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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><strong>UNITED
        STATES</strong></font></div>
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        AND EXCHANGE COMMISSION</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>WASHINGTON,
        D.C.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>20549</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>_____________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman"><strong>FORM
        8-K</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>_____________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
        REPORT</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
        to Section 13 or 15(d) of the</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Securities
        Exchange Act of 1934</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
        of
        report (Date of earliest event reported): December 27, 2005</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 23pt; FONT-FAMILY: Times New Roman"><strong>Keryx
        Biopharmaceuticals, Inc.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
        Name of Registrant as Specified in Charter)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br>&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="25%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Delaware</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
                  or Other Jurisdiction</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                  Incorporation)</font></div>
              </td>
              <td valign="top" width="23%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>000-30929</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                  File Number)</font></div>
              </td>
              <td valign="top" width="29%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>13-4087132</strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                  Employer Identification No.)</font></div>
              </td>
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        </table>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>750
        Lexington Avenue</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>New
        York, New York 10022</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
        of Principal Executive Offices)</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(212)
        531-5965</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant's
        telephone number, including area code)</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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:</font></div>
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              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2, serif">&#163;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Written
                  communications pursuant to Rule 425 under the Securities
                  Act.</font></div>
              </td>
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        </table>
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              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2, serif">&#163;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
                  material pursuant to Rule 14a-12 under the Exchange
                  Act.</font></div>
              </td>
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        </table>
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              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2, serif">&#163;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                  communications pursuant to Rule 14d-2b under the Exchange
                  Act.</font></div>
              </td>
            </tr>

        </table>
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      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

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              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2, serif">&#163;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                  communications pursuant to Rule 13e-4(c) under the Exchange
                  Act.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
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      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
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          </div>
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        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        1.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Entry
        into a Material Definitive Agreement.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
        December 27, 2005, the Compensation Committee of the Board of Directors of
        Keryx
        Biopharmaceuticals, Inc. (the &#8220;Company&#8221;) approved base salaries for fiscal 2006
        for each named executive officer. The table below indicates each named executive
        officer&#8217;s base salary for fiscal 2006: </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left">&#160;</div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="bottom" width="10%" style="BORDER-BOTTOM: #ffffff thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Executive
                  officer</u></strong></font></div>
              </td>
              <td align="left" valign="middle" width="45%" style="BORDER-BOTTOM: #ffffff thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" colspan="3" valign="bottom" width="7%" style="BORDER-BOTTOM: #ffffff thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Base
                  salary for </u></strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>2006</u></strong></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div align="left">
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="61%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Michael
                  S. Weiss, Chairman and Chief Executive Officer</font></div>
              </td>
              <td align="left" valign="middle" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">375,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="61%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I.
                  Craig Henderson, President</font></div>
              </td>
              <td align="left" valign="middle" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">300,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="61%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ron
                  Bentsur, Vice President, Finance and Investor Relations</font></div>
              </td>
              <td align="left" valign="middle" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">225,000</font></div>
              </td>
              <td align="left" valign="middle" width="1%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(1)</sup></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.9pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.9pt" align="left"><strong><font size="2">_____________</font></strong></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0.9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)
        As
        previously announced, Mr. Bentsur has accepted the position of Chief Executive
        Officer of XTL Biopharmaceuticals, Ltd. He will remain as Vice President,
        Finance and Investor Relations of the Company until a successor is named.
        As a
        result, his base salary will be prorated in accordance with the amount of
        time
        he dedicates to his position at the Company.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
        8.01. </strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
        Events.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(a)</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Rule
          10b5-1 Plan</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
          December 30, 2005, Michael S. Weiss, Chairman and Chief Executive Officer
          of the
          Company, adopted a Rule 10b5-1 trading plan (the &#8220;Plan&#8221;) with a brokerage firm
          to exercise stock options issued to Mr. Weiss pursuant to his employment
          agreement and the Company&#8217;s stock option plans and to sell the common stock
          underlying such options. Mr. Weiss entered into the Plan to facilitate
          the
          exercise of stock options and as part of his personal long-term investment
          strategy for asset diversification and liquidity. Mr. Weiss will have no
          control
          over the timing of the option exercises or stock sales under the
          Plan.</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
          to the Plan, the brokerage firm may exercise employee stock options of
          up to
          1,000,000 shares of common stock (representing approximately 15% of Mr.
          Weiss&#8217;s
          holdings) beginning in February 2006. The Plan is scheduled to terminate
          in
          February 2008, whether or not the total number of shares is sold. The stock
          options will be exercised monthly and the shares of common stock will be
          sold on
          a monthly basis pursuant to the following formula:</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
        <div>
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td align="left" valign="top" width="31%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Share
                    price on date of sale</strong></font></div>
                </td>
                <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 8.1pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
                    of shares to be sold in month</strong></font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="31%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$0
                    - $7.49</font></div>
                </td>
                <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">0</font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="31%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$7.50
                    - $12.49</font></div>
                </td>
                <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,000</font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="31%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$12.50
                    - $17.49</font></div>
                </td>
                <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">40,000</font></div>
                </td>
              </tr>
              <tr bgcolor="#ffffff">
                <td align="left" valign="top" width="31%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$17.50
                    - $22.49</font></div>
                </td>
                <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">80,000</font></div>
                </td>
              </tr>
              <tr bgcolor="#ccffcc">
                <td align="left" valign="top" width="31%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equal
                    to or greater than $22.50</font></div>
                </td>
                <td align="left" valign="top" width="37%" style="BORDER-BOTTOM: black thin solid">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">120,000</font></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
          transactions under the Plan will be reported by Mr. Weiss through Form
          4 filings
          with the Securities and Exchange Commission (the "SEC"). The Plan is intended
          to
          comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended
          (the
          "Exchange Act"), and the Company&#8217;s insider trading policy. </font></div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(b)&#160;&#160;</strong></font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;&#160;&#160;
                  Annual Report for the year ended December 31, 2004 on Form
                  10-K</strong></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
        part
        of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
        the
        SEC's regular review of reports filed under the Exchange Act, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
        SEC
        requested that the Company revise the disclosure provided in its annual report
        on Form 10-K regarding the Company&#8217;s significant assumptions used in valuing
        in-process research and development and the estimated costs and time to complete
        the current stage of the Company&#8217;s products under development. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Company and the SEC agreed that such disclosure would be made in the Company&#8217;s
        annual report on a going forward basis and that the Company would also file
        the
        disclosure on a Form 8-K to make the revised disclosure immediately available
        to
        investors. References to the relevant section of Form 10-K have been made
        for
        each disclosure item for the reader&#8217;s convenience. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">2</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Revised
          Disclosure for the &#8220;Critical Accounting Policies&#8221; portion of the Management&#8217;s
          Discussion and Analysis of Financial Condition and Results of Operations
          section
          of the Company&#8217;s annual report on Form 10-K (Item 7):</u></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Accounting
          Related to the Valuation of Acquired In-Process Research and
          Development.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
          required by Financial Accounting Standards Board Interpretation No.&#160;4,
          &#8220;Applicability of Financial Accounting Standards Board Statement No. 2 to
          Business Combinations Accounted for by the Purchase Method," or FIN 4,
          we
          recorded a charge of $18,800,000 for the estimate of the portion of the
          ACCESS
          Oncology, Inc., or ACCESS Oncology, purchase price allocated to acquired
          in-process research and development. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
          project-by-project valuation using the guidance in Statement of Financial
          Accounting Standards No. 141, &#8220;Business Combinations&#8221; and the AICPA Practice Aid
&#8220;Assets Acquired in a Business Combination to Be Used In Research and
          Development Activities: A Focus on Software, Electronic Devices and
          Pharmaceutical Industries&#8221; was performed with the assistance of independent
          valuation specialists to determine the fair value of research and development
          projects of ACCESS Oncology which were in-process, but not yet
          completed.</font></div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        fair
        value was determined using the income approach on a project-by-project basis.
