#146;s website at http://www.sec.gov. You may also send communications to our Board of Directors at:
Intra-Cellular Therapies, Inc., 3960 Broadway, New York, New York 10032, Attention: Board of Directors. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">104
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Market Price of and Dividends on Our Common Equity and Related Stockholder Matters </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">There is not currently, and there has never been, any market for any of our securities. Our securities are not eligible for trading on any
national securities exchange, The NASDAQ Global Market or any other over-the-counter markets, including the Over-the-Counter Bulletin Board. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As of August&nbsp;29, 2013, we had 22,134,647 outstanding shares of common stock and no outstanding shares of preferred stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">For a description of our dividend policy, see &#147;Description of Securities &#150; Dividend Policy&#148; below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Description of Securities </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following statements are qualified in their
entirety by reference to the detailed provisions of our certificate of incorporation and bylaws. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Capital Structure </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We currently have authorized capital stock of 110,000,000 shares, of which 100,000,000 are designated as common stock, par value $0.0001
per share, and 10,000,000 shares are designated as preferred stock, par value $0.0001 per share. Under our restated certificate of incorporation approved by our sole director and sole stockholder prior to the Merger, which we expect to file 20 days
after filing with the SEC and mailing to such stockholder a Schedule 14C reporting the adoption of the restated certificate of incorporation, we will have authorized capital stock consisting of 105,000,000 shares, of which 100,000,000 will be
designated as common stock, par value $0.0001 per share, and 5,000,000 shares will be designated as preferred stock, par value $0.0001 per share. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Upon the closing of the Merger on August&nbsp;29, 2013, 22,134,647 shares of our common stock and no shares of our preferred stock were issued and outstanding. As of August&nbsp;29, 2013, following the
closing of the Merger, there were 258 holders of record of our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Common Stock </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The holders of our common stock are entitled to one vote per share on matters on which our stockholders vote. There are no cumulative
voting rights. Subject to any preferential dividend rights of any outstanding shares of preferred stock, holders of our common stock are entitled to receive dividends, if declared by our board of directors, out of funds that we may legally use to
pay dividends. If we liquidate or dissolve, holders of our common stock are entitled to share ratably in our assets once our debts and any liquidation preference owed to any then-outstanding preferred stockholders are paid. Our certificate of
incorporation does not provide our common stock with any redemption, conversion or preemptive rights. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">105
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Preferred Stock </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As of August&nbsp;29, 2013, no shares of our preferred stock are currently outstanding. If we issue preferred stock in the future, such preferred stock would have priority over common stock with respect
to dividends and other distributions, including the distribution of assets upon liquidation. Our board of directors has the authority, without further stockholder authorization, to issue from time to time up to 10,000,000 shares of preferred stock
in one or more series and to fix the terms, limitations, voting rights, relative rights and preferences and variations of each series. This amount will be set at 5,000,000 shares upon the effectiveness of our restated certificate of incorporation.
Although we have no present plans to issue any shares of preferred stock, the issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could decrease the amount of earnings and assets available for distribution to
the holders of common stock, could adversely affect the rights and powers, including voting rights, of the common stock, and could have the effect of delaying, deterring or preventing a change of control of us or an unsolicited acquisition proposal.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Dividend Policy </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In the past, we have not distributed earnings to stockholders. Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings
for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends. Even if the Board decides to pay dividends, the
form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board may deem relevant. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Recent Sales of Unregistered Securities </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Set forth below is information regarding shares of common stock, convertible preferred stock, convertible notes and warrants issued, and options granted, by us and by Intra-Cellular within the past three
years that were not registered under the Securities Act. Also included is the consideration, if any, received by Intra-Cellular for such shares, notes, warrants and options and information relating to the section of the Securities Act, or rule of
the Securities and Exchange Commission, under which exemption from registration was claimed. The number of shares and the warrant issued prior to the Merger described below in paragraphs C and D below do not reflect the exchange of shares in the
Merger, which is further described in paragraph E below. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Original Issuances of Stock, Convertible Notes and Warrants
</I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A. On October&nbsp;15, 2012, the Shell Company issued an aggregate of 5,000,000 shares of its common stock to its then
sole stockholder in exchange for $10,000, which represented all of the Shell Company&#146;s outstanding common stock immediately prior to the Merger. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">B. On October&nbsp;25, 2012, Intra-Cellular issued convertible promissory notes having an aggregate principal amount of $14,343,795 to seven accredited investors. On November&nbsp;14, 2012, Intra-Cellular
issued additional convertible promissory notes having an aggregate principal amount of $846,098 to two additional accredited investors. On March&nbsp;20, 2013, Intra-Cellular issued additional convertible promissory notes having an aggregate
principal amount of $100,000 to two additional accredited investors. In connection with the Private Placement described in paragraph D below, the principal amount of all outstanding convertible promissory notes, plus accrued interest, converted into
Intra-Cellular common stock on August&nbsp;29, 2013. </FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">C. On April&nbsp;19, 2013, Intra-Cellular issued 36,450 shares of Intra-Cellular common
stock and a warrant to purchase 3,645 shares of Intra-Cellular common stock to one accredited investor in exchange for biotechnology grant funding received from the investor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">D. On August&nbsp;29, 2013, immediately prior to the Effective Time, Intra-Cellular issued 18,889,307 shares of its common stock at a price of $3.1764 per share, or an aggregate purchase price of
approximately $60.0 million, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular&#146;s then outstanding convertible promissory notes (such that Intra-Cellular received
$40.0 million in net proceeds, after expenses), to 206 accredited investors in the Private Placement. As part of the Private Placement, all outstanding convertible promissory notes, plus accrued interest thereon, described in paragraph B above, were
converted into shares of Intra-Cellular common stock at a price of $3.1764 per share. Leerink Swann LLC acted as sole lead placement agent and National Securities Corporation and Livingston Securities LLC acted as co-agents for purposes of the sale
of Intra-Cellular common stock in the Private Placement. Entities and individuals affiliated with Leerink Swann LLC purchased an aggregate of 346,302 shares of Intra-Cellular common stock in the Private Placement on the same terms as the other
investors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">E. On August 29, 2013, at the Effective Time, each share of Intra-Cellular common stock and preferred stock that
was issued and outstanding immediately prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock. We issued an aggregate of 22,134,647 shares of our common stock upon such exchange of the outstanding shares of
Intra-Cellular common stock and preferred stock to Intra-Cellular&#146;s stockholders immediately prior to the Effective Time, which included no more than 35 non-accredited investors. In addition, at the Effective Time, we assumed the 2003 Equity
Incentive Plan, and all options to purchase Intra-Cellular common stock then outstanding under the 2003 Equity Incentive Plan, and such options became exercisable for an aggregate of 1,462,380 shares of our common stock, subject to the vesting and
other terms of such options. At the Effective Time, we also assumed the outstanding warrant to purchase Intra-Cellular common stock described in paragraph C above, and such warrant became exercisable for 1,822 shares of our common stock. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">F. From August&nbsp;1, 2010 through the Effective Time, which occurred on August&nbsp;29, 2013, Intra-Cellular issued an aggregate of
519,936 shares of its common stock upon the exercise of stock options issued under the 2003 Equity Incentive Plan. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Stock
Option Grants </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">From August&nbsp;1, 2010 through the consummation of the Merger on August&nbsp;29, 2013, Intra-Cellular
granted stock options under the 2003 Equity Incentive Plan to purchase an aggregate of 579,300 shares of common stock, net of forfeitures, at a weighted-average exercise price of $2.99 per share, to certain of its employees, consultants and
directors. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Securities Act Exemptions </I></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We deemed the offers, sales and issuances of the securities described above under &#147; &#150; Original Issuances of Stock, Convertible Notes and Warrants&#148; to be exempt from registration under the
Securities Act in reliance on Section&nbsp;4(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We deemed the grants of stock options described above under &#147; &#150; Stock Option Grants&#148; to be exempt from registration under
the Securities Act in reliance on Rule 701 of the Securities </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">107
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction
exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">All certificates representing the securities issued in the transactions described under &#147;Recent Sales of Unregistered Securities&#148; included appropriate legends setting forth that the securities
had not been offered or sold pursuant to a registration statement and describing the applicable restrictions on transfer of the securities. There were no underwriters employed in connection with any of the transactions set forth in &#147;Recent
Sales of Unregistered Securities.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Shares Eligible for Future Sale </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As of August&nbsp;29, 2013, we had outstanding 22,134,647 shares of common stock. All of these shares are restricted securities under Rule
144, in that they were issued in private transactions not involving a public offering. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Restrictions on the Use of Rule 144 by Shell
Companies or Former Shell Companies </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Rule 144 is not available for the resale of securities initially issued by
companies that are, or previously were, blank check companies like us, to their promoters or affiliates despite technical compliance with the requirements of Rule 144. Rule 144 also is not available for resale of securities issued by any shell
companies (other than business combination-related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an exception to this prohibition, however, if the following conditions are met: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the issuer of the securities that was formerly a shell company has ceased to be a shell company; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the issuer of the securities is subject to the reporting requirements of Section&nbsp;13 or 15(d) of the Exchange Act; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 12 months (or
such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="1%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that
is not a shell company. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As a result, none of our stockholders is currently able to sell shares of our
common stock in reliance on Rule 144. Assuming we continue to meet the requirements set forth above, Rule 144 will become available to our stockholders one year after the date of this report. Our stockholders may currently resell their shares of our
common stock only pursuant to a registration statement that has been declared effective under the Securities Act or pursuant to another exemption from registration. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">108
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The disclosures set forth in Item&nbsp;4.01 below are hereby incorporated by reference into this Item&nbsp;2.01. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;3.02. Unregistered Sales of Equity Securities. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The disclosures set forth in Item&nbsp;2.01 above are hereby incorporated by reference into this Item&nbsp;3.02. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;4.01. Changes in Registrant&#146;s Certifying Accountant. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective at the Effective Time of the Merger, Raich Ende Malter&nbsp;&amp; Co. LLP, or REM, was dismissed as the independent registered
public accounting firm that audits the financial statements of the Company.&nbsp;Effective as of the Effective Time, our Board of Directors engaged Ernst&nbsp;&amp; Young LLP, or E&amp;Y, as the independent registered public accounting firm to audit
the Company&#146;s financial statements for the fiscal year ended December&nbsp;31, 2013. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">REM&#146;s audit report on the
Company&#146;s financial statements for the period from August 29, 2012 (inception) through March&nbsp;31, 2013, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the Company&#146;s most recent fiscal year (since inception) and any subsequent interim period
prior to the date hereof, there were no disagreements with REM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of REM, would
have caused it to make reference to the subject matter thereof in connection with its report. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">During the Company&#146;s most
recent fiscal year (since inception) and any subsequent interim period prior to the date hereof, neither the Company nor anyone acting on its behalf consulted E&amp;Y regarding the application of accounting principles to a specified transaction,
either completed or proposed or the type of audit opinion that might be rendered on the Company&#146;s financial statements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company has provided REM with a copy of this report prior to the filing hereof and has requested that REM furnish to the Company a
letter addressed to the Securities and Exchange Commission stating whether REM agrees with the statements made by the Company in this Report. REM has furnished such letter, which letter is filed as Exhibit 16.1 hereto, as required by
Item&nbsp;304(a)(3) of Regulation S-K. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;5.01. Changes in Control of Registrant. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The disclosures set forth in Item&nbsp;2.01 above are hereby incorporated by reference into this Item&nbsp;5.01. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">109
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective immediately following the Merger, Sharon Mates, Ph.D. was appointed to our Board of
Directors, and together with the sole director of the Shell Company, Samir N. Masri, constitute our Board of Directors. Effective upon the eleventh day after the Company files with the SEC and mails to our former sole stockholder a Schedule 14f-1
reporting a change in the majority of our directors, our Board of Directors will be reconstituted by the appointment of Christopher Alafi, Ph.D., Richard Lerner, M.D., Joel S. Marcus and Sir Michael Rawlins, M.D., FRCP, FMedSci, to serve with
Dr.&nbsp;Mates as our directors, and the resignation of Mr.&nbsp;Masri as a director. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective immediately following the
Merger, our executive management team was also reconstituted by the appointment of Dr.&nbsp;Mates as our President and Chief Executive Officer, Lawrence J. Hineline as our Vice President of Finance, Chief Financial Officer and Secretary, Allen A.
Fienberg, Ph.D. as our Vice President of Business Development; Lawrence P. Wennogle, Ph.D. as our Vice President, Drug Discovery and Kimberly E. Vanover, Ph.D. as our Vice President, Clinical Development, effective upon the resignation of Samir N.
Masri as our Chief Executive Officer, Chief Financial Officer, President and Secretary. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Biographical and other information
regarding these individuals is provided under the caption &#147;Management and Directors&#148; in Item&nbsp;2.01 above, which is incorporated by reference into this Item&nbsp;5.02. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">On August&nbsp;29, 2013, we filed a Certificate of Ownership and Merger with the Secretary of State of the State of Delaware pursuant to which Intra-Cellular Therapies, Inc., our newly created
wholly-owned subsidiary, merged with and into us with us remaining as the surviving corporation, which we refer to as the Name Change Merger. In connection with the Name Change Merger, and as set forth in the Certificate of Ownership and Merger, we
changed our corporate name to &#147;Intra-Cellular Therapies, Inc.&#148; The Certificate of Ownership and Merger is filed herewith as Exhibit 3.4. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Effective August&nbsp;29, 2013, prior to the Merger, our sole director and our sole stockholder approved by written consent a restated certificate of incorporation to, among other things, reduce the
number of authorized shares of preferred stock, provide for our Board of Directors to be divided into three classes, require that any action taken by our stockholders be at a duly called annual or special meeting of stockholders and not by written
consent, and to require a supermajority vote of our stockholders for our stockholders to remove any of our directors, amend, alter or repeal, or adopt any provision inconsistent with, certain provisions contained in our restated certificate of
incorporation, or to adopt, amend or repeal our restated bylaws. We intend to prepare and file an information statement on Schedule 14C with the SEC to notify our former sole stockholder of this action. Twenty days after we mail the information
statement, we expect to file the restated certificate of incorporation with the Secretary of State of the State of Delaware. When the restated certificate of incorporation becomes effective, we will have authorized capital stock of 105,000,000
shares, of which will 100,000,000 shares will be designated as common stock, par value $0.0001 per share, and of which 5,000,000 shares will be designated as preferred stock, par value $0.0001 per share. A copy of the restated certificate of
incorporation that we intend to file with the Secretary of State of the State of Delaware is filed herewith as Exhibit 3.2, and is incorporated herein by reference. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">110
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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effective August&nbsp;29, 2013, our sole director approved our restated bylaws to, among
other things, provide for our Board of Directors to be divided into three classes, require that any action taken by our stockholders be at a duly called annual or special meeting of stockholders and not by written consent, and to require a
supermajority vote of our stockholders for our stockholders to remove any of our directors or to adopt, amend or repeal any provision of our restated bylaws. A copy of our restated bylaws is filed herewith as Exhibit 3.5, and is incorporated hereby
by reference. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As a result of the Merger, our board of directors has decided to change our fiscal year end from March&nbsp;31
to December&nbsp;31. Accordingly, we will file our Annual Report on Form 10-K for the fiscal year ended December&nbsp;31, 2013 with the SEC on or before March&nbsp;31, 2014. As the transition period covers six months or more, in accordance with the
SEC&#146;s transition report rules as set forth in Rule 13a-10 of the Securities Exchange Act of 1934, as amended, we will need to file a transition report on Form 10-K within 90 days of December&nbsp;31, 2013 and our next Quarterly Report on Form
10-Q will contain the necessary financial information for the transition period. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;5.06. Change in Shell Company Status.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As described in Items 1.01 and 2.01 above, which are incorporated by reference into this Item&nbsp;5.06, we ceased being a
shell company (as defined in Rule 12b-2 under the Exchange Act) upon completion of the Merger. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;9.01. Financial Statements and
Exhibits</B>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) As a result of its acquisition of Intra-Cellular as described in Item&nbsp;2.01, the registrant is filing herewith
Intra-Cellular&#146;s audited financial statements as of and for the years ended December&nbsp;31, 2012 and 2011 and its unaudited financial statements as of June 30, 2013 and for the three and six months ended June&nbsp;30, 2013 and 2012 as Exhibit
99.1 to this Current Report on Form 8-K. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Unaudited pro forma condensed combined financial statements for the year ended December&nbsp;31,
2012 and as of and for the six months ended June&nbsp;30, 2013 is attached as Exhibit 99.2 to this Current Report on Form 8-K. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) Exhibits.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this Current Report on Form 8-K,
which Exhibit Index is incorporated herein by reference. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">111
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SIGNATURE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="46%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom"></TD>
<TD WIDTH="2%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="45%"></TD></TR>


<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">INTRA-CELLULAR THERAPIES, INC.</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Date: September 5, 2013</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Sharon Mates, Ph.D.</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sharon Mates, Ph.D.</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chairman, President and Chief Executive Officer</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">112
</FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="93%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:25pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:39pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;2.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Agreement and Plan of Merger, dated as of August 23, 2013, by and among the Registrant, ITI, Inc. and Intra-Cellular Therapies, Inc. (incorporated by reference to Exhibit 10.1 to
the Registrant&#146;s Current Report on Form 8-K filed with the SEC on August 29, 2013 (File No. 000-54896)).</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;2.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Agreement and Plan of Merger, dated as of August 29, 2013, by and between the Registrant and Intra-Cellular Therapies, Inc., relating to the name change of the
Registrant.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;3.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on August&nbsp;29, 2012 (incorporated by reference to Exhibit 3.1 to
the Registrant&#146;s Registration Statement on Form 10 filed with the SEC on February 8, 2013 (File No. 000-54896)).</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;3.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Restated Certificate of Incorporation of the Registrant, to be filed with the Secretary of State of the State of Delaware.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;3.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certificate of Merger relating to the Merger of ITI, Inc. with and into Intra-Cellular Therapies, Inc., filed with the Secretary of State of the State of Delaware on August 29,
2013.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;3.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certificate of Ownership and Merger relating to the Merger of Intra-Cellular Therapies, Inc. with and into the Registrant, filed with the Secretary of State of the State of Delaware
on August 29, 2013, relating to the name change of the Registrant.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;3.5</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Restated Bylaws of the Registrant.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;4.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of common stock certificate.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;4.2.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Warrant to Purchase Common Stock dated April 19, 2013 issued to Alzheimer Drug Discovery Foundation, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;4.2.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment dated August 29, 2013 to Warrant to Purchase Common Stock dated April 19, 2013 issued to Alzheimer Drug Discovery Foundation, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.1.1**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">License Agreement dated as of May 31, 2005 by and between Bristol-Meyers Squibb Company and Intra-Cellular Therapies, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.1.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amendment No. 1 to License Agreement dated as of November 3, 2010 by and between Bristol-Meyers Squibb Company and Intra-Cellular Therapies, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.2**</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">License and Collaboration Agreement dated as of February 25, 2011 by and between Takeda Pharmaceutical Company Limited and Intra-Cellular Therapies,
Inc.</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">113
</FONT></P>


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<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD WIDTH="92%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:25pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:39pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.3*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement effective as of February&nbsp;26, 2008 by and between Sharon Mates, Ph.D. and Intra-Cellular Therapies, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.4*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement effective as of February 26, 2008 by and between Lawrence J. Hineline and Intra-Cellular Therapies, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.5*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement effective as of February 26, 2008 by and between Allen Fienberg, Ph.D. and Intra-Cellular Therapies, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.6*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employment Agreement effective as of February 26, 2008 by and between Lawrence Wennogle, Ph.D. and Intra-Cellular Therapies, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.7*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Offer Letter dated February 2, 2007 by Intra-Cellular Therapies, Inc. to Kimberly Vanover.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.8*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of September 1, 2003 by and between Sharon Mates, Ph.D. and Intra-Cellular Therapies,
Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.9*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of December 1, 2003 by and between Lawrence J. Hineline and Intra-Cellular Therapies,
Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.10*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of June 3, 2002 by and between Allen Fienberg, Ph.D. and Intra-Cellular Therapies,
Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.11*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of January 1, 2003 by and between Lawrence Wennogle, Ph.D. and Intra-Cellular Therapies,
Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.12*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of March 5, 2007 by and between Kimberly E. Vanover, Ph.D. and Intra-Cellular Therapies,
Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.13*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Indemnification Agreement by and between the Company and its directors and executive officers.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.14*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">2003 Equity Incentive Plan, as amended.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.15*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Stock Option Agreement under the 2003 Equity Incentive Plan, as amended.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.16*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">2013 Equity Incentive Plan.</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">114
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<TD WIDTH="92%"></TD></TR>

<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:25pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Exhibit</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:39pt" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.17</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Redemption Agreement dated as of August&nbsp;29, 2013 by and between the Registrant and NLBDIT 2010 Services, LLC.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.18</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Indemnity Agreement dated as of August 29, 2013 by and among the Registrant, Intra-Cellular Therapies, Inc. and Samir N. Masri.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.19</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration Rights Agreement dated as of August 29, 2013 by and among Intra-Cellular Therapies, Inc., the stockholders named therein and the Registrant.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">16.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Letter from Raich Ende Malter &amp; Co. LLP to the Securities and Exchange Commission, dated September 5, 2013.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Audited financial statements of Intra-Cellular Therapies, Inc. as of and for the years ended December 31, 2012 and 2011 and unaudited financial statements of Intra-Cellular
Therapies, Inc. as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">99.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unaudited Pro Forma Condensed Combined Financial Statements for the year ended December 31, 2012 and as of and for the six months ended June 30, 2013.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">99.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Press Release dated September 3, 2013.</FONT></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B></B>*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Management contract or compensatory plan or arrangement. </B></FONT></TD></TR></TABLE>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>**</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Confidential treatment requested by the Registrant. Redacted portion filed separately with the Securities and Exchange Commission. </B></FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">115
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[{"type": "8-K", "sequence": "1", "filename": "d590040d8k.htm", "description": "FORM 8-K", "secsgml_size_bytes": 797673}]
{"company-data": {"conformed-name": "Intra-Cellular Therapies, Inc.", "cik": "0001567514", "assigned-sic": "6770", "irs-number": "364742850", "state-of-incorporation": "DE", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-54896", "film-number": "131080587"}, "business-address": {"street1": "3960 BROADWAY", "city": "NEW YORK", "state": "NY", "zip": "10032", "phone": "212-923-3344"}, "mail-address": {"street1": "3960 BROADWAY", "city": "NEW YORK", "state": "NY", "zip": "10032"}, "former-company": {"former-conformed-name": "Oneida Resources Corp.", "date-changed": "20130122"}}
Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): August 29, 2013
INTRA-CELLULAR THERAPIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
000-54896
36-4742850
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
3960 Broadway
New York, New York 10032
(Address of principal executive offices) (Zip
Code)
(212) 923-3344
(Registrant's telephone number, including area code)
Oneida
Resources Corp.
c/o Samir Masri CPA Firm P.C., 175 Great Neck Road, Suite 403, Great Neck, NY 11021
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01.
Entry into a Material Definitive Agreement.
The disclosures set forth in Item 2.01 hereof are hereby incorporated by reference into this Item 1.01.
Item 2.01.
Completion of Acquisition or Disposition of Assets.
Pursuant to an Agreement and Plan of Merger dated August 23, 2013, or the Merger Agreement, by and among Oneida Resources Corp., which is referred to herein as the Company, we, our and us; ITI, Inc.,
a Delaware corporation and wholly-owned subsidiary of the Company, or Merger Sub; and Intra-Cellular Therapies, Inc., a Delaware corporation, which is referred to hereinafter as Intra-Cellular; Merger Sub merged with and into Intra-Cellular, with
Intra-Cellular remaining as the surviving entity and a wholly-owned operating subsidiary of the Company. This transaction is referred to throughout this report as the "Merger." The Merger was effective as of August 29, 2013, upon the
filing of a Certificate of Merger with the Secretary of State of the State of Delaware. As part of the Merger, Intra-Cellular changed its name to ITI, Inc. A copy of the Merger Agreement is filed herewith as Exhibit 2.1, and is incorporated herein
by reference.
Following the Merger, a newly organized wholly-owned subsidiary of the Company named "Intra-Cellular
Therapies, Inc.", or Name Change Merger Sub, merged with and into the Company, leaving the Company as the surviving corporation. This transaction is referred to throughout this report as the "Name Change Merger." In connection with
the Name Change Merger, we relinquished our corporate name "Oneida Resources Corp." and assumed in its place the name "Intra-Cellular Therapies, Inc." The Name Change Merger and name change became effective on August 29,
2013, upon the filing of a Certificate of Ownership and Merger with the Secretary of State of the State of Delaware. The Certificate of Ownership and Merger is filed as Exhibit 3.4 hereto, and is incorporated herein by reference.
At the effective time of the Merger, or the Effective Time, the legal existence of Merger Sub ceased and each share of Intra-Cellular
common stock and each share of Intra-Cellular preferred stock that was issued and outstanding immediately prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock, or the Exchange. We issued an aggregate of
22,134,647 shares of our common stock upon such exchange of the outstanding shares of Intra-Cellular common stock and preferred stock. In addition, at the Effective Time, we assumed Intra-Cellular's 2003 Equity Incentive Plan, as amended, or
the 2003 Equity Incentive Plan, and all options to purchase Intra-Cellular common stock then outstanding under the 2003 Equity Incentive Plan, and such options became exercisable for an aggregate of 1,462,380 shares of our common stock, subject to
the vesting and other terms of such options. The vesting of such options was not accelerated as a result of the Merger. At the Effective Time, we also assumed the outstanding warrant to purchase Intra-Cellular common stock, and such warrant became
exercisable for 1,822 shares of our common stock.
Immediately following the Effective Time, pursuant to the terms of a
Redemption Agreement dated August 29, 2013, or the Redemption Agreement, by and among the Company and its then-current sole stockholder, we completed the closing of a redemption of an aggregate 5,000,000 shares of our common stock, or the
Redemption, from our then-current sole stockholder in consideration of an aggregate of $60,000, plus professional costs related to the transaction, not to exceed $20,000. The 5,000,000 shares constituted all of the issued and outstanding shares of
our capital stock, on a fully-diluted basis, immediately prior to the Merger. A copy of the Redemption Agreement is filed herewith as Exhibit 10.17, and is incorporated herein by reference.
Upon completion of the Merger and the Redemption, the former stockholders of Intra-Cellular hold 100% of the outstanding shares of our
capital stock. Unless otherwise indicated in this Current Report on Form 8-K, or this report, all share and per share figures are after giving effect to the Merger. The share and per share numbers in the financial statements of Intra-Cellular filed
herewith as Exhibit 99.1 are not adjusted to give effect to the Merger.
2
As a condition to the Merger, we entered into an Indemnity Agreement with our former sole
officer and director, or the Indemnity Agreement, pursuant to which we agreed to indemnify such former officer and director for actions taken by him in his official capacities relating to the consideration, approval and consummation of the Merger
and certain related transactions. A copy of the Indemnity Agreement is filed herewith as Exhibit 10.18, and is incorporated herein by reference.
The Merger is being accounted for as a capital transaction. Upon the effectiveness of the Merger, the Company's business became the operation of Intra-Cellular and its business. Immediately following
the Effective Time, our Board of Directors, or the Board, which immediately prior to the Effective Time consisted of Samir N. Masri as our sole director, appointed Sharon Mates, Ph.D., who was Chairman, President and Chief Executive Officer of
Intra-Cellular, as our Chairman, President and Chief Executive Officer, to serve on the Board with Mr. Masri. At the Effective Time, Mr. Masri resigned from all of his positions as an officer of the Company. In addition, immediately
following the Effective Time, the Board appointed Lawrence J. Hineline, who was the Vice President of Finance, Chief Financial Officer and Secretary of Intra-Cellular, as our Vice President of Finance, Chief Financial Officer and Secretary; Allen A.
Fienberg, Ph.D., who was the Vice President of Business Development of Intra-Cellular, as our Vice President of Business Development; Lawrence P. Wennogle, Ph.D., who was the Vice President, Drug Discovery of Intra-Cellular, as our Vice President,
Drug Discovery; and Kimberly E. Vanover, Ph.D., who was the Vice President, Clinical Development of Intra-Cellular, as our Vice President, Clinical Development. On September 9, 2013, which is the eleventh day following the date that we filed
with the Securities and Exchange Commission, or SEC, and transmitted to our sole stockholder prior to the Merger, a Schedule 14f-1 reporting a change in the majority of our directors, or the New Board Effective Date, Christopher Alafi, Ph.D.,
Richard Lerner, M.D., Joel S. Marcus and Sir Michael Rawlins, M.D., FRCP, FMedSci, will be appointed to the Board to serve on the Board with Dr. Mates, and Mr. Masri will resign from the Board as of such date. Each of Dr. Mates,
Dr. Alafi, Dr. Lerner, Mr. Marcus, and Sir Michael were directors of Intra-Cellular immediately prior to the Merger.
Prior to the Merger, Intra-Cellular sold to accredited investors approximately $60.0 million of its shares of common stock, or 18,889,307 shares at a price of $3.1764 per share, which included $15.3
million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular's then outstanding convertible promissory notes, or Notes. We refer to this transaction as the Private Placement and the number of shares stated in
this paragraph do not reflect the Exchange in the Merger. The price per share in the Private Placement, as adjusted for the Exchange in the Merger, would be $6.3528 per share of our post-Merger common stock. Also, Intra-Cellular granted the
investors in the Private Placement registration rights requiring Intra-Cellular or any successor to register those shares of
3
Intra-Cellular common stock (which were exchanged for shares of our common stock, along with the rest of the outstanding shares of Intra-Cellular capital stock, except for dissenting shares, at
the Effective Time) for public resale, as described in more detail below. The then existing stockholders of Intra-Cellular who agreed to become parties to the registration rights agreement also became entitled to such registration rights, subject to
specified differences in the agreement between the rights of new investors and existing stockholders. The existing Second Amended and Restated Investor Rights Agreement, by and among Intra-Cellular and the investors listed therein, dated as of
October 25, 2007, as amended, was terminated at the Effective Time. The Private Placement closed immediately prior to the filing of a Certificate of Merger with the Secretary of State of the State of Delaware, on August 29, 2013.
The Merger Agreement has been attached as Exhibit 2.1 to this Current Report on Form 8-K to provide investors and security
holders with information regarding its terms. It is not intended to provide any other factual information about the Company or Intra-Cellular. The representations, warranties and covenants contained in the Merger Agreement were made only for the
purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for
the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable
to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of
the Company, Intra-Cellular or any of their respective subsidiaries or affiliates. In addition, the assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in a confidential disclosure
schedule provided by Intra-Cellular, which is not being filed with this Current Report on Form 8-K as permitted by the SEC's rules and regulations. Accordingly, investors should not rely on the representations and warranties as
characterizations of the actual state of facts, since (i) they were made only as of the date of such agreement or a prior, specified date, (ii) in some cases they are subject to qualifications with respect to materiality, knowledge and/or
other matters, and (iii) they may be modified in important part by the underlying disclosure schedule. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in the Company's public disclosures.
Intra-Cellular
announced the Private Placement and the Merger in a press release dated September 3, 2013, which has been attached as Exhibit 99.3 to this Current Report on Form 8-K.
4
DESCRIPTION OF THE BUSINESS OF INTRA-CELLULAR THERAPIES, INC.
Overview
We were
originally incorporated in the State of Delaware in August 2012 under the name "Oneida Resources Corp." Oneida Resources Corp., or the Shell Company, was a "shell" company registered under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, with no specific business plan or purpose until it began operating the business of Intra-Cellular through the Merger transaction on August 29, 2013. Intra-Cellular was incorporated in Delaware in May 2001 to focus
primarily on the development of novel drugs for the treatment of neuropsychiatric and neurologic diseases and other disorders of the central nervous system. Effective upon the Merger, a wholly-owned subsidiary of the Shell Company merged with and
into Intra-Cellular, and Intra-Cellular continues as the operating subsidiary of the Shell Company. As used herein, the words the "Company," "Intra-Cellular," "we," "us," and "our" refer to the
current Delaware corporation operating the business of Intra-Cellular as a wholly-owned subsidiary, which business will continue as the business of the Shell Company.
We are a biopharmaceutical company focused on the discovery and clinical development of innovative, small molecule drugs that address underserved medical needs in neuropsychiatric and neurological
disorders by targeting intracellular signaling mechanisms within the central nervous system, or CNS. Our lead product candidate, ITI-007, is in Phase 2 clinical trials as a first-in-class treatment for schizophrenia. Current medications available
for the treatment of schizophrenia do not adequately address the broad array of symptoms associated with this CNS disorder. Use of these current medications also is limited by their substantial side effects. ITI-007 is designed to be effective
across a wider range of symptoms, treating both the acute and residual phases of schizophrenia, with improved safety and tolerability.