        This method starts with a forecast of the expected future net cash flows.
        These
        cash flows are then adjusted to present value by applying an appropriate
        discount rate that reflects the project&#8217;s stage of completion and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">other
        risk factors. These other risk factors can include the nature of the product,
        the scientific data associated with the technology, the current patent situation
        and market competition.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        forecast of future cash flows required the following assumptions to be
        made:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">revenue
                  that is likely to result from specific in-process research and
                  development
                  projects, including estimated patient populations, estimated selling
                  prices, estimated market penetration and estimated market share
                  and
                  year-over-year growth rates over the product life
                  cycles;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cost
                  of sales related to the potential products using industry data
                  or other
                  sources of market data;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">sales
                  and marketing expense using industry data or other market
                  data;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">general
                  and administrative expenses; and</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">research
                  and development expenses.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        valuations are based on information that was available as of the acquisition
        date and the expectations and assumptions deemed reasonable by our management.
        No assurance can be given, however, that the underlying assumptions or events
        associated with such assets will occur as projected. For example, the following
        changes in our assumptions would have yielded the indicated change in the
        total
        amount of the acquired in-process research and development charge:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">if
                  the growth rate regarding the revenue assumptions for the three
                  drugs
                  under development and included in the assumptions on future cash
                  flows
                  were increased by 10%, the result on the aggregate amount of the
                  charge
                  would have been approximately $4,500,000, yielding a total charge
                  of
                  approximately $23,300,000, or if the growth rate were decreased
                  by 5%, the
                  result on the aggregate amount of the charge would have been approximately
                  $2,200,000, yielding a total charge of approximately
                  $16,600,000;</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">if
                  the discount rate used to bring the estimated future cash flows
                  to a
                  present value amount (which was based on a 55% rate) were reduced
                  by 10%,
                  the total charge would have increased to approximately $33,000,000,
                  and if
                  the discount rate were increased by 10%, the total charge would
                  have
                  decreased to approximately $11,000,000.
</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additionally,
        if it was assumed that the research and development activity of the least
        developed of the three drugs under development acquired with ACCESS Oncology
        was
        going to be terminated for any reason and had no alternative future use,
        including inconclusive clinical results, the amount of the in-process research
        and development charge&#160;would have been reduced, possibly creating
        a
        situation where the Company would have recognized goodwill. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        each
        of the above scenarios, the change in the in-process research and development
        charge would have required an equal change in contingent equity rights, or
        if a
        significant decrease, goodwill would have been recorded.&#160; Contingent
        equity
        rights represent the lesser of negative goodwill and the maximum value of
        the
        contingent consideration at the date of the acquisition.&#160; Changes
        in the
        acquired in-process research and development charge do not change the amount
        or
        the value of the contingent consideration that could ultimately be paid.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">3</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Additional
        Disclosure for the &#8220;Overview&#8221; portion of the Management&#8217;s Discussion and
        Analysis of Financial Condition and Results of Operations section of the
        Company&#8217;s annual report on Form 10-K (Item 7):</u></font></div>
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        and development expenses consist primarily of salaries and related personnel
        costs, fees paid to consultants and outside service providers for clinical
        and
        laboratory development, facilities-related and other expenses relating to
        the
        design, development, testing, and enhancement of our product candidates and
        technologies, as well as expenses related to in-licensing of new product
        candidates. We expense our research and development costs as they are incurred.
        Other research and development expenses, which excludes non-cash compensation
        and acquired in-process research and development expenses, for the years
        ended
        December 31, 2004, 2003 and 2002 were $9,805,000, $5,996,000 and $9,523,000,
        respectively. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        following table sets forth the other research and development expenses per
        project for the periods presented.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div>
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              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Years
                  ended December 31,</strong></font></div>
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              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
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            <tr>
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff solid">&#160;</td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2004</strong></font></div>
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              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2003</strong></font></div>
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              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2002</strong></font></div>
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              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cumulative,
                  </strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>as
                  of </strong></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>December
                  31, 2004</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-101</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,064,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
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                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,074,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,215,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14,204,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-0401</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,230,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ffffff">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,230,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
                  clinical stage oncology compounds</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">623,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">N/A</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">623,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ffffff thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">888,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,922,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7,308,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22,655,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ffffff thin solid">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 8.25pt">&#160;</font></div>
              </td>
              <td width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9,805,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
                </div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,996,000</font></div>
              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
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              </td>
              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
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              </td>
              <td align="left" valign="bottom" width="2%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
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              <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: #ccffcc">
                <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">
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              </td>
              <td align="left" valign="bottom" width="1%" style="BORDER-BOTTOM: #ccffcc">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Revised
        Disclosure for the &#8220;Products Under Development&#8221; portion of the Business section
        of the Company&#8217;s annual report on Form 10-K (Item 1):</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PRODUCTS
        UNDER DEVELOPMENT</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>KRX-101</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Overview</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        lead
        compound under development is KRX-101 (sulodexide). We own the exclusive
        rights
        to use KRX-101 for the treatment of diabetic nephropathy in North America,
        Japan
        and certain other markets outside of Europe. Diabetic nephropathy is a long-term
        complication of diabetes in which the kidneys are progressively damaged.
        KRX-101, our lead drug candidate, is a glycosaminoglycan compound with
        structural similarities to the broad family of marketed heparins and low
        molecular weight heparins. Specifically, KRX-101 is comprised of heparan
        sulfate, also referred to as fast-moving heparin, dermatan sulfate and
        slow-moving heparin. This drug has been marketed in a number of European,
        Asian
        and South American countries for many years by our licensor for certain
        cardiovascular conditions and has a well established safety profile at the
        doses
        used for such indications. Additionally, it has been demonstrated in multiple
        clinical trials conducted in Europe and the U.S., including two randomized,
        double-blind, placebo-controlled Phase II studies, that KRX-101 can reduce
        urinary protein excretion in patients with diabetic nephropathy. KRX-101
        is in a
        pivotal Phase III and Phase IV clinical program under a Special Protocol
        Assessment, or SPA, with the Food &amp; Drug Administration, or FDA. These
        trials are being conducted by the Collaborative Study Group, or the CSG,
        the
        world&#8217;s largest standing renal clinical trial group. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">4</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        plan
        to develop KRX-101 in the United States, and possibly other countries where
        we
        have exclusive rights under our license, for the treatment of diabetic
        nephropathy and potentially for other indications. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Market
        Opportunity</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">According
        to the American Diabetes Association, or the ADA, there are 18.2 million
        people
        in the United States, or approximately 6.3% of the population, who have
        diabetes. Of this population, approximately 13 million have been diagnosed,
        of
        whom approximately 90-95% have been diagnosed with Type II diabetes. Type
        II
        diabetes results from the combination of insulin deficiency and the body's
        relative insensitivity to the insulin present, as opposed to Type I diabetes,
        in
        which severe insulin deficiency results from destruction of the
        insulin-producing beta cells of the pancreas. Moreover, an August 2003 study
        published by Datamonitor estimates that approximately 50% of all diabetics
        in
        the U.S., or approximately nine million people, have diabetic nephropathy.
        Diabetes is the most common cause of End Stage Renal Disease, or ESRD, in
        the
        United States and in many other developed nations and represents approximately
        45% of all new cases of ESRD in the United States. Despite advances in clinical
        care, including improvements in glycemic or blood sugar control and blood
        pressure control, the number of Type I and Type II diabetes-related cases
        of
        ESRD continues to rise. In particular, the incidence of Type II diabetes-related
        ESRD is rapidly increasing. Approximately 20% of diabetics on dialysis in
        the
        United States survive for five years, making the mortality of end-stage renal
        failure in this group higher than most forms of cancer. Unfortunately, renal
        transplantation is an option for less than 15% of diabetics with ESRD, as
        compared to 35-40% of non-diabetics, principally due to age and concomitant
        vascular disease. Despite recent advances, diabetic nephropathy remains a
        potentially catastrophic illness for which partial but insufficient treatment
        is
        currently available.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Scientific
        Background</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Both
        Type
        I and Type II diabetes are characterized by insufficient insulin effect upon
        insulin-requiring tissues. As insulin is required for normal metabolism of
        glucose, fat and protein, diabetes is accompanied by abnormal blood levels
        of
        these substances. In the short term, hyperglycemia, or elevated blood glucose,
        causes the classic symptoms of diabetes: excessive thirst, frequent urination
        and weight loss. In the long term, hyperglycemia, as well as other effects
        resulting from insufficient insulin effect, can progressively damage critical
        anatomic structures resulting in chronic diabetic complications. We are
        developing KRX-101 for the treatment of diabetic nephropathy, a long-term
        complication of diabetes in which the kidneys are progressively damaged.
        This
        progressive damage results in diminished kidney function progressing to ESRD,
        which ultimately leads to death unless treated by dialysis and/or renal
        transplant.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">5</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        kidney consists of two anatomically and functionally distinct components
        placed
        in serial configuration. The first component is the glomerulus, which performs
        the critical filtering function of the kidney. Blood is passed through delicate
        microscopic glomerular capillary loops, which, acting as sieves, allow waste
        chemicals and excess water to pass through into the glomerular filtrate while
        retaining desirable components, such as blood cells and albumin, within the
        blood. One of the key components of the glomerular capillary filtering membrane
        is highly anionic, or negatively charged, glycosaminoglycan molecules that
        are
        similar to the chemical components of KRX-101. The glomerular filtrate, which
        is
        the precursor of what will eventually be excreted as urine, flows into the
        next
        serial component, the tubular interstitial structure. In the tubules, further
        water is extracted from the filtrate and minerals and other body chemicals
        are
        absorbed from or secreted into the filtrate. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        diabetic nephropathy, it is the delicate glomerular loops that first sustain
        damage as a result of the diabetic state. These harmful effects
        include:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                  delicate filtering membranes of the glomerular loops thicken and
                  their
                  crucial anionic glycosaminoglycan molecules are either depleted
                  or altered
                  and lose some or all of their negative charge. As the glycosaminoglycan
                  negative charge provides normal filtering selectivity to the glomerular
                  membranes, their loss of negative charge results in the release
                  of
                  protein, usually albumin, from the blood into the filtrate and
                  urine. The
                  releases of abnormal amounts of protein or albumin into the urine
                  are
                  called proteinuria and albuminuria,
                  respectively.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                  addition, hyperglycemia induced overproduction of TGF beta, a regulatory
                  protein, by the kidney induces scar formation in the area surrounding
                  the
                  glomerular capillaries. Over time, the extrinsic pressure of this
                  scar
                  tissue causes collapse of individual glomeruli, loss of functionality
                  and
                  release of albumin into the filtrate and
                  urine.</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        normally functioning kidneys, interstitial structures are not exposed to
        albumin. It is believed that the exposure of the interstitial structures
        to
        albumin ultimately leads to a potent inflammatory and scarring response
        (mediated in part by TGF beta) in the tubules, as well as in the surrounding
        interstitial tissues. This scarring results in progressive diminution in
        kidney
        function. As might be expected, increasing urinary albumin excretion closely
        parallels this drop in kidney function. In ESRD, kidney function declines
        to the
        point where dialysis or transplantation becomes necessary to sustain
        life.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-101
        belongs to a proposed new class of nephroprotective, or kidney protecting,
        drugs, known as the glycosaminoglycans. A variety of members of this chemical
        family have been shown to decrease pathological albumin excretion in diabetic
        nephropathy in humans. Some of the members of this chemical family include
        the
        following approved drugs: standard heparin, low molecular weight heparin
        and
        danaparoid. However, these agents all require therapy by injection and are
        all
        potent anticoagulants, which are blood thinners capable of inducing bleeding.