At the lowest doses, ITI-007 acts primarily as a potent 5-HT2A serotonin receptor antagonist. As the dose is increased, additional benefits are derived from the engagement of additional drug targets
including modest dopamine receptor modulation and modest inhibition of serotonin transporters. We believe that combined interactions at these receptors may provide additional benefits above and beyond selective 5-HT2A antagonism for treating
agitation, aggression and sleep disturbances while avoiding many of the side effects associated with more robust dopamine receptor antagonism. As the dose of ITI-007 is further increased, leading to moderate dopamine receptor modulation, inhibition
of serotonin transporters, and indirect glutamate modulation, these actions complement the complete blockade of 5-HT2A serotonin receptors. In this dose range, we believe that ITI-007 will be useful in treating the symptoms associated with
schizophrenia, bipolar disorder, major depressive disorder and other neuropsychiatric diseases.
Given the potential utility
for ITI-007 and follow-on compounds to treat these additional indications, we may investigate, either on our own or with a partner, aggression/anxiety disorders, major depressive disorder, intermittent explosive disorder, non-motor symptoms and
motor complications associated with Parkinson's disease, and post-traumatic stress disorder. We hold exclusive, worldwide commercialization rights to ITI-007 and a family of compounds from Bristol-Myers Squibb Company pursuant to an exclusive
license.
5
We have a second major program that has yielded a portfolio of compounds that selectively
inhibits the enzyme phosphodiesterase 1, or PDE1. PDE1 helps regulate brain activity related to cognition, memory processes and movement/coordination. We have licensed the lead compound in this portfolio, ITI-214, and other compounds in this
portfolio, to Takeda Pharmaceutical Company Limited, or Takeda. ITI-214 is the first compound in its class to successfully advance into Phase 1 clinical trials and is being developed for the treatment of cognitive impairment associated with
schizophrenia, or CIAS, and other disorders. The results of our first Phase 1 clinical trial in 70 subjects in a randomized, double-blind, placebo-controlled study indicate that ITI-214 was safe and well-tolerated across a broad range of single oral
doses. Other compounds in the PDE1 portfolio outside the Takeda collaboration are being advanced for the treatment of other indications, including non-CNS therapeutic areas.
Our pipeline also includes pre-clinical programs that are focused on advancing drugs for the treatment of cognitive dysfunction, in both schizophrenia and Alzheimer's disease, and for disease
modification and the treatment of neurodegenerative disorders, including Alzheimer's disease.
We have assembled a
management team with significant industry experience to lead the discovery and development of our product candidates. We complement our management team with a group of scientific and clinical advisors that includes recognized experts in the fields
of schizophrenia and other central nervous system disorders, including Nobel Laureate, Dr. Paul Greengard, one of our co-founders.
Our corporate headquarters and laboratory are located at 3960 Broadway, New York, New York, and our telephone number is (212) 923-3344. We also have an office in Towson, Maryland. We maintain a
website at www.intracellulartherapies.com, to which we regularly post copies of our press releases as well as additional information about us. Our filings with the Securities and Exchange Commission, or SEC, will be available free of charge through
the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Information contained in our website does not constitute a part of this report or our other filings with the SEC.
All brand names or trademarks appearing in this report are the property of their respective holders. Use or display by us of other
parties' trademarks, trade dress, or products in this report is not intended to, and does not, imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owners.
Our Strategy
Our goal
is to discover and develop novel small molecule therapeutics for the treatment of CNS diseases in order to improve the lives of people suffering from such illnesses. Using our key understanding of intracellular signaling, we seek to accomplish our
goal, using our in-house expert drug discovery and clinical development teams, in two ways:
•
we seek to have the capability to develop first-in-class medications with novel mechanisms that have the potential to treat CNS diseases for which
there are no previously marketed drugs; and
6
•
we seek to develop drugs that can differentiate themselves in competitive markets by addressing aspects of CNS disease which are either not treated by
currently marketed drugs or can be effective with fewer side effects.
The key elements of our strategy are
to:
•
complete the development of ITI-007 for its lead indication, treatment of acute symptoms in schizophrenia, and for additional neuropsychiatric
indications, such as bipolar disorder and residual symptoms in schizophrenia;
•
expand the commercial potential of ITI-007 by investigating its usefulness in neurological areas, such as behavioral disturbances in dementia,
including Alzheimer's disease and autism spectrum disorder, and in additional neuropsychiatric indications, such as sleep disorders associated with neuropsychiatric and neurological disorders and major depressive disorder;
•
continue to develop with our collaboration partner, Takeda, PDE inhibitor compounds, such as ITI-214, for CNS indications such as CIAS; and
•
advance earlier stage product candidates in our pipeline.
Our Drug Discovery Platform and Capabilities
Based on
the pioneering efforts of Intra-Cellular co-founder and Nobel laureate, Dr. Paul Greengard, we have developed a detailed understanding of intracellular signaling pathways and intracellular targets. We have used that knowledge to develop several
state of the art technology platforms, including one called CNSProfile
TM
. This technology monitors the phosphoprotein changes elicited by major psychotropic drug classes and subclasses, and generates a unique molecular signature for drug compounds. By monitoring how the
levels of these phosphoproteins change
in vivo
, we identify intracellular signaling pathways through which several major drug classes operate. Along with what we believe to be state of the art drug discovery efforts, we have used, and may
continue to use, this information as a tool to validate our selection of preclinical candidate molecules.
During the years
ended December 31, 2012 and 2011, we incurred $15.5 million and $7.7 million in research and development expenses, respectively.
7
Disease and Market Overview
Our programs for small molecule therapeutics are designed to address various CNS diseases that we believe are underserved or unmet by currently available therapies and that represent large potential
commercial market opportunities for us. Background information on the CNS diseases and related commercial markets that may be addressed by our programs is set forth below.
Schizophrenia
Schizophrenia is a disabling and chronic mental
illness that is characterized by multiple symptoms during an acute phase of the disorder that can include so-called "positive" symptoms, such as hearing voices, grandiose beliefs and suspiciousness or paranoia. These symptoms can be
accompanied by additional, harder to treat symptoms, such as social withdrawal, blunted emotional response and speech deficits, collectively referred to as "negative" symptoms, difficulty concentrating and disorganized thoughts, or
cognitive impairment, depression and insomnia. Such symptoms often persist even after the acute positive symptoms subside, and contribute substantially to the social and employment disability associated with schizophrenia. Current antipsychotic
medications provide some relief for the symptoms associated with the acute phase of the disorder, but they do not effectively treat the residual phase symptoms associated with chronic schizophrenia. Moreover, currently available medications used to
treat acute schizophrenia are limited in their use due to side effects that can include movement disorders, weight gain, metabolic disturbances, and cardiovascular disorders.
According to the National Institute of Mental Health, over 1% of the world's population suffers from schizophrenia, and more than 3 million Americans suffer from the illness in any given year.
Worldwide sales of antipsychotic drugs used to treat schizophrenia and other CNS related disorders exceeded $40 billion in 2012. These drugs have been increasingly used by physicians to address a range of disorders in addition to schizophrenia,
including bipolar disorder and a variety of psychoses and related conditions in elderly patients. Despite their commercial success, current antipsychotic drugs have substantial limitations, including inadequate efficacy and severe side effects.
The first-generation, or typical, antipsychotics that were introduced in the late-1950s block dopamine receptors. While
typical antipsychotics are effective against positive symptoms of schizophrenia in many patients, these drugs often induce disabling motor disturbances, and they fail to address or worsen most of the negative symptoms and cognitive disturbances
associated with schizophrenia.
Most schizophrenia patients in the United States are treated today with second-generation, or
atypical, antipsychotics, which induce fewer motor disturbances than typical antipsychotics, but still fail to address most of the negative symptoms of schizophrenia. In addition, currently prescribed treatments do not effectively address or may
exacerbate cognitive disturbances associated with schizophrenia. It is believed that the efficacy of atypical antipsychotics is due to their interactions with dopamine and 5-HT2A receptors. The side effects induced by the atypical agents may include
weight gain, non-insulin dependent (type II) diabetes, cardiovascular side effects, sleep disturbances, and motor disturbances. We believe that these side effects generally arise either from non-essential receptor interactions or from excessive
dopamine blockade.
8
The limitations of currently available antipsychotics result in poor patient compliance. A
landmark study funded by the National Institute of Mental Health, the Clinical Antipsychotic Trials of Intervention Effectiveness, also referred to as CATIE, which was published in The New England Journal of Medicine in September 2005, found that
74% of patients taking typical or atypical antipsychotics discontinued treatment within 18 months because of side effects or lack of efficacy. We believe there is a large underserved medical need for new therapies that have improved side effect and
efficacy profiles.
Bipolar Disorder
Bipolar disorder, commonly referred to as manic-depressive illness, is characterized by extreme shifts in mood. Individuals with bipolar disorder may experience intense feelings of over-excitement,
irritability, and impulsivity with grandiose beliefs and racing thoughts, referred to as a manic episode. Symptoms of depression may include feeling tired, hopeless and sad, with difficulty concentrating and thoughts of suicide. Some people
experience both types of symptoms in the same "mixed" episode. Severe symptoms of bipolar disorder can be associated with hallucinations or delusions, otherwise referred to as psychosis.
Bipolar disorder affects 4.4% of the adult United States population, or approximately 13 million adults, with a worldwide prevalence
of 2.4%. In 2012, therapeutics used to treat bipolar disorder had global sales of approximately $6 billion.
Bipolar disorder
is often treated with antipsychotic medications alone or in combination with mood stabilizers. The side effects and safety risks associated with antipsychotic drugs in patients with bipolar disorder are similar to those experienced by patients with
schizophrenia. Moreover, a large national research program conducted from 1998 to 2005 called the Systematic Treatment Enhancement Program for Bipolar Disorder, or STEP-BD, followed 4,360 patients with bipolar disorder long term and showed that
about half of patients who were treated for bipolar disorder still experienced lingering and recurrent symptoms, indicating a clear need for improved treatments.
Alzheimer's Disease
Alzheimer's disease is a progressive
neurodegenerative disorder that slowly destroys memory and thinking skills, and eventually even the ability to carry out simple tasks. Its symptoms include cognitive dysfunction, memory abnormalities, progressive impairment in activities of daily
living, and a host of behavioral and neuropsychiatric symptoms. Alzheimer's disease primarily affects older people and, in most cases, symptoms first appear after age 60. Alzheimer's disease gets worse over time and is fatal.
The market for Alzheimer's disease therapeutics is categorized into two segments: acetylcholinesterase
inhibitors and NMDA receptor antagonists, which include Aricept
®
, Namenda
®
, Exelon
®
and Ebixa
®
.
Acetylcholinesterase inhibitors, which account for 40% of the total worldwide market, had total sales of $4.1 billion in 2011. In 2012, global sales of CNS therapeutics for dementia and Alzheimer's disease reached $8 billion.
9
According to the Alzheimer's Association, 5.2 million people in the United States are
living with Alzheimer's disease, and it is currently the fifth leading cause of death for people age 65 and older. It has been estimated that 35.6 million people worldwide were living with dementia in 2010. This number is expected to
nearly double to 65.7 million by 2030 and to 115.4 million by 2050. While the diagnostic criteria for Alzheimer's disease mostly focus on the related cognitive deficits, it is often the behavioral and psychiatric symptoms that are
most troublesome for caregivers and lead to poor quality of life for patients. These symptoms include agitation, aggressive behaviors, and psychosis. Studies have suggested that approximately 20% to 51% of Alzheimer's disease patients may
develop psychosis, commonly consisting of hallucinations and delusions. The diagnosis of Alzheimer's disease psychosis is associated with more rapid cognitive and functional decline and institutionalization.
The U.S. Food and Drug Administration, or FDA, has not approved any drug to treat the behavioral symptoms of Alzheimer's disease. As
symptoms progress and become more severe, physicians often resort to off-label use of antipsychotic medications in these patients. Current antipsychotic drugs are associated with a number of side effects, which can be problematic for elderly
patients with Alzheimer's disease. In addition, antipsychotic drugs may exacerbate the cognitive disturbances associated with Alzheimer's disease. Current antipsychotic drugs also have a boxed warning for use in elderly patients with
dementia-related psychosis due to increased mortality and morbidity. There is a large unmet medical need for a safe and effective therapy to treat the behavioral symptoms in patients with Alzheimer's disease.
Parkinson's Disease
Parkinson's disease is a chronic and progressive neurodegenerative disorder that involves malfunction and death of neurons in a region of the brain that controls movement. This neurodegeneration
creates a shortage of an important brain signaling chemical, or neurotransmitter, known as dopamine, thereby rendering patients unable to direct or control their movements in a normal manner. Parkinson's disease is characterized by well-known
motor symptoms, including tremors, limb stiffness, slowness of movements, and difficulties with posture and balance, as well as by non-motor symptoms, which include sleep disturbances, mood disorders, cognitive impairment and psychosis.
Parkinson's disease progresses slowly in most people and the severity of symptoms tends to worsen over time.
Parkinson's disease is the second most common neurodegenerative disorder after Alzheimer's disease. According to the National
Parkinson Foundation, about 1 million people in the United States and from approximately 4 to 6 million people worldwide suffer from this disease. Parkinson's disease is more common in people over 60 years of age, and the prevalence
of this disease is expected to increase significantly as the average age of the population increases. Parkinson's disease patients are commonly treated with dopamine replacement therapies, such as levodopa, commonly referred to as L-DOPA, which
is metabolized to dopamine, and dopamine agonists, which are molecules that mimic the action of dopamine. Sales of therapeutics such as L-DOPA and dopamine agonists used to treat the motor symptoms of the disease reached $2.5 billion in 2012.
10
Non-motor symptoms can be particularly distressing and even more troublesome to patients
with Parkinson's disease than the primary motor disturbances. Non-motor symptoms substantially contribute to the burden of Parkinson's disease and deeply affect the quality of life of patients and their caregivers. Non-motor symptoms of
Parkinson's disease are associated with increased caregiver stress and burden, nursing home placement, and increased morbidity and mortality.
Treatment of non-motor symptoms associated with Parkinson's disease poses a challenge to physicians. Current dopamine replacement drugs used to treat the motor symptoms of Parkinson's disease do
not help, and sometimes worsen, the non-motor symptoms. No drugs are currently approved by the FDA for treating the broad non-motor symptoms associated with Parkinson's disease, and this remains a large unmet medical need.
Depression
Major depressive disorder, or MDD, is a brain disorder that can be associated with symptoms of sadness, hopelessness, helplessness, feelings of guilt, irritability, loss of interest in formerly
pleasurable activities, cognitive impairment, disturbed sleep patterns, and suicide ideation or behavior. Different people may experience different symptoms, but everyone with major depression experiences symptoms that are severe enough to interfere
with everyday functioning, such as the ability to concentrate at work or school, social interactions, eating and sleeping. Sometimes the depressive episode can be so severe it is accompanied by psychosis (hallucinations and delusions). According to
the National Institute of Mental Health, approximately 3% of teenagers and approximately 7% of adults experience MDD each year. Worldwide sales of antidepressant drugs reached $11.9 billion in 2011. The antidepressant market is primarily composed of
selective serotonin reuptake inhibitors such as Lexapro
®
(marketed by Forest Laboratories and Lundbeck) and
selective norepinephrine reuptake inhibitors, or SNRIs, such as Cymbalta
®
(marketed by Eli Lilly).
Antipsychotics such as Seroquel
®
(marketed by Astrazeneca) and Abilify
®
(marketed jointly by Bristol Myers Squibb and Otsuka Pharmaceutical) are also used as adjunctive treatments with
antidepressant treatment. The National Institute of Mental Health-funded Sequenced Treatment Alternatives to Relieve Depression, or STAR*D, study showed that only one-third of treated patients experience complete remission of depressive symptoms.
Nearly two-thirds of patients were considered treatment-resistant.
11
Our Clinical Programs
Our pipeline includes two product candidates in clinical development and two product candidates in advanced pre-clinical testing. We believe that our product candidates offer innovative therapeutic
approaches and may provide significant advantages relative to current therapies. The following table summarizes our product candidates and programs:
ITI-007 (ITI-007 is the lead molecule in the ITI-007 program)
Our lead product candidate, ITI-007, possesses a mechanism of action targeting multiple brain systems and may allow a physician to fine
tune the drug's action in the brain by simple dose adjustments. At the lowest doses, ITI-007 acts primarily as a potent 5-HT2A receptor antagonist, blocking the activity of this receptor with minimal interaction with dopamine receptors and
serotonin transporters. As the dose is increased, ITI-007 interacts more robustly with these targets, including dopamine receptors, serotonin transporters and indirect modulation of glutamate signaling. The combination of ITI-007's high potency
blockade of 5-HT2A receptors, and the unique way in which ITI-007 interacts with the dopamine receptor, serotonin reuptake inhibition and enhancement of glutamate neurotransmission, may make it possible to select a clinical dose capable of treating
an array of symptoms associated with schizophrenia and other CNS disorders that is broader than that addressable by other antipsychotic drugs, yet without causing the side effects commonly experienced with use of such drugs. The differential
pharmacology of ITI-007 at different doses may allow physicians to customize dosing based on an individual patient's symptoms.
We believe these features of ITI-007 may be able to improve the quality of life of patients with schizophrenia to allow them to more fully integrate into their families and their workplace.
12
In addition, ITI-007 can be used to treat disorders at either low-doses (
e.g.,
sleep, aggression and agitation) or high-doses (
e.g.
, acute exacerbated and residual schizophrenia,
bipolar disorders, and mood disorders).
ITI-007 for the treatment of exacerbated and residual schizophrenia
ITI-007 has completed multiple Phase 1 and 2 clinical trials, and has demonstrated clinical signals consistent with
reductions in psychosis, depression and insomnia. Reductions in psychosis are consistent with the potential to treat acute schizophrenia, whereas reductions in depression and insomnia are consistent with the potential to treat residual phase
schizophrenia. ITI-007 has been shown to be safe and well-tolerated across a wide range of doses in these studies. Further, at doses that have demonstrated clinical activity, ITI-007 has caused fewer adverse effects than those typically associated
with antipsychotic drug treatment. These adverse side effects are a major cause of patient noncompliance with current antipsychotic therapies. Based on the successful completion of these studies, ITI-007 has advanced in development and is currently
being studied in a randomized, placebo and active controlled Phase 2 clinical trial for the treatment of acute exacerbated schizophrenia at multiple sites in the United States. We anticipate the results of this study will be available in the fourth
quarter of 2013. Additional clinical trials are planned to explore ITI-007's unique mechanism of action for addressing residual phase schizophrenia. We believe that ITI-007's pharmacological profile may expand its therapeutic use beyond
the treatment of acutely exacerbated schizophrenia to also include chronic residual schizophrenia by improving negative symptoms, mood, sleep and cognition.
ITI-007 for the treatment of bipolar disorder
The pharmacological profile
of ITI-007 offers the potential to treat bipolar mania, depression, and mixed symptoms at doses similar to those targeted for the treatment of schizophrenia. We believe that ITI-007 may be effective alone or in combination with mood stabilizers.
Given that many patients with bipolar disorder also experience disturbed sleep and cognitive impairment similar to that observed in schizophrenia, we believe that ITI-007 may treat a wide array of symptoms in patients with bipolar disorder,
including improvement of cognition and sleep. Phase 3 clinical trials to address the therapeutic utility of ITI-007 in bipolar disorder are planned to be conducted in parallel with the ITI-007 Phase 3 program for schizophrenia.
ITI-007 for the treatment of sleep deficits associated with neurologic and psychiatric disorders
In a Phase 2 clinical trial at low doses, ITI-007 improved sleep maintenance in patients with primary insomnia. This compound does not
induce sleep, but rather helps maintain sleep once sleep has been initiated. In addition, ITI-007 is not associated with next day cognitive impairment, or "hang-over," effects. We believe that ITI-007 may be particularly useful in the
treatment of sleep disorders that accompany neuropsychiatric and neurologic disorders, including schizophrenia, autism spectrum disorder, Parkinson's disease and dementia. Previous work has suggested that selective 5-HT2A receptor antagonists
increase deep, slow wave sleep in both humans and animals. We believe, however, that other neuropharmacological mechanisms, in addition to 5-HT2A receptor antagonism, such as engaging some dopamine modulation, may be
13
beneficial for a successful treatment of sleep maintenance insomnia in humans. ITI-007 represents a new approach to the treatment of sleep maintenance insomnia because of its unique pharmacology
and neuropharmacological interactions beyond selective 5-HT2A receptor antagonism. ITI-007 offers a potentially new approach to the treatment of sleep maintenance disorders, particularly in those disorders that accompany neuropsychiatric and
neurologic disorders. Many of these disorders are accompanied by profound sleep deficits, which impair day-time functioning including cognition, exacerbate disease symptoms and increase cost of care.
ITI-007 for the treatment of behavioral disturbances associated with dementia, including Alzheimer's Disease
Behavioral disturbances are common in dementia and Alzheimer's disease, and are a major component of the burden to caregivers, and
often lead to institutionalization. Although currently available treatments for patients with dementia mainly address cognitive disturbances, behavioral disturbances are considerably more problematic and likely more amenable to drug treatment.
Several behavioral symptoms are quite prevalent in patients with dementia, including patients with Alzheimer's disease. Rates of depression in Alzheimer's disease are estimated to be up to 87%, although most estimates are between 30% and
50%. Agitation and aggression are present in approximately 60% of patients. Sleep disturbances, particularly as an increased likelihood of day-night reversal, are present in up to approximately 60% of patients. In view of the potential multiple
beneficial effects of ITI-007 on aggression, agitation, sleep disorders and depression, and the lack of undesirable side effects, we believe that ITI-007 may provide a novel therapy for treating the behavioral disturbances accompanying dementia,
including Alzheimer's disease.
Overall, we believe ITI-007 represents a novel approach to treating neuropsychiatric and
neurological disorders, having different beneficial effects at different doses, and an excellent tolerability profile.
ITI-002 (PDE1
Inhibitors)
Our ITI-002 portfolio of compounds modulate CNS pathways that are critical to controlling cognition and
motor behavior through the inhibition of an important intracellular enzyme, phosphodiesterase 1, or PDE1. In March 2011, we entered into a license and collaboration agreement with Takeda to develop and commercialize selected PDE1 inhibitors in our
ITI-002 program for the treatment of CIAS. Cognitive deficits are believed to underlie much of the significant functional impairments observed in patients with schizophrenia. One of these portfolio compounds, ITI-214, has advanced into Phase 1
clinical trials. The results of the initial Phase 1 study in 70 subjects in a randomized, double-blind, placebo-controlled study indicated that ITI-214 was safe and well-tolerated across a broad range of single oral doses. Moreover, ITI-214
demonstrates a favorable pharmacokinetic profile consistent with once-a-day dosing. This study represents a significant milestone as the first use of a potent and highly specific PDE1 inhibitor in humans. We have worked closely with Takeda over the
last two years to advance ITI-214 into clinical development and to optimize select backup/follow-on compounds for treating various other CNS diseases, including Parkinson's disease and attention deficit disorders. Inhibition of PDE1 may also be
beneficial in a number of therapeutic indications
14
outside of CNS diseases, such as pulmonary arterial hypertension, heart failure, muscular dystrophy and inflammatory disease. Additional ITI-002 PDE1 inhibitor compounds outside the scope of the
Takeda collaboration are being pursued for the treatment of cardiovascular and other disorders. With its scientific strength in the PDE1 field, Intra-Cellular is exploring the potential utility of PDE1 inhibitors across a broad array of therapeutic
indications.
Additional PDE Inhibitors
There are multiple forms and isoforms of PDE with distinct roles in intracellular signaling. We have developed strong internal expertise in the design and synthesis of inhibitors specific for
individual PDE isoforms. Based on our understanding of the expression and functions of these isoforms in the CNS, we have identified PDE2 and PDE9 as compelling targets for drug discovery. We believe that inhibitors of these PDEs may be useful
in treating neurodegeneration and bioenergetic failure in a variety of CNS diseases.
ITI-012 (Casein Kinase 1 Inhibitors) and ITI-009
(GSAP Inhibitors)
We are pursuing early stage drug development programs targeting two different pathways thought to be
involved in the pathogenesis of Alzheimer's disease. The first program targets the enzyme casein kinase 1, the misregulation of which in Alzheimer's disease may provoke misfolding of a neuronal protein, tau, which has been linked to
cellular loss in the brains of patients with Alzheimer's disease. Our CK1 inhibitors are currently undergoing optimization before being advanced into preclinical development. We have a second program targeting the protein Gamma Secretase
Activating Protein, or GSAP. We have demonstrated in preclinical models that inhibiting GSAP lowers the level of a toxic protein located in the brain called Abeta. Scientists in the field of dementia and Alzheimer's disease believe that
inhibiting the accumulation of Abeta may slow the onset of Alzheimer's disease. The discovery of GSAP was made by Intra-Cellular in collaboration with Dr. Paul Greengard, Nobel Laureate and Intra-Cellular co-founder. The preclinical
characterization of this class of molecules is ongoing. We believe that these compounds have the potential to provide novel, disease-modifying treatments for Alzheimer's disease and related disorders.
Intellectual Property
Our Patent
Portfolio
We own or control over 60 patent families filed in the United States and other major markets worldwide,
including approximately 27 issued U.S. patents, 45 pending U.S. patent applications, 40 issued foreign patents, and 326 foreign patent applications, directed to novel compounds, formulations, methods of treatment, synthetic methods, and platform
technologies.
Our ITI-007 program on novel compounds for neuropsychiatric and neurodegenerative diseases includes patents
exclusively in-licensed from Bristol Myers Squibb on families of compounds, including the ITI-007 lead molecule. We have extensively characterized this lead and filed additional patent applications on polymorphs, formulations, additional
indications, derivatives and additional compounds. The ITI-007 lead molecule has composition of matter protection through 2025 and additional Orange Book-listable protection to 2034. Additionally,
15
we expect to have data exclusivity in the European Union for up to 11 years from launch. We also have a follow-on program, directed to compounds structurally related to the ITI-007 lead, but
having composition of matter protection beyond 2031.
Our program on PDE1 inhibitors for cognition and dopamine-mediated
disorders, such as Parkinson's disease, includes patent protection for the lead, ITI-214, as well as a wide range of filings on other proprietary compounds and indications. Certain PDE1 inhibitors are being developed under a joint
development agreement with Takeda, under which we received an upfront cash payment and are eligible to receive payments for development and sales, as well as royalty payments. We also have an option to co-promote with Takeda in the U.S., and we
retain certain rights to PDE1 inhibitor compounds and uses outside the scope of that collaboration. The ITI-214 lead molecule has composition of matter protection to 2029, with possible extensions and additional Orange Book-listable protection to
2034. Additionally, we expect to have data exclusivity in the European Union for up to 11 years from commercial launch. We are also evaluating potential follow-on compounds for ITI-214 which would have patent protection beyond 2030.
We have also filed patent applications on novel proprietary targets and lead compounds for Alzheimer's disease, which would provide
compound protection beyond 2028 or beyond 2034, depending on which compound is ultimately selected for development.
License Agreement
The Bristol-Myers Squibb License Agreement
On May 31, 2005 we entered into a world-wide, exclusive License Agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we hold a license to certain patents and know-how of BMS
relating to ITI-007 and other specified compounds. The agreement was amended on November 3, 2010. The licensed rights are exclusive, except BMS retains rights in specified compounds in the fields of obesity, diabetes, metabolic syndrome and
cardiovascular disease. However, BMS has no right to use, develop or commercialize ITI-007 and other specified compounds in any field of use. We have the right to grant sublicenses of the rights conveyed by BMS. We are obliged under the license to
use commercially reasonable efforts to develop and commercialize the licensed technology. We are also prohibited from engaging in the clinical development or commercialization of specified competitive compounds.
Under the agreement, we made an upfront payment to BMS, and we may be obliged to make milestone payments for each licensed product. We
are also obliged to make royalty payments on sales of licensed products. We are obliged to pay to BMS a percentage of non-royalty payments made in consideration of any sublicense.
The agreement extends, and royalties are payable, on a country-by-country and product-by-product basis, through the later of ten years
after first commercial sale of a licensed product in such country, expiration of the last licensed patent covering a licensed product, its method of manufacture or use, or the expiration of other government grants providing market exclusivity,
subject to certain rights of the parties to terminate the agreement on the occurrence of certain events. On termination of the agreement, we may be obliged to convey to BMS rights in developments relating to a licensed compound or licensed product,
including regulatory filings, research results and other intellectual property rights.
16
Collaboration Agreement
The Takeda Pharmaceutical License and Collaboration Agreement
On
February 25, 2011, we entered into a license and collaboration agreement with Takeda Pharmaceutical Company Limited under which we agreed to collaborate to research, develop and commercialize our proprietary compound ITI-214 and other selected
compounds that selectively inhibit PDE1 for use in the prevention and treatment of human diseases. As part of the agreement, we assigned to Takeda certain patents owned by us that claim ITI-214 and granted Takeda an exclusive license to develop and
commercialize compounds identified in the conduct of the research program that satisfy specified criteria. However, we have retained rights to all compounds that do not meet the specified criteria and we continue to develop PDE1 inhibitors outside
the scope of the agreement.
Under the terms of the agreement, we are conducting a research program with an initial term of
three years to identify and characterize compounds that meet certain specified criteria sufficient for further development by Takeda. We are responsible for our expenses incurred in the conduct of certain research activities specified in the
research plan. Takeda has agreed to reimburse us for expenses we incur in conducting additional research activities.
Takeda
is obliged to use commercially reasonable efforts to develop and commercialize licensed compounds at its expense, and has agreed to reimburse us for the costs and expenses of development activities we may perform. We have formed a joint steering
committee with Takeda to coordinate and oversee activities on which we collaborate under the agreement. We have the option to co-promote any licensed product in the United States by assuming responsibility for a certain percentage of the detailing
activity with respect to that product.
We are responsible for supplying Takeda with ITI-214 for nonclinical activities and
phase 1 clinical trials at our expense. Takeda is responsible, at its expense, for the manufacture and supply of compounds that it develops and commercializes under the agreement for all other activities.
Upon execution of the agreement, Takeda made a nonrefundable payment to us. We are eligible to receive payments of approximately
$500,000,000 in the aggregate upon achievement of certain development milestones and up to an additional $250,000,000 in the aggregate upon achievement of certain sales-based milestones, along with tiered royalty payments based on net sales by
Takeda.
The agreement extends, on a country-by-country and product-by-product basis, through the later of expiration of the
last licensed patent covering a licensed product, its method of manufacture or use, the expiration of other government grants providing market exclusivity or ten years after first commercial sale of a licensed product in such country, subject to
rights of the parties to sooner terminate the agreement on certain events and the right of Takeda to unilaterally terminate the agreement upon a specified number of days' prior notice. Upon the termination of
17
the agreement, Takeda is obliged to assign to us the patents covering ITI-214 assigned to Takeda upon the execution of the agreement, to grant us a license to develop and commercialize licensed
compounds developed by Takeda and to transfer to us certain materials, information and regulatory materials reasonably necessary for us to continue the development and commercialization of those compounds.
Manufacturing
We do not
own or operate manufacturing facilities for the production of any of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on one third-party contract manufacturer for
all of our required raw materials, active pharmaceutical ingredient, or API, and finished product for our preclinical research and clinical trials, including the Phase 2 trial for ITI-007 for the treatment of schizophrenia. We believe that we would
be able to contract with another third-party contract manufacturer to obtain API if our existing source of API was no longer available, but there is no assurance that API would be available from another third-party manufacturer on acceptable terms,
on the timeframe that our business would require, or at all. We do not have long-term agreements with our existing third-party contract manufacturer. We also do not have any current contractual relationships for the manufacture of commercial
supplies of any of our product candidates if they are approved. As ITI-007 and any of our other product candidates continue to progress towards potential regulatory approval, we intend to enter into agreements with a third-party contract
manufacturer and one or more back-up manufacturers for the commercial production of those products. Development and commercial quantities of any products that we develop will need to be manufactured in facilities, and by processes, that comply with
the requirements of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval. We currently employ internal resources to manage our manufacturing contractors.
Sales and Marketing
We
currently have no marketing, sales or distribution capabilities. In order to commercialize any of our product candidates, we must develop these capabilities internally or through collaboration with third parties. In selected therapeutic areas where
we feel that our product candidates can be commercialized by a specialty sales force that calls on a limited and focused group of physicians, we may plan to participate in the commercialization of our product candidates in the United States. In
therapeutic areas that require a large sales force selling to a large and diverse prescribing population, we may elect to commercialize through, or in collaboration with, strategic partners. We may choose to commercialize our products in markets
outside of the United States by establishing one or more strategic alliances in the future.
Competition
We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and
research institutions and governmental agencies, both in the United States and abroad. We compete, or will compete, with existing and new products being developed by our competitors. Some of these competitors are pursuing the development of
pharmaceuticals that target the same diseases and conditions that our research and development programs target.
18
Even if we are successful in developing our product candidates, the
resulting products would compete with a variety of established drugs in the areas of our targeted CNS therapeutic indications. Our potential products for the treatment of schizophrenia and bipolar disorder would compete with, among other branded
products, Abilify
®
, marketed jointly by Bristol-Myers Squibb and Otsuka Pharmaceutical; Fanapt
®
, marketed by Novartis Pharmaceuticals; Seroquel XR
®
, marketed by AstraZeneca;
Invega
®
, marketed by Janssen; and Latuda
®
, marketed by Sunovion. In addition, our product candidates, if approved, will compete with, among other generic antipsychotic products, haloperidol, risperidone,
quetiapine, olanzapine and clozapine.
In addition, the companies described above and other competitors may have a variety of
drugs in development or awaiting FDA approval that could reach the market and become established before we have a product to sell. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may
develop. Many of our competitors are using technologies or methods different or similar to ours to identify and validate drug targets and to discover novel small molecule drugs. Many of our competitors and their collaborators have significantly
greater experience than we do in the following:
•
identifying and validating targets;
•
screening compounds against targets;
•
preclinical and clinical trials of potential pharmaceutical products; and
•
obtaining FDA and other regulatory clearances.
In addition, many of our competitors and their collaborators have substantially greater advantages in the following areas:
•
capital resources;
•
research and development resources;
•
manufacturing capabilities; and
•
sales and marketing.
Smaller companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaborative arrangements with large pharmaceutical and established biotechnology
companies. Many of our competitors have products that have been approved by the FDA or are in advanced development. We face competition from other companies, academic institutions, governmental agencies and other public and private research
organizations for collaborative arrangements with pharmaceutical and biotechnology companies, in recruiting and retaining highly qualified scientific and management personnel and for licenses to additional technologies. Our competitors, either alone
or with their collaborators, may succeed in developing technologies or drugs that are more effective, safer, and more affordable or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us.
Developments by others may render our product candidates or our technologies obsolete. Our failure to compete effectively could have a material adverse effect on our business.
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Government Regulation
United States—FDA Process
The research, development, testing,
manufacture, labeling, promotion, advertising, import and export, distribution and marketing, among other things, of drug products are extensively regulated by governmental authorities in the United States and other countries. In the United States,
the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA
refusal to approve pending New Drug Applications, or NDAs, warning letters, fines, civil penalties, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.
Drug Approval Process.
None of our drug product candidates may be marketed in the United States until the drug has received FDA
approval. Such approval can take many years to obtain and may be rejected by the FDA at a number of steps. The steps required before a drug may be marketed in the United States generally include the following:
•
completion of extensive pre-clinical laboratory tests, animal studies, and formulation studies in accordance with the FDA's Good Laboratory
Practice, or GLP, regulations;
•
submission to the FDA of an Investigational New Drug, or IND, for human clinical testing, which must become effective before human clinical trials may
begin;
•
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each proposed indication;
•
submission to the FDA of an NDA after completion of all clinical trials;
•
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the active pharmaceutical ingredient, or
API, and finished drug product are produced and tested to assess compliance with current Good Manufacturing Practices, or cGMPs;
•
satisfactory completion of FDA inspections of clinical trial sites to assure that data supporting the safety and effectiveness of product candidates
has been generated in compliance with Good Clinical Practices; and
•
FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.
The development and approval process requires substantial time, effort and financial resources, and we cannot be certain that any
approvals for our product candidates will be granted on a timely basis, if at all.
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Pre-clinical tests include laboratory evaluation of product chemistry, toxicity and
formulation, as well as animal studies. The conduct of the pre-clinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the pre-clinical tests, together with manufacturing
information and analytical data, are submitted to the FDA as part of an IND, which 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 the conduct of the trial, such as whether human research subjects will be exposed to an unreasonable health risk. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or
questions before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin.
Clinical trials involve administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the
objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be provided to the FDA as part of a separate submission to the IND. Further, an Institutional Review Board, or
IRB, for each medical center proposing to conduct the clinical trial must review and approve the study protocol and informed consent information for study subjects for any clinical trial before it commences at that center, and the IRB must monitor
the study until it is completed. There are also requirements governing reporting of on-going clinical trials and clinical trial results to public registries. Study subjects must sign an informed consent form before participating in a clinical trial.
Clinical trials necessary for product approval typically are conducted in three sequential phases, but the phases may
overlap.
•
Phase 1 usually involves the initial introduction of the investigational drug into a limited population, typically healthy humans, to evaluate its
short-term safety, dosage tolerance, metabolism, pharmacokinetics and pharmacologic actions, and, if possible, to gain an early indication of its effectiveness.
•
Phase 2 usually involves trials in a limited patient population to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify
possible adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy of the drug for specific targeted indications. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning
larger and more expensive Phase 3 clinical trials.
•
Phase 3 trials, commonly referred to as pivotal studies, are undertaken in an expanded patient population at multiple, geographically dispersed
clinical trial centers to further evaluate clinical efficacy and test further for safety by using the drug in its final form. There can be no assurance that Phase 1, Phase 2 or Phase 3 testing will be completed successfully within any specified
period of time, if at all. Furthermore, we, the FDA or an IRB may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Moreover, the FDA may
approve an NDA for a product candidate, but require that the sponsor conduct additional clinical trials to further assess the drug after NDA approval under a post-approval commitment. Post-approval trials are typically referred to as Phase 4
clinical trials.
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During the development of a new drug, sponsors are given an opportunity to meet with the FDA
at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information
about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach an agreement on the next phase of development. Sponsors typically use the end of Phase 2 meeting to discuss their Phase 2 clinical results and
present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug. A sponsor may request a Special Protocol Assessment, or SPA, to reach an agreement with the FDA that the protocol design, clinical
endpoints, and statistical analyses are acceptable to support regulatory approval of the product candidate with respect to effectiveness in the indication studied. If such an agreement is reached, it will be documented and made part of the
administrative record, and it will be binding on the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue essential to determining the safety or effectiveness of the product after clinical studies begin,
or if the sponsor fails to follow the protocol that was agreed upon with the FDA. There is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA.
Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information
about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug
candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug
candidate does not undergo unacceptable deterioration over its shelf life.
Assuming successful completion of the required
clinical testing, the results of pre-clinical studies and of clinical studies, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of an NDA requesting
approval to market the product for one or more indications. An NDA must be accompanied by a significant user fee, which is waived for the first NDA submitted by a qualifying small business. In July 2012, the Food and Drug Administration Safety and
Innovation Act, or FDASIA, was signed into law. Among other things, FDASIA reauthorizes the FDA's authority to collect user fees from industry participants to fund reviews of innovator drugs.
The testing and approval process requires substantial time, effort and financial resources. The FDA will review the NDA and may deem it
to be inadequate to support approval, and we cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to the appropriate advisory committee, typically a panel of clinicians, for review,
evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee, but it typically follows such recommendations.
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Before approving an NDA, the FDA inspects the facility or the facilities at which the drug
and/or its active pharmaceutical ingredient is manufactured and will not approve the product unless the manufacturing is in compliance with cGMPs. If the FDA evaluates the NDA and the manufacturing facilities are deemed acceptable, the FDA may issue
an approval letter, or in some cases a Complete Response Letter. The approval letter authorizes commercial marketing of the drug for specific indications. As a condition of NDA approval, the FDA may require post-marketing testing and surveillance to
monitor the drug's safety or efficacy, or impose other conditions. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require
additional clinical data and/or additional clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. Even if such additional information is submitted,
the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials is not always conclusive and the FDA may interpret data differently than we or our collaborators interpret data. Alternatively, the FDA
could also approve the NDA with a Risk Evaluation and Mitigation Strategy to mitigate risks of the drug, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods,
patient registries or other risk minimization tools. Once the FDA approves a drug, the FDA may withdraw product approval if on-going regulatory requirements are not met or if safety problems occur after the product reaches the market. In addition,
the FDA may require testing, including Phase 4 clinical trials, and surveillance programs to monitor the safety effects of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product
based on the results of these post-marketing programs or other information.
Post-Approval Requirements.
After a drug
has been approved by the FDA for sale, the FDA may require that certain post-approval requirements be satisfied, including the conduct of additional clinical studies. In addition, certain changes to an approved product, such as adding new
indications, making certain manufacturing changes, or making certain additional labeling claims, are subject to further FDA review and approval. Before a company can market products for additional indications, it must obtain additional approvals
from the FDA, typically a new NDA. Obtaining approval for a new indication generally requires that additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for any product candidate will be
approved on a timely basis, or at all.
If post-approval conditions are not satisfied, the FDA may withdraw its approval of
the drug. In addition, holders of an approved NDA are required to (i) report certain adverse reactions to the FDA and maintain pharmacovigilance programs to proactively look for these adverse events; (ii) comply with certain requirements
concerning advertising and promotional labeling for their products; and (iii) continue to have quality control and manufacturing procedures conform to cGMPs after approval. The FDA periodically inspects the sponsor's records related to
safety reporting and/or manufacturing facilities, which includes assessment of on-going compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP
compliance. We intend to
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use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may identify compliance issues 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 after approval may result in restrictions on a product, manufacturer or holder of an approved
NDA, including recall of the product from the market or withdrawal of approval of the NDA for that drug.
Patent Term
Restoration and Marketing Exclusivity.
Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and
Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory
review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product's approval date. The patent term restoration period is generally one-half the time between the effective
date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the extension must be
requested prior to expiration of the patent. The U.S. Patent and Trademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for
restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant
NDA.
Data and market exclusivity provisions under the FDCA also can delay the submission or the approval of certain
applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously
approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or
ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four
years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than
bioavailability studies, conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers
only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the
submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct, or obtain a right of reference to all of the pre-clinical studies, adequate and well-controlled clinical trials necessary to demonstrate
safety and effectiveness.
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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. Whether or not we
obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials and approval of foreign countries or economic areas, such as the European Union, before
we may market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter
than that required for FDA approval.
In the European Economic Area, or EEA, which is comprised of the 27 member states of the
European Union, or Member States, plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of MAs:
•
Community MAs – These are issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal
Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and are valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products,
orphan medicinal products, and medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active
substance not yet authorized in the EEA; for products that constitute a significant therapeutic, scientific or technical innovation; or for products that are in the interest of public health in the European Union.
•
National MAs – These are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, and are
available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through
the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized
Procedure, an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State. The competent authority of the Reference
Member State prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for
their approval. If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling or packaging proposed by the Reference Member State, the product is subsequently granted a
National MA in all the Member States (i.e., in the Reference Member State and the Member States Concerned).
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Under the above described procedures, before granting the MA, the EMA or the competent
authorities of the Member States of the EEA assess the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.
As in the United States, it may be possible in foreign countries to obtain a period of market and/or data exclusivity that would have the effect of postponing the entry into the marketplace of a
competitor's generic product. For example, if any of our products receive marketing approval in the EEA, we expect they will benefit from eight years of data exclusivity and ten years of marketing exclusivity. An additional non-cumulative
one-year period of marketing exclusivity is possible if during the data exclusivity period (the first eight years of the 10-year marketing exclusivity period), we obtain an authorization for one or more new therapeutic indications that are deemed to
bring a significant clinical benefit compared to existing therapies. The data exclusivity period begins on the date of the product's first marketing authorization in the European Union and prevents generics from relying on the marketing
authorization holder's pharmacological, toxicological and clinical data for a period of eight years. After eight years, a generic product application may be submitted and generic companies may rely on the marketing authorization holder's
data. However, a generic cannot launch until two years later (or a total of 10 years after the first marketing authorization in the European Union of the innovator product), or three years later (or a total of 11 years after the first marketing
authorization in the European Union of the innovator product) if the marketing authorization holder obtains marketing authorization for a new indication with significant clinical benefit within the eight-year data exclusivity period. In Japan, our
products may be eligible for eight years of data exclusivity. There can be no assurance that we will qualify for such regulatory exclusivity, or that such exclusivity will prevent competitors from seeking approval solely on the basis of their own
studies.
When conducting clinical trials in the European Union, we must adhere to the provisions of the European Union
Clinical Trials Directive and the laws and regulations of the European Union Member States implementing them. These provisions require, among other things, that the prior authorization of an Ethics Committee and the competent Member State authority
is obtained before commencing the clinical trial.
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Pricing and Reimbursement
In the United States and internationally, sales of products that we market in the future, and our ability to generate revenues on such
sales, are dependent, in significant part, on the availability of adequate coverage and reimbursement from third-party payors, such as state and federal governments, managed care providers and private insurance plans. Private insurers, such as
health maintenance organizations and managed care providers, have implemented cost-cutting and reimbursement initiatives and likely will continue to do so in the future. These include establishing formularies that govern the drugs and biologics that
will be offered and the out-of-pocket obligations of member patients for such products. We may need to conduct pharmacoeconomic studies to demonstrate the cost-effectiveness of our products for formulary coverage and reimbursement. Even with such
studies, our products may be considered less safe, less effective or less cost-effective than existing products, and third-party payors may not provide coverage and reimbursement for our product candidates, in whole or in part.
In addition, particularly in the United States and increasingly in other countries, we are required to provide discounts and pay rebates
to state and federal governments and agencies in connection with purchases of our products that are reimbursed by such entities. It is possible that future legislation in the United States and other jurisdictions could be enacted to potentially
impact reimbursement rates for the products we are developing and may develop in the future and could further impact the levels of discounts and rebates paid to federal and state government entities. Any legislation that impacts these areas could
impact, in a significant way, our ability to generate revenues from sales of products that, if successfully developed, we bring to market.
Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes. There have been, and we expect there will continue to be, legislative and
regulatory proposals to change the health care system in ways that could significantly affect our future business. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation
Act, or collectively, the PPACA, enacted in March 2010, substantially changes the way health care is financed by both governmental and private insurers. Among other cost containment measures, PPACA establishes:
•
an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;
•
a new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer
discounts to eligible beneficiaries during their coverage gap period, or the donut hole; and
•
a new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.
In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. On August 2,
2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select
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Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby
triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama
signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA, among other things, also reduced
Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Sales and Marketing
The FDA regulates all advertising and promotion activities for products under its jurisdiction prior to and after approval, including standards and regulations for direct-to-consumer advertising,
dissemination of off-label information, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the
approved label. Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new or supplemental NDA, which may
require us to collect additional data or conduct additional pre-clinical studies and clinical trials. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective
advertising, consent decrees and the full range of civil and criminal penalties available to the FDA.
Physicians may
prescribe legally available drugs for uses that are not described in the drug's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties, and often reflect a
physician's belief that the off-label use is the best treatment for the patient. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers'
communications regarding off-label uses. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal
penalties available to the FDA.
Outside the United States, our ability to market a product is contingent upon obtaining
marketing authorization from the appropriate regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from country to country.
We may also be subject to various federal and state laws pertaining to health care "fraud and abuse," including anti-kickback
laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription
of a particular drug. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations and very few court decisions addressing industry practices, it is possible that
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our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment to
third-party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities
relating to the sale and marketing of our products may be subject to scrutiny under these laws.
Violations of fraud and abuse
laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal health care programs (including Medicare and Medicaid) and corporate integrity agreements, which
impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties also may be imposed upon executive officers and employees, including criminal sanctions against executive officers under the
so-called "responsible corporate officer" doctrine, even in situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing. Given the penalties that may be imposed on companies and individuals if
convicted, allegations of such violations often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and
corporate integrity agreements. If the government was to allege or convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals have the ability to bring similar actions. Our activities
could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Further, there are an increasing number of state laws that
require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, our reporting
actions could be subject to the penalty provisions of the pertinent state authorities.
Employees
As of the date of this report, we employ 21 employees, 20 of whom are full-time. To successfully develop our drug candidates, we must be
able to attract and retain highly skilled personnel. We anticipate hiring additional employees for research and development, clinical and regulatory affairs and general and administrative activities over the next few years. In addition, we intend to
use clinical research organizations and third parties to perform our clinical studies and manufacturing.
Properties
Our headquarters are located at 3960 Broadway, New York, New York 10032, where we occupy approximately 13,000 square feet of office and
laboratory space. The term of the lease expires September 30, 2014, and we have the option to extend the term of the lease for one additional year, until September 30, 2015. We also lease office space in Towson, Maryland on a month to
month basis.
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Legal Proceedings
We are not currently involved in any material legal proceedings.
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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited
to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," "could," and similar expressions
or phrases, or the negative of those expressions or phrases identify forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements
are based on our projections of the future that are subject to known and unknown risks and uncertainties and other factors that may cause our actual results, level of activity, performance or achievements expressed or implied by these
forward-looking statements, to differ. The sections in this report entitled "Description of the Business of Intra-Cellular Therapies, Inc.," "Risk Factors," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as well as other sections in this report, discuss some of the factors that could contribute to these differences. These forward-looking statements include, among other things, statements about:
•
the initiation, cost, timing, progress and results of our development activities, preclinical studies and clinical trials;
•
the timing of and our ability to obtain and maintain regulatory approval of our existing product candidates, any product candidates that we may
develop, and any related restrictions, limitations, and/or warnings in the label of any approved product candidates;
•
our plans to research, develop and commercialize our future product candidates;
•
our collaborators' election to pursue research, development and commercialization activities;
•
our ability to attract collaborators with development, regulatory and commercialization expertise;
•
our ability to obtain and maintain intellectual property protection for our product candidates;
•
our ability to successfully commercialize our product candidates;
•
the size and growth of the markets for our product candidates and our ability to serve those markets;
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the rate and degree of market acceptance of any future products;
•
the success of competing drugs that are or become available;
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•
regulatory developments in the United States and other countries;
•
the performance of our third-party suppliers and manufacturers and our ability to obtain alternative sources of raw materials;
•
our ability to obtain additional financing;
•
our use of the proceeds from our recently completed private placement;
•
the accuracy of our estimates regarding expenses, future revenues, capital requirements and the need for additional financing; and
•
our ability to attract and retain key scientific or management personnel.
Other unknown or unpredictable factors also could harm our results. Consequently, actual results or developments anticipated by us may
not be realized or, even if substantially realized, may not have the expected consequences to, or effects on, us. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. Except
as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this report.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. In addition to the other information set forth in this Current Report on Form 8-K, you should carefully consider the factors discussed
below when considering an investment in our common stock. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations and financial condition could suffer significantly. As a result, you
could lose some or all of your investment in our common stock. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business.
Risks Related to Our Business
We currently do not have, and may never have, any products that generate significant revenues.
We have a limited operating history on which to evaluate our business and prospects. To date, we have not generated any product revenues from our product candidates currently in development. We cannot
guarantee that any of our product candidates currently in development will ever become marketable products.
We must
demonstrate that our drug candidates satisfy rigorous standards of safety and efficacy for their intended uses before the FDA, and other regulatory authorities in the European Union and elsewhere will approve them for commercialization. Significant
additional research, preclinical testing and clinical testing is required before we can file applications with the FDA or other regulatory authorities for premarket approval of our drug candidates. In addition, to compete effectively, our drugs must
be easy to administer, cost-effective and economical to manufacture on a commercial scale. We may not achieve any of these objectives. ITI-007, our most advanced drug candidate, is currently in Phase 2 clinical trials and ITI-214 is currently in
Phase 1 clinical trials. We cannot be certain that the clinical development of these or any other drug candidates in preclinical testing or clinical development will be successful, that we will receive the regulatory approvals required to
commercialize them or that any of our other research and drug discovery programs will yield a drug candidate suitable for investigation through clinical trials. Our commercial revenues from our product candidates currently in development, if any,
will be derived from sales of drugs that will not become marketable for several years, if at all.
There is no guarantee that our
currently ongoing Phase 2 or our other planned clinical trials for ITI-007 in acute schizophrenia or in other indications will be successful.
In our Phase 1 and initial Phase 2 clinical trials, our lead product candidate, ITI-007, has demonstrated improved sleep maintenance, and clinical signals consistent with reduction in psychosis,
depression and insomnia. We are currently evaluating ITI-007 in a randomized, placebo and active controlled Phase 2 clinical trial for the treatment of acute schizophrenia. We currently anticipate the results of this trial will be available in the
fourth quarter of 2013. Our preclinical studies and initial clinical trials demonstrate that ITI-007 has shown evidence of addressing the symptoms of schizophrenia without causing cardiovascular and metabolic abnormalities, or motor impairments.
Further, we believe ITI-007 may be effective at doses that
33
do not cause adverse effects displayed by existing antipsychotic drugs that tend to lead to high rates of noncompliance by the patients who most need these drugs. We are currently in the process
of attempting to prove our hypotheses in later-stage clinical trials.
The historical rate of failures for product candidates
in clinical development and late-stage clinical trials is high. While we are currently conducting our Phase 2 clinical trial in patients with acute schizophrenia and plan to conduct further clinical studies in patients with acute schizophrenia and
other indications, there is no guarantee that we will have the same level of success in these trials as we have had in our earlier clinical trials, or be successful at all.
In addition, although we believe that ITI-007 and follow-on compounds may also have clinical utility in indications other than acute schizophrenia, such as behavioral disturbances in dementia, bipolar
disorder, intermittent explosive disorder, non-motor disorders associated with Parkinson's disease, obsessive compulsive disorder and anxiety disorders and post-traumatic stress disorder, we have never tested ITI-007 in clinical trials for
these other indications.
If we do not successfully complete clinical development of ITI-007, we will be unable to market and
sell products derived from it and to generate product revenues. Even if we do successfully complete clinical trials for ITI-007 in patients with acute schizophrenia, those results are not necessarily predictive of results of future pivotal trials
that may be needed before we may submit an NDA to the FDA for the initial or other future indications. Of the vast number of drugs in development, only a small percentage result in the submission of an NDA to the FDA, and even less result in the NDA
ultimately being approved by the FDA for commercialization.
Safety issues with our product candidates, or with product candidates or
approved products of third parties that are similar to our product candidates, could give rise to delays in the regulatory approval process, restrictions on labeling or product withdrawal after approval.
Problems with product candidates or approved products marketed by third parties that utilize the same therapeutic target or that belong
to the same therapeutic class as our product candidates could adversely affect the development, regulatory approval and commercialization of our product candidates. In 2012, the FDA released draft guidance recommending that prospective suicidality
assessments be performed in clinical trials of any drug being developed for a psychiatric indication. Our development programs are focused on psychiatric indications. Our PDE1 program is a novel target and may have unexpected safety effects that do
not appear until late in clinical development or after commercial approval.
Discovery of previously unknown class effect
problems may prevent or delay clinical development and commercial approval of product candidates or result in restrictions on permissible uses after their approval, including withdrawal of the medicine from the market. Many drugs acting on the CNS
include boxed warnings and precautions related to suicidal behavior or ideation, driving impairment, somnolence/sedation and dizziness, discontinuation, weight gain, non-insulin dependent (type II) diabetes, cardiovascular side effects, sleep
disturbances, and motor disturbances. If we or others later identify undesirable side effects caused by the mechanisms of action or classes of our product candidates or specific product candidates:
•
we may be required to conduct additional clinical trials or implement a Risk Evaluation and Mitigation Strategies program prior to approval;
34
•
regulatory authorities may not approve our product candidates or, as a condition of approval, require specific warnings and contraindications;
•
regulatory authorities may withdraw their approval of the product and require us to take our drug off the market;
•
we may have limitations on how we promote our drugs;
•
sales of products may decrease significantly;
•
we may be subject to litigation or product liability claims; and
•
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase our commercialization costs and expenses, which, in turn, could
delay or prevent us from generating significant revenues from its sale.
Finally, if the FDA determines that a drug may
present a risk of substance abuse, it can recommend to the Drug Enforcement Administration that the drug be scheduled under the Controlled Substances Act. Any failure or delay in commencing or completing clinical trials or obtaining regulatory
approvals for our product candidates would delay commercialization of our product candidates, and severely harm our business and financial condition.
If we seek to enter into strategic alliances for our drug candidates, but fail to enter into and maintain successful strategic alliances, we may have to reduce or delay our drug candidate
development or increase our expenditures.
An important element of a biotechnology company's strategy for
developing, manufacturing and commercializing its drug candidates may be to enter into strategic alliances with pharmaceutical companies or other industry participants to advance its programs and enable it to maintain its financial and operational
capacity. We may face significant competition in seeking appropriate alliances. If we seek such alliances, we may not be able to negotiate alliances on acceptable terms, if at all. In addition, these alliances may be unsuccessful. If we seek such
alliances and then fail to create and maintain suitable alliances, we may have to limit the size or scope of, or delay, one or more of our drug development or research programs. If we elect to fund drug development or research programs on our own,
we will have to increase our expenditures and will need to obtain additional funding, which may be unavailable or available only on unfavorable terms.
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To the extent we are able to enter into collaborative arrangements or strategic alliances, we will be
exposed to risks related to those collaborations and alliances.
We are currently party to a license and collaboration
agreement with Takeda Pharmaceutical Company Limited. Biotechnology companies at our stage of development sometimes become dependent upon collaborative arrangements or strategic alliances to complete the development and commercialization of drug
candidates, particularly after the Phase 2 stage of clinical testing. If we elect to enter into collaborative arrangements or strategic alliances, these arrangements may place the development of our drug candidates outside our control, may require
us to relinquish important rights or may otherwise be on terms unfavorable to us.
Dependence on collaborative arrangements or
strategic alliances would subject us to a number of risks, including the risk that:
•
we may not be able to control the amount and timing of resources that our collaborators may devote to the drug candidates;
•
our collaborators may experience financial difficulties;
•
we may be required to relinquish important rights, such as marketing and distribution rights;
•
business combinations or significant changes in a collaborator's business strategy may also adversely affect a collaborator's willingness or
ability to complete its obligations under any arrangement;
•
a collaborator could independently move forward with a competing drug candidate developed either independently or in collaboration with others,
including our competitors; and
•
collaborative arrangements are often terminated or allowed to expire, which would delay the development and may increase the cost of developing our
drug candidates.
We expect our net losses to continue for at least several years and are unable to predict the extent
of future losses or when we will become profitable, if ever.
We have experienced significant net losses since our
inception. As of June 30, 2013, we had an accumulated deficit of approximately $44.6 million. We expect to incur net losses over the next several years as we advance our programs and incur significant clinical development costs. We have not
received, and do not expect to receive for at least the next several years, any revenues from the commercialization of our product candidates. Substantially all of our revenues for the year ended December 31, 2012 were from our license and
collaboration agreement with Takeda and our agreements with various U.S. governmental agencies and other parties, including our research and development grants. We anticipate that our collaborations, which provide us with research funding and
potential milestone payments will continue to be our primary sources of revenues for the next several years. We cannot be certain that the milestones required to trigger payments under our existing collaborations will be achieved or that we will
enter into additional collaboration agreements. To obtain revenues from our product candidates, we must succeed, either alone or with others, in developing, obtaining regulatory approval for, and manufacturing and marketing drugs with significant
market potential. We may never succeed in these activities, and may never generate revenues that are significant enough to achieve profitability.
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If we fail to obtain the capital necessary to fund our operations, we will be unable to successfully
develop our products.
We have consumed substantial amounts of capital since our inception. Our cash, cash equivalents
and investment securities totaled $10.3 million at June 30, 2013. On August 29, 2013, immediately prior to the Merger, Intra-Cellular received proceeds of approximately $60.0 million from the closing of its private placement of
Intra-Cellular common stock, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular's then outstanding convertible promissory notes, and which resulted in net proceeds,
after expenses, of approximately $40.0 million. While we believe that our existing cash resources and anticipated payments from our existing collaborations will be sufficient to fund our cash requirements for the next 12 months, we will require
significant additional financing in the future to continue to fund our operations. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:
•
the progress in, and the costs of, our preclinical studies and clinical trials and other research and development programs;
•
the scope, prioritization and number of our research and development programs;
•
the ability of our collaborators and us to reach the milestones, and other events or developments, triggering payments under our collaboration
agreements or to otherwise make payments under these agreements;
•
our ability to enter into new, and to maintain existing, collaboration and license agreements;
•
the extent to which our collaborators are obligated to reimburse us for clinical trial costs under our collaboration agreements;
•
the costs involved in filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
•
the costs of securing manufacturing arrangements for clinical or commercial production;
•
the costs of preparing applications for regulatory approvals for our product candidates;
•
the costs of establishing, or contracting for, sales and marketing capabilities if we obtain regulatory clearances to market our product candidates;
and
•
the costs associated with litigation.
Until we can generate significant continuing revenues, we expect to satisfy our future cash needs through our existing cash, cash equivalents and investment securities, strategic
37
collaborations, private or public sales of our securities, debt financings, grant funding, or by licensing all or a portion of our product candidates or technology. Turmoil and volatility in the
financial markets have adversely affected the market capitalizations of many biotechnology companies, and generally made equity and debt financing more difficult to obtain. This, coupled with other factors, may limit our access to additional
financing over the near-term future. This could have a material adverse effect on our ability to access sufficient funding. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not
available, we will be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts.
Our management has broad discretion over the use of our cash and we may not use our cash effectively, which could adversely affect our results of operations.
Our management has significant flexibility in applying our cash resources and could use these resources for corporate purposes that do
not increase our market value, or in ways with which our stockholders may not agree. We may use our cash resources for corporate purposes that do not yield a significant return or any return at all for our stockholders, which could adversely affect
our future growth prospects.
Our lead product candidate, ITI-007, is only part way through the clinical trials we anticipate needing to
complete before we may be able to submit an NDA to the FDA. Clinical trials are long, expensive and unpredictable, and there is a high risk of failure.
Preclinical testing and clinical trials are long, expensive and unpredictable processes that can be subject to delays. It may take several years to complete the preclinical testing and clinical
development necessary to commercialize a drug, and delays or failure can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in preclinical testing and early clinical trials does not ensure
that later clinical trials will be successful. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials.
In connection with clinical trials, we face risks that a product candidate may not prove to be efficacious; patients may die or suffer
other adverse effects for reasons that may or may not be related to the product candidate being tested; the results may not confirm the positive results of our earlier preclinical studies and clinical trials; and the results may not meet the level
of statistical significance required by the FDA or other regulatory agencies. If we do not successfully complete preclinical and clinical development, we will be unable to market and sell products derived from our product candidates and to generate
product revenues. Even if we do successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before an NDA may be submitted to the FDA or the FDA may approve the NDA.
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Delays, suspensions and terminations in our clinical trials could result in increased costs to us,
delay our ability to generate product revenues and therefore may have a material adverse effect on our business, results of operations and future growth prospects.
The commencement of clinical trials can be delayed for a variety of reasons, including: delays in demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;
reaching agreement on acceptable terms with prospective contract research organizations and clinical trial sites; manufacturing sufficient quantities of a product candidate; obtaining clearance from the FDA to commence clinical trials pursuant to an
IND; obtaining institutional review board approval to conduct a clinical trial at a prospective clinical trial site; and patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the
protocol, the proximity of patients to clinical trial sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial.
Once a clinical trial has begun, it may be delayed, suspended or terminated due to a number of factors, including: ongoing discussions
with regulatory authorities regarding the scope or design of our clinical trials or requests by them for supplemental information with respect to our clinical trial results; failure to conduct clinical trials in accordance with regulatory
requirements; lower than anticipated screening or retention rates of patients in clinical trials; serious adverse events or side effects experienced by participants; and insufficient supply or deficient quality of product candidates or other
materials necessary for the conduct of our clinical trials.
Many of these factors may also ultimately lead to denial of
regulatory approval of a current or potential product candidate. If we experience delays, suspensions or terminations in a clinical trial, the commercial prospects for the related product candidate will be harmed, and our ability to generate product
revenues will be delayed.
We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may
result in costs and delays that prevent us from successfully commercializing our product candidates.
Although we
design and manage our current preclinical studies and clinical trials, we do not now have the ability to conduct clinical trials for our product candidates on our own. In addition to our collaborators, we rely on contract research organizations,
medical institutions, clinical investigators, and contract laboratories to perform data collection and analysis and other aspects of our clinical trials. In addition, we also rely on third parties to assist with our preclinical studies, including
studies regarding biological activity, safety, absorption, metabolism, and excretion of product candidates.
Our preclinical
activities or clinical trials may be delayed, suspended, or terminated if: the quality or accuracy of the data obtained by the third parties on whom we rely is compromised due to their failure to adhere to our clinical protocols or regulatory
requirements or if for other reasons, these third parties do not successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines, or these third parties need to be replaced.
If the third parties on whom we rely fail to perform, our development costs may increase, our ability to obtain regulatory approval, and
consequently, to commercialize our product candidates may be delayed or prevented altogether. We currently use several contract research
39
organizations to perform services for our preclinical studies and clinical trials. While we believe that there are numerous alternative sources to provide these services, in the event that we
seek such alternative sources, we may not be able to enter into replacement arrangements without delays or incurring additional expenses.
Even if we successfully complete the clinical trials of one or more of our product candidates, the product candidates may fail for other reasons.
Even if we successfully complete the clinical trials for one or more of our product candidates, the product
candidates may fail for other reasons, including the possibility that the product candidates will:
•
fail to receive the regulatory approvals required to market them as drugs;
•
be subject to proprietary rights held by others requiring the negotiation of a license agreement prior to marketing;
•
be difficult or expensive to manufacture on a commercial scale;
•
have adverse side effects that make their use less desirable; or
•
fail to compete with product candidates or other treatments commercialized by our competitors.
If we are unable to receive the required regulatory approvals, secure our intellectual property rights, minimize the incidence of any
adverse side effects or fail to compete with our competitors' products, our business, financial condition, and results of operations could be materially and adversely affected.
Following regulatory approval of any of our drug candidates, we will be subject to ongoing regulatory obligations and restrictions, which may result in significant expense and limit our ability to
commercialize our potential products.