        KRX-101, on the other hand, is given orally and, in this form, has demonstrated
        little, if any, anticoagulant effects to date.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Pre-Clinical
        and Clinical Data</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Pre-Clinical
        Data</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">6</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        pre-clinical studies, glycosaminoglycan components similar or identical to
        those
        that make up KRX-101 have been evaluated using well accepted rodent models
        of
        diabetic nephropathy, in both preventive protocols where the drug was given
        at a
        time when diabetes was induced and prior to kidney damage, and treatment
        protocols, where the drug was given after diabetic kidney damage was already
        present. These glycosaminoglycans diminished the thickening of glomerular
        capillary filtering membranes, replenished the crucial anionic, or albumin
        repelling, charge, lowered urinary albumin leakage and decreased kidney
        expression of the specific scar protein collagen IV, both in the preventive
        and
        the treatment protocols, returning these parameters nearly to their normal
        levels. In addition, data demonstrated that KRX-101 suppresses the
        hyperglycemia-induced, or high glucose-induced, overproduction of TGF beta,
        one
        of the most specific inducers of kidney scarring in diabetic and other kidney
        diseases. Thus, glycosaminoglycans similar or identical to the components
        of
        KRX-101 in pre-clinical models have prevented or reversed the hallmark
&#8220;upstream&#8221; pathological abnormalities that drive the engine of progressive
        kidney dysfunction. Furthermore, data was presented at the 2005 American
        Society
        of Nephrology&#8217;s Renal Week that demonstrated that KRX-101 inhibited heparanase,
        an enzyme that is over-expressed in diabetic nephropathy patients and is
        believed to be a contributing factor to the long-term damage to the kidneys
        as a
        result of diabetes. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>European
        Clinical Data</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        have been approximately 20 studies published assessing the safety and efficacy
        of KRX-101 in humans. KRX-101 has been administered to more than 3,000 patients
        in clinical trials conducted in Europe for the treatment of certain diabetic
        and
        non-diabetic conditions and, to our knowledge, has not demonstrated any
        significant side effects at the doses tested for those uses.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">European
        researchers, with the support of a grant by Alfa Wassermann S.p.A., or Alpha
        Wasserman, the licensor of KRX-101, conducted a randomized, double-blind,
        placebo-controlled, Phase II study of the use of KRX-101 to treat diabetic
        nephropathy in 223 patients in Europe between 1996 and 1999. In this study,
        also
        known as the DiNAS study, Type I and Type II diabetics with diabetic nephropathy
        were treated daily for four months with 50, 100 and 200 milligram gelcaps
        of
        KRX-101. These patients showed substantial dose-dependent reduction in
        proteinuria or pathological urinary albumin excretion rates. In this study,
        the
        higher the dose administered daily, the greater the demonstrated decrease
        in
        albumin excretion. The DiNAS study was published in the June 2002 issue of
        the
        Journal of the American Society of Nephrology.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>U.S.-based
        Clinical Data</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
        recently completed, U.S.-based Phase II multi-center clinical trial study
        was
        conducted by the CSG. This randomized, double-blind, placebo-controlled study
        compared two doses (200mg and 400mg daily) of KRX-101 versus placebo for
        the
        treatment of diabetic nephropathy in 149 patients between 2003 and 2005.
        We
        announced the positive results of this study at the American Society of
        Nephrology&#8217;s Renal Week in November 2005. Interim positive results from this
        study had been previously announced at the National Kidney Foundation&#8217;s Spring
        Clinical Meeting in May 2005. The results of the study are presented
        below.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Design
        of the Phase II Study</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        Phase
        II study was designed as a pilot for the fully-powered pivotal Phase III
        study,
        which is currently ongoing. In this Phase II study, two doses of KRX-101
        (200 mg
        and 400 mg) were compared to placebo in patients with diabetic microalbuminuria
        on maximal therapy with an angiotensin converting enzyme inhibitor, called
        an
        ACEi, or a angiotensin receptor blocker, known as an ARB. Patients were treated
        with KRX-101 or placebo for six months and followed for an additional two
        months
        post-treatment. Patients were randomized 1:1:1, placebo, 200mg and 400mg
        of
        KRX-101, respectively. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">7</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        this
        Phase II study, the primary endpoint for the study was the percentage of
        patients achieving &#8220;Therapeutic Success&#8221; at six months. This is also the
        endpoint in the protocol for the KRX-101 Phase III clinical trial now recruiting
        patients, and which was agreed to with the FDA under a SPA. A patient is
        considered a &#8220;Therapeutic Success&#8221; if they achieve one of the following outcomes
        following the six months in the study:</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50%
                  reduction in albumin to creatinine ratio or &#8220;ACR&#8221;&#8212; ACR is a standard
                  measurement used to assess the level of kidney disease in these
                  patients.
                  ACR measures the level of albumin protein in urine, also referred
                  to as
                  &#8220;albuminuria,&#8221; or</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" id="list" width="100%">

            <tr valign="top" style="LINE-HEIGHT: 1.25">
              <td align="right" style="WIDTH: 54pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)&#160;&#160;</font></td>
              <td>
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Normalization
                  of ACR with at least a 25% reduction in ACR&#8212;in this study the normal
                  laboratory range for albuminuria was defined as less than 20mg
                  of albumin
                  to 1g of creatinine. </font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Phase
        II Data Analysis</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
        total
        of 149 patients were randomized into the study. All patients evaluable for
        Therapeutic Success at six months (i.e. all patients with a baseline ACR
        and a
        six-month ACR) were included in the Intent to Treat analysis, for a total
        of 136
        patients. All patients in the Intent to Treat population that at baseline
        were
        within the target eligibility range of microalbuminuria as defined in the
        protocol (ACR 20mg/G to 200mg/G) were included in the Per Protocol analysis,
        for
        a total population of 117 patients.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
        of
        the primary and secondary analyses shown were pre-specified. For the primary
        endpoint analysis, statistical nominal p values have been provided for
        informational purposes only since this Phase II study, as a pilot study,
        had
        less than a 20% power to show statistically significant results for these
        endpoints.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        data
        is being presented in two ways. First, the 200mg arm is compared to placebo
        because the 200mg is the dose in our Phase III and Phase IV protocols, as
        agreed
        to with the FDA under the SPA. Next, the data is presented as Active (200mg
        and
        400mg) vs. Placebo; this was the primary endpoint defined by the Phase II
        protocol. Information on the effects of the 400mg arm alone can be found
        in the
        footnotes to the tables. The dose response relationship of KRX-101 previously
        demonstrated up to 200mg was not observed from 200mg to 400mg in this study.
        </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">8</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Table
        1&#8212;Primary Endpoint Analysis (Therapeutic Success at six months) (200mg vs.
        Placebo)</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Number
                  of Patients</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(Placebo/200mg)</u></font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Placebo</u></font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>200mg
                  </u></font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>p
                  value</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Fisher&#8217;s
                  Exact Test (2-sided)</u></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Per
                  Protocol </font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">36/36</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.0%</font></div>
              </td>
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">33.0%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">P=.045</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Intent
                  to Treat </font></div>
              </td>
              <td valign="top" width="19%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">42/44</font></div>
              </td>
              <td valign="top" width="17%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.0%</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">32.0%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">P=.074</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Table
        2&#8212;Primary Endpoint Analysis (Therapeutic Success at six months) (200mg and
        400mg</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><u>(1)</u></sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
        vs.