With regard to our drug candidates, if any, approved by the FDA or by another
regulatory authority, we are held to extensive regulatory requirements over product manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping. Regulatory approvals may also be subject to
significant limitations on the indicated uses or marketing of the drug candidates. Potentially costly follow-up or post-marketing clinical studies may be required as a condition of approval to further substantiate safety or efficacy, or to
investigate specific issues of interest to the regulatory authority. Previously unknown problems with the drug candidate, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the drug, and
could include withdrawal of the drug from the market.
In addition, the law or regulatory policies governing pharmaceuticals
may change. New statutory requirements may be enacted or additional regulations may be enacted that could prevent or delay regulatory approval of our drug candidates. We cannot predict the likelihood,
40
nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or elsewhere. If we are not able to maintain
regulatory compliance, we might not be permitted to market our drugs and our business could suffer.
Our product candidates may not gain
acceptance among physicians, patients, or the medical community, thereby limiting our potential to generate revenues, which will undermine our future growth prospects.
Even if our product candidates are approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any approved product candidate by physicians, health care
professionals and third-party payors, and our profitability and growth will depend on a number of factors, including:
•
the ability to provide acceptable evidence of safety and efficacy;
•
pricing and cost effectiveness, which may be subject to regulatory control;
•
our ability to obtain sufficient third-party insurance coverage or reimbursement;
•
effectiveness of our or our collaborators' sales and marketing strategy;
•
relative convenience and ease of administration;
•
the prevalence and severity of any adverse side effects; and
•
availability of alternative treatments.
If any product candidate that we develop does not provide a treatment regimen that is at least as beneficial as the current standard of care or otherwise does not provide some additional patient benefit
over the current standard of care, that product will not achieve market acceptance and we will not generate sufficient revenues to achieve profitability.
The failure to attract and retain skilled personnel and key relationships could impair our drug development and commercialization efforts.
We are highly dependent on our senior management and key clinical development, scientific and technical personnel. Competition for these
types of personnel is intense. The loss of the services of any member of our senior management, clinical development, scientific or technical staff may significantly delay or prevent the achievement of drug development and other business objectives
and could have a material adverse effect on our business, operating results and financial condition. We also rely on consultants and advisors to assist us in formulating our strategy. All of our consultants and advisors are either self-employed or
employed by other organizations, and they may have conflicts of interest or other commitments, such as consulting or advisory contracts with other organizations, that may affect their ability to contribute to us. We intend to expand and develop new
drug candidates, and will need additional funding to grow our business. We will need to hire additional employees in order to continue our research and
41
clinical trials and to market our drugs when approved. This strategy will require us to recruit additional executive management and clinical development, regulatory, scientific, technical and
sales and marketing personnel. There is currently intense competition for skilled executives and employees with relevant clinical development, scientific, technical and sales and marketing expertise, and this competition is likely to continue. The
inability to attract and retain sufficient clinical development, scientific, technical and managerial personnel, due to intense competition and our limited resources, would limit or delay our product development efforts, which would adversely affect
the development of our drug candidates and commercialization of our potential drugs and growth of our business.
We may not be able to
continue or fully exploit our partnerships with outside scientific and clinical advisors, which could impair the progress of our clinical trials and our research and development efforts.
We work with scientific and clinical advisors at academic and other institutions who are experts in the field of CNS disorders. They
advise us with respect to our clinical trials. These advisors are not our employees and may have other commitments that would limit their future availability to us. If a conflict of interest arises between their work for us and their work for
another entity, we may lose their services, which may impair our reputation in the industry and delay the development or commercialization of our product candidates.
Relying on third-party manufacturers may result in delays in our clinical trials, regulatory approvals and product introductions.
We have no manufacturing facilities and do not have extensive experience in the manufacturing of drugs or in designing drug-manufacturing
processes. We have contracted with third-party manufacturers to produce, in collaboration with us, our product candidates, including ITI-007, for clinical trials. If any of our product candidates are approved by the FDA or other regulatory agencies
for commercial sale, we may need to amend our contract with our current manufacturer or contract with another third party to manufacture them in larger quantities. While we believe that there are alternative sources available to manufacture our
product candidates, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without delays or additional expenditures. We cannot estimate these delays or costs with certainty but, if they were to
occur, they could cause a delay in our development and commercialization efforts. We have not entered into long-term agreements with our current third-party manufacturers or with any alternate suppliers. Although we intend to do so prior to any
commercial launch of a product that is approved by the FDA in order to ensure that we maintain adequate supplies of commercial drug product, we may be unable to enter into such agreements or do so on commercially reasonable terms, which could delay
a product launch or subject our commercialization efforts to significant supply risk.
The manufacturers of our product
candidates are obliged to operate in accordance with FDA-mandated current good manufacturing practices, or cGMPs. In addition, the facilities used by our contract manufacturers or other third party manufacturers to manufacture our product candidates
must be approved by the FDA pursuant to inspections that will be conducted after we request regulatory approval from the FDA. A failure of any of our current or future contract
42
manufacturers to establish and follow cGMPs and to document their adherence to such practices may lead to significant delays in clinical trials or in obtaining regulatory approval of product
candidates or the ultimate launch of products based on our product candidates into the market. Failure by our current or future 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 the government to grant pre-market approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of products, operating restrictions, and criminal prosecutions.
We will need to continue to manage our organization and we may encounter difficulties with our staffing and any future transitions,
which could adversely affect our results of operations.
We will need to effectively manage our operations and
facilities in order to advance our drug development programs (including ITI-007, ITI-214 and those compounds covered by our collaboration with Takeda), achieve milestones under our license and collaboration agreement with Takeda, facilitate
additional collaborations, and pursue other development activities. It is possible that our infrastructure may be inadequate to support our future efforts and growth. In particular, we may have to develop internal sales, marketing, and distribution
capabilities if we decide to market any drug that we may successfully develop. We may not successfully manage our operations and, accordingly, may not achieve our research, development, and commercialization goals.
Our ability to generate product revenues will be diminished if our products do not receive coverage from payors or sell for inadequate prices, or
if patients are unable to obtain adequate levels of reimbursement.
Patients who are prescribed medicine for the
treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental health care programs, such as Medicare and
Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already
available or subsequently become available. Even if we obtain coverage for any approved products, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely
to use any products we may market unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of those products.
In addition, the market for any products for which we may receive regulatory approval will depend significantly on access to third-party payors' drug formularies, or lists of medications for which
third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular
branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available.
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Third-party payors, whether foreign or domestic, or governmental or commercial, are
developing increasingly sophisticated methods of controlling health care costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and
reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of
our products candidates to each payor separately, with no assurance that coverage will be obtained. If we are unable to obtain coverage of, and adequate payment levels for, our products from third-party payors, physicians may limit how much or under
what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our ability to successfully commercialize any approved products and thereby adversely impact our profitability, results of
operations, financial condition, and future success.
In the future, if we have products that are approved, health care legislation may
make it more difficult to receive revenues from those products.
In both the United States and certain foreign
jurisdictions, there have been a number of legislative and regulatory proposals in recent years to change the health care system in ways that could impact our ability to sell our products profitably. In March 2010, the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, PPACA, became law in the United States. PPACA substantially changed the way health care is financed by both governmental and private
insurers and significantly affects the health care industry. Among the provisions of PPACA of importance to our potential product candidates are the following:
•
imposition of an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government health care programs;
•
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to
23% and 13% of the average manufacturer price for most branded and generic drugs, respectively;
•
expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and
enhanced penalties for noncompliance;
•
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of
applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;
•
extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
•
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals
beginning in
44
2014 and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers'
Medicaid rebate liability;
•
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
•
new requirements to report certain financial arrangements with physicians and teaching hospitals, as defined in PPACA and its implementing regulations,
including reporting any "payments or transfers of value" made or distributed to prescribers, teaching hospitals and other health care providers and reporting any ownership and investment interests held by physicians and their immediate
family members and applicable group purchasing organizations during the preceding calendar year, with data collection to be required beginning August 1, 2013 and reporting to the Centers for Medicare & Medicaid Services, or CMS, to be
required by March 31, 2014 and by the 90th day of each subsequent calendar year;
•
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
•
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along
with funding for such research.
Many of the details regarding the implementation of PPACA are yet to be
determined and, at this time, it remains unclear what the full effect that PPACA would have on our business. On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of PPACA, excepting certain provisions that would have required
each state to expand its Medicaid programs or risk losing all of the state's Medicaid funding. At this time, it remains unclear whether there will be any further changes made to PPACA, whether in part or in its entirety. Some states have
indicated that they intend not to implement certain sections of PPACA, and some members of the U.S. Congress are still working to repeal PPACA. We cannot predict whether these challenges will continue or other proposals will be made or adopted, or
what impact these efforts may have on us.
In addition, in many foreign countries, particularly the countries of the European
Union, the pricing of prescription drugs is subject to government control. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from
country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal
products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. We may
face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there may be importation of foreign products that compete with any products we may market, which could
negatively impact our profitability.
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We expect that PPACA, as well as other health care reform measures that may be adopted in
the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we may receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other health care reforms may prevent us from being able to generate revenue, attain profitability, or commercialize any products for which we
receive regulatory approval.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties
to sell and market any products we may develop, we may not be able to generate product revenue.
We do not currently
have an organization for the sales, marketing or distribution of pharmaceutical products. In order to market any products that may be approved by the FDA, we must build our sales, marketing, managerial, and related capabilities or make arrangements
with third parties to perform these critical commercial services. If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and
may not become profitable.
Risks Related to Our Intellectual Property
Our ability to compete may be undermined if we do not adequately protect our proprietary rights.
Our commercial success depends on obtaining and maintaining proprietary rights to our product candidates and technologies and their uses,
as well as successfully defending these rights against third-party challenges. We will only be able to protect our product candidates, proprietary technologies, and their uses from unauthorized use by third parties to the extent that valid and
enforceable patents, or effectively protected trade secrets, cover them. We have patent rights under issued patents in many cases covering our ITI-007 and ITI-002 development programs. Nonetheless, the issued patents and patent applications covering
our primary technology programs remain subject to uncertainty and continuous monitoring and action by us due to a number of factors, including:
•
we may not have been the first to make the inventions covered by our pending patent applications or issued patents;
•
we may not have been the first to file patent applications for our product candidates or the technologies we rely upon;
•
others may independently develop similar or alternative technologies or duplicate any of our technologies;
•
our disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;
46
•
any or all of our pending patent applications may not result in issued patents;
•
we may not seek or obtain patent protection in all countries that will eventually provide a significant business opportunity;
•
any patents issued to us or our collaborators may not provide a basis for commercially viable products, may not provide us with any competitive
advantages or may be challenged by third parties;
•
our proprietary technologies may not be patentable;
•
others may design around our patent claims to produce competitive products which fall outside of the scope of our patents;
•
others may identify prior art which could invalidate our patents; or
•
changes to patent laws that limit the exclusivity rights of patent holders.
Even if we have or obtain patents covering our product candidates or technologies, we may still be barred from making, using and selling
our product candidates or technologies because of the patent rights of others. Others have or may have filed, and in the future are likely to file, patent applications covering compounds, assays, genes, gene products or therapeutic products that are
similar or identical to ours. There are many issued U.S. and foreign patents relating to genes, nucleic acids, polypeptides, chemical compounds or therapeutic products, and some of these may encompass reagents utilized in the identification of
candidate drug compounds or compounds that we desire to commercialize. Numerous U.S. and foreign issued patents and pending patent applications owned by others exist in the area of central nervous system disorders and the other fields in which we
are developing products. These could materially affect our ability to develop our product candidates or sell our products. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may
later result in issued patents that our product candidates or technologies may infringe. These patent applications may have priority over patent applications filed by us.
We regularly conduct searches to identify patents or patent applications that may prevent us from obtaining patent protection for our proprietary compounds or that could limit the rights we have claimed
in our patents and patent applications. Disputes may arise regarding the ownership or inventorship of our inventions. It is difficult to determine how such disputes would be resolved. Others may challenge the validity of our patents. If our patents
are found to be invalid, we will lose the ability to exclude others from making, using or selling the inventions claimed therein.
Some of our academic institutional licensors, research collaborators and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality
of our technology and other confidential information in connection with our collaborations, then our ability to receive patent protection or protect our proprietary information will be impaired. Additionally, any employee whose employment with us
terminates, whether voluntarily by the employee or by us in connection with restructurings or
47
otherwise, may seek future employment with our competitors. Although each of our employees is required to sign a confidentiality agreement with us at the time of hire, we cannot guarantee that
the confidential nature of our proprietary information will be maintained in the course of such future employment. In addition, technology that we may license-in may become important to some aspects of our business. We generally will not control the
patent prosecution, maintenance or enforcement of in-licensed technology.
Confidentiality agreements with employees and others may not
adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete.
Because we operate in the highly technical field of drug discovery and development of small molecule drugs, we rely in part on trade
secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality and intellectual property assignment agreements with our corporate partners, employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party
or made known to the party by us during the course of the party's relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property.
However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the
outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.
A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and
costly, and an unfavorable outcome could harm our business.
There is significant litigation in our industry regarding
patent and other intellectual property rights. While we are not currently subject to any pending intellectual property litigation, and are not aware of any such threatened litigation, we may be exposed to future litigation by third parties based on
claims that our product candidates, technologies or activities infringe the intellectual property rights of others. If our drug development activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to
such patents. We may need to resort to litigation to enforce a patent issued to us, protect our trade secrets or determine the scope and validity of third-party proprietary rights. From time to time, we may hire scientific personnel formerly
employed by other companies involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of their prior
affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We also may not be able to afford the costs of litigation.
48
The patent applications of pharmaceutical and biotechnology companies involve highly complex legal and
factual questions, which, if determined adversely to us, could negatively impact our patent position.
The patent
positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. The USPTO's standards are uncertain and could change in the future. Consequently, the issuance and scope of patents
cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination
proceedings in the USPTO (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss
or reduction in the scope of one or more of the claims of the patent or patent application. Similarly, opposition or invalidity proceedings could result in loss of rights or reduction in the scope of one or more claims of a patent in foreign
jurisdictions. In addition, such interference, reexamination and opposition proceedings may be costly. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes.
In addition, changes in or different interpretations of patent laws in the United States and foreign countries may permit others to use
our discoveries or to develop and commercialize our technology and products without providing any compensation to us or may limit the number of patents or claims we can obtain. In particular, there have been proposals to shorten the exclusivity
periods available under U.S. patent law that, if adopted, could substantially harm our business. The product candidates that we are developing are protected by intellectual property rights, including patents and patent applications. If any of our
product candidates becomes a marketable product, we will rely on our exclusivity under patents to sell the compound and recoup our investments in the research and development of the compound. If the exclusivity period for patents is shortened, then
our ability to generate revenues without competition will be reduced and our business could be materially adversely impacted. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws, and those countries
may lack adequate rules and procedures for defending our intellectual property rights. For example, some countries, including many in Europe, do not grant patent claims directed to methods of treating humans and, in these countries, patent
protection may not be available at all to protect our product candidates. In addition, U.S. patent laws may change, which could prevent or limit us from filing patent applications or patent claims to protect our products and/or technologies or limit
the exclusivity periods that are available to patent holders. For example, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was recently signed into law and includes a number of significant changes to U.S. patent law. These include
changes to transition from a "first-to-invent" system to a "first-to-file" system and to the way issued patents are challenged. These changes may favor larger and more established companies that have more resources to devote to
patent application filing and prosecution. The USPTO has been in the process of implementing regulations and procedures to administer the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act may
affect our ability to obtain, enforce or defend our patents. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will ultimately have on the cost of prosecuting our patent applications, our ability to obtain patents based on our
discoveries and our ability to enforce or defend our issued patents.
49
If we fail to obtain and maintain patent protection and trade secret protection of our
product candidates, proprietary technologies and their uses, we could lose our competitive advantage and competition we face would increase, reducing our potential revenues and adversely affecting our ability to attain or maintain profitability.
Risks Related to Our Industry
We will be subject to stringent regulation in connection with the marketing of any products derived from our product candidates, which could delay the development and commercialization of our
products.
The pharmaceutical industry is subject to stringent regulation by the FDA and other regulatory agencies in
the United States and by comparable authorities in other countries. Neither we nor our collaborators can market a pharmaceutical product in the United States until it has completed rigorous preclinical testing and clinical trials and an extensive
regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product, and requires substantial resources. Even if regulatory approval is
obtained, it may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, and/or marketing of such products, and requirements for post-approval studies, including additional research and
development and clinical trials. These limitations may limit the size of the market for the product or result in the incurrence of additional costs. Any delay or failure in obtaining required approvals could have a material adverse effect on our
ability to generate revenues and continue our business.
Outside the United States, the ability to market a product is
contingent upon receiving approval from the appropriate regulatory authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing, and reimbursement vary widely from country to country. Only after the
appropriate regulatory authority is satisfied that adequate evidence of safety, quality, and efficacy has been presented will it grant a marketing authorization. Approval by the FDA does not automatically lead to the approval by regulatory
authorities outside the United States and, similarly, approval by regulatory authorities outside the United States will not automatically lead to FDA approval.
Many of our competitors have greater resources and capital than us, putting us at a competitive disadvantage. If our competitors develop and market products that are more effective than our product
candidates, they may reduce or eliminate our commercial opportunity.
Competition in the pharmaceutical and
biotechnology industries is intense and increasing. We face competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United States and abroad. Some of
these competitors have products or are pursuing the development of drugs that target the same diseases and conditions that are the focus of our drug development programs.
50
For example, our potential products for the treatment of acute
schizophrenia would compete with, among other branded products, Abilify
®
, marketed jointly by Bristol-Myers
Squibb and Otsuka Pharmaceutical, Fanapt
®
, marketed by Novartis Pharmaceuticals, Seroquel XR
®
, marketed by AstraZeneca, Invega
®
, marketed by Janssen, and
Latuda
®
, marketed by Sunovion. In addition, our products will compete with, among other generic antipsychotic
drugs, haloperidol, risperidone, quetiapine, olanzapine and clozapine.
Many of our competitors and their collaborators have
significantly greater experience than we do in the following:
•
identifying and validating targets;
•
screening compounds against targets;
•
preclinical studies and clinical trials of potential pharmaceutical products; and
•
obtaining FDA and other regulatory approvals.
In addition, many of our competitors and their collaborators have substantially greater capital and research and development resources, manufacturing, sales and marketing capabilities, and production
facilities. Smaller companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaboration arrangements with large pharmaceutical and established biotechnology companies. Many of our
competitors have products that have been approved or are in advanced development and may develop superior technologies or methods to identify and validate drug targets and to discover novel small molecule drugs. Our competitors, either alone or with
their collaborators, may succeed in developing drugs that are more effective, safer, more affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than us. Our competitors may also develop
alternative therapies that could further limit the market for any drugs that we may develop. Our failure to compete effectively could have a material adverse effect on our business.
Any claims relating to improper handling, storage, or disposal of biological, hazardous, and radioactive materials used in our business could be costly and delay our research and development
efforts.
Our research and development activities involve the controlled use of potentially harmful hazardous
materials, including volatile solvents, biological materials such as blood from patients that have the potential to transmit disease, chemicals that cause cancer, and various radioactive compounds. Our operations also produce hazardous waste
products. We face the risk of contamination or injury from the use, storage, handling or disposal of these materials. We are subject to federal, state and local laws and regulations governing the use, storage, handling, and disposal of these
materials and specified waste products. The cost of compliance with these laws
51
and regulations could be significant, and current or future environmental regulations may impair our research, development, or production efforts. If one of our employees were accidentally
injured from the use, storage, handling, or disposal of these materials, the medical costs related to his or her treatment would be covered by our workers' compensation insurance policy. However, we do not carry specific biological or hazardous
waste insurance coverage and our general liability insurance policy specifically excludes coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we
could be subject to criminal sanctions or fines or be held liable for damages, our operating licenses could be revoked, or we could be required to suspend or modify our operations and our research and development efforts.
Consumers may sue us for product liability, which could result in substantial liabilities that exceed our available resources and damage our
reputation.
Researching, developing, and commercializing drug products entail significant product liability risks.
Liability claims may arise from our and our collaborators' use of products in clinical trials and the commercial sale of those products. Consumers may make these claims directly and our collaborators or others selling these products may seek
contribution from us if they receive claims from consumers. Although we currently have product liability insurance that covers our clinical trials, we will need to increase and expand this coverage as we commence larger scale trials and if our
product candidates are approved for commercial sale. This insurance may be prohibitively expensive or may not fully cover our potential liabilities. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect
against potential product liability claims could prevent or inhibit the commercialization of products that we or our collaborators develop. Product liability claims could have a material adverse effect on our business and results of operations. Our
liability could exceed our total assets if we do not prevail in a lawsuit from any injury caused by our drug products.
Risks Relating to Owning Our Common Stock
There is currently no market for our common stock and there can be no assurance that any market will ever develop. You may therefore be unable to re-sell shares of our common stock at times and
prices that you believe are appropriate.
Our common stock is not listed on a national securities exchange, an
over-the-counter market or any other exchange. Therefore, there is no trading market, active or otherwise, for our common stock and our common stock may never be included for trading on any stock exchange, automated quotation system or any
over-the-counter market. Accordingly, our common stock is highly illiquid and you will likely experience difficulty in re-selling such shares at times and prices that you may desire.
Our common stock may not be eligible for listing or quotation on any securities exchange.
We do not currently meet the initial listing standards of any national securities exchange or over-the-counter trading system. We cannot assure you that we will be able to meet the initial listing
standards of any national securities exchange, or, if we do meet
52
such initial listing standards, that we will be able to maintain any such listing. Further, the national securities exchanges have adopted so-called "seasoning" rules that require that
we meet certain requirements, including prescribed periods of time trading over-the-counter and minimum filings of periodic reports with the SEC, before we are eligible to apply for listing on such national securities exchanges. We intend to contact
an authorized market maker for an over-the-counter quotation system for sponsorship of our common stock, but we cannot guarantee that such sponsorship will be approved and our common stock listed and quoted for sale. Even if our common stock is
quoted for sale on an over-the-counter quotation system, buyers may be insufficient in numbers to allow for a robust market and it may prove impossible to sell your shares. In addition, an investor may find it difficult to obtain accurate quotations
as to the market value of our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers
and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital.
The price of our common stock could be subject to volatility related or unrelated to our operations.
If a market for our common stock develops, its market price could fluctuate substantially due to a variety of factors, including market
perception of our ability to meet our growth projections and expectations, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial
markets or other developments affecting our business and the business of others in our industry. In addition, the stock market itself is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons related and unrelated to their operating performance and could have the same effect on our common stock.
The designation of our common stock as a "penny stock" would limit the liquidity of our common stock.
Our common stock may be deemed a "penny stock" (as that term is defined under Rule 3a51-1 of the Exchange Act) in any market that may develop in the future. Generally, a "penny stock"
is a common stock that is not listed on a securities exchange and trades for less than $5.00 per share. Prices often are not available to buyers and sellers and the market may be very limited. Penny stocks in start-up companies are among the
riskiest equity investments. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level
of risks involved in investing in the penny stock market. A broker must also provide purchasers with bid and offer quotations and information regarding broker and salesperson compensation and make a written determination that the penny stock is a
suitable investment for the purchaser and obtain the purchaser's written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there may be less trading activity in
penny stocks in any market that develops for our common stock in the future and stockholders are likely to have difficulty selling their shares.
53
Management and certain members of our board of directors beneficially own a substantial amount of our
outstanding equity securities and will be able to exert substantial control over us.
Our executive officers and
directors beneficially own a substantial percentage of the outstanding equity securities of the Company. Accordingly, if they act as a group, the executive officers and directors of the Company will be able to make all business decisions, including
with respect to such matters as amendments to the Company's charter, other fundamental corporate transactions, such as mergers, asset sales and the sale of the Company, and otherwise will be able to direct the Company's business and
affairs.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting
public companies, which could harm our operating results.
As a public company, we will incur significant legal,
accounting and other expenses, including costs associated with public company reporting requirements. We will also incur substantial expenses in connection with the preparation and filing of the registration statement for resale of our common stock
that we expect to file, and responding to SEC comments in connection with its review of such registration statement. We will also incur costs associated with current corporate governance requirements, including requirements under Section 404
and other provisions of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC or any stock exchange or inter-dealer quotations system on which our common stock may be listed in the future. The
expenses incurred by public companies for reporting and corporate governance purposes have increased dramatically in recent years. We expect these rules and regulations to substantially increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. We are unable currently to estimate these costs with any degree of certainty. We also expect that these new rules and regulations may make it difficult and expensive for us to obtain director and
officer liability insurance, and if we are able to obtain such insurance, we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage available to privately-held
companies. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.
If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability
to operate our business and investors' views of us.
We will be required to comply with Section 404 of the
Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and attestations of the effectiveness of internal controls by independent auditors.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is
54
a costly and time-consuming effort that will need to be evaluated frequently. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the
Sarbanes-Oxley Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock. In addition,
if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against
us and our business may be harmed.
The shares of common stock issued in the Merger are "restricted securities" and, as such,
may not be sold except in limited circumstances.
None of the shares of common stock that we issued in the Merger,
which constitute all of our outstanding shares of common stock as of the date of this Current Report on Form 8-K, have been registered under the Securities Act of 1933, as amended, or the Securities Act, or registered or qualified under any state
securities laws. The shares of common stock that we issued in the Merger were issued pursuant to exemptions contained in and under those laws. Accordingly, such shares of common stock are "restricted securities" as defined in Rule 144
under the Securities Act, or Rule 144, and must, therefore, be held indefinitely unless registered under applicable federal and state securities laws, or an exemption is available from the registration requirements of those laws. The certificates
representing the shares of common stock issued in the Merger will reflect their restricted status.
We have agreed to register
the shares of common stock issued in the Merger. There can be no assurance, however, that the SEC will declare the registration statement effective, thereby enabling the shares of common stock issued in the Merger to be freely tradable. In addition,
Rule 144 under the Securities Act, which permits the resale, subject to various terms and conditions, of limited amounts of restricted securities after they have been held for six months, will not immediately apply to our common stock because we
were at one time designated as a "shell company" under SEC regulations. Pursuant to Rule 144(i), securities issued by a current or former shell company that otherwise meet the holding period and other requirements of Rule 144 nevertheless
cannot be sold in reliance on Rule 144 until one year after the date on which the issuer filed current "Form 10 information" (as defined in Rule 144(i)) with the SEC reflecting that it ceased being a shell company and, provided that at the
time of a proposed sale pursuant to Rule 144, the issuer has satisfied certain reporting requirements under the Exchange Act. We believe this requirement to file Form 10 information has been satisfied by the filing of this Current Report on Form
8-K. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply regardless of holding period, the restrictive legends on certificates for the shares of common stock issued in the Merger cannot be removed except in
connection with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Securities Act.
55
If we are unable to register in a timely manner the shares of common stock that we issued to
stockholders in the Merger, then the ability to re-sell shares of our common stock will be delayed.
We expect to
prepare and file a registration statement with the SEC registering the resale of the shares of our common stock issued in connection with the Merger. There are many reasons, including some over which we have little or no control, which could keep
the registration statement from being declared effective by the SEC, including delays resulting from the SEC review process and comments raised by the SEC during that process. Accordingly, in the event that the registration statement is not declared
effective within these timeframes, the shares of common stock proposed to be covered by such registration statement will not be eligible for resale until the registration statement is effective or an exemption from registration, such as Rule 144,
becomes available. In addition, we have agreed to pay damages to the investors in the Private Placement if we do not satisfy certain deadlines and requirements in connection with the registration statement, as specified in the Registration Rights
Agreement.
Because we became a reporting company under the Exchange Act by means other than a traditional underwritten initial public
offering, we may not be able to attract the attention of research analysts at major brokerage firms.
Because we did
not become a reporting company by conducting an underwritten initial public offering, or IPO, of our common stock, and because we will not be listed on a national securities exchange, security analysts of brokerage firms may not provide coverage of
our company. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we were to become a public reporting company by means of an IPO because they may be less familiar with our
company as a result of more limited coverage by analysts and the media, and because we became public at an early stage in our development. The failure to receive research coverage or support in the market for our shares will have an adverse effect
on our ability to develop a liquid market for our common stock.
Because the Merger was a reverse merger, the registration statement we
expect to file with respect to the shares of common stock received by stockholders in the Merger might be subject to heightened scrutiny by the SEC, and we may not be able to attract the attention of major brokerage firms.
Additional risks may exist as a result of our becoming a public reporting company through a "reverse merger." Certain SEC rules
are more restrictive when applied to reverse merger companies, such as the ability of stockholders to re-sell their shares of common stock pursuant to Rule 144, and the SEC may subject the registration statement we expect to file with respect to the
shares of our common stock received by stockholders in the Merger to heightened scrutiny. In addition, securities analysts of major brokerage firms may not provide coverage of our capital stock or business. Because we became a public reporting
operating company through a reverse merger, there is no incentive for brokerage firms to recommend the purchase of our common stock. We cannot assure you that brokerage firms will want to provide analyst coverage of our capital stock or business in
the future.
The resale of shares covered by a registration statement could adversely affect the market price of our common stock in the
public market, should one develop, which result would in turn negatively affect our ability to raise additional equity capital.
The sale, or availability for sale, of our common stock in the public market may adversely affect the prevailing market price of our common stock and may impair our ability to
56
raise additional capital by selling equity or equity-linked securities. We expect to prepare and file a registration statement with the SEC registering the resale of the shares of our common
stock issued in connection with the Merger. Once effective, the registration statement will permit the resale of these shares at any time. The resale of a substantial number of shares of our common stock in the public market could adversely affect
the market price for our common stock and make it more difficult for you to sell shares of our common stock at times and prices that you feel are appropriate. Furthermore, we expect that, because there will be a large number of shares registered
pursuant to a registration statement, selling stockholders will continue to offer shares covered by such registration statement for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and
price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time and continued negative pressure on the market price of our common stock could have a material adverse effect on our ability
to raise additional equity capital.
If securities or industry analysts do not publish, or cease publishing, research or reports about
us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
If a trading market for our common stock develops, the trading market for our common stock will be influenced by whether industry or securities analysts publish research and reports about us, our
business, our market or our competitors and, if any analysts do publish such reports, what they publish in those reports. We may not obtain analyst coverage in the future. Any analysts that do cover us may make adverse recommendations regarding our
stock, adversely change their recommendations from time to time, and/or provide more favorable relative recommendations about our competitors. If any analyst who may cover us in the future were to cease coverage of our company or fail to regularly
publish reports on us, or if analysts fail to cover us or publish reports about us at all, we could lose, or never gain, visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We do not anticipate paying cash dividends in the foreseeable future.
We currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in the foreseeable
future. As a result, you should not rely on an investment in our securities if you require dividend income. Capital appreciation, if any, of our shares may be your sole source of gain for the foreseeable future. Moreover, you may not be able to
re-sell your shares at or above the price you paid for them.
57
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of Intra-Cellular Therapies, Inc. and its wholly-owned subsidiary should be read in conjunction with the financial
statements and the notes to those statements attached as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K. This discussion includes forward-looking statements that involve risk and uncertainties. As a result of many factors, such as those
set forth above under "Risk Factors," actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Effective as of August 29, 2013, we consummated the Merger
and changed our name from "Oneida Resources Corp." to "Intra-Cellular Therapies, Inc."
We are a
biopharmaceutical company focused on the discovery and clinical development of innovative, small molecule drugs that address underserved medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms
within the central nervous system. Our lead product candidate, ITI-007, is in Phase 2 clinical trials as a first-in-class treatment for schizophrenia. We believe that ITI-007 and follow-on compounds have utility to treat additional indications,
which we may investigate, either on our own or with a partner. We hold exclusive, worldwide commercialization rights to ITI-007 and a family of related compounds from Bristol-Myers Squibb Company.
We have a second major program called ITI-002 that has yielded a portfolio of compounds that selectively inhibits the enzyme PDE1. We
have licensed the lead compound in the ITI-002 portfolio, ITI-214, and other compounds in that portfolio, to Takeda. ITI-214 is the first compound in its class to successfully advance into Phase 1 clinical trials and is being developed for the
treatment of cognitive impairment associated with schizophrenia and other disorders.
Our pipeline also includes preclinical
programs that are focused on advancing drugs for the treatment of cognitive dysfunction, in both schizophrenia and Alzheimer's disease, and for disease modification and the treatment of neurodegenerative disorders, including Alzheimer's
disease.
Since inception, we have devoted all of our efforts and resources to our research and development activities. We
have incurred significant net losses since inception. As of June 30, 2013, our accumulated deficit was $44.6 million. We expect to continue incurring substantial losses for the next several years as we continue to develop our clinical and
pre-clinical drug candidates and programs. Our operating expenses are comprised of research and development expenses and general and administrative expenses.
We have not generated any revenue from product sales to date and we do not expect to generate revenues from product sales for at least the next several years. Our revenues for the fiscal years ended
December 31, 2012 and 2011 have been primarily from a license and collaboration agreement with Takeda, and, to a much lesser extent, from grants from U.S. government agencies and foundations. Prior to 2011, our revenue was entirely from grants
from these agencies and foundations.