        Placebo)</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Number
                  of Patients</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(Placebo/Active)</u></font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Placebo</u></font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Active</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><u><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(200mg
                  and 400mg</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font><font style="DISPLAY: inline; FONT-SIZE: 7pt; FONT-FAMILY: Times New Roman, serif"><sup>1</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></u></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>p
                  value</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Fisher&#8217;s
                  Exact Test (2-sided)</u></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Per
                  Protocol</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">36/81</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11%</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">25%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">P=.136</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Intent
                  to Treat</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">42/94</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14%</font></div>
              </td>
              <td valign="top" width="18%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">26%</font></div>
              </td>
              <td valign="top" width="13%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">P=.180</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>_____________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1
        For the
        400mg group alone, the Therapeutic Success was 18% on a per protocol basis
        and
        20% on intent to treat basis.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Table
        3&#8212;Secondary Endpoint Analysis at Six months (Intent to Treat)</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="25%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Placebo</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>n=42</u></font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>200mg</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>n=44</u></font></div>
              </td>
              <td valign="top" width="24%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Active</u></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><u><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(200mg
                  and 400mg</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>1</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
                  </font></u></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>n=94</u></font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="top" width="25%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&gt;50
                  % reduction in ACR</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.0%</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">27.0%</font></div>
              </td>
              <td valign="top" width="24%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22.0%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="25%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Normalization
                  of ACR</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.0%</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23.0%</font></div>
              </td>
              <td valign="top" width="24%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">17.0%</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>_____________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1
        For the
        400mg group alone, the 50% reduction and normalization were 18% and 10%,
        respectively.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Table
        4&#8212;Average Changes of ACR Over Time (Intent to Treat)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup><u>1</u></sup></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="justify" valign="top" width="23%" style="BORDER-BOTTOM: black thin solid">&#160;</td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200mg
                  vs. Placebo</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Placebo
                  vs. Baseline</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">200mg
                  vs. Baseline</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="23%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Two
                  months</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-17.00%</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-4.0%</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-21.00%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="justify" valign="top" width="23%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Four
                  months</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-25.78%</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.5%</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-18.28%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="justify" valign="top" width="23%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Six
                  months</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-28.03%</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.57%</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-15.46%</font></div>
              </td>
            </tr>
            <tr bgcolor="#ffffff">
              <td align="left" valign="top" width="23%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Eight
                  months </font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Two
                  months off therapy)</font></div>
              </td>
              <td valign="top" width="14%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-28.98%</font></div>
              </td>
              <td valign="top" width="16%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">18.5%</font></div>
              </td>
              <td valign="top" width="15%" style="BORDER-BOTTOM: black thin solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-10.48%</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>_____________</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1
        The
        average changes from baseline over time for the 400mg dose group were 3.4%,
        3.24%, 5.59% and 12.59%, respectively. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
        were no serious adverse events, or SAEs, that were deemed by the investigators
        to be related, probably related or possibly related to the study drug. A
        full
        analysis of the safety database will be conducted in the coming
        months.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">9</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Development
        Status </em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        June
        2000, we filed an investigational new drug application, or IND, with the
        FDA for
        permission to conduct a clinical trial for the treatment of patients with
        diabetic nephropathy. In 2001, KRX-101 was granted Fast-Track designation
        for
        the treatment of diabetic nephropathy, and, in 2002, we announced that the
        FDA
        had agreed, in principle, to permit us to avail ourselves of the accelerated
        approval process under subpart H of the FDA&#8217;s regulations governing applications
        for the approval to market a new drug. Generally, subpart H allows for the
        use
        of surrogate endpoints in Phase III trials to support the approval of an
        NDA
        with confirmatory studies completed post-approval, and could greatly reduce
        the
        development time to market.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        the
        fourth quarter of 2003, we initiated the Phase II portion of our Phase II/III
        clinical program for KRX-101, and in the third quarter of 2004, we completed
        the
        target enrollment for the Phase II portion of the clinical program.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        January 2005, we announced that the CSG recommended that we proceed to the
        Phase
        III portion of our Phase II/III clinical program of KRX-101. This recommendation
        was based on the completion, by an independent Data Safety Monitoring Committee,
        or DSMC, on January 4, 2005, of a safety evaluation of the first interim
        analysis from the 149 patient, randomized, double-blind, placebo-controlled
        Phase II clinical trial of KRX-101 discussed above, and an efficacy assessment
        of the same data set conducted by the CSG. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        March
        2005, we announced that we had finalized a SPA agreement with the FDA for
        the
        Phase III and Phase IV clinical trials of KRX-101. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        June
        2005, we announced the initiation of our pivotal Phase III and Phase IV clinical
        program for KRX-101. We are conducting both of these trials under our SPA
        with
        the FDA. This clinical plan consists of: a single Phase III trial in patients
        with microalbuminuria based on the surrogate marker of regression of
        microalbuminuria as the primary endpoint; supportive data from previously
        conducted clinical studies; and substantial recruitment into our Phase IV
        confirmatory study that will measure clinical outcomes in patients with overt
        nephropathy, or macroalbuminuria. The Phase III portion of the program is
        a
        randomized, double-blind, placebo-controlled study comparing a 200 milligram
        daily dose of KRX-101 versus a placebo in patients with persistent
        microalbuminuria. The Phase IV portion of the program is a randomized,
        double-blind, placebo-controlled study comparing a 200 milligram daily dose
        of
        KRX-101 versus a placebo in patients with persistent macroalbuminuria. The
        CSG
        is conducting the pivotal Phase III and Phase IV clinical program of KRX-101
        for
        the treatment of diabetic nephropathy.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        November 2005, we announced positive final results from our Phase II study
        of
        KRX-101 for diabetic nephropathy at the American Society of Nephrology&#8217;s Renal
        Week. As discussed in detail above, the Phase II study compared two oral
        doses
        of KRX-101, 200 and 400 milligrams, versus a placebo in patients with diabetic
        microalbuminuria who were receiving an ACE inhibitor or ARB. In this study,
        patients were treated with KRX-101 or a placebo for six months and were
        monitored for an additional two months post-treatment. The primary endpoint
        for
        the study was &#8220;therapeutic success&#8221; of the two dose levels combined versus a
        placebo at six months. Therapeutic success was a binary composite endpoint
        defined as: conversion from microalbuminuria to normoalbuminuria (with at
        least
        a 25% reduction in microalbuminuria) as measured by the ACR; or at least
        a 50%
        reduction in the ACR level relative to baseline. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>KRX-0401</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Overview</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        are
        also developing KRX-0401 (perifosine), which is a novel, first-in-class,
        oral
        anti-cancer agent that modulates Akt, a protein in the body associated with
        tumor survival and growth, and a number of other key signal transduction
        pathways, including the JNK and MAPK pathways, which are pathways associated
        with programmed cell death, cell growth, cell differentiation and cell
        survival.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
        compound has demonstrated preliminary single agent anti-tumor activity and
        is
        currently in a Phase II clinical program where it is being studied both as
        a
        single agent and in combination with other anti-cancer treatments for multiple
        forms of cancer. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-0401
        is the prototype of a new group of anti-cancer drugs referred to as
        alkylphosphocholines that block proliferation and induce the apoptosis of
        cancer
        cells. This effect is relatively specific for cancer cells compared to normal
        cells. The mechanism of action for these drugs is not clear. They are known
        to
        modulate signaling in a number of pathways known to function abnormally during
        the development of cancer. One of the pathways inhibited by the
        alkylphosphocholines is Akt, a pathway associated with tumor survival and
        growth. Akt is considered to be one of the most important cancer targets
        being
        researched today.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        September 2002, ACCESS Oncology, which we acquired in February 2004, entered
        into an exclusive commercial license agreement with Zentaris AG, a wholly
        owned
        subsidiary of AEterna Zentaris Inc., to acquire a license to a series of
        U.S.
        and foreign patents and patent applications relating to the composition of
        matter and use of KRX-0401 in the treatment of cancer and other conditions.
        This
        license agreement covers the United States, Canada and Mexico.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Pre-Clinical
        and Clinical Data</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        vitro,
        KRX-0401 inhibits the growth of a variety of human tumor cell lines and has
        substantial activity in vivo against a number of murine tumor models and
        human
        xenografts. In model systems the drug appears to be synergistic with
        radiotherapy and additive or synergistic with cytotoxics such as cisplatin,
        adriamycin, and cyclophosphamide. In these experiments, the combination regimens
        were superior to chemotherapy alone and were well tolerated. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-clinical
        studies presented at the American Society of Hematology Annual Meeting in
        December 2005 demonstrated KRX-0401&#8217;s potential utility in the treatment of
        multiple myeloma and possibly other forms of hematological tumors. These
        studies
        demonstrated that KRX-0401 has activity in a variety of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
        vitro</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
        vivo</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        multiple
        myeloma models and is synergistic with a number of agents used in the treatment
        of multiple myeloma including bortezomib (Velcade&#174;) and dexamethasone.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Six
        Phase
        I studies of KRX-0401 have been completed, three in Europe by Zentaris and
        three
        in the U.S. by the National Cancer Institute, or NCI, a department of the
        National Institutes of Health, or NIH, as part of a Cooperative Research
        and
        Development Agreement, or CRADA, and by the Company. These trials demonstrated
        that KRX-0401 can be safely given to humans with an acceptable toxicity profile
        and no observed myelosuppression, or bone marrow suppression. The dose limiting
        toxicity in the Phase I studies was gastrointestinal: nausea, vomiting and
        diarrhea. In addition, some patients experienced fatigue, especially with
        prolonged administration. In these Phase I studies, there was single agent
        activity as evidenced by two durable partial responses (one of which lasted
        more
        than six months and the other more than 18 months) out of 10 patients with
        previously treated, evaluable soft tissue sarcomas, a tumor type relatively
        unresponsive to chemotherapy. In addition 21 patients were considered by
        the
        investigators to have had disease stabilization for two or more months,
        including patients with sarcomas (2), prostate cancer (3), non-small cell
        lung
        cancer (2), breast cancer (2), colon cancer (2), melanoma (2), renal cancer
        (2),
        ovarian cancer (1), salivary gland cancer (1), mesothelioma (2) and hepatoma
        (2). The meaning of disease stabilization in an individual patient in a Phase
        I
        study is difficult to assess because the time to progression is variable
        and may
        give a false impression of stabilization in individual patients. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        NCI
        has completed a number Phase II clinical trials studying KRX-0401 as a single
        agent, including studies in prostate, breast, head and neck and pancreatic
        cancers, as well as melanoma and sarcomas. In total, nine NCI clinical trials
        have been conducted across the six tumor types mentioned. The NCI and its
        collaborators have presented and/or published data from seven of their Phase
        II
        studies, including from Phase II studies involving prostate (2), sarcoma,
        head
        and neck, melanoma, pancreas and breast cancers. Findings from these studies
        led
        the investigators to conclude that the drug was safe and well-tolerated at
        the
        Phase II dose utilized. The studies used dosing schedules in which a large
        &#8220;bolus&#8221; dose was given on day one or once every 28 days followed by daily doses
        either continuously or on days two to 21 of a four-week cycle. Bolus doses
        ranged from 300 mg to 900 mg followed by daily doses of 100 - 150 mg. These
        studies confirm the safety profile of the bolus plus daily regimens, which
        had
        limited grade 3 and no grade 4 gastrointestinal toxicity, the dose limiting
        toxicity in most of the Phase I trials. However, studies using a single bolus
        dose of 600 mg to 900 mg on day one and continuous daily KRX-0401 at a dose
        of
        100 mg per day appeared to be better tolerated than studies that used 150
        mg per
        day on days two to 21 in each four-week cycle. In the one published Phase
        II
        sarcoma study, the investigators reported a partial response (greater than
        50%
        decrease in tumor mass) as well as several disease stabilizations. With the
        responses seen in the Phase I trials, there are now three sarcoma patients
        with
        durable partial responses. This has led us to consider exploring additional
        studies in sarcoma. On the Phase II breast cancer study, the investigators
        scored three of 15 evaluable patients as having stable disease. One of these
        patients had measurable tumor regression which failed to reach the level
        of a
        partial response by the time the patient elected to withdraw from the study
        because of gastrointestinal toxicity. The breast cancer trial utilized the
        more
        toxic of the regimens employed in these NCI Phase II studies. In the melanoma
        trial published by the National Cancer Institute of Canada, one patient with
        a
        primary mucosal melanoma of the vagina and inguinal adenopathy had a 50%
        reduction in the size of the palpable nodes after 4 cycles but developed
        new
        disease after cycle 5. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
        May
        2005, we announced that Phase II data presented at the annual meeting of
        the
        American Society of Clinical Oncology in Orlando, Florida demonstrated the
        tolerability and potential efficacy of KRX-0401 in the treatment of patients
        with biochemically recurrent hormone-sensitive prostate cancer, or HSPC.