58
Our corporate headquarters and research facility are located in New York, New York.
Recent Developments
Private Placement
Prior to the Merger, Intra-Cellular sold to accredited investors approximately $60.0 million of its shares of common stock, or 18,889,307
shares, at a price of $3.1764 per share, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular's then outstanding convertible promissory notes, or Notes. We refer to
this transaction as the Private Placement. Also, Intra-Cellular granted the investors in the Private Placement registration rights requiring Intra-Cellular or any successor to register those shares of Intra-Cellular common stock (which were
exchanged for shares of our common stock, along with the rest of the outstanding shares of Intra-Cellular capital stock, except for dissenting shares, at the Effective Time) for public resale, as described in more detail below. The then existing
stockholders of Intra-Cellular who agreed to become parties to the registration rights agreement also became entitled to such registration rights, subject to specified differences in the agreement between the rights of new investors and existing
stockholders. The existing Second Amended and Restated Investor Rights Agreement, by and among Intra-Cellular and the investors listed therein, dated as of October 25, 2007, as amended, was terminated at the Effective Time. The Private
Placement closed immediately prior to the filing of a Certificate of Merger with the Secretary of State of the State of Delaware, on August 29, 2013.
Reverse Merger
On August 29, 2013, pursuant to the Merger
Agreement, Merger Sub merged with and into Intra-Cellular, with Intra-Cellular remaining as the surviving entity and a wholly-owned operating subsidiary of the Company. The Merger was effective as of August 29, 2013, upon the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware. As part of the Merger, Intra-Cellular changed its name to ITI, Inc.
At the Effective Time, the legal existence of Merger Sub ceased and each share of Intra-Cellular common stock and each share of Intra-Cellular preferred stock that was issued and outstanding immediately
prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock. We issued an aggregate of 22,134,647 shares of our common stock upon such exchange of the outstanding shares of Intra-Cellular common stock and preferred
stock. In addition, at the Effective Time, we assumed Intra-Cellular's 2003 Equity Incentive Plan, as amended, or the 2003 Equity Incentive Plan, and all options to purchase Intra-Cellular common stock then outstanding under the 2003 Equity
Incentive Plan, and such options became exercisable for an aggregate of 1,462,380 shares of our common stock, subject to the vesting and other terms of such options. The vesting of such options was not accelerated as a result of the Merger. At the
Effective Time, we also assumed the outstanding warrant to purchase Intra-Cellular common stock, and such warrant became exercisable for 1,822 shares of our common stock.
Immediately following the Effective Time, pursuant to the terms of the Redemption Agreement, we completed the closing of a redemption of an aggregate 5,000,000 shares of our
59
common stock from our then-current sole stockholder in consideration of an aggregate of $60,000, plus professional costs related to the transaction, not to exceed $20,000. The 5,000,000 shares
constituted all of the issued and outstanding shares of our capital stock, on a fully-diluted basis, immediately prior to the Merger.
In accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, section 805 entitled, "
Business Combinations
," Intra-Cellular is considered
the accounting acquirer in the Merger. Intra-Cellular is considered the acquirer for accounting purposes, and will account for the transaction as a reverse business combination, because Intra-Cellular's former stockholders received 100% of the
voting rights in the combined entity and Intra-Cellular's senior management represents all of the senior management of the combined entity. Consequently, the assets and liabilities and the historical operations that will be reflected in our
consolidated financial statements will be those of Intra-Cellular and will be recorded at the historical cost basis of the Company.
Results of Operations
Revenues
The following discussion summarizes the key factors our management believes are necessary for an understanding of our
financial statements.
We have not generated any revenue from product sales to date and we do not expect to generate revenues
from product sales for at least the next several years. Our revenues for the last two years have been primarily from the license and collaboration agreement with Takeda, and, to a much lesser extent, grants from U.S. government agencies and
foundations. Prior to 2011, our revenue was entirely from grants from these agencies and foundations.
The revenue from Takeda
has been comprised primarily of an upfront payment, a milestone payment and reimbursements for costs incurred in the development of and patent prosecutions for compounds subject to the collaboration. The upfront payment was evaluated and it was
determined that there were separate units of accounting for the deliverables that are provided for in the license and collaboration agreement. A larger portion of the upfront payment was considered a license fee, and the remaining portion was deemed
to be related to the performance of agreed upon activities under the collaboration component of the license and collaboration agreement. We determined this amount in accordance with ASC Topic 605-25, using best estimate of selling price, for the
work that we would be required to perform. We considered multiple factors in estimating this amount, including, but not limited to, direct external expenses and internal costs for salary and related fringes, among others. The straight line method of
amortization with a three-year schedule was used and revenue was and will be recognized equally for the years 2011 through 2013. Revenue from the license payment was recognized as earned when received. Revenue from milestone payments is recognized
when all of the following conditions are met: (1) the milestone payments are non-refundable, (2) the achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement,
(3) substantive effort on our part is involved in achieving the milestone, (4) the amount of the milestone payment is reasonable in relation to the effort
60
expended or the risk associated with achievement of the milestone, and (5) a reasonable amount of time passes between the up-front license payment and the first milestone payment.
Reimbursement revenue is recognized when the costs are incurred and the services have been performed.
We expect our revenues
for the next several years to consist of limited reimbursable costs incurred for patent prosecutions, amortized revenue in 2013 related to the upfront payment made by Takeda, and reimbursements related to our collaboration with Takeda under the
license and collaboration agreement. In addition, we expect to receive possible milestone payments under the license and collaboration agreement, but these are not assured at this time and would not be significant enough to fund operations for a
meaningful period of time.
Expenses
The process of researching and developing drugs for human use is lengthy, unpredictable and subject to many risks. We are unable with any certainty to estimate either the costs or the timelines in which
those costs will be incurred. We have one project, ITI-007 for the treatment of schizophrenia, which consumes a large proportion of our current, as well as projected, resources. We intend to pursue other disease indications that ITI-007 may address,
but there are large costs associated with pursuing FDA approval for those indications, which would include the cost of additional clinical trials. Our other projects, exclusive of the Takeda collaboration, are still in the preclinical stages, and
will require extensive funding not only to complete preclinical testing, but to enter into and complete clinical trials. Expenditures that we incur on these projects will be subject to availability of funding in addition to the funding required for
the advancement of ITI-007. Any failure or delay in the advancement of ITI-007 could require us to re-allocate resources from our other projects to the advancement of ITI-007, which could have a significant material adverse impact on the advancement
of these other projects and on our operations.
Our operating expenses are comprised of (i) research and development
expenses and (ii) general and administrative expenses. Our research and development costs are comprised of:
•
internal recurring costs, such as labor and fringe benefits, materials and supplies, facilities and maintenance costs; and
•
fees paid to external parties who provide us with contract services, such as preclinical testing, manufacturing and related testing, and clinical trial
activities.
General and administrative expenses are incurred in three major categories:
•
salaries and related benefit costs;
•
patent, legal and professional costs; and
•
office and facilities overhead.
61
The following table sets forth our revenues and operating expenses for the fiscal years
ended December 31, 2012 and 2011, and for the three and six month periods ended June 30, 2013 and 2012:
For the Year Ended December 31
Three Months Ended June 30
Six Months Ended June 30
2012
2011
2013
2012
2013
2012
(Audited)
(Unaudited)
(Unaudited)
(in thousands)
Revenues
$
3,118
$
23,362
$
643
$
1,495
$
1,242
$
2,071
Expenses
Research and Development
15,486
7,655
7,788
9,439
12,740
13,133
General and Administrative
4,035
4,612
903
1,115
1,950
2,112
19,521
12,267
8,691
10,554
14,690
15,245
Net Income (Loss)
$
(16,591
)
$
11,092
$
(8,277
)
$
(9,056
)
$
(13,916
)
$
(13,167
)
Comparison of Years Ended December 31, 2012 and December 31, 2011
Research and Development Expenses
Total research and development expenses were approximately $15.5 million for the fiscal year ended December 31, 2012, as compared to $7.7 million for the fiscal year ended December 31, 2011.
This increase of $7.8 million in total research and development expenses is due primarily to an increase of $9.1 million in direct costs for clinical trials. Clinical trial costs for the fiscal year ended December 31, 2011 were $1.5 million.
This increase in clinical trial costs was offset in part by lower costs during the fiscal year ended December 31, 2012 to manufacture drug product required for clinical trials and testing, and by lower costs associated with non-clinical drug
testing.
The research and development expenses incurred for amounts payable to external parties started to become a larger
component of our research and development costs during the fiscal year ended December 31, 2011, and comprise a significant portion of our research and development spending during the fiscal year ended December 31, 2012, due primarily to
the preparation for and commencement of our Phase 2 clinical trial for ITI-007. We incurred expenses of approximately $12.2 million and $4.2 million during the years ended December 31, 2012 and 2011, respectively, for amounts payable to
external parties who manufactured, tested and performed clinical trial activities for all of our projects. During the same periods, our internal research and development expenses were approximately $3.3 million and $3.5 million during the years
ended December 31, 2012 and 2011, respectively. We currently employ 15 full time personnel in our research and development group.
The clinical development work related to ITI-007 requires the largest portion of our resources and, consequently, comprises the majority of our spending. We spent approximately $11.3 and $2.9 million on
direct external costs for the development of ITI-007, exclusive of internal labor and fringes, during the periods ended December 31, 2012 and 2011, respectively. As development of ITI-007 progresses, we anticipate costs for ITI-007 to increase
considerably in the next several years as we complete the ongoing Phase 2 clinical trial for ITI-007 and begin other clinical trials. We are also required to complete non-clinical testing to obtain FDA approval and manufacture material needed for
clinical trial use, which includes non-clinical testing of the drug product and the creation of an inventory of drug product in anticipation of possible FDA approval.
62
We currently have several projects in addition to ITI-007 that are in the research and
development stages. These are in the areas of cognitive dysfunction and the treatment of neurodegenerative diseases, including Alzheimer's disease, among others. We have used internal resources and incurred expenses not only in relation to the
development of ITI-007 but on these additional projects as well. We have not, however, reported these costs on a project by project basis, as they are broadly spread among these projects. The external costs for these projects have been minimal and
are reflected in the amounts discussed in this section " – Research and Development Expenses." During the years ended December 31, 2012 and 2011, we also incurred costs that were both reimbursable and non-reimbursable under the
license and collaboration agreement with Takeda. We incurred approximately $700,000 and $320,000 on direct costs that were billable to Takeda for the years ended December 31, 2012 and 2011, respectively. We anticipate that these costs will be
reduced significantly as the research portion of the license and collaboration agreement concludes in February 2014.
General and Administrative Expenses
Salaries and related benefit costs for our executive, finance and administrative functions for 2012 and 2011 constituted slightly less than half of the total general and administrative costs. The next
major categories of expenses are patent costs, some of which are reimbursed by Takeda, legal, accounting and other professional fees and, to a lesser extent, facilities and general office-related overhead. We expect all of these costs to increase
significantly as we expand our operations and become subject to the reporting requirements of a public company. General and administrative expenses were $4.0 million for the fiscal year ended December 31, 2012 compared to $4.6 million for the
fiscal year ended December 31, 2011. The decrease is the result of higher legal, patent and personnel costs in 2011 related to consummating the license and collaboration agreement, offset in part by a decrease in patent costs for other
non-Takeda related products.
Comparison of Three and Six Month Periods Ended June 30, 2013 and June 30, 2012
Research and Development Expenses
Research and development expenses decreased for both the three and six month periods ended June 30, 2013 as compared to the three and six month periods ended June 30, 2012 by approximately $1.7
million and $393,000, respectively. The decrease in the three month period ended June 30, 2013 as compared to the three month period ended June 30, 2012 is due almost exclusively to lower costs of manufacturing of compounds, outside
clinical testing and non-clinical testing. The decrease in the six month period ended June 30, 2013 as compared to the six month period ended June 30, 2012 is due to approximately $1.1 million of lower manufacturing costs of compounds and
approximately $100,000 of lower non-clinical testing offset in part by approximately $900,000 of higher clinical testing costs. The variations in the above costs are primarily related to the timing of these expenses from period to period. We were
conducting comparable levels of clinical testing for our ITI-007 compound in the periods under comparison.
63
The increase in clinical testing costs for the six month period ended June 30, 2013 as compared to the
six month period ended June 30, 2012 is also the result of a slight increase in the number of clinical trial subjects being tested in 2013.
General and Administrative Expenses
General and administrative expenses
decreased slightly for both the three and six month periods ended June 30, 2013 as compared to the three and six month periods ended June 30, 2012 by approximately $212,000 and $162,000, respectively. The decrease of $212,000 for the three
month period ended June 30, 2013 as compared to the three month period ended June 30, 2012 is primarily the result of approximately $97,000 of lower patent filing costs, with the remainder comprised primarily of lower professional fees.
The $162,000 decrease for the six month period ended June 30, 2013 as compared to the six month period ended June 30, 2012 is due to lower professional fees of approximately $36,000, and the rest is due to minor increases and decreases in
other expense category items.
Liquidity and Capital Resources
Through June 30, 2013, we have funded our operations with approximately $109.0 million of cash that has been obtained from the following main sources: $25.4 million from sales of equity; $0.2 million
from the exercise of stock options; $15.3 million in sales of convertible promissory notes; $40.6 million from grants from government agencies and foundations; and $27.5 million in total payments received under the license and collaboration
agreement with Takeda, including approximately $1.7 million for reimbursement of development costs incurred in 2011 and 2012 and $1.4 million for patent costs incurred during the same time period. During the fiscal year ended December 31, 2012,
we did not receive any funding through grants. We do not believe that grant revenue will be a significant source of funding in the near future. We expect that reimbursements of our development costs by Takeda will decline going forward, and we do
not expect such reimbursements to be a significant source of funding in the future. We also expect the reimbursements for patent filing costs will remain at the same level, but because reimbursements will be offset by the actual expenditures
incurred, reimbursements do not represent a net source of funding for us.
In October and November 2012, we issued convertible
promissory notes, or Notes, having an aggregate principal amount of approximately $15.2 million. We issued additional Notes having an aggregate principal amount of $0.1 million in March 2013. The Notes were unsecured and accrued interest at a rate
of 6% per year, were originally scheduled to mature on April 25, 2013, but were extended until October 25, 2013. The principal amount of the Notes, together with the accrued interest thereon, converted into shares of Intra-Cellular
common stock at the closing of the private placement described above under "Recent Developments – Private Placement."
As of December 31, 2012, we had a total of $19.1 million in cash, cash equivalents and certificates of deposit, or CDs, and approximately $18.2 million of short term liabilities consisting of $3.0
million of short term liabilities from operations and $15.2 million in principal amount of Notes. As of June 30, 2013, we had a total of $10.3 million in cash, cash equivalents
64
and CDs, and approximately $22.7 million of short term liabilities consisting of $7.4 million of short term liabilities from operations and $15.3 million in principal amount of Notes. This
reduction in working capital of $12.4 million for the six month period ended June 30, 2013 is primarily due to the funding of the Phase 2 clinical trial for ITI-007, our lead drug candidate. Working capital used to fund recurring operations
during this period was approximately $4.5 million. We expect to consume working capital of approximately $11.0 to $12.0 million for the second half of 2013. This will be due primarily to expenses incurred for the completion of the Phase 2 clinical
trial and, to a lesser extent, the preparations for additional trials and non-clinical testing related to the development of ITI-007.
Prior to the Merger, on August 29, 2013, Intra-Cellular closed the Private Placement in which it sold to accredited investors approximately $60.0 million of its shares of common stock, which included
approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of the Notes. All of the shares issued in the Private Placement, along with the other shares of Intra-Cellular that were outstanding immediately prior
to the Merger, were exchanged for shares of our common stock at the Effective Time. For a more detailed discussion of the Private Placement and the Merger, see "Recent Developments – Reverse Merger" above.
Our cash, cash equivalents and investment securities totaled $10.3 million at June 30, 2013. On August 29, 2013, immediately
prior to the Merger, Intra-Cellular sold approximately $60.0 million of its common stock, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular's then outstanding
convertible promissory notes, and which resulted in net proceeds, after expenses, of approximately $40.0 million. While we believe that our existing cash resources and anticipated payments from our existing collaborations will be sufficient to fund
our cash requirements for the next 12 months, we will require significant additional financing in the future to continue to fund our operations.
We have incurred losses in every year since inception with the exception of the fiscal year ended December 31, 2011. These losses have resulted in significant cash used in operations. During the
fiscal year ended December 31, 2012, our cash used in operations was approximately $18.9 million. During the fiscal year ended December 31, 2011, if we exclude the upfront fee and milestone payments from Takeda, our cash used in operations
would have been $7.8 million. This increase of cash used during calendar 2012 is primarily due to the clinical development and clinical trial activities for ITI-007. While we have several research and development programs underway, the ITI-007
program has advanced the furthest and will continue to consume increasing amounts of cash for conducting clinical trials and the testing and manufacturing of product material. As we continue to conduct these activities necessary to pursue FDA
approval of ITI-007 and our other product candidates, we expect the cash needed to fund operations to increase significantly over the next several years.
Until we can generate significant revenues from operations, we will need to satisfy our future cash needs through public or private sales of our equity securities, sales of debt securities, strategic
collaborations, licensing a portion or all of our product candidates and technology and, to a lesser extent, grant funding. We cannot be sure that future funding will be available to us on acceptable terms, or at all. Due to the recent volatile
nature of the financial markets and, in particular, the adverse impact on market capitalization and valuation of biotechnology companies, equity and debt financing may be difficult to obtain. In addition, any unfavorable development or delay in the
progress for our ITI-007 program could have a material adverse impact on our ability to raise additional capital.
65
If we cannot raise adequate capital in the future, we will be required to delay and possibly
eliminate the research and development work not only of our lead drug candidate ITI-007, but also our other preclinical stage product candidates. In this case, we could be required to relinquish greater or all rights to our product candidates at an
earlier stage of development and on less favorable terms than we would otherwise agree.
Our cash is maintained in money
market accounts and, to a lesser extent, in CDs at major financial institutions. Due to the current low interest rates available for these instruments, we are earning limited interest income. Our investment portfolio has not been adversely impacted
by the problems in the credit markets that have existed over the last several years, but there can be no assurance that our investment portfolio will not be adversely affected in the future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet
arrangements.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations set forth below are based on our financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States, or GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and
reported amounts of revenues and expenses for the periods presented. Judgments must also be made about the disclosure of contingent liabilities. We base our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management makes estimates
and exercises judgment in revenue recognition and stock-based compensation. Actual results may differ from those estimates and under different assumptions or conditions.
We believe that the following critical accounting policies affect management's more significant judgments and estimates used in the preparation of our financial statements:
Revenue Recognition
Revenue is recognized when all terms and conditions of the agreements have been met, including persuasive evidence of an arrangement, delivery has occurred or services have been rendered, price is fixed
or determinable and collectability is reasonably assured. We are reimbursed for certain costs incurred on specified research projects under the terms and conditions of grants, collaboration agreements, and awards. We record the amount of
reimbursement as revenues on a gross basis in accordance with ASC 605-45, "
Revenue Recognition/Principal Agent Considerations
." We are the primary obligor with respect to
66
purchasing goods and services from third-party suppliers, are obligated to compensate the service provider for the work performed, and have discretion in selecting the supplier. Provisions for
estimated losses on research grant projects and any other contracts are made in the period such losses are determined.
Effective January 1, 2011, we adopted a new accounting standard that amends the guidance on the accounting for arrangements
involving the delivery of more than one element. Pursuant to the new standard, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting. For us, this determination is generally based on whether the
deliverable has "stand-alone value" to the customer. We adopted this new accounting standard on a prospective basis for all Multiple-Deliverable Revenue Arrangements, or MDRAs, entered into on or after January 1, 2011, and for any
MDRAs that were entered into prior to January 1, 2011, but materially modified on or after that date.
For MDRAs entered
into prior to January 1, 2011 (pre-2011 arrangements) and not materially modified thereafter, we continue to apply our prior accounting policy with respect to such arrangements. Under this policy, in general, revenue from non-refundable,
up-front fees related to intellectual property rights/licenses, where we have continuing involvement and where standalone value could not be determined under the previous guidance, is recognized ratably over the estimated period of ongoing
involvement. In general, the consideration with respect to the other deliverables is recognized when the goods or services are delivered.
The adoption of this accounting standard did not have a material impact on our results of operations for the years ended December 31, 2012 and 2011, or on our financial positions as of
December 31, 2012 and 2011.
In January 2011, we adopted ASC Topic 605-28, "
Milestone Method
." Under
this guidance, we recognize revenue contingent upon the achievement of a substantive milestone in its entirety in the period the milestone is achieved. Substantive milestone payments are recognized upon achievement of the milestone only if all of
the following conditions are met:
•
the milestone payments are non-refundable;
•
achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement;
•
substantive effort on our part is involved in achieving the milestone;
•
the amount of the milestone payment is reasonable in relation to the effort expended or the risk associated with achievement of the milestone; and
•
a reasonable amount of time passes between the up-front license payment and the first milestone payment, as well as between each subsequent milestone
payment.
Determination as to whether a payment meets the aforementioned conditions involves
management's judgment. If any of these conditions are not met, the resulting payment would not
67
be considered a substantive milestone, and therefore, the resulting payment would be considered part of the consideration for the single unit of accounting and be recognized as revenue as such
performance obligations are performed under either the proportional performance or straight-line methods, as applicable. In addition, the determination that one such payment was not a substantive milestone could prevent us from concluding that
subsequent milestone payments were substantive milestones and, as a result, any additional milestone payments could also be considered part of the consideration for the single unit of accounting and would be recognized as revenue as such performance
obligations are performed under either the proportional performance or straight-line methods, as applicable.
Stock-Based Compensation
Stock-based payments are accounted for in accordance with the provisions of ASC 718, "
Compensation –
Stock Compensation
." The fair value of share-based payments is estimated, on the date of grant, using the Black-Scholes-Merton option-pricing model (the Black-Scholes model). The resulting fair value is recognized ratably over the requisite
service period, which is generally the vesting period of the option.
For all time vesting awards granted, expense is
amortized using the straight-line attribution method. For awards that contain a performance condition, expense is amortized using the accelerated attribution method. As stock-based compensation expense recognized in the statements of operations for
the fiscal years ended December 31, 2012 and 2011, is based on share-based awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures are based on our historical experience for the fiscal years ended December 31, 2012 and 2011, and have not been material.
We utilize the Black-Scholes model for estimating fair value of its stock options granted. Option valuation models, including
Black-Scholes model, require the input of subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield,
expected volatility and the expected life of the award.
Expected volatility rates are based on historical volatility of the
common stock of comparable publicly traded entities and other factors due to the lack of historic information of our common stock. The expected life of stock-based options is the period of time for which the stock-based options are expected to be
outstanding. Given the lack of historic exercise data, the expected life is determined using the "simplified method" which is defined as the midpoint between the vesting date and the end of the contractual term.
The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect
at the time of the grant. We have not paid dividends to its stockholders since its inception and do not plan to pay cash dividends in the foreseeable future. Therefore, we have assumed an expected dividend rate of zero.
68
Given the absence of an active market for our common stock, the exercise price of the stock
options on the date of grant was determined and approved by the board of directors using several factors, including progress and milestones achieved in our business development and performance, the price per share of our convertible preferred stock
offerings and general industry and economic trends. In establishing the estimated fair value of our common stock, we considered the guidance set forth in American Institute of Certified Public Accountants Practice Guide, "
Valuation of
Privately-Held-Company Equity Securities Issued as Compensation
."
Under ASC 718, the cumulative amount of
compensation cost recognized for instruments classified as equity that ordinarily would result in a future tax deduction under existing tax law shall be considered to be a deductible difference in applying ASC 740, "
Income Taxes
."
The deductible temporary difference is based on the compensation cost recognized for financial reporting purposes; however, these provisions currently do not impact us, as all the deferred tax assets have a full valuation allowance.
Since we had net operating loss carry-forwards as of December 31, 2012 and 2011, no excess tax benefits for the tax deductions
related to share-based awards were recognized in the statements of operations.
Equity instruments issued to non-employees are
accounted for under the provisions of ASC 718 and ASC 505-50, "
Equity/Equity-Based Payments to Non-Employees
." Accordingly, the estimated fair value of the equity instrument is recorded on the earlier of the performance commitment
date or the date the services required are completed and are marked to market during the service period.
Recently Issued Accounting
Pronouncements
We review new accounting standards to determine the expected financial impact, if any, that the adoption of
each such standard will have. For the recently issued accounting standards that we believe may have an impact on our financial statements, see Exhibit 99.1, "Notes to Financial Statements – Note 2 – Summary of Significant Accounting
Policies."
69
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of our common stock beneficially owned as of August 29, 2013, following the completion of the Private Placement and Merger, by (i) each of our
current directors, directors-elect and named executive officers, (ii) all executive officers, directors and directors-elect as a group, and (iii) each person known by us to be the beneficial owner of more than 5% of the outstanding shares
of our common stock. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based
on information provided to us by these stockholders, subject to community property laws, where applicable. Percentage of ownership is based on 22,134,647 shares of common stock outstanding on August 29, 2013, after giving effect to the Private
Placement and Merger. Unless otherwise noted below, the address of each stockholder below is c/o Intra-Cellular Therapies, Inc., 3960 Broadway, New York, New York 10032.
Beneficial Owner
Title
Shares
of
Common Stock
Beneficially Owned
(#)
(1)
Percentage of
Common 
Stock
Beneficially Owned
(%)
(1)
Directors, Directors-Elect and
Named Executive Officers
Sharon Mates, Ph.D.
(2)
Chairman, President and Chief Executive Officer
1,341,433
6.0
%
Lawrence J. Hineline
(3)
Vice President of Finance, Chief Financial Officer and Secretary
154,999
*
Allen A. Fienberg, Ph.D.
(4)
Vice President of Business Development
342,499
1.5
%
Samir N. Masri
(5)
Director
—
*
Christopher Alafi, Ph.D.
(6)
Director-Elect
4,046,638
18.3
%
Richard Lerner, M.D.
(7)
Director-Elect
116,250
*
Joel S. Marcus
(8)
Director-Elect
1,383,348
6.2
%
Sir Michael Rawlins, M.D., FRCP, FMedSci
Director-Elect
—
*
All current executive officers, directors and directors-elect as a group (10 persons)
(9)
7,631,583
33.3
%
Other 5% or More Stockholders
Alafi Capital Company, LLC and Moshe Alafi
(10)
3,558,627
16.1
%
Alexandria Real Estate Equities, Inc.
(11)
1,283,856
5.8
%
Entities affiliated with Fidelity Investments
(12)
1,999,120
9.0
%
Paul Greengard, Ph.D.
(13)
1,131,250
5.1
%
Morton I. Sosland
(14)
3,388,389
15.3
%
70
*
Represents beneficial ownership of less than 1% of the shares of common stock.
(1)
Beneficial ownership is determined in accordance with SEC rules, and includes any shares as to which the stockholder has sole or shared voting power or investment
power, and also any shares which the stockholder has the right to acquire within 60 days of August 29, 2013, whether through the exercise or conversion of any stock option, convertible security, warrant or other right. The indication herein
that shares are beneficially owned is not an admission on the part of the stockholder that he, she or it is a direct or indirect beneficial owner of those shares.
(2)
Consists of 1,053,935 shares of common stock and options to purchase 287,498 shares of common stock which are exercisable within 60 days of August 29, 2013.
(3)
Consists of 50,000 shares of common stock and options to purchase 104,999 shares of common stock which are exercisable within 60 days of August 29, 2013.
(4)
Consists of 237,500 shares of common stock and options to purchase 104,999 shares of common stock which are exercisable within 60 days of August 29, 2013. Does not
include: (i) 208,023 shares of common stock held by J.D.F. Holdings Ltd., in which Dr. Fienberg holds a 20% ownership interest; and (ii) 50,000 shares of common stock held by two trusts for the benefit of members of
Dr. Fienberg's family. Dr. Fienberg has no voting or investment control with respect to any of the shares owned by J.D.F. Holdings Ltd. or held in the trusts.
(5)
In connection with the Merger, Mr. Masri executed a letter of resignation to be effective on the New Board Effective Date.
(6)
Dr. Alafi has been appointed a director to be effective on the New Board Effective Date. Consists of 3,542,885 shares of common stock held by Alafi Capital
Company, LLC, or Alafi Capital, and 503,753 shares of common stock held by a trust for the benefit of members of the Alafi family. Dr. Alafi is a managing partner of Alafi Capital and has shared voting and investment power with respect to the
shares owned by Alafi Capital and full voting and investment power with respect to shares owned by the trust. Does not include 503,776 shares held by two other trusts for the benefit of members of the Alafi family for which Dr. Alafi does not
have voting or investment control. The address for Dr. Alafi is c/o Alafi Capital Company, LLC, 8 Admiral Drive, Suite 324, Emeryville, CA 94608.
(7)
Dr. Lerner has been appointed a director to be effective on the New Board Effective Date. Consists of options to purchase 78,750 shares of common stock held by
Dr. Lerner which are exercisable within 60 days of August 29, 2013, and 37,500 shares of common stock held by the Lerner Family Trust UAD 11/14/94, or the Lerner Family Trust. Dr. Lerner shares voting and investment control with
respect to the shares held by the Lerner Family Trust.
(8)
Mr. Marcus has been appointed a director to be effective on the New Board Effective Date. Consists of (i) 1,283,856 shares of common stock held by Alexandria
Equities, LLC and (ii) 15,742 shares of common stock and options to purchase 83,750 shares of common stock held by Mr. Marcus, which are exercisable within 60 days of August 29, 2013. Mr. Marcus is the Chairman, CEO and Founder
of Alexandria Real Estate Equities, Inc., which is the managing member of Alexandria Equities, LLC, which has full voting and investment power with respect to the shares owned by Alexandria Equities, LLC. As an officer of Alexandria Real Estate
Equities, Inc., Mr. Marcus may be deemed to have voting and investment power with respect to the shares owned by Alexandria Equities, LLC. Mr. Marcus disclaims beneficial ownership of the shares held by Alexandria Equities, LLC, except to
the extent of his underlying pecuniary interest therein. The address for Mr. Marcus is c/o Alexandria Real Estate Equities, Inc., 385 East Colorado Boulevard, Suite 299, Pasadena, CA 91101.
(9)
See footnotes 2 through 8. Also includes 100,000 shares of common stock and options to purchase 115,833 shares of common stock held by Lawrence P. Wennogle, Ph.D., Vice
President, Drug Discovery, which are exercisable within 60 days of August 29, 2013, and options to purchase 30,583 shares of common stock, which are exercisable within 60 days of August 29, 2013, held by Kimberly E. Vanover, Ph.D., Vice
President, Clinical Development.
71
(10)
Consists of 3,542,885 shares of common stock held by Alafi Capital and 15,742 shares of common stock held by Moshe Alafi. Christopher Alafi, Ph.D., who will be
appointed a director to be effective on the New Board Effective Date, and Moshe Alafi are each managing partners of Alafi Capital and share voting and investment power with respect to the shares owned by Alafi Capital. The address for Moshe Alafi
and Alafi Capital is 8 Admiral Drive, Suite 324, Emeryville, CA 94608.
(11)
Consists of 1,283,856 shares of common stock held by Alexandria Equities, LLC. Joel S. Marcus, who will be appointed a director to be effective on the New Board
Effective Date, is the Chairman, CEO and Founder of Alexandria Real Estate Equities, Inc., which is the managing member of Alexandria Equities, LLC, which has full voting and investment power with respect to the shares owned by Alexandria Equities,
LLC. As an officer of Alexandria Real Estate Equities, Inc., Mr. Marcus may be deemed to have voting and investment power with respect to the shares owned by Alexandria Equities, LLC. Mr. Marcus disclaims beneficial ownership of the shares
held by Alexandria Equities, LLC, except to the extent of his underlying pecuniary interest therein. The address for Alexandria Equities, LLC is c/o Alexandria Real Estate Equities, Inc., 385 East Colorado Boulevard, Suite 299, Pasadena, CA 91101.
(12)
Fidelity Management & Research Company, or Fidelity, 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR LLC and an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 1,999,120 shares of common stock as a result of acting as investment adviser to various investment companies registered under Section 8
of the Investment Company Act of 1940. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 1,999,120 shares of common stock owned by the Funds. Members of the family of Edward C.
Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have
entered into a shareholders' voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and
the execution of the shareholders' voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d, Chairman
of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds' Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines
established by the Funds' Boards of Trustees.
(13)
Consists of 1,131,250 shares of common stock held by Dr. Greengard. Does not include 1,500,000 shares of common stock held by six trusts for the benefit of members
of Dr. Greengard's family, as the trustee of these trusts, Ursula von Rydingsvard, has sole voting and investment control over the shares held by the trusts. The address for Dr. Greengard and the trusts is Dr. Paul Greengard, c/o
TAG Associates, 75 Rockefeller Plaza, 9th Floor, New York, NY 10019.
(14)
Consists of 707,287 shares of common stock held by David N. Sosland Trust A; 1,948,554 shares of common stock held by The Sosland Family Trust B Partnership; and
732,548 shares of common stock held by The Sosland Foundation. Morton I. Sosland is Trustee of the David N. Sosland Trust A, Managing Partner of The Sosland Family Trust B Partnership and Vice Chairman of The Sosland Foundation, which we refer to
collectively as the Sosland Holders. As such, Mr. Sosland has sole voting and investment power with respect to the shares held by the Sosland Holders. The address for Mr. Sosland and the Sosland Holders is 4800 Main Street, Suite 100,
Kansas City, MO 64112.
72
MANAGEMENT AND DIRECTORS
Effective immediately following the Merger, Sharon Mates, Ph.D. was appointed to our board of directors, and together with the sole
director of the Shell Company, Samir N. Masri, constitute our board of directors as of August 29, 2013. Effective upon the eleventh day after the Company files with the SEC and mails to our sole stockholder prior to the Merger a Schedule 14f-1
reporting a change in the majority of our directors, the board of directors will be reconstituted by the appointment of Christopher Alafi, Ph.D., Richard Lerner, M.D., Joel S. Marcus and Sir Michael Rawlins, M.D., FRCP, FMedSci, to serve with
Dr. Mates as directors, and the resignation of Mr. Masri as a director. Our executive management team was also reconstituted upon the closing of the Merger by the appointment of Dr. Mates as our President and Chief Executive Officer,
Allen A. Fienberg, Ph.D. as our Vice President of Business Development, Lawrence J. Hineline as our Vice President of Finance, Chief Financial Officer and Secretary, Lawrence P. Wennogle, Ph.D. as our Vice President, Drug Discovery and Kimberly E.
Vanover, Ph.D. as our Vice President, Clinical Development, and the resignation of Samir N. Masri as our Chief Executive Officer, Chief Financial Officer, President and Secretary. The following table sets forth the name and positions of each of our
directors, directors-elect and executive officers after the Merger.
Executive Officers and Directors
The following table sets forth certain information concerning our executive officers, directors and directors-elect as of August 29,
2013:
Name
Age
Position
Executive Officers
Sharon Mates, Ph.D.
60
Chairman, President and Chief Executive Officer
Allen A. Fienberg, Ph.D.
53
Vice President of Business Development
Lawrence J. Hineline
57
Vice President of Finance, Chief Financial Officer and Secretary
Lawrence P. Wennogle, Ph.D.
63
Vice President, Drug Discovery
Kimberly E. Vanover, Ph.D.
47
Vice President, Clinical Development
Non-Employee Directors and Directors-Elect
Samir N. Masri
68
Director
Christopher Alafi, Ph.D.
49
Director-Elect
Richard Lerner, M.D.
75
Director-Elect
Joel S. Marcus
65
Director-Elect
Sir Michael Rawlins, M.D.,
FRCP, FMedSci
72
Director-Elect
Executive Officers
Sharon Mates, Ph.D.
Dr. Mates has been the Chairman of the board of directors, President and Chief Executive Officer of Intra-Cellular since June 2002. Dr. Mates co-founded Intra-Cellular
in May 2002. Prior to co-founding Intra-Cellular, Dr. Mates was a co-founder of Functional Genetics, and served as its Chairman and Chief Executive Officer from December 2000 until August 2003. From 1989-1998 Dr. Mates was the President
and a board member of
73
North American Vaccine Inc. and its predecessor companies. She has served on several boards, and recently completed a board membership and a two-year chairmanship of the Board of the New York
Biotechnology Association. Dr. Mates has also served on the Advisory Council of the Center for Society and Health at the Harvard School of Public Health, the Board of Visitors of the Biotechnology Institute of the University of Maryland and the
board of directors of Gilda's Club of New York. Earlier in her career, Dr. Mates spent several years as a research analyst and investment banker, and as an advisor to the life sciences industry. Dr. Mates received her B.S. from the
Ohio State University and her Ph.D. from the University of Washington, and completed her postdoctoral fellowships at The Massachusetts General Hospital and Harvard Medical School.
We believe that Dr. Mates possesses specific attributes that qualify her to serve as chairman of our board of directors, including
the perspective and experience she brings as the co-founder, President and Chief Executive of Intra-Cellular, which brings historic knowledge, operational expertise and continuity to our board of directors, and her industry expertise, including
over 24 years of experience leading both private and public companies.
Allen A. Fienberg, Ph.D.
Dr. Fienberg has
served as Vice President of Business Development of Intra-Cellular since June 2002. He co-founded Intra-Cellular in May 2002. Dr. Fienberg received his A.B. degree in Genetics from the University of California, Berkeley and his Ph.D. in Human
Genetics from Yale University. He completed post-doctoral studies at The Rockefeller University under the direction of Dr. Paul Greengard from 1991-1999. From 1999-2001, Dr. Fienberg was a staff scientist at the Genomics Institute of the
Novartis Research Foundation and was appointed a Research Assistant Professor at The Rockefeller University from 2001-2002.
Lawrence J. Hineline
,
CPA.
Mr. Hineline has served as Vice President of Finance, Chief Financial Officer and
Secretary of Intra-Cellular since June 2002. From December 2000 to November 2003, Mr. Hineline was the Vice-President of Finance and Chief Financial Officer of Functional Genetics, Inc. Prior to that, Mr. Hineline served as the Vice
President of Finance of North American Vaccine, Inc. and its predecessor companies from 1993 to 2000, and he served as Corporate Controller from 1989 to 1993. During this time, Mr. Hineline oversaw the growth of the accounting function and
its systems for the company that emerged as a start-up and was later acquired by Baxter Health Care. Mr. Hineline is a licensed CPA in the State of Maryland and received his Bachelor's Degree from the University of Maryland Baltimore
County.
Lawrence P. Wennogle, Ph.D.
Dr. Wennogle has served as Vice President, Drug Discovery of Intra-Cellular
since January 2003. For the past 33 years, Dr. Wennogle has been involved in research and development in the pharmaceutical industry aimed at the discovery of novel pharmaceutical entities for human diseases. He was a Staff Scientist
and Principal Research Fellow at Ciba-Geigy and Novartis Pharmaceutical Corporation for 19 years, where he led drug discovery programs for CNS disorders, cardiovascular diseases, diabetes and inflammation. Dr. Wennogle received his B.A. from
Ithaca College and his Ph.D. in Biochemistry from the University of Colorado, Boulder. He then completed two post-doctoral positions, one at the University of Colorado and the second at the Pasteur Institute in Paris, France, working under
Jean-Pierre Changeux on the structure-function of the nicotinic acetylcholine receptor.
74
Kimberly E. Vanover, Ph.D
. Dr. Vanover joined Intra-Cellular in March 2007
and has been Vice President, Clinical Development of Intra-Cellular since January 2011. Previously, she was Executive Director, Clinical Development of Intra-Cellular from January 2008 to December 2010 and Senior Director, Clinical Development
of Intra-Cellular from March 2007 to December 2007. She has spent over 20 years on the discovery and development of small molecule drugs for the treatment of neuropsychiatric and neurodegenerative diseases. Dr. Vanover was Postdoctoral
Research Scientist at Lederle Laboratories from 1992 to 1994, Postdoctoral Research Trainee in the Department of Psychiatry at the University of California San Diego from 1994 to 1995, Senior Scientist and Group Leader at CoCensys from 1995 to 2000
and held positions as Group Leader and Director at ACADIA Pharmaceuticals from 2000 to 2007. In these positions, Dr. Vanover participated in the discovery and development of a broad range of new CNS therapeutics, including drugs to treat
psychosis, insomnia, cognitive impairment, movement disorders, acute and neuropathic pain, anxiety, epilepsy, and drug abuse. Dr. Vanover received her B.A. in Psychology from the University of Missouri and her Ph.D. in Biopsychology from
the University of Chicago.
Non-Employee Directors and Directors-Elect
Samir N. Masri
. Mr. Masri was the Chief Executive Officer, Chief Financial Officer, President and Secretary of the Shell
Company from October 2012 until the closing of the Merger. In addition, he continues to serve as director, but has agreed to resign as a director effective upon the eleventh day following the date the Company files with the SEC and mails to its sole
stockholder prior to the Merger a Schedule 14f-1 reporting a change in the majority of our directors, or the New Board Effective Date. Mr. Masri is the founder and has been the President of Samir Masri CPA Firm P.C. since 2006. Mr. Masri
has also served as President and a director of Iron Sands Corp. and Putnam Hills Corp. since May 26, 2011 and Chief Executive Officer, Chief Financial Officer, President, Secretary and director of Dutchess Holdings Corp. and Fern Holdings Corp.
since October 15, 2012. Mr. Masri served as an executive officer and a director of China Display Technologies, Inc. (formerly Lincoln International Corp.), a publicly reporting and non-trading shell company, from 2004 until a share
exchange with an operating company was completed in 2007. Mr. Masri received a B.A. in 1967 and a M.A. in 1970 in Politics, Philosophy and Economics from St. Catherine's College in Oxford, England. Mr. Masri is a fellow of the
Institute of Chartered Accountants in England and Wales and a CPA licensed in New York.
Mr. Masri's past experience
as executive officer and director of a shell company which has completed a business combination will be beneficial to the Company until the directors-elect take office.
Christopher Alafi, Ph.D.
Dr. Alafi has served on the board of directors of Intra-Cellular since January 2013. Dr. Alafi has been a General Partner of Alafi Capital Company, LLC, a venture
capital firm, since 1995. He was previously a Physiology and Anatomy teacher at Santa Monica College, a visiting scholar in the Department of Chemistry at Stanford University and a researcher at DNAX. Dr. Alafi currently serves as a director of
ISTO Technologies, Inc. and has previously served as a director of Coley Pharmaceutical Group, Inc., CyberGold, Inc. and Stereotaxis, Inc. Dr. Alafi received a B.A. in Biology from Pomona College and a D.Phil. in Biochemistry from the
University of Oxford.
75
We believe that Dr. Alafi possesses specific attributes that qualify him to serve as a
member of our board of directors, including the perspective and experience he brings as a General Partner of Alafi Capital Company, LLC.
Richard Lerner, M.D.
Dr. Lerner has served on the board of directors of Intra-Cellular since 2002. Dr. Lerner served as President of the Scripps Research Institute, a private, non-profit
biomedical research organization from 1986 to January 2012, and since then has served and continues to serve as Institute Professor. Dr. Lerner received the Wolf Prize in Chemistry in 1994, the California Scientist of the Year Award in 1996,
the Paul Ehrlich and Ludwig Darmstaedter Prize in 2003, and the Prince of Asturias Award in 2012 for his achievements in the development of catalytic antibodies and combinatorial antibody libraries. Dr. Lerner is a member of the National
Academy of Sciences and the Royal Swedish Academy of Sciences. Dr. Lerner served as a director of Kraft Foods, Inc. from 2005 to March 2012 and currently serves as a director of Opko Health, Inc., Teva Pharmaceutical Industries Ltd., and
Sequenom, Inc. Dr. Lerner received his M.D. from Stanford Medical School.
We believe that Dr. Lerner possesses
specific attributes that qualify him to serve as a member of our board of directors, including his service as a director of other public companies, combined with his business acumen and judgment provide our board of directors with valuable
scientific and operational expertise and leadership skills.
Joel S. Marcus
J.D., CPA.
Mr. Marcus has
served on the board of directors of Intra-Cellular since April 2006. Mr. Marcus co-founded Alexandria Real Estate Equities, Inc. in 1994, Alexandria Venture Investments in 1996, and the annual Alexandria Summit in 2011. He has served as
Chairman of the Board of Directors of Alexandria Real Estate Equities, Inc. since May 2007, Chief Executive Officer since March 1997, President since February 2009, and a director since the company's inception in 1994. From 1986 to 1994,
Mr. Marcus was a partner at the law firm of Brobeck, Phleger & Harrison LLP, specializing in corporate finance and capital markets, venture capital, and mergers and acquisitions. From 1984 to 1994, he also served as General Counsel and
Secretary of Kirin-Amgen, Inc., a joint venture that financed the development of, and owned patents to, two multi-billion dollar genetically engineered biopharmaceutical products. Mr. Marcus was formerly a practicing certified public accountant
and tax manager with Arthur Young & Co. specializing in the financing and taxation of REITs. He received his undergraduate and Juris Doctor degrees from the University of California, Los Angeles. In addition to Intra-Cellular,
Mr. Marcus serves on the boards of the Accelerator Corporation, of which he was one of the original architects and co-founders, Foundation for the National Institutes of Health (FNIH), Multiple Myeloma Research Foundation (MMRF), and the
Partnership for New York City. Mr. Marcus also served on the Board of Trustees of PennyMac Mortgage Investment Trust, a publicly traded mortgage REIT, from August 2009 to August 2012. Mr. Marcus received the Ernst & Young 1999
Entrepreneur of the Year Award (Los Angeles – Real Estate).
We believe that Mr. Marcus possesses specific
attributes that qualify him to serve as a member of our board of directors, including his many years of experience in the life sciences industry and his extensive experience serving as a director and an executive officer of other public companies.
76
Sir Michael Rawlins, M.D., FRCP, FMedSci
. Sir Michael has served on the board of
directors of Intra-Cellular since May 2013. Sir Michael is known for his long standing leadership of the United Kingdom's National Institute for Clinical Excellence, or NICE, which he led from its inception in 1999 through March 2013. Recently
in July 2012, Sir Michael was appointed as the President of the United Kingdom's Royal Society of Medicine, a center for education and scholarship both in the UK and globally. Sir Michael was a professor of clinical pharmacology and a general
physician at the University of Newcastle upon Tyne from 1973 to 2006. He received the Prince Mahidol Award for Medicine in 2012, the Galen Medal in 2010, and the Hutchinson Medal in 2003. Sir Michael was appointed Knight Bachelor in 1999.
We believe that Sir Michael possesses specific attributes that qualify him to serve as a member of our board of directors,
including his extensive experience in areas of health policy and economics.
Scientific Advisory Board
We have a Scientific Advisory Board which is chaired by Paul Greengard, Ph.D., one of our founders. Dr. Greengard received his Ph.D.
in biophysics from Johns Hopkins University in 1953. After postgraduate work in England, he served for nine years as director of biochemical research at the Geigy Research Laboratories. In 1968, he was appointed Professor of Pharmacology at Yale
University. In 1983, he was appointed the Vincent Astor Professor at The Rockefeller University, where he founded the Laboratory of Molecular and Cellular Neuroscience.
Dr. Greengard is a pioneer in the field of neuronal signal transduction and his seminal discoveries over the years have provided a framework by which to understand the complexity of how
neurotransmitters function in the brain. Dr. Greengard's many awards and honors include the CIBA-Geigy Drew Award in Biomedical Research (1979), the New York Academy of Sciences Award in Biological and Medical Sciences (1980), the Andrew
D. White Professorship-at-Large of Cornell University (1981-87), the Pfizer Biomedical Research Award (1987), the Ralph W. Gerard Prize in Neuroscience, Society for Neuroscience (1994), the Charles A. Dana Award for Pioneering Achievements in Health
(1997), and the Nobel Prize in Physiology or Medicine (2000). Dr. Greengard has also been a consultant to major pharmaceutical companies and a Chairman and member of the scientific advisory boards of numerous biotechnology companies.
We have additional members of our Scientific Advisory Board who change from time to time, with whom we consult on an
as-needed basis.
Medical Advisory Board
Carol A. Tamminga, M.D. is the Chair of our Medical Advisory Board. Dr. Tamminga is the Chair of the Psychiatry Department at the University of Texas Southwestern School of Medicine. She holds the
McKenzie Foundation Chair in Psychiatry, the Communities Foundation of Texas, Inc. Chair in Brain Science and is the Chief of Translational Neuroscience Research in Schizophrenia.
77
Jeffrey Lieberman, M.D. is the Lawrence C. Kolb Professor and Chairman of Psychiatry, at the
Columbia University College of Physicians and Surgeons; and Director, of the New York State Psychiatric Institute; Psychiatrist-in-Chief, New York Presbyterian Hospital-Columbia University Medical Center.
John M. Kane, M.D. is Professor and Chairman of Psychiatry at The Hofstra North Shore-LIJ School of Medicine and Vice President for
Behavioral Health Services at The North Shore-LIJ Health System.
Christoph U. Correll, M.D. is Professor of Psychiatry and
Molecular Medicine, Hofstra North Shore LIJ School of Medicine; Medical Director, Recognition and Prevention (RAP) Program, The Zucker Hillside Hospital, North Shore Long Island Jewish Health System.
Donald Goff, M.D. is Professor and Vice Chair for Research in the Department of Psychiatry at New York University Langone Medical Center
(NYULMC) and Director of the Nathan S. Kline Institute for Psychiatric Research.
Compensation Committee Interlocks and Insider
Participation
We currently do not have a compensation committee. While Intra-Cellular had a compensation committee
comprised of all directors serving on the Intra-Cellular board of directors, no member of Intra-Cellular's compensation committee has at any time been an employee of ours or Intra-Cellular other than Dr. Mates, who did not vote on her own
compensation. None of our executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board of Directors or compensation committee.
Board Composition and Election of Directors
Terms of Office
Our restated certificate of incorporation, which we
expect to file on or about the date that is 20 calendar days from the date we expect to file with the SEC and mail to our sole stockholder prior to the Merger a Schedule 14C reporting the adoption of the restated certificate of incorporation by our
sole stockholder prior to the Merger, and our restated bylaws, which became effective upon the Merger, provided that, subject to any applicable rights of holders of any preferred stock then outstanding, the authorized number of directors may be
changed only by resolution of the Board. We currently have authorized two directors and will have five directors effective on the New Board Effective Date. In accordance with our restated certificate of incorporation and restated bylaws, the Board
will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders commencing with the meeting in 2014, the successors to the directors whose terms then expire will be elected to serve until the third annual
meeting following the election. Our directors will be divided among the three classes as follows:
•
the Class I directors will be Richard Lerner, M.D. and Sir Michael Rawlins, M.D., FRCP, FMedSci, and their terms will expire at the annual meeting of
stockholders to be held in 2014;
78
•
the Class II directors will be Christopher Alafi, Ph.D. and Joel S. Marcus, and their terms will expire at the annual meeting of stockholders to be
held in 2015; and
•
the Class III director will be Sharon Mates, Ph.D. and her term will expire at the annual meeting of stockholders to be held in 2016.
Any additional directorships resulting from an increase in the number of directors will be distributed
among the three classes so that each class will consist of approximately one-third of the directors.
Director Independence
Our securities are not listed on a national securities exchange or on any inter-dealer quotation system which has a
requirement that a majority of directors be independent. We evaluate independence, however, by the standards for director independence set forth in the NASDAQ Marketplace Rules. Under Rules 5605 and 5615 of the NASDAQ Marketplace Rules, a majority
of a listed company's board of directors must be comprised of independent directors, subject to certain phase-in exceptions. In addition, NASDAQ Marketplace Rules require that, subject to specified exceptions, each member of a listed
company's audit, compensation and governance and nominating committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Rule 5605(a)(2) of the NASDAQ
Marketplace Rules, a director will only qualify as an "independent director" if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.
Based upon information requested from and provided by each
director concerning their background, employment and affiliations, including family relationships, our Board of Directors has determined that none of Dr. Alafi, Dr. Lerner, Mr. Marcus or Sir Michael, representing four out of five
directors who will serve on the board on the New Board Effective Date, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is
"independent" as that term is defined under Rule 5605(a)(2) of the NASDAQ Marketplace Rules. Dr. Mates and Mr. Masri, our current directors, are or have been employed by the Company during 2013 and are therefore not independent
under NASDAQ Marketplace Rules.
Board of Directors' Meetings
During the fiscal year ended December 31, 2012, there were five meetings of Intra-Cellular's board of directors, and the
compensation committee, which was the only standing
79
committee of Intra-Cellular's board of directors, met one time. No director of Intra-Cellular attended fewer than 75% of the total number of meetings of Intra-Cellular's board of
directors and of committees of its board of directors on which he or she served during fiscal 2012, except for David Kipnis, M.D., a former director of Intra-Cellular, who attended three of the six meetings of Intra-Cellular's board of
directors and committees of its board of directors during fiscal 2012. In addition, Christopher Alafi, Ph.D. was not elected a director of Intra-Cellular until 2013. Our Board of Directors intends to adopt a policy under which each member of the
Board is strongly encouraged but not required to attend each annual meeting of our stockholders. Neither we nor Intra-Cellular held an annual meeting of stockholders in 2012.
Committees of the Board of Directors
Our Board of Directors does
not currently have an audit committee, a compensation committee or a nominating and governance committee. Our Board of Directors intends to establish an audit committee, a compensation committee and a nominating and corporate governance committee.
Each committee will operate under a charter to be approved by our Board of Directors.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more
than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To our
knowledge, based solely on a review of the copies of such reports furnished to us and written representations regarding the filing of required reports, we believe that all Section 16(a) filing requirements applicable to our directors, executive
officers and greater-than-ten-percent beneficial owners with respect to fiscal 2012 were met, as our directors, executive officers and greater-than-ten percent beneficial owners were not required by file reports under Section 16(a) before the
Company became an Exchange Act reporting company in fiscal 2013.
Code of Ethics
Prior to the Merger, the Shell Company had adopted a code of conduct and ethics. We intend to adopt an amended and restated code of
conduct and ethics that will apply to all of our employees, including our principal executive officer and our principal financial and accounting officer, and plan to post a copy of such code of conduct and ethics on our website at
www.intracellulartherapies.com. Once we adopt the amended and restated code of conduct and ethics, disclosure regarding any amendments to, or waivers from, provisions of the amended and restated code of conduct and ethics that we intend to adopt
that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting or the issuance of a press
release of such amendments or waivers is then permitted by the rules of The NASDAQ Stock Market.
80
Board Leadership Structure and Role on Risk Oversight
Our Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board,
as the Board believes it is in the best interest of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board has determined that having an employee director serve as
Chairman is in the best interest of the Company's stockholders at this time because of the efficiencies achieved in having the role of Chief Executive Officer and Chairman combined, and because the detailed knowledge of our day-to-day
operations and business that the Chief Executive Officer possesses greatly enhances the decision-making processes of the Board as a whole. We have a strong governance structure in place, including independent directors who will join the Board on the
New Board Effective Date, to ensure the powers and duties of the dual role are handled responsibly. We do not have a lead independent director.
The Chairman of the Board of Directors and the other members of the Board work in concert to provide oversight of our management and affairs. Our Board encourages communication among its members and
between management and the Board to facilitate productive working relationships. Working with the other members of the Board, Dr. Mates also strives to ensure that there is an appropriate balance and focus among key Board responsibilities such
as strategic development, review of operations and risk oversight.
Indemnification of Directors and Officers
Our pending restated certificate of incorporation and our restated by-laws effective upon consummation of the Merger provide that each
person who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director, officer, or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of such proceeding is alleged action in an official capacity as a director, officer or trustee or in any other capacity while serving as a director, officer or trustee, shall be indemnified and
held harmless by us to the fullest extent authorized by the Delaware General Corporation Law against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such.
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify any director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or proceeding brought by
reason of the fact that such person is or was a director or officer of the corporation, if such person acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe his or her conduct was unlawful. In a derivative action (i.e., one brought by or on behalf of the corporation), indemnification may be provided only
for expenses actually and reasonably incurred by any director or officer in connection with the defense or settlement of such an action or suit if such person acted in good faith and in a manner that he or she reasonably believed to be
81
in, or not opposed to, the best interests of the corporation, except that no indemnification shall be provided if such person shall have been adjudged to be liable to the corporation, unless and
only to the extent that the Delaware Chancery Court or the court in which the action or suit was brought shall determine that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law, Article Eighth of our pending restated
certificate of incorporation eliminates the liability of a director to us or our stockholders for monetary damages for such a breach of fiduciary duty as a director, except for liabilities arising:
•
from any breach of the director's duty of loyalty to us or our stockholders;
•
from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•
under Section 174 of the Delaware General Corporation Law; and
•
from any transaction from which the director derived an improper personal benefit.
We will enter into indemnification agreements with our directors (other than Mr. Masri), directors-elect and certain officers, in
addition to the indemnification to be provided in our pending restated certificate of incorporation and provided for in our restated by-laws, and intend to enter into indemnification agreements with any new directors and executive officers in the
future. We have purchased and intend to maintain insurance on behalf of any person who is or was a director or officer against any loss arising from any claim asserted against him or her and incurred by him or her in any such capacity, subject to
certain exclusions.
In addition, as a condition to the Merger, we also entered into an indemnity agreement with the former
officer and director of the Public Shell pursuant to which we agreed to indemnify such former officer and director for actions taken by him in his official capacity relating to the consideration, approval and consummation of the Merger and certain
related transactions.
The foregoing discussion of our pending restated certificate of incorporation, restated by-laws,
indemnification agreements, indemnity agreement, and Delaware law is not intended to be exhaustive and is qualified in its entirety by such restated certificate of incorporation, restated by-laws, indemnification agreements indemnity agreement, or
law.
Provisions of Delaware Law Governing Business Combinations
We are subject to the "business combination" provisions of Section 203 of the Delaware General Corporation Law. In general,
such provisions prohibit a publicly held Delaware corporation from engaging in any "business combination" transactions with any "interested stockholder" for a period of three years after the date on which the person became an
"interested stockholder," unless:
•
prior to such date, the board of directors approved either the "business combination" or the transaction which resulted in the
"interested stockholder" obtaining such status; or
82
•
upon consummation of the transaction which resulted in the stockholder becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the
"interested stockholder") those shares owned by (a) persons who are directors and also officers and (b) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
•
at or subsequent to such time the "business combination" is approved by the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the "interested stockholder."
A "business combination" is defined to include mergers, asset sales and other transactions resulting in financial benefit to a
stockholder. In general, an "interested stockholder" is a person who, together with affiliates and associates, owns 15% or more of a corporation's voting stock or within three years did own 15% or more of a corporation's voting
stock. The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.
83
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Unless we specifically indicate otherwise, all share and per share numbers included in this "Executive Officer and Director
Compensation" section have been adjusted as necessary to reflect the exchange of shares in the Merger.
Summary Compensation Table
The following table shows the total compensation paid or accrued during the last two fiscal years ended December 31,
2012 and 2011 to (1) our President and Chief Executive Officer and (2) our two next most highly compensated executive officers who earned more than $100,000 during the fiscal year ended December 31, 2012 and were serving as executive
officers as of such date.
Name and Principal Position
Year
Salary
($)
Bonus
($)
Option
Awards
($)
(1)
All Other
Compensation
($)
Total
($)
Sharon Mates, Ph.D.
Chairman, President and Chief Executive Officer
2012
588,400
117,700
100,000
7,750
(2)
813,850
2011
565,800
313,200
(3)
—
7,600
(4)
886,600
Lawrence J. Hineline
Vice President of Finance, Chief Financial Officer and Secretary
2012
250,000
17,500
20,000
7,750
(5)
295,250
2011
237,600
30,900
—
7,378
(6)
275,878
Allen A. Fienberg, Ph.D.
Vice President of Business Development
2012
250,400
8,800
20,000
7,750
(7)
286,950
2011
243,100
17,000
—
7,543
(8)
267,643
(1)
These amounts represent the aggregate grant date fair value for option awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718.
See Note 5 to our audited financial statements for the fiscal years ended December 31, 2012 and 2011 attached as Exhibit 99.1 to this Current Report on Form 8-K for details as to the assumptions used to calculate the fair value of the option
awards. See also our discussion of stock-based compensation under "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates."
(2)
Consists of $7,500 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr. Mates with a face value of $150,000.
(3)
Dr. Mates received a bonus of $113,200 for her performance during the fiscal year ended December 31, 2011 plus an additional bonus of $200,000 for her
performance in connection with our entering into the license and collaboration agreement with Takeda Pharmaceutical Company Limited.
(4)
Consists of $7,350 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr. Mates with a face value of $150,000.
(5)
Consists of $7,500 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Mr. Hineline with a face value of $150,000.
(6)
Consists of $7,128 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Mr. Hineline with a face value of $150,000.
(7)
Consists of $7,500 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr. Fienberg with a face value of $150,000.
(8)
Consists of $7,293 in matching contributions made under our 401(k) plan and $250 in life insurance premiums we paid for a term life insurance policy to benefit
Dr. Fienberg with a face value of $150,000.
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2012 Fiscal Year Grants of Plan-Based Awards
The following table shows information regarding grants of equity awards that we made during the fiscal year ended December 31, 2012
to each of our executive officers named in the Summary Compensation Table. We did not grant any non-equity incentive plan awards during the fiscal year ended December 31, 2012.
Name
Compensation
Committee
Approval
(1)
Grant
Date
(1)
All Other Option
Awards: Number
of Securities
Underlying
Options (#)
(2)
Exercise or Base
Price
of Option
Awards ($/Sh)
(3)
Grant Date Fair
Value of Stock and
Option Awards
($)
(4)
Sharon Mates, Ph.D.
12/20/2011
5/1/2012
50,000
2.84
100,000
Lawrence J. Hineline
12/20/2011
5/1/2012
10,000
2.84
20,000
Allen A. Fienberg, Ph.D.
12/20/2011
5/1/2012
10,000
2.84
20,000
(1)
On December 20, 2011, the Compensation Committee of Intra-Cellular approved these option grants to be granted following the completion of a valuation of
Intra-Cellular's common stock. Following the completion of the valuation of Intra-Cellular's common stock, on May 1, 2012 the board of directors of Intra-Cellular approved these grants at an exercise price of $2.84 per share. In
addition, on December 20, 2012, the Compensation Committee approved grants of 50,000 options to Dr. Mates, 10,000 options to Mr. Hineline and 7,500 options to Dr. Fienberg (the "Additional Grants") to be granted
following the completion of a valuation of Intra-Cellular's common stock and an increase in the number of shares reserved under Intra-Cellular's 2003 Equity Incentive Plan. Following the completion of the valuation of Intra-Cellular's
common stock and the increase in the number of shares reserved under Intra-Cellular's 2003 Equity Incentive Plan, on May 31, 2013 the board of directors of Intra-Cellular approved the Additional Grants at an exercise price of $3.26 per
share.
(2)
These awards are subject to vesting, as described in detail under " – Outstanding Equity Awards at 2012 Fiscal Year-End" below.
(3)
The 2003 Equity Incentive Plan provides that the exercise price shall be determined by using the fair market value of our common stock, which is defined under the 2003
Equity Incentive Plan as the value of our common stock determined in good faith by our board of directors.
(4)
These amounts represent the aggregate grant date fair value for option awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718.
See Note 5 to our audited financial statements for the fiscal years ended December 31, 2012 and 2011 attached as Exhibit 99.1 to this Current Report on Form 8-K for details as to the assumptions used to calculate the fair value of the option
awards. See also our discussion of stock-based compensation under "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates."
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Sharon Mates, Ph.D.
We entered into an employment agreement with Dr. Mates in February 2008, who has been our President and
Chief Executive Officer since 2003. The agreement provides for a salary of $503,000 effective in February 2008, subject to our annual review and adjustment in the discretion of the Board, and that Dr. Mates is eligible for bonus payments and
stock options as may be awarded by the Board. The most recent adjustment, effective on January 1, 2013, increased Dr. Mates' salary to $611,900. In 2012, she was awarded a bonus of $117,700, which represented a bonus of 20% of her
then current base salary of $588,400. In addition, her employment agreement provides that we will pay the premium on a life insurance policy in an amount equal to one and one half times her base salary; however, we paid a premium in the amount of
$250 on a life insurance policy with a face value of $150,000, to which she assented. For 2012, we also paid $7,500 in matching contributions under our 401(k) plan. The employment agreement also provides that Dr. Mates is entitled to
participate in
85
our benefit plans on the same basis as other executive level employees as well as long-term disability insurance and reimbursement for reasonable business expenses. The initial term of the
agreement was three years and will be renewed for successive one year terms, unless we or Dr. Mates provides notice that we or she, as the case may be, does not wish to renew the agreement or wishes to renew the agreement on different terms
than those contained in the agreement.
If Dr. Mates' employment is terminated for any reason, she will be entitled
to compensation and benefits through the last day of her employment, including accrued but untaken vacation. If her employment is terminated due to her death or disability, we will also pay her or her estate the compensation which would otherwise
have been payable to her through the end of the month in which such termination occurs as well as payment for any accrued but untaken vacation. If her employment is terminated without cause by us or she terminates her employment for good reason, she
will receive the following severance benefits following her employment termination, on condition that she executes a general release in our favor: (a) payment of 12 months of her then current base salary and the pro rata portion of an amount
equal to the bonus she was awarded for the previous year, if any, which severance payments will be paid in one lump sum on the date the general release she executes becomes effective; (b) payment for 12 months of the portion of the COBRA
premiums that we paid prior to her termination; and (c) all of her unvested stock options will become fully vested and exercisable. Dr. Mates will also be entitled to such severance benefits if we elect not to renew her employment
agreement for reasons other than death, disability or cause, but (i) such severance benefits are conditioned on Dr. Mates executing a general release in favor of us, returning all our property, and complying with her employment agreement,
proprietary information, inventions, and non-competition agreement, and the general release and (ii) Dr. Mates will not be eligible for such severance benefits if she or we wish to renew the agreement on different terms than those
contained in her employment agreement. In the event of a change of control, all of her unvested stock options and restricted stock will immediately vest. If her employment is terminated for reasons other than death or disability within three months
before or 12 months following a change of control, she terminates her employment for good reason during such period, or she terminates her employment for any reason within one month following a change of control, she will be eligible for the
following severance benefits following her employment termination: (a) payment of 18 months of her then current base salary and the pro rata portion of an amount equal to the bonus she was awarded for the previous year, which severance payments
will be paid in one lump sum on the eighth day following the effective date of the general release, and (b) payment for 18 months of the portion of the COBRA premiums that we paid prior to her termination. Such severance benefits following a
change of control are payable on condition that she executes a general release in favor of us, returns all our property and complies with her post-termination obligations under her employment agreement, her proprietary information, inventions, and
non-competition agreement, and her general release.