        The
        investigators concluded that KRX-0401 in the treatment of HSPC patients is
        feasible, well-tolerated and has been shown to reduce prostate-specific antigen,
        or PSA, levels in some patients. Because of its inhibitory effects on the
        Akt
        and related pathways, we believe that further studies of KRX-0401 in combination
        with androgen ablation and chemotherapy are warranted. In a second study
        published by investigators at the NCI, there were no radiographic responses
        or&#160;PSA declines of 50% or greater related to KRX-0401, but four patients
        had stable PSA values for 12 weeks or longer. Eleven of 14 patients, or 78%,
        in
        whom circulating tumor cells were measured pre- and post-treatment, showed
        a
        decreased number of circulating tumor cells after treatment.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Development
        Status</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        the second quarter of 2004, we announced the initiation of a Phase II program
        utilizing KRX-0401 as a single agent and in combination with a number of
        standard anti-cancer therapies in multiple tumor types. To date, we have
        initiated a number of trials under this program, including single agent studies
        in lung cancer and sarcoma, and combination studies with a number of standard
        anti-cancer treatments, such as gemcitabine, paclitaxel, docetaxel, Herceptin&#174;
        and endocrine therapy. We have also initiated an &#8220;all-comers&#8221; Phase II clinical
        trial evaluating KRX-0401 as a single-agent, administered either weekly or
        daily
        in a variety of tumor types. We plan to commence additional Phase II trials
        in
        2006. </font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        ultimate clinical timeline, and consequent cost, for further development
        of
        KRX-0401 will depend, in part, on the successful completion of our Phase
        II
        trials, and ultimate approval by the FDA.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ADDITIONAL
        PRODUCT CANDIDATES </strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>KRX-0402</em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-0402
        (O6-benzyl guanine or O6-BG) is a small molecule that was specifically designed
        to block the repair protein, AGT. AGT confers resistance to 06-alkylating
        agents, such as temozolomide and BCNU, that are commonly used to treat brain
        cancer, melanoma and non-Hodgkin&#8217;s lymphoma. Recent research has shown that
        KRX-0402 can also potentiate the activity of other alkylating agents, such
        as
        cisplatinum and carboplatinum, through an as of yet unconfirmed mechanism.
        These
        drugs are some of the most widely used chemotherapy drugs and are commonly
        used
        to treat breast cancer, non-small cell lung cancer and ovarian cancer.
        Accordingly, we believe that KRX-0402 may have an important role in making
        cells
        more susceptible to the damaging effects of alkylating agents, and that KRX-0402
        may have utility in the treatment of multiple forms of cancer. KRX-0402 is
        usually administered intravenously. To date, approximately 400 patients have
        received KRX-0402 in multiple clinical studies. Dose limiting toxicity for
        KRX-0402 in combination with chemotherapy was bone marrow suppression. KRX-0402
        alone has no identified dose limiting toxicity. Currently, we have plans
        to
        conduct additional company-sponsored clinical trials for KRX-0402. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>KRX-0403
        </em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
        2005, we terminated development of KRX-0403.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>KRX-0404
        </em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-0404,
        currently in pre-clinical development, is an alkylphosphocholine, but, in
        contrast to KRX-0401, it is suitable for intravenous
        administration.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>KRX-0501
        </em></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-0501,
        currently in pre-clinical development, is an orally available small molecule
        in
        pre-clinical development with the potential to treat neurological disorders
        via
        its unique ability to enhance nerve growth factor, a naturally occurring
        protein
        which is essential in the development and survival of certain sympathetic
        and
        sensory neurons in both the central and peripheral nervous systems.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>COSTS
        AND TIME TO COMPLETE PRODUCT DEVELOPMENT</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
        information below provides estimates regarding the costs associated with
        the
        completion of the current development phase and our current estimated range
        of
        the time that will be necessary to complete that development phase for KRX-101.
        We also have provided information with respect to our other drug candidates.
        We
        also direct your attention to the risk factors which could significantly
        affect
        our ability to meet these cost and time estimates found in this report in
        Item
        1A under the heading &#8220;Risk Factors Associated with Our Product Development
        Efforts.&#8221;</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-101
        is currently in Phase III and Phase IV clinical trials. We estimate that
        the
        cost to complete the Phase III will be approximately $20 million to $30 million
        and we believe that the Phase III will be completed in 2007. </font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
        respect to KRX-0401 and KRX-0402, we are unable to estimate the cost to complete
        the current phase of each drug and also unable to project a time for the
        completion of the current phase. Each of KRX-0401 and KRX-0402 are in Phase
        II
        studies. Phase II clinical trials are highly unpredictable and their length
        and
        results will vary based on patient enrollment, response rates in the trials,
        and
        the potential need for additional trials or increases in patients included,
        among other factors. Due to the nature of a Phase II and our inability to
        predict the results of such studies, we cannot estimate when such a program
        will
        end, and it is equally difficult to project the cost to complete such
        phase.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">KRX-0404
        and KRX-0501 are currently pre-clinical drug candidates. The timing and results
        of pre-clinical studies are highly unpredictable. Due to the nature of
        pre-clinical studies and our inability to predict the results of such studies,
        we cannot estimate when such pre-clinical development will end, and it is
        equally difficult to project the cost to complete such development.
</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Revised
        Disclosure for the &#8220;Risk Factors&#8221; portion of the Business section of the
        Company&#8217;s annual report on Form 10-K (Item 1A):</u></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Risk
        Factors Associated with Our Product Development
        Efforts</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>If
        we
        are unable to successfully complete our clinical trial programs, or if such
        clinical trials take longer to complete than we project, our ability to execute
        our current business strategy will be adversely affected.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Whether
        or not and how quickly we complete clinical trials is dependent in part upon
        the
        rate at which we are able to engage clinical trial sites and, thereafter,
        the
        rate of enrollment of patients. Patient enrollment is a function of many
        factors, including the size of the patient population, the proximity of patients
        to clinical sites, the eligibility criteria for the study, the existence
        of
        competitive clinical trials, and whether existing or new drugs are approved
        for
        the indication we are studying. We are aware that other companies are planning
        clinical trials that will seek to enroll patients with the same diseases
        as we
        are studying. In addition, one of our current trials for KRX-101 is designed
        to
        continue until a pre-specified number of events have occurred to the patients
        enrolled. Trials such as this are subject to delays stemming from patient
        withdrawal and from lower than expected event rates and may also incur increased
        costs if enrollment is increased in order to achieve the desired number of
        events. If we experience delays in identifying and contracting with sites
        and/or
        in patient enrollment in our clinical trial programs, we may incur additional
        costs and delays in our development programs, and may not be able to complete
        our clinical trials on a cost-effective basis.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">14</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
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          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additionally,
        we have finalized with the FDA our SPA regarding a subpart H clinical
        development plan for the clinical development of KRX-101 for diabetic
        nephropathy. This clinical plan consists of: a single Phase III trial in
        patients with microalbuminuria based on the surrogate marker of regression
        of
        microalbuminuria as the primary endpoint; supportive data from previously
        conducted clinical studies; and substantial recruitment into our Phase IV
        confirmatory study that will measure clinical outcomes in patients with overt
        nephropathy, or macroalbuminuria, before filing a NDA with the FDA. The subpart
        H process is complex and requires careful execution and no assurance can
        be
        given that we will be able to meet the requirements set forth in the SPA.