Pursuant to her proprietary information, inventions, and non-competition
agreement, Dr. Mates has agreed to not (i) solicit customers, consultants, contractors or employees of ours for a period of one year after the termination of her employment or (ii) compete with us for a period of one year after the
later of the termination of her employment or the date a court of competent jurisdiction enters an order enforcing the non-competition provision.
86
Lawrence J. Hineline.
We entered into an employment agreement with Mr. Hineline
in February 2008, who has been our Vice President of Finance, Chief Financial Officer and Secretary since 2002. The agreement provides for a salary of $216,400 effective in February 2008, subject to our annual review and adjustment in the discretion
of the Board, and that Mr. Hineline is eligible for bonus payments and stock options as may be awarded by the Board. The most recent adjustment, effective on January 1, 2013, increased Mr. Hineline's salary to $257,500. In 2012,
he was awarded a bonus of $17,500, which represented a bonus of 7% of his then current base salary of $250,000. In addition, his employment agreement provides that we will pay the premium on a life insurance policy in an amount equal to one and one
half times his base salary; however, we paid a premium in the amount of $250 on a life insurance policy with a face value of $150,000, to which he assented. For 2012, we also paid $7,500 in matching contributions under our 401(k) plan. The
employment agreement also provides that Mr. Hineline is entitled to participate in our benefit plans on the same basis as other executive level employees as well as long-term disability insurance and reimbursement for reasonable business
expenses. The initial term of the agreement was three years and will be renewed for successive one year terms, unless we or Mr. Hineline provides notice that we or he, as the case may be, does not wish to renew the agreement or wishes to renew
the agreement on different terms than those contained in the agreement.
If Mr. Hineline's employment is terminated
for any reason, he will be entitled to compensation and benefits through the last day of his employment, including accrued but untaken vacation. If his employment is terminated due to his death or disability, we will also pay him or his estate the
compensation which would otherwise have been payable to him through the end of the month in which such termination occurs as well as payment for any accrued but untaken vacation. If his employment is terminated without cause by us or he terminates
his employment for good reason, he will receive the following severance benefits following his employment termination, on condition that he executes a general release in our favor: (a) payment of 12 months of his then current base salary and
the pro rata portion of an amount equal to the bonus he was awarded for the previous year, if any, which severance payments will be paid in one lump sum on the date the general release he executes becomes effective; (b) payment for 12 months of
the portion of the COBRA premiums that we paid prior to his termination; and (c) all of his unvested stock options will become fully vested and exercisable. Mr. Hineline will also be entitled to such severance benefits if we elect not to
renew his employment agreement for reasons other than death, disability or cause, but (i) such severance benefits are conditioned on Mr. Hineline executing a general release in our favor, returning all our property, and complying with his
employment agreement, proprietary information, inventions, and non-competition agreement, and the general release and (ii) Mr. Hineline will not be eligible for such severance benefits if he or we wish to renew the agreement on different
terms than those contained in his employment agreement. In the event of a change of control, all of his unvested stock options and restricted stock will immediately vest. If his employment is terminated for reasons other than death or disability
within three months before or 12 months following a change of control, he terminates his employment for good reason during such period, or he terminates his employment for any reason within one month following a change of control, he will be
eligible for the following severance benefits following his employment termination: (a) payment of 18 months of his then current base salary and the pro rata portion of an amount equal to the bonus he was awarded for the previous year, which
severance payments will be paid in one lump sum on the eighth day following the effective date of the general release, and (b) payment for 18 months of
87
the portion of the COBRA premiums that we paid prior to his termination. Such severance benefits following a change of control are payable on condition that he executes a general release in favor
of us, returns all our property and complies with his post-termination obligations under his employment agreement, his proprietary information, inventions, and non-competition agreement, and his general release.
Pursuant to his proprietary information, inventions, and non-competition agreement, Mr. Hineline has agreed to not (i) solicit
customers, consultants, contractors or employees of ours for a period of one year after the termination of his employment or (ii) compete with us for a period of one year after the later of the termination of his employment or the date a court
of competent jurisdiction enters an order enforcing the non-competition provision.
Allen A. Fienberg, Ph.D.
We entered
into an employment agreement with Dr. Fienberg in February 2008, who has been our Vice President of Business Development since 2002. The agreement provides for a salary of $221,400 effective in February 2008, subject to our annual review and
adjustment in the discretion of the Board, and that Dr. Fienberg is eligible for bonus payments and stock options as may be awarded by the Board. The most recent adjustment, effective on January 1, 2013, increased Dr. Fienberg's
salary to $257,900. In 2012, he was awarded a bonus of $8,800, which represented a bonus of 3.5% of his then current base salary of $250,400. In addition, his employment agreement provides that we will pay the premium on a life insurance policy in
an amount equal to one and one half times his base salary; however, we paid a premium in the amount of $250 on a life insurance policy with a face value of $150,000, to which he assented. For 2012, we also paid $7,500 in matching contributions under
our 401(k) plan. The employment agreement also provides that Dr. Fienberg is entitled to participate in our benefit plans on the same basis as other executive level employees as well as long-term disability insurance and reimbursement for
reasonable business expenses. The initial term of the agreement was three years and will be renewed for successive one year terms, unless we or Dr. Fienberg provides notice that we or he, as the case may be, does not wish to renew the agreement
or wishes to renew the agreement on different terms than those contained in the agreement.
If Dr. Fienberg's
employment is terminated for any reason, he will be entitled to compensation and benefits through the last day of his employment, including accrued but untaken vacation. If his employment is terminated due to his death or disability, we will also
pay him or his estate the compensation which would otherwise have been payable to him through the end of the month in which such termination occurs as well as payment for any accrued but untaken vacation. If his employment is terminated without
cause by us or he terminates his employment for good reason, he will receive the following severance benefits following his employment termination, on condition that he executes a general release in our favor: (a) payment of 12 months of his
then current base salary and the pro rata portion of an amount equal to the bonus he was awarded for the previous year, if any, which severance payments will be paid in one lump sum on the date the general release he executes becomes effective;
(b) payment for 12 months of the portion of the COBRA premiums that we paid prior to his termination; and (c) all of his unvested stock options will become fully vested and exercisable. Dr. Fienberg will also be entitled to such
severance benefits if we elect not to renew his employment agreement for reasons other than death, disability or cause, but (i) such severance benefits are conditioned on Dr. Fienberg executing a general release in our favor, returning all
our property, and complying with his employment agreement, proprietary information, inventions, and non-competition
88
agreement, and the general release and (ii) Dr. Fienberg will not be eligible for such severance benefits if he or we wish to renew the agreement on different terms than those contained
in his employment agreement. In the event of a change of control, 75% of his unvested stock options and restricted stock will immediately vest.
Pursuant to his proprietary information, inventions, and non-competition agreement, Dr. Fienberg has agreed to not (i) solicit customers, consultants, contractors or employees of ours for a
period of one year after the termination of his employment or (ii) compete with us for a period of one year after the later of the termination of his employment or the date a court of competent jurisdiction enters an order enforcing the
non-competition provision.
The meanings of the terms "cause," "good reason," "disability" and
"change of control" for purposes of these employment agreements are described below under "Potential Payments upon Termination or Change in Control."
Outstanding Equity Awards at 2012 Fiscal Year-End
The following table
shows grants of stock options and grants of unvested stock awards outstanding on the last day of the fiscal year ended December 31, 2012, including both awards subject to performance conditions and non-performance-based awards, to each of the
executive officers named in the Summary Compensation Table.
Name
(1)
Number of
Securities
Underlying
Unexercised Options
(#)
(2)
Exercisable
Number of
Securities
Underlying
Unexercised Options
(#)
(2)
Unexercisable
Option
Exercise 
Price
($)
Option
Expiration Date
Sharon Mates, Ph.D.
50,000
0
$
0.30
12/16/2013
50,000
0
$
0.50
12/19/2014
25,000
0
$
0.60
12/14/2015
25,000
0
$
1.36
12/5/2016
37,500
0
$
1.50
12/12/2017
50,000
0
$
1.50
12/18/2018
50,000
0
$
2.74
6/10/2020
33,333
16,667
$
2.74
12/21/2020
16,666
33,334
$
2.84
4/30/2022
Lawrence J. Hineline
50,000
0
$
0.30
12/16/2013
37,500
0
$
0.50
12/19/2014
12,500
0
$
0.60
12/14/2015
12,500
0
$
1.36
12/5/2016
12,500
0
$
1.50
12/12/2017
10,000
0
$
1.50
12/18/2018
10,000
0
$
2.74
6/10/2020
6,666
3,334
$
2.74
12/21/2020
3,333
6,667
$
2.84
4/30/2022
Allen A. Fienberg, Ph.D.
37,500
0
$
0.30
12/16/2013
37,500
0
$
0.50
12/19/2014
12,500
0
$
0.60
12/14/2015
12,500
0
$
1.36
12/5/2016
12,500
0
$
1.50
12/12/2017
10,000
0
$
1.50
12/18/2018
10,000
0
$
2.74
6/10/2020
6,666
3,334
$
2.74
12/21/2020
3,333
6,667
$
2.84
4/30/2022
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(1)
On December 20, 2012, the Compensation Committee of Intra-Cellular approved grants of 50,000 options to Dr. Mates, 10,000 options to Mr. Hineline and
7,500 options to Dr. Fienberg (the "Additional Grants") to be granted following the completion of a valuation of Intra-Cellular's common stock and an increase in the number of shares reserved under Intra-Cellular's 2003
Equity Incentive Plan. Following the completion of the valuation of Intra-Cellular's common stock and the increase in the number of shares reserved under Intra-Cellular's 2003 Equity Incentive Plan, on May 31, 2013 the board of
directors of Intra-Cellular approved the Additional Grants at an exercise price of $3.26 per share, which are not reflected in this table.
(2)
Unless otherwise indicated, each option to purchase our common stock vests as to 1/3 of the shares on the first anniversary of the grant date, 1/3 of the shares on the
second anniversary of the grant date, and 1/3 of the shares on the third anniversary of the grant date. Each of these options has a ten year term from the date of grant.
Option Exercises and Stock Vested in 2012
During the fiscal year ended
December 31, 2012, none of our named executive officers exercised any options.
Pension Benefits
We do not have any qualified or non-qualified defined benefit plans.
Nonqualified Deferred Compensation
We do not have any nonqualified defined
contribution plans or other deferred compensation plans.
Potential Payments upon Termination or Change in Control
Upon termination of employment without cause or a resignation for good reason, each as defined below, our named executive officers are
entitled to receive severance payments. Severance for termination without cause or termination for good reason, each as defined below, for named executive officers is 12 months of base salary plus the pro rata portion of an amount equal to the bonus
awarded to such named executive officer for the previous year, if any. In addition, each named executive officer is entitled to payment of 12 months of the portion of the premiums for medical insurance coverage under COBRA that we paid prior to such
named executive officer's termination. Payment of these severance benefits is conditioned on the named executive officer signing a general release in our favor.
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The table below summarizes the potential payments and benefits to each of our named
executive officers assuming a termination without cause or resignation for good reason had occurred as of December 31, 2012.
Name
Severance
Payments(1)
Bonus
Payments(2)
Post-Termination
Benefits(3)
Total
Benefits
Sharon Mates, Ph.D.
$
588,400
$
113,200
$
14,976
$
716,576
Lawrence J. Hineline
$
250,000
$
30,900
$
14,976
$
295,876
Allen A. Fienberg, Ph.D.
$
250,400
$
17,000
$
14,976
$
282,376
(1)
The severance agreements for our named executive officers are set forth in their respective employment agreements.
(2)
Reflects a pro rata portion of the named executive officer's 2011 bonus based on the period from January 1, 2012 through December 31, 2012, which equals
the full amount of the named executive officer's 2011 bonus. However, the 2012 bonus had already been paid to such named executive officers prior to December 31, 2012 in the amounts set forth in the "Summary Compensation Table"
above, so we would not have paid the amounts set forth in this column at December 31, 2012 in addition to the 2012 bonus payments already made.
(3)
Represents premiums that would be payable by us for continuation of the executive's medical and dental insurance coverage, assuming a termination without cause or
resignation for good reason had occurred as of December 31, 2012.
The table below summarizes the potential
payments and benefits to each of our named executive officers assuming a termination following a change in control had occurred at December 31, 2012. Each of our named executive officers has agreed in writing that the Merger does not constitute
a change in control under their respective employment agreements.
Name
Severance
Payments(1)
Bonus
Payments(1)(2)
Value of
Additional
Vested
Option
Awards(1)(3)
Post-
Termination
Benefits(1)(4)
Total
Benefits
Sharon Mates, Ph.D.
$
882,600
$
113,200
$
22,668
$
22,464
$
1,040,932
Lawrence J. Hineline
$
375,000
$
30,900
$
4,533
$
22,464
$
432,897
Allen A. Fienberg, Ph.D.
N/A
N/A
$
3,400
N/A
$
3,400
(1)
Each of our named executive officers, except for Dr. Fienberg, shall, if the executive's employment is terminated for reasons other than death or disability
within three months before or 12 months following a change of control, the executive terminates his or her employment for good reason during such period, or the executive terminates his or her employment for any reason within one month following a
change of control, be entitled to (a) payment of 18 months of the executive's then current base salary and the pro rata portion of an amount equal to the bonus the executive was awarded for the previous year, if any, and (b) payment
by us of 18 months of the portion of the premiums for medical insurance coverage under COBRA that we paid prior to such executive's termination. Such severance benefits following a change of control are payable on condition that the executive
executes a general release in favor of us, returns all our property and complies with his or her post-termination obligations under his or her employment agreement, proprietary information, inventions, and non-competition agreement, and general
release. In addition, in the event of a change of control, any unvested stock options or restricted stock awarded to Dr. Mates or Mr. Hineline will immediately vest and become exercisable and 75% of any unvested stock options or restricted
stock awarded to Dr. Fienberg will immediately vest and become exercisable.
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(2)
Reflects a pro rata portion of the named executive officer's 2011 bonus based on the period from January 1, 2012 through December 31, 2012, which equals
the full amount of the named executive officer's 2011 bonus. However, the 2012 bonus had already been paid to such named executive officers prior to December 31, 2012 in the amounts set forth in the "Summary Compensation Table"
above, so we would not have paid the amounts set forth in this column at December 31, 2012 in addition to the 2012 bonus payments already made.
(3)
This represents the intrinsic value of the number of option shares that would vest, assuming a change of control termination had occurred at December 31, 2012.
(4)
Represents premiums that would be payable by us for continuation of the executive's medical and dental insurance coverage, assuming a change of control termination
had occurred at December 31, 2012.
The table below summarizes the potential payments and benefits to each
of our named executive officers assuming a change in control without termination had occurred at December 31, 2012.
Name
Severance
Payments
Bonus
Payments
Value of
Additional
Vested
Option
Awards(1)(2)
Post-
Termination
Benefits
Total
Benefits
Sharon Mates, Ph.D.
N/A
N/A
$
22,668
N/A
$
22,668
Lawrence J. Hineline
N/A
N/A
$
4,533
N/A
$
4,533
Allen A. Fienberg, Ph.D.
N/A
N/A
$
3,400
N/A
$
3,400
(1)
In the event of a change of control, any unvested stock options or restricted stock awarded to Dr. Mates or Mr. Hineline will immediately vest and become
exercisable and 75% of any unvested stock options or restricted stock awarded to Dr. Fienberg will immediately vest and become exercisable.
(2)
This represents the intrinsic value of the number of option shares that would vest, assuming a change of control without termination had occurred at December 31,
2012.
For purposes of severance payments, "good reason" is defined as an executive resigning after
the occurrence of one of the following events without the executive's written consent:
•
The assignment to the executive of any duties or responsibilities which result in the material diminution of the executive's position;
•
a reduction by the Company in the executive's annual base salary of 5% or greater with respect to Dr. Mates and Mr. Hineline, and of
greater than 5% with respect to Dr. Fienberg;
•
a material change in the geographic location at which the executive is required to perform services; or
•
material breach by the Company of any material provision of the executive's employment agreement.
The executive must provide us with written notice within 60 days after the occurrence of a good reason event, and we have 30 days to
correct the event after receipt of the notice.
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For purposes of severance payments, "cause" is defined as a termination by us
after the occurrence of one of the following events:
•
a good faith finding by the Company that the executive has engaged in gross negligence or gross misconduct that is materially injurious to the Company;
•
the executive's conviction of a felony or crime involving fraud or embezzlement of Company property;
•
the executive's material breach of the executive's employment agreement which, if curable, has not been cured by the executive within 60 days
after he or she receives written notice from the Company stating with reasonable specificity the nature of the breach;
•
material breach of fiduciary duty; or
•
refusal to following or implement a clear and reasonable directive of the Board as a whole (or an officer of the Company, in the case of
Mr. Hineline and Dr. Fienberg), provided that such directive is ethical and legal and which, if curable, has not been cured by the executive within 60 days after he or she receives written notice from the Company stating with reasonable
specificity the nature of such refusal.
For purposes of severance payments, the determination of
"disability" will occur when the executive is unable due to a physical or mental condition to perform the essential functions of his or her position with or without reasonable accommodation for 90 consecutive days, or 180 days in the
aggregate whether or not consecutive, during any 360-day period, or based on the written certification by a licensed physician of the likely continuation of such condition for such period.
For purposes of severance payments, a "change in control" means:
•
a sale, lease or other disposition of all or substantially all of the assets of the Company;
•
a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which
the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the outstanding voting power of the surviving entity (and its parent) following the consolidation, merger or reorganization; or
•
any transaction (or series of related transactions involving a person or entity, or a group of affiliated persons or entities) in which in excess of
50% of the Company's outstanding voting power is transferred.
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Notwithstanding the foregoing, a "change in control" will not be deemed to occur on account of the
sale or acquisition of the Company's capital stock by institutional investors or venture capital firms for the primary purpose of obtaining financing for the Company.
Director Compensation
The following table shows the total compensation
paid or accrued during the fiscal year ended December 31, 2012 to each of our directors, other than Dr. Mates who does not receive compensation for her service as a director.
Name
Fees
Earned or
Paid in
Cash
($)
Stock
Awards
($)
Option
Awards
(1)
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
($)
Total
($)
David Kipnis, M.D.
(2)(3)
N/A
N/A
24,500
N/A
N/A
N/A
24,500
Richard Lerner, M.D.
(4)
N/A
N/A
24,500
N/A
N/A
N/A
24,500
Joel S. Marcus
(5)
N/A
N/A
24,500
N/A
N/A
N/A
24,500
(1)
These amounts represent the aggregate grant date fair value for option awards granted to our named executive officers, computed in accordance with FASB ASC Topic 718.
See Note 5 to our audited financial statements for the fiscal years ended December 31, 2012 and 2011 attached as Exhibit 99.1 to this Current Report on Form 8-K for details as to the assumptions used to calculate the fair value of the option
awards. See also our discussion of stock-based compensation under "Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates."
(2)
Dr. Kipnis resigned from the Board effective December 31, 2012. Effective January 1, 2013, the Board appointed Christopher Alafi, Ph.D. as a director,
and effective May 10, 2013, the Board appointed Sir Michael Rawlins as a director.
(3)
As of December 31, 2012, Dr. Kipnis held 102,500 options to purchase shares of our common stock, of which 96,250 options were vested.
(4)
As of December 31, 2012, Dr. Lerner held 110,000 options to purchase shares of our common stock, of which 103,750 options were vested.
(5)
As of December 31, 2012, Mr. Marcus held 77,500 options to purchase shares of our common stock, of which 71,250 options were vested.
Director Compensation Policy
As compensation to our non-employee directors for the year ending December 31, 2013 and the years ended December 31, 2012 and 2011, we granted options to purchase 20,000 shares, 12,500 shares
and 12,500 shares of our common stock, respectively, to each of our non-employee directors serving during such years. We granted any non-employee director who resigned from or joined the Intra-Cellular board of directors during such years the pro
rata portion of the annual option grant representing the portion of such year during which such non-employee director served. We intend to adopt a non-employee director compensation policy designed to ensure that the compensation aligns the
directors' interests with the long-term interests of the stockholders, that the structure of the compensation is simple, transparent and easy for stockholders to understand and that our directors are fairly compensated.
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of
December 31, 2012.
Plan category
Number of securities to be
issued upon exercise of
outstanding 
options,
warrants and rights
Weighted-average
exercise
price of outstanding
options,
warrants and rights
Number of 
securities
remaining available for
future issuance under
equity
compensation
plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders
(1) (2)
1,707,113
$
1.38
44,867
(1)
Equity compensation plans not approved by security holders
—
—
—
Total
1,707,113
(2)
$
1.38
(2)
44,867
(2)
(1)
This plan consists of the 2003 Equity Incentive Plan. The 2003 Equity Incentive Plan terminated by its terms in July 2013. As a result of such termination, no
additional awards may be granted under the 2003 Equity Incentive Plan, but equity awards previously granted under the 2003 Equity Incentive Plan will remain outstanding and continue to be governed by the terms of the 2003 Equity Incentive Plan.
(2)
The table above does not include shares that are reserved for issuance under the 2013 Equity Incentive Plan, which was adopted in connection with the Merger, which
consists of 799,934 shares reserved plus up to an additional 1,462,380 shares reserved solely after the cancellation or expiration of any unexercised stock options that we assumed in the Merger, subject to adjustment as provided in the plan.
The Intra-Cellular 2003 Equity Incentive Plan, as amended, was adopted by the board of directors of
Intra-Cellular in July 2003 and by the stockholders of Intra-Cellular in September 2003. The 2003 Equity Incentive Plan was subsequently amended in January 2006, February 2010 and December 2012, and expired by its terms in July 2013. As a
result of such expiration, no additional awards may be granted under the 2003 Equity Incentive Plan, but equity awards previously granted under the 2003 Equity Incentive Plan will remain outstanding and continue to be governed by the terms of the
2003 Equity Incentive Plan. In connection with the Merger, we assumed the options then outstanding under the 2003 Equity Incentive Plan, and immediately following the Merger on August 29, 2013, the only outstanding awards under the 2003 Equity
Incentive Plan were options to purchase 1,462,380 shares of our common stock. The 2003 Equity Incentive Plan is administered by our board of directors.
If we are acquired, the surviving or acquiring company may assume or continue the outstanding options by substituting either (a) the consideration payable with respect to the outstanding shares of
common stock in connection with the acquisition or (b) shares of stock of the successor or acquiring company. If the surviving or acquiring company does not assume or continue the outstanding options, the outstanding options will be accelerated
in full prior to the effective time of the acquisition and will terminate if not exercised at or prior to such effective time.
95
2013 Equity Incentive Plan
In August 2013, the Board approved the 2013 Equity Incentive Plan. The 2013 Equity Incentive Plan will be effective upon twenty days after the mailing of the information statement on Schedule 14C to our
sole stockholder prior to the Merger or such later date as required by the Exchange Act or other applicable law. Unless sooner terminated by our board of directors or our stockholders, the 2013 Equity Incentive Plan will expire 10 years from its
date of effectiveness. Under our 2013 Equity Incentive Plan, we may grant incentive stock options, non-qualified stock options, restricted and unrestricted stock awards and other stock based awards.
The maximum number of shares of our common stock that may be delivered in satisfaction of awards under the 2013 Equity Incentive Plan is
799,934 shares, plus up to an additional 1,462,380 shares solely after the cancellation or expiration of any unexercised stock options that we assumed in the Merger. This number is subject to additional adjustment in the event of a stock split,
stock dividend or other change in our capitalization.
In addition, the 2013 Equity Incentive Plan contains an
"evergreen" provision, which allows for an annual increase in the number of shares of our common stock available for issuance under the 2013 Equity Incentive Plan on January 1 of each year during the period beginning on
January 1, 2014 and ending upon expiration of the Plan. The annual increase in the number of shares shall be equal to the lesser of:
•
800,000 shares of our common stock;
•
4% of the number of shares of our common stock outstanding as of such date; and
•
such lesser number of shares as determined by our board of directors.
Shares of our common stock to be issued under the 2013 Equity Incentive Plan may be authorized but unissued shares of our common stock or
previously issued shares acquired by us. Any shares of our common stock underlying awards that otherwise expire, terminate, or are forfeited prior to the issuance of stock will again be available for issuance under the 2013 Equity Incentive Plan.
The 2013 Equity Incentive Plan will be administered by our board of directors until we establish a compensation committee.
Our board of directors, or compensation committee once established, will have full power and authority to determine the terms of awards granted pursuant to this plan, including:
•
which employees, directors and consultants shall be granted options and other awards;
96
•
the exercise price of each option, which generally shall not be less than fair market value of our common stock on the date of grant;
•
the schedule upon which options become exercisable;
•
the termination or cancellation provisions applicable to options;
•
the terms and conditions of other awards, including conditions for repurchase or forfeiture, termination or cancellation, issue price and repurchase
price; and
•
all other terms and conditions upon which each award may be granted in accordance with the 2013 Equity Incentive Plan.
However, a maximum of 200,000 shares of our common stock subject to options, stock appreciation rights and other awards whose value is
determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value on the date the award is granted may be granted to any one participant during any one calendar year.
The Board may amend or discontinue the 2013 Equity Incentive Plan at any time and may amend any outstanding award. No such amendment may
adversely affect the rights under any outstanding award without the holder's consent. Stockholder approval will be required for any amendment to the 2013 Equity Incentive Plan to the extent such approval is required by law, including the
Internal Revenue Code of 1986, as amended, or applicable stock exchange requirements.
If we are acquired, our board of
directors (or compensation committee, once established) will (i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation's parent company) to assume or continue the award or to substitute a
similar award for the award; (ii) cancel or arrange for the cancellation of the award, to the extent not vested or not exercised prior to the effective time of the transaction, in exchange for such cash consideration, if any, as our board of
directors in its sole discretion, may consider appropriate; and (iii) make a payment, in such form as may be determined by our board of directors equal to the excess, if any, of (A) the value of the property the holder would have received
upon the exercise of the award immediately prior to the effective time of the transaction, over (B) any exercise price payable by such holder in connection with such exercise. In addition in connection with such transaction, our board of
directors may accelerate the vesting, in whole or in part, of the award (and, if applicable, the time at which the award may be exercised) to a date prior to the effective time of such transaction and may arrange for the lapse, in whole or in part,
of any reacquisition or repurchase rights held by the Company with respect to an award.
CERTAIN RELATIONSHIPS AND RELATED
PERSON TRANSACTIONS
Since January 1, 2011, Intra-Cellular has engaged in the following transactions with its
directors, directors-elect, executive officers and holders of more than 5% of our voting securities, which we refer to as our principal stockholders, and affiliates or immediate family members of
97
our directors, directors-elect, executive officers and principal stockholders. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated
third parties.
As described above, the following executive officers and directors held the following positions at
Intra-Cellular prior to the Merger:
•
Sharon Mates, Ph.D., our President, Chief Executive Officer and Chairman of the Board, was the President, Chief Executive Officer and Chairman of the
board of directors of Intra-Cellular prior to the Merger.
•
Lawrence J. Hineline, our Vice President of Finance, Chief Financial Officer and Secretary, was the Vice President of Finance, Chief Financial Officer
and Secretary of Intra-Cellular prior to the Merger.
•
Allen A. Fienberg, Ph.D., our Vice President of Business Development, was the Vice President of Business Development of Intra-Cellular prior to the
Merger.
•
Lawrence P. Wennogle, Ph.D., our Vice President, Drug Discovery, was the Vice President, Drug Discovery of Intra-Cellular prior to the Merger.
•
Kimberly E. Vanover, Ph.D., our Vice President, Clinical Development, was the Vice President, Clinical Development of Intra-Cellular prior to the
Merger.
•
Our directors-elect who will join the Board on the New Board Effective Date, Christopher Alafi, Ph.D., Richard Lerner, M.D., Joel S. Marcus and Sir
Michael Rawlins, M.D., FRCP, FMedSci, were each directors of Intra-Cellular prior to the Merger.
Some of
our directors are affiliated with our principal stockholders as indicated in the table below:
Director
Affiliation with Principal Stockholder
Christopher Alafi, Ph.D.
Dr. Alafi is a General Partner of Alafi Capital Company, LLC.
Joel S. Marcus
Mr. Marcus is co-founder, Chairman of the board of directors, Chief Executive Officer, President and a director of Alexandria Real Estate Equities, Inc., which is the managing
member of Alexandria Equities, LLC.
The directors of Intra-Cellular were previously selected as directors of Intra-Cellular in accordance
with the terms of Intra-Cellular's then existing Restated Certificate of Incorporation, which is no longer effective following the Merger, and Intra-Cellular's Second Amended and Restated Voting Agreement effective as of October 25,
2007, as amended, which was terminated immediately prior to the Effective Time.
98
Convertible Promissory Notes Issued in 2012 and 2013
In October 2012, Intra-Cellular entered into a convertible note purchase agreement with certain investors pursuant to which Intra-Cellular
issued convertible promissory notes having an aggregate principal amount of approximately $15.3 million, which were issued on October 25, 2012, November 14, 2012 and March 20, 2013. Certain of these convertible promissory notes
were purchased by our principal stockholders and by an entity related to one of our executive officers in the following amounts and on the following dates:
Name of Beneficial Owner
(1)
Original Principal Amount
of Convertible Notes
Issuance Date
Alafi Capital Company, LLC
$
6,423,419
October 25, 2012
Alexandria Equities, LLC
$
1,812,307
October 25, 2012
Sosland Family Trust B Partnership
$
4,783,094
October 25, 2012
(1)
Does not include the convertible promissory note having a principal amount of $124,975 held by J.D.F. Holdings Ltd., in which Allen A. Fienberg, Ph.D., our Vice
President of Business Development, holds a 20% ownership interest. Dr. Fienberg has no voting or investment control with respect to any of the securities owned by J.D.F. Holdings Ltd.
The convertible promissory notes were unsecured, accrued interest at the rate of 6% per year and had a maturity date of
October 25, 2013. The convertible promissory notes converted into shares of Intra-Cellular common stock in connection with the Private Placement discussed in " – Common Stock Issued in Private Placement in 2013" below. In
addition, Intra-Cellular paid $7,200 to the purchasers' legal counsel for fees and expenses of purchasers' legal counsel incurred in connection with the convertible promissory note financing.
Common Stock Issued in Private Placement in 2013
The following table summarizes Intra-Cellular's sales of its common stock on August 29, 2013 in the Private Placement to our officers, directors and beneficial owners of more than five percent
of any class of our voting securities. The purchase price of $3.1764 per share (as adjusted to $6.3528 after giving effect to the Merger) was the fair market value as determined by arms-length negotiations between sophisticated investors and
Intra-Cellular's management and board of directors. In addition, the holders of the convertible promissory notes elected to convert the aggregate principal amount plus accrued interest on all of the Company's outstanding convertible
promissory notes into shares of Intra-Cellular common stock at the purchase price of $3.1764 per share (as adjusted to $6.3528 after giving effect to the Merger). Intra-Cellular received no additional consideration from the conversion of the
convertible promissory notes.
Name of Beneficial
Owner
(1)
Purchase Price
of Common
Stock
Principal Plus
Accrued Interest of
Convertible Notes
Through Date
of
Conversion
Shares of Common
Stock Issued
(5)
Sharon Mates, Ph.D.
(2)
$
24,998
—
7,870
Joel S. Marcus
(3)
$
100,006
—
31,484
Alafi Capital Company, LLC
$
4,747,498
$
6,748,637
3,619,234
Moshe Alafi
(4)
$
100,006
—
31,484
Alexandria Equities, LLC
$
1,339,462
$
1,904,064
1,021,133
Entities affiliated with Fidelity Investments
$
12,700,003
—
3,998,238
David N. Sosland Trust A
$
900,004
—
283,341
Sosland Family Trust B Partnership
$
400,006
$
5,025,263
1,707,993
The Sosland Foundation
$
2,235,128
—
703,667
99
(1)
Does not include 104,301 shares of Intra-Cellular common stock issued to J.D.F Holdings Ltd., in which Allen A. Fienberg, Ph.D., our Vice President of Business
Development, holds a 20% ownership interest. Dr. Fienberg has no voting or investment control with respect to any of the shares owned by J.D.F. Holdings Ltd.
(2)
Dr. Mates is our Chairman, President and Chief Executive Officer.
(3)
Mr. Marcus is one of our directors-elect. Mr. Marcus may also be deemed to beneficially own the shares held by Alexandria Equities, LLC set forth in the
table.