        Even
        if we meet those requirements, the FDA is not obligated to grant approval
        of our
        NDA for KRX-101. If the FDA approves KRX-101 for marketing on the basis of
        our
        SPA, our Phase IV clinical trial may yield insufficient efficacy data or
        give
        rise to safety concerns, which could result in withdrawal of such approval
        or
        could cause us to withdraw the product from the market. Many companies who
        have
        been granted the right to utilize an accelerated approval approach have failed
        to obtain approval. Moreover, negative or inconclusive results from the clinical
        trials we hope to conduct or adverse medical events could cause us to have
        to
        repeat or terminate the clinical trials. Accordingly, we may not be able
        to
        complete the clinical trials within an acceptable time frame, if at
        all.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>If
        Our Drug Candidates Do Not Receive The Necessary Regulatory Approvals, We
        Will
        Be Unable To Commercialize Our Drug Candidates.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        have
        not received, and may never receive, regulatory approval for the commercial
        sale
        of any of our drug candidates. We will need to conduct significant additional
        research and human testing before we can apply for product approval with
        the FDA
        or with regulatory authorities of other countries. Pre-clinical testing and
        clinical development are long, expensive and uncertain processes. Satisfaction
        of regulatory requirements typically depends on the nature, complexity and
        novelty of the product and requires the expenditure of substantial resources.
        Data obtained from pre-clinical and clinical tests can be interpreted in
        different ways, which could delay, limit or prevent regulatory approval.
        It may
        take us many years to complete the testing of our drug candidates and failure
        can occur at any stage of this process. Negative or inconclusive results
        or
        medical events during a clinical trial could cause us to delay or terminate
        our
        development efforts.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Furthermore,
        interim results of preclinical or clinical studies do not necessarily predict
        their final results, and acceptable results in early studies might not be
        obtained in later studies. Drug candidates in the later stages of clinical
        development may fail to show the desired safety and efficacy traits despite
        having progressed through initial clinical testing. There can be no assurance
        that the results from the Phase III study will track the data from the Phase
        II
        study, or that the results from the Phase IV study will yield sufficient
        efficacy data. Moreover, the recommendation to move into our pivotal program,
        as
        well as the announced Phase II data, may not be indicative of results from
        future clinical trials and the risk remains that the pivotal program for
        KRX-101
        may generate efficacy data that will be insufficient for the approval of
        the
        drug, or may raise safety concerns that may prevent approval of the
        drug.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Clinical
        trials also have a high risk of failure. A number of companies in the
        pharmaceutical industry, including biotechnology companies, have suffered
        significant setbacks in advanced clinical trials, even after achieving promising
        results in earlier trials. If we experience delays in the testing or approval
        process or if we need to perform more or larger clinical trials than originally
        planned, our financial results and the commercial prospects for our drug
        candidates may be materially impaired. In addition, we have limited experience
        in conducting and managing the clinical trials necessary to obtain regulatory
        approval in the United States and abroad and, accordingly, may encounter
        unforeseen problems and delays in the approval process.</font></div>
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Because
        All Of Our Proprietary Technologies Are Licensed To Us By Third Parties,
        Termination Of These License Agreements Would Prevent Us From Developing
        Our
        Drug Candidates.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 54pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        do not
        own any of our drug candidates. We have licensed the patent rights to these
        drugs candidates from others. These license agreements require us to meet
        development or financing milestones and impose development and commercialization
        due diligence requirements on us. In addition, under these agreements, we
        must
        pay royalties on sales of products resulting from licensed technologies and
        pay
        the patent filing, prosecution and maintenance costs related to the licenses.
        If
        we do not meet our obligations in a timely manner or if we otherwise breach
        the
        terms of our license agreements, our licensors could terminate the agreements,
        and we would lose the rights to our drug candidates.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
        Rely On Third Parties To Manufacture Our Products. If These Third Parties
        Do Not
        Successfully Manufacture Our Products, Our Business Will Be
        Harmed.</em></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        have
        no experience in manufacturing products for clinical or commercial purposes
        and
        do not have any manufacturing facilities. We intend to continue, in whole
        or in
        part, to use third parties to manufacture our products for use in clinical
        trials and for future sales. We may not be able to enter into future third-party
        contract manufacturing agreements on acceptable terms to us, if at
        all.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Contract
        manufacturers often encounter difficulties in scaling up production, including
        problems involving production yields, quality control and assurance, shortage
        of
        qualified personnel, compliance with FDA and foreign regulations, production
        costs and development of advanced manufacturing techniques and process controls.
        Our third-party manufacturers may not perform as agreed or may not remain
        in the
        contract manufacturing business for the time required by us to successfully
        produce and market our drug candidates. In addition, our contract manufacturers
        will be subject to ongoing periodic, unannounced inspections by the FDA and
        corresponding foreign governmental agencies to ensure strict compliance with,
        among other things, current good manufacturing practices, in addition to
        other
        governmental regulations and corresponding foreign standards. We will not
        have
        control over, other than by contract, third-party manufacturers' compliance
        with
        these regulations and standards. Switching or engaging multiple manufacturers
        may be difficult because the number of potential manufacturers is limited
        and,
        particularly in the case of KRX-101, the process by which multiple manufacturers
        make the drug substance must be identical at each manufacturing facility.
        It may
        be difficult for us to find and engage replacement or multiple manufacturers
        quickly and on terms acceptable to us, if at all. Moreover, if we need to
        change
        manufacturers, the FDA and corresponding foreign regulatory agencies must
        approve these manufacturers in advance, which will involve testing and
        additional inspections to ensure compliance with FDA and foreign regulations
        and
        standards.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
        third-party manufacturers fail to deliver the required quantities of our
        drug
        candidates on a timely basis and at commercially reasonable prices, we will
        not
        be able to commercialize our products as planned.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
        have
        entered into a relationship with a U.S.-based contract manufacturer for KRX-101
        which we believe will be adequate to satisfy our current clinical and initial
        commercial supply needs; however, as we </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strike>s</strike></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cale-up
        for commercial manufacturing, we will need to ensure that the manufacturing
        process matches the established process on a larger scale. As with all
        heparin-like compounds, the end product is highly sensitive to the manufacturing
        process utilized. Accordingly, as we scale-up, reproducibility will be required
        for the successful commercialization of KRX-101. There can be no assurance
        that
        we will be successful in this endeavor. Additionally, as we scale-up, we
        will
        incur capital expenditures to enable larger scale production.</font></div>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURES</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="justify"><br></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 14.4pt" align="justify"><br></div>
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              <tr valign="top" bgcolor="#ffffff">
                <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
                <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
                <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              </tr>
              <tr valign="top" bgcolor="#ffffff">
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
                <td colspan="2">
                  <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Keryx
                    Biopharmaceuticals, Inc.</strong></font></div>
                  <div><font size="2">(Registrant)</font></div>
                </td>
              </tr>
              <tr valign="top" bgcolor="#ffffff">
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<br>&#160;</font></td>
              </tr>
              <tr valign="top" bgcolor="#ffffff">
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:&#160;December
                  30, 2005<font id="TAB2" style="COLOR: black; LETTER-SPACING: 148.5pt" size="3">&#160;</font></font></td>
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>By:</strong>&#160;&#160;</font></td>
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;/s/
                  Ron Bentsur</font></td>
              </tr>
              <tr valign="top" bgcolor