(4)
Moshe Alafi may also be deemed to beneficially own the shares held by Alafi Capital Company, LLC set forth in the table.
(5)
Does not reflect the adjustment in the number of shares as a result of the Merger.
At the Effective Time of the Merger, on August 29, 2013, each share of Intra-Cellular preferred stock and Intra-Cellular common
stock outstanding immediately prior to the Effective Time was exchanged for 0.5 shares of the Company's common stock. The following table summarizes the exchange of the outstanding shares of Intra-Cellular preferred stock and common stock at
the Effective Time by our officers, directors, directors-elect and beneficial owners of more than five percent of any class of our voting securities.
Name of Beneficial Owner
Number of
Shares of
Intra-Cellular
Preferred
Stock
Held
Immediately
Prior to
Exchange
Number of
Shares of
Intra-Cellular
Common
Stock
Held
Immediately
Prior to
Exchange
Number of
Shares of
Company
Common
Stock
Held
Immediately
Following
Exchange
Sharon Mates, Ph.D.
(1)
—
2,107,870
1,053,935
Lawrence J. Hineline
(2)
—
100,000
50,000
Allen A. Fienberg, Ph.D.
(3)
—
475,000
237,500
Lawrence P. Wennogle
(4)
—
200,000
100,000
Christopher Alafi, Ph.D.
(5)
1,007,505
0
503,753
Richard Lerner, M.D.
(6)
—
75,000
37,500
Joel S. Marcus
(7)
—
31,484
15,742
Alafi Capital Company, LLC
3,466,535
3,619,234
3,542,885
Moshe Alafi
(8)
—
31,484
15,742
Alexandria Equities, LLC
1,546,579
1,021,133
1,283,856
Entities affiliated with Fidelity Investments
—
3,998,238
1,999,120
Paul Greengard, Ph.D.
(9)
—
2,262,500
1,131,250
David N. Sosland Trust A
1,131,233
283,341
707,287
The Sosland Family Trust B Partnership
2,189,115
1,707,993
1,948,554
The Sosland Foundation
761,429
703,667
732,548
(1)
Dr. Mates is our Chairman, President and Chief Executive Officer.
(2)
Mr. Hineline is our Vice President of Finance, Chief Financial Officer and Secretary.
(3)
Dr. Fienberg is our Vice President of Business Development. Does not include: (i) 311,745 shares of Intra-Cellular preferred stock and 104,301 shares of
Intra-Cellular common stock held by J.D.F. Holdings Ltd., in which Dr. Fienberg holds a 20% ownership interest; or (ii) 100,000 shares of Intra-Cellular common stock held by two trusts for the benefit of members of Dr. Fienberg's
family, which were exchanged for an aggregate of 258,023 shares of our common stock at the Effective Time. Dr. Fienberg has no voting or investment control with respect to any of the shares owned by J.D.F. Holdings Ltd. or held in the trusts.
100
(4)
Dr. Wennogle is our Vice President, Drug Discovery.
(5)
Dr. Alafi is one of our directors-elect. Consists of shares held by a trust for the benefit of members of Dr. Alafi's family. Dr. Alafi may also be
deemed to beneficially own the shares held by Alafi Capital Company, LLC set forth in the table. Does not include 1,007,550 shares of Intra-Cellular preferred stock, which were exchanged for 503,776 shares of our common stock at the Effective Time,
held by two other trusts for the benefit of members of Dr. Alafi's family, as Dr. Alafi does not have voting or investment control over the shares held by those trusts.
(6)
Dr. Lerner is one of our directors-elect. Consists of shares held by the Lerner Family Trust UAD 11/14/94, or the Lerner Family Trust. Dr. Lerner shares
voting and investment control with respect to the shares held by the Lerner Family Trust.
(7)
Mr. Marcus is one of our directors-elect. Mr. Marcus may also be deemed to beneficially own the shares held by Alexandria Equities, LLC set forth in the
table.
(8)
Moshe Alafi may also be deemed to beneficially own the shares held by Alafi Capital Company, LLC set forth in the table.
(9)
Does not include 3,000,000 shares of Intra-Cellular common stock, which were exchanged for 1,500,000 shares of our common stock at the Effective Time, held by six
trusts for the benefit of members of Dr. Greengard's family, as the trustee of these trusts, Ursula von Rydingsvard, has sole voting and investment control over the shares held by the trusts.
Assumption of Outstanding Stock Options in Merger
At the Effective Time, on August 29, 2013, the Company assumed all options to purchase Intra-Cellular common stock then outstanding under the Intra-Cellular 2003 Equity Incentive Plan, and such
options became exercisable for an aggregate of 1,462,380 shares of Company common stock, subject to the vesting and other terms of such options. The vesting of such options was not accelerated as a result of the Merger. The following table provides
the number of outstanding options and the weighted average exercise price of such options under the 2003 Equity Incentive Plan held by our officers, directors, directors-elect and beneficial owners of more than five percent of any class of our
voting securities that the Company assumed from Intra-Cellular in connection with the Merger, as adjusted for the exchange ratio in the Merger:
Name of Beneficial Owner
Number
of
Shares of the
Company's
Common
Stock
Underlying
Outstanding
Options
Weighted
Average
Exercise Price
Per Share
Sharon Mates, Ph.D.
387,500
$
2.02
Lawrence J. Hineline
125,000
$
1.54
Allen A. Fienberg, Ph.D.
122,500
$
1.51
Lawrence P. Wennogle, Ph.D.
130,000
$
1.34
Kimberly E. Vanover, Ph.D.
49,750
$
2.38
Christopher Alafi, Ph.D.
29,375
$
3.26
Richard Lerner, M.D.
105,000
$
2.49
Joel S. Marcus
110,000
$
2.42
Sir Michael Rawlins, M.D., FRCP, FMedSci
27,000
$
3.26
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The Redemption
Immediately following the Effective Time, pursuant to the terms of a Redemption Agreement dated August 29, 2013 by and among the Company and its then-current sole stockholder, we completed the
closing of a redemption of an aggregate 5,000,000 shares of Company common stock from our then-current sole stockholder in consideration of an aggregate of $60,000, plus professional costs related to the transaction, not to exceed $20,000. The
5,000,000 shares constituted all of the issued and outstanding shares of the Company's capital stock, on a fully-diluted basis, immediately prior to the Merger.
Agreements with Stockholders
Termination of Existing Stockholder Agreements
In connection with Intra-Cellular's Series C preferred stock financing in 2007 and 2010, Intra-Cellular entered
into various stockholder agreements with the holders of its common stock and preferred stock relating to voting rights, information rights and registration rights, among other things. The stockholder agreements terminated immediately prior to the
Effective Time. Parties to the existing registration rights agreement, however, as well as our directors and executive officers and all of our other stockholders, were provided with an opportunity to become parties to the registration rights
agreement that Intra-Cellular entered into in connection the private placement, as discussed below under " – Registration Rights Agreement."
Registration Rights Agreement
At the closing of the Private
Placement, Intra-Cellular entered into a registration rights agreement with the investors in the Private Placement and also the existing stockholders of Intra-Cellular who agreed to become parties to certain provisions of the agreement or who choose
to become parties in the future, which covers substantially all of our outstanding shares of common stock as of the date of this filing. We assumed the registration rights agreement in connection with the Merger. Pursuant to the registration rights
agreement and subject to the rules and regulations of the SEC, we have agreed to file a shelf registration statement covering the resale of the shares of our common stock held by the investors in the Private Placement and the shares of our common
stock held by the former stockholders of Intra-Cellular who are parties to the agreement. We are required to file the shelf registration statement within 45 days of the date of the registration rights agreement (October 13, 2013). In the event fewer
than all of our outstanding shares of common stock can be registered pursuant to the so-called Rule 415 doctrine, priority will be given to the shares issued in the Private Placement, but in such event at least 25% of the shares registered shall be
those held by Intra-Cellular's existing stockholders prior to the Private Placement.
We will be liable to each investor
in the Private Placement (but not to the former stockholders of Intra-Cellular who are parties to the agreement) for liquidated damages, on a 30-day basis, equal to 1.0% of the aggregate purchase price paid by the investor for the registrable shares
of our common stock then held by the investor , subject to an overall cap of 5%, (i) if we fail to file the registration statement on time, (ii) if the registration statement is not declared effective within 150 days from the date of the
registration rights agreement (January 26, 2014), (iii) if we suspend (subject to limited blackout periods described below) or terminate the registration statement prior to the date which is the earlier of (x) the third anniversary of its
effectiveness (or the third
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anniversary of the date on which all registrable shares are included therein, if later) and (y) the date on which all of the registrable shares cease to be registrable shares, or
(iv) in the event one or more suspensions of the effectiveness of the registration statement exceeds 60 days in the aggregate during any 12-month period. We will be permitted to suspend the registration statement one or more times during any
12-month period provided such suspensions do not exceed 30 consecutive days or 60 days in the aggregate in any 12-month period. Any suspension associated with our filing of an annual, periodic or current report, as required by the Exchange Act, will
be permitted and will not be counted against the 60 day limitation. Any shares not registered due to the Rule 415 doctrine will not be subject to liquidated damages. Expenses with respect to the filing and effectiveness of such registration
statement (but not selling expenses, or underwriter or agent compensation) will be paid by us, including expenses of one counsel for the selling stockholders.
Lock-Up Provisions in Registration Rights Agreement
One of the
provisions of the registration rights agreement that is applicable to the former stockholders of Intra-Cellular who are parties to the agreement, other than the investors in the Private Placement, is a lock-up provision pursuant to which these
stockholders agreed, subject to specified exceptions, not to sell, transfer, dispose of, contract to sell, sell any option or contract to purchase, or otherwise transfer or dispose of, directly or indirectly, without the written consent of Leerink
Swann LLC or, in certain circumstances, the two lead institutional investors in the Private Placement, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock until the earlier
of (a) up to 180 days (as requested by the lead underwriter) after the date on which our shares of common stock are listed for trading on a national securities exchange in connection with a firm commitment underwritten public offering by us
with gross proceeds to us of at least $40 million, or (b) the date that is 18 months following the date of the Merger (February 28, 2015). These lock-up provisions will not apply to, among other things, shares of common stock acquired in
connection with any follow-on securities offerings by us or in open market transactions, or upon the exercise of stock options granted pursuant to our equity incentive plans, so long as the shares acquired upon exercise remain subject to the lock-up
provisions in the agreement, or certain gifts and other transfers for estate-planning purposes or by stockholders who are entities to their limited partners, members or stockholders, as specified in the agreement. In the event that a former
stockholder of Intra-Cellular was also an investor in the Private Placement, then these lock-up provisions in the agreement will only apply with respect to the shares held by such stockholder that were not purchased in the Private Placement. Under
the registration rights agreement, we did not enter into any lock-up agreement or other restriction on the transfer or registration of the shares of our common stock acquired by the investors in the Private Placement (other than those imposed by
non-disclosure agreements and the requirement that each investor continue to hold 200 shares of Intra-Cellular common stock (which were exchanged for 100 shares of our common stock in the Merger) until the earlier of (y) the date on which our
shares are listed on a national securities exchange or (z) the date 18 months after the closing of the Private Placement (February 28, 2015)).
Indemnification Agreements
We will enter into indemnification agreements
with each of our directors and certain of our officers. The indemnification agreements, our
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pending restated certificate of incorporation and our restated by-laws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, as a
condition to the Merger, we also entered into an indemnity agreement with the former sole officer and director of the Shell Company pursuant to which we agreed to indemnify him for actions taken by him in his official capacities relating to the
consideration, approval and consummation of the Merger and certain related transactions. See "Indemnification of Directors and Officers."
Indemnity Agreement
As a condition to the Merger, we entered into an
Indemnity Agreement with our former sole officer and director pursuant to which we agreed to indemnify such former officer and director for actions taken by him in his official capacities relating to the consideration, approval and consummation of
the Merger and certain related transactions.
Policy for Approval of Related Person Transactions
We do not currently have a policy for the review and approval of related person transactions. We intend to adopt such a policy when we
adopt an audit committee charter and establish an audit committee, which we expect will be responsible for reviewing and approving all transactions in which we are a participant and in which any parties related to us, including our executive
officers, our directors, beneficial owners of more than 5% of our securities, immediate family members of the foregoing persons and any other persons whom our board of directors determines may be considered related parties under Item 404 of
Regulation S-K, has or will have a direct or indirect material interest.
Legal Proceedings
We are not aware of any material proceedings in which any of our directors, executive officers or affiliates, any owner of record or
beneficially of more than 5% of our common stock, or any associate of any such director, officer, affiliate or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us.
Stockholder Communication with the Board of Directors
Stockholders may send communications to our Board of Directors by writing to Intra-Cellular Therapies, Inc., 3960 Broadway New York, New York 10032, Attention: Board of Directors.
Other Information
We
are required to file periodic reports, proxy statements and other information with the SEC. You may read and copy this information at the Public Reference Room of the SEC, 100 F. Street, N.E., Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of these reports by accessing the SEC's website at http://www.sec.gov. You may also send communications to our Board of Directors at:
Intra-Cellular Therapies, Inc., 3960 Broadway, New York, New York 10032, Attention: Board of Directors.
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Market Price of and Dividends on Our Common Equity and Related Stockholder Matters
There is not currently, and there has never been, any market for any of our securities. Our securities are not eligible for trading on any
national securities exchange, The NASDAQ Global Market or any other over-the-counter markets, including the Over-the-Counter Bulletin Board.
As of August 29, 2013, we had 22,134,647 outstanding shares of common stock and no outstanding shares of preferred stock.
For a description of our dividend policy, see "Description of Securities – Dividend Policy" below.
Description of Securities
The following statements are qualified in their
entirety by reference to the detailed provisions of our certificate of incorporation and bylaws.
Capital Structure
We currently have authorized capital stock of 110,000,000 shares, of which 100,000,000 are designated as common stock, par value $0.0001
per share, and 10,000,000 shares are designated as preferred stock, par value $0.0001 per share. Under our restated certificate of incorporation approved by our sole director and sole stockholder prior to the Merger, which we expect to file 20 days
after filing with the SEC and mailing to such stockholder a Schedule 14C reporting the adoption of the restated certificate of incorporation, we will have authorized capital stock consisting of 105,000,000 shares, of which 100,000,000 will be
designated as common stock, par value $0.0001 per share, and 5,000,000 shares will be designated as preferred stock, par value $0.0001 per share.
Upon the closing of the Merger on August 29, 2013, 22,134,647 shares of our common stock and no shares of our preferred stock were issued and outstanding. As of August 29, 2013, following the
closing of the Merger, there were 258 holders of record of our common stock.
Common Stock
The holders of our common stock are entitled to one vote per share on matters on which our stockholders vote. There are no cumulative
voting rights. Subject to any preferential dividend rights of any outstanding shares of preferred stock, holders of our common stock are entitled to receive dividends, if declared by our board of directors, out of funds that we may legally use to
pay dividends. If we liquidate or dissolve, holders of our common stock are entitled to share ratably in our assets once our debts and any liquidation preference owed to any then-outstanding preferred stockholders are paid. Our certificate of
incorporation does not provide our common stock with any redemption, conversion or preemptive rights.
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Preferred Stock
As of August 29, 2013, no shares of our preferred stock are currently outstanding. If we issue preferred stock in the future, such preferred stock would have priority over common stock with respect
to dividends and other distributions, including the distribution of assets upon liquidation. Our board of directors has the authority, without further stockholder authorization, to issue from time to time up to 10,000,000 shares of preferred stock
in one or more series and to fix the terms, limitations, voting rights, relative rights and preferences and variations of each series. This amount will be set at 5,000,000 shares upon the effectiveness of our restated certificate of incorporation.
Although we have no present plans to issue any shares of preferred stock, the issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could decrease the amount of earnings and assets available for distribution to
the holders of common stock, could adversely affect the rights and powers, including voting rights, of the common stock, and could have the effect of delaying, deterring or preventing a change of control of us or an unsolicited acquisition proposal.
Dividend Policy
In the past, we have not distributed earnings to stockholders. Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings
for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends. Even if the Board decides to pay dividends, the
form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board may deem relevant.
Recent Sales of Unregistered Securities
Set forth below is information regarding shares of common stock, convertible preferred stock, convertible notes and warrants issued, and options granted, by us and by Intra-Cellular within the past three
years that were not registered under the Securities Act. Also included is the consideration, if any, received by Intra-Cellular for such shares, notes, warrants and options and information relating to the section of the Securities Act, or rule of
the Securities and Exchange Commission, under which exemption from registration was claimed. The number of shares and the warrant issued prior to the Merger described below in paragraphs C and D below do not reflect the exchange of shares in the
Merger, which is further described in paragraph E below.
Original Issuances of Stock, Convertible Notes and Warrants
A. On October 15, 2012, the Shell Company issued an aggregate of 5,000,000 shares of its common stock to its then
sole stockholder in exchange for $10,000, which represented all of the Shell Company's outstanding common stock immediately prior to the Merger.
B. On October 25, 2012, Intra-Cellular issued convertible promissory notes having an aggregate principal amount of $14,343,795 to seven accredited investors. On November 14, 2012, Intra-Cellular
issued additional convertible promissory notes having an aggregate principal amount of $846,098 to two additional accredited investors. On March 20, 2013, Intra-Cellular issued additional convertible promissory notes having an aggregate
principal amount of $100,000 to two additional accredited investors. In connection with the Private Placement described in paragraph D below, the principal amount of all outstanding convertible promissory notes, plus accrued interest, converted into
Intra-Cellular common stock on August 29, 2013.
106
C. On April 19, 2013, Intra-Cellular issued 36,450 shares of Intra-Cellular common
stock and a warrant to purchase 3,645 shares of Intra-Cellular common stock to one accredited investor in exchange for biotechnology grant funding received from the investor.
D. On August 29, 2013, immediately prior to the Effective Time, Intra-Cellular issued 18,889,307 shares of its common stock at a price of $3.1764 per share, or an aggregate purchase price of
approximately $60.0 million, which included approximately $15.3 million in principal and $0.8 million in accrued interest from the conversion of Intra-Cellular's then outstanding convertible promissory notes (such that Intra-Cellular received
$40.0 million in net proceeds, after expenses), to 206 accredited investors in the Private Placement. As part of the Private Placement, all outstanding convertible promissory notes, plus accrued interest thereon, described in paragraph B above, were
converted into shares of Intra-Cellular common stock at a price of $3.1764 per share. Leerink Swann LLC acted as sole lead placement agent and National Securities Corporation and Livingston Securities LLC acted as co-agents for purposes of the sale
of Intra-Cellular common stock in the Private Placement. Entities and individuals affiliated with Leerink Swann LLC purchased an aggregate of 346,302 shares of Intra-Cellular common stock in the Private Placement on the same terms as the other
investors.
E. On August 29, 2013, at the Effective Time, each share of Intra-Cellular common stock and preferred stock that
was issued and outstanding immediately prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock. We issued an aggregate of 22,134,647 shares of our common stock upon such exchange of the outstanding shares of
Intra-Cellular common stock and preferred stock to Intra-Cellular's stockholders immediately prior to the Effective Time, which included no more than 35 non-accredited investors. In addition, at the Effective Time, we assumed the 2003 Equity
Incentive Plan, and all options to purchase Intra-Cellular common stock then outstanding under the 2003 Equity Incentive Plan, and such options became exercisable for an aggregate of 1,462,380 shares of our common stock, subject to the vesting and
other terms of such options. At the Effective Time, we also assumed the outstanding warrant to purchase Intra-Cellular common stock described in paragraph C above, and such warrant became exercisable for 1,822 shares of our common stock.
F. From August 1, 2010 through the Effective Time, which occurred on August 29, 2013, Intra-Cellular issued an aggregate of
519,936 shares of its common stock upon the exercise of stock options issued under the 2003 Equity Incentive Plan.
Stock
Option Grants
From August 1, 2010 through the consummation of the Merger on August 29, 2013, Intra-Cellular
granted stock options under the 2003 Equity Incentive Plan to purchase an aggregate of 579,300 shares of common stock, net of forfeitures, at a weighted-average exercise price of $2.99 per share, to certain of its employees, consultants and
directors.
Securities Act Exemptions
We deemed the offers, sales and issuances of the securities described above under " – Original Issuances of Stock, Convertible Notes and Warrants" to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering.
We deemed the grants of stock options described above under " – Stock Option Grants" to be exempt from registration under
the Securities Act in reliance on Rule 701 of the Securities
107
Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction
exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us.
All certificates representing the securities issued in the transactions described under "Recent Sales of Unregistered Securities" included appropriate legends setting forth that the securities
had not been offered or sold pursuant to a registration statement and describing the applicable restrictions on transfer of the securities. There were no underwriters employed in connection with any of the transactions set forth in "Recent
Sales of Unregistered Securities."
Shares Eligible for Future Sale
As of August 29, 2013, we had outstanding 22,134,647 shares of common stock. All of these shares are restricted securities under Rule
144, in that they were issued in private transactions not involving a public offering.
Restrictions on the Use of Rule 144 by Shell
Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by
companies that are, or previously were, blank check companies like us, to their promoters or affiliates despite technical compliance with the requirements of Rule 144. Rule 144 also is not available for resale of securities issued by any shell
companies (other than business combination-related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an exception to this prohibition, however, if the following conditions are met:
•
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
•
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
•
the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 12 months (or
such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
•
at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that
is not a shell company.
As a result, none of our stockholders is currently able to sell shares of our
common stock in reliance on Rule 144. Assuming we continue to meet the requirements set forth above, Rule 144 will become available to our stockholders one year after the date of this report. Our stockholders may currently resell their shares of our
common stock only pursuant to a registration statement that has been declared effective under the Securities Act or pursuant to another exemption from registration.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The disclosures set forth in Item 4.01 below are hereby incorporated by reference into this Item 2.01.
Item 3.02. Unregistered Sales of Equity Securities.
The disclosures set forth in Item 2.01 above are hereby incorporated by reference into this Item 3.02.
Item 4.01. Changes in Registrant's Certifying Accountant.
Effective at the Effective Time of the Merger, Raich Ende Malter & Co. LLP, or REM, was dismissed as the independent registered
public accounting firm that audits the financial statements of the Company. Effective as of the Effective Time, our Board of Directors engaged Ernst & Young LLP, or E&Y, as the independent registered public accounting firm to audit
the Company's financial statements for the fiscal year ended December 31, 2013.
REM's audit report on the
Company's financial statements for the period from August 29, 2012 (inception) through March 31, 2013, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
During the Company's most recent fiscal year (since inception) and any subsequent interim period
prior to the date hereof, there were no disagreements with REM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of REM, would
have caused it to make reference to the subject matter thereof in connection with its report.
During the Company's most
recent fiscal year (since inception) and any subsequent interim period prior to the date hereof, neither the Company nor anyone acting on its behalf consulted E&Y regarding the application of accounting principles to a specified transaction,
either completed or proposed or the type of audit opinion that might be rendered on the Company's financial statements.
The Company has provided REM with a copy of this report prior to the filing hereof and has requested that REM furnish to the Company a
letter addressed to the Securities and Exchange Commission stating whether REM agrees with the statements made by the Company in this Report. REM has furnished such letter, which letter is filed as Exhibit 16.1 hereto, as required by
Item 304(a)(3) of Regulation S-K.
Item 5.01. Changes in Control of Registrant.
The disclosures set forth in Item 2.01 above are hereby incorporated by reference into this Item 5.01.
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Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers.
Effective immediately following the Merger, Sharon Mates, Ph.D. was appointed to our Board of
Directors, and together with the sole director of the Shell Company, Samir N. Masri, constitute our Board of Directors. Effective upon the eleventh day after the Company files with the SEC and mails to our former sole stockholder a Schedule 14f-1
reporting a change in the majority of our directors, our Board of Directors will be reconstituted by the appointment of Christopher Alafi, Ph.D., Richard Lerner, M.D., Joel S. Marcus and Sir Michael Rawlins, M.D., FRCP, FMedSci, to serve with
Dr. Mates as our directors, and the resignation of Mr. Masri as a director.
Effective immediately following the
Merger, our executive management team was also reconstituted by the appointment of Dr. Mates as our President and Chief Executive Officer, Lawrence J. Hineline as our Vice President of Finance, Chief Financial Officer and Secretary, Allen A.
Fienberg, Ph.D. as our Vice President of Business Development; Lawrence P. Wennogle, Ph.D. as our Vice President, Drug Discovery and Kimberly E. Vanover, Ph.D. as our Vice President, Clinical Development, effective upon the resignation of Samir N.
Masri as our Chief Executive Officer, Chief Financial Officer, President and Secretary.
Biographical and other information
regarding these individuals is provided under the caption "Management and Directors" in Item 2.01 above, which is incorporated by reference into this Item 5.02.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On August 29, 2013, we filed a Certificate of Ownership and Merger with the Secretary of State of the State of Delaware pursuant to which Intra-Cellular Therapies, Inc., our newly created
wholly-owned subsidiary, merged with and into us with us remaining as the surviving corporation, which we refer to as the Name Change Merger. In connection with the Name Change Merger, and as set forth in the Certificate of Ownership and Merger, we
changed our corporate name to "Intra-Cellular Therapies, Inc." The Certificate of Ownership and Merger is filed herewith as Exhibit 3.4.
Effective August 29, 2013, prior to the Merger, our sole director and our sole stockholder approved by written consent a restated certificate of incorporation to, among other things, reduce the
number of authorized shares of preferred stock, provide for our Board of Directors to be divided into three classes, require that any action taken by our stockholders be at a duly called annual or special meeting of stockholders and not by written
consent, and to require a supermajority vote of our stockholders for our stockholders to remove any of our directors, amend, alter or repeal, or adopt any provision inconsistent with, certain provisions contained in our restated certificate of
incorporation, or to adopt, amend or repeal our restated bylaws. We intend to prepare and file an information statement on Schedule 14C with the SEC to notify our former sole stockholder of this action. Twenty days after we mail the information
statement, we expect to file the restated certificate of incorporation with the Secretary of State of the State of Delaware. When the restated certificate of incorporation becomes effective, we will have authorized capital stock of 105,000,000
shares, of which will 100,000,000 shares will be designated as common stock, par value $0.0001 per share, and of which 5,000,000 shares will be designated as preferred stock, par value $0.0001 per share. A copy of the restated certificate of
incorporation that we intend to file with the Secretary of State of the State of Delaware is filed herewith as Exhibit 3.2, and is incorporated herein by reference.
110
Effective August 29, 2013, our sole director approved our restated bylaws to, among
other things, provide for our Board of Directors to be divided into three classes, require that any action taken by our stockholders be at a duly called annual or special meeting of stockholders and not by written consent, and to require a
supermajority vote of our stockholders for our stockholders to remove any of our directors or to adopt, amend or repeal any provision of our restated bylaws. A copy of our restated bylaws is filed herewith as Exhibit 3.5, and is incorporated hereby
by reference.
As a result of the Merger, our board of directors has decided to change our fiscal year end from March 31
to December 31. Accordingly, we will file our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 with the SEC on or before March 31, 2014. As the transition period covers six months or more, in accordance with the
SEC's transition report rules as set forth in Rule 13a-10 of the Securities Exchange Act of 1934, as amended, we will need to file a transition report on Form 10-K within 90 days of December 31, 2013 and our next Quarterly Report on Form
10-Q will contain the necessary financial information for the transition period.
Item 5.06. Change in Shell Company Status.
As described in Items 1.01 and 2.01 above, which are incorporated by reference into this Item 5.06, we ceased being a
shell company (as defined in Rule 12b-2 under the Exchange Act) upon completion of the Merger.
Item 9.01. Financial Statements and
Exhibits
.
(a) As a result of its acquisition of Intra-Cellular as described in Item 2.01, the registrant is filing herewith
Intra-Cellular's audited financial statements as of and for the years ended December 31, 2012 and 2011 and its unaudited financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 as Exhibit
99.1 to this Current Report on Form 8-K.
(b) Unaudited pro forma condensed combined financial statements for the year ended December 31,
2012 and as of and for the six months ended June 30, 2013 is attached as Exhibit 99.2 to this Current Report on Form 8-K.
(d) Exhibits.
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this Current Report on Form 8-K,
which Exhibit Index is incorporated herein by reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
INTRA-CELLULAR THERAPIES, INC.
Date: September 5, 2013
By:
/s/ Sharon Mates, Ph.D.
Sharon Mates, Ph.D.
Chairman, President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit
Description
2.1
Agreement and Plan of Merger, dated as of August 23, 2013, by and among the Registrant, ITI, Inc. and Intra-Cellular Therapies, Inc. (incorporated by reference to Exhibit 10.1 to
the Registrant's Current Report on Form 8-K filed with the SEC on August 29, 2013 (File No. 000-54896)).
2.2
Agreement and Plan of Merger, dated as of August 29, 2013, by and between the Registrant and Intra-Cellular Therapies, Inc., relating to the name change of the
Registrant.
3.1
Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on August 29, 2012 (incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on Form 10 filed with the SEC on February 8, 2013 (File No. 000-54896)).
3.2
Form of Restated Certificate of Incorporation of the Registrant, to be filed with the Secretary of State of the State of Delaware.
3.3
Certificate of Merger relating to the Merger of ITI, Inc. with and into Intra-Cellular Therapies, Inc., filed with the Secretary of State of the State of Delaware on August 29,
2013.
3.4
Certificate of Ownership and Merger relating to the Merger of Intra-Cellular Therapies, Inc. with and into the Registrant, filed with the Secretary of State of the State of Delaware
on August 29, 2013, relating to the name change of the Registrant.
3.5
Restated Bylaws of the Registrant.
4.1
Form of common stock certificate.
4.2.1
Warrant to Purchase Common Stock dated April 19, 2013 issued to Alzheimer Drug Discovery Foundation, Inc.
4.2.2
Amendment dated August 29, 2013 to Warrant to Purchase Common Stock dated April 19, 2013 issued to Alzheimer Drug Discovery Foundation, Inc.
10.1.1**
License Agreement dated as of May 31, 2005 by and between Bristol-Meyers Squibb Company and Intra-Cellular Therapies, Inc.
10.1.2
Amendment No. 1 to License Agreement dated as of November 3, 2010 by and between Bristol-Meyers Squibb Company and Intra-Cellular Therapies, Inc.
10.2**
License and Collaboration Agreement dated as of February 25, 2011 by and between Takeda Pharmaceutical Company Limited and Intra-Cellular Therapies,
Inc.
113
Exhibit
Description
10.3*
Employment Agreement effective as of February 26, 2008 by and between Sharon Mates, Ph.D. and Intra-Cellular Therapies, Inc.
10.4*
Employment Agreement effective as of February 26, 2008 by and between Lawrence J. Hineline and Intra-Cellular Therapies, Inc.
10.5*
Employment Agreement effective as of February 26, 2008 by and between Allen Fienberg, Ph.D. and Intra-Cellular Therapies, Inc.
10.6*
Employment Agreement effective as of February 26, 2008 by and between Lawrence Wennogle, Ph.D. and Intra-Cellular Therapies, Inc.
10.7*
Offer Letter dated February 2, 2007 by Intra-Cellular Therapies, Inc. to Kimberly Vanover.
10.8*
Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of September 1, 2003 by and between Sharon Mates, Ph.D. and Intra-Cellular Therapies,
Inc.
10.9*
Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of December 1, 2003 by and between Lawrence J. Hineline and Intra-Cellular Therapies,
Inc.
10.10*
Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of June 3, 2002 by and between Allen Fienberg, Ph.D. and Intra-Cellular Therapies,
Inc.
10.11*
Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of January 1, 2003 by and between Lawrence Wennogle, Ph.D. and Intra-Cellular Therapies,
Inc.
10.12*
Employee Proprietary Information, Inventions, and Non-Competition Agreement effective as of March 5, 2007 by and between Kimberly E. Vanover, Ph.D. and Intra-Cellular Therapies,
Inc.
10.13*
Form of Indemnification Agreement by and between the Company and its directors and executive officers.
10.14*
2003 Equity Incentive Plan, as amended.
10.15*
Form of Stock Option Agreement under the 2003 Equity Incentive Plan, as amended.
10.16*
2013 Equity Incentive Plan.
114
Exhibit
Description
10.17
Redemption Agreement dated as of August 29, 2013 by and between the Registrant and NLBDIT 2010 Services, LLC.
10.18
Indemnity Agreement dated as of August 29, 2013 by and among the Registrant, Intra-Cellular Therapies, Inc. and Samir N. Masri.
10.19
Registration Rights Agreement dated as of August 29, 2013 by and among Intra-Cellular Therapies, Inc., the stockholders named therein and the Registrant.
16.1
Letter from Raich Ende Malter & Co. LLP to the Securities and Exchange Commission, dated September 5, 2013.
99.1
Audited financial statements of Intra-Cellular Therapies, Inc. as of and for the years ended December 31, 2012 and 2011 and unaudited financial statements of Intra-Cellular
Therapies, Inc. as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012.
99.2
Unaudited Pro Forma Condensed Combined Financial Statements for the year ended December 31, 2012 and as of and for the six months ended June 30, 2013.
99.3
Press Release dated September 3, 2013.
*
Management contract or compensatory plan or arrangement.
**
Confidential treatment requested by the Registrant. Redacted portion filed separately with the Securities and Exchange Commission.
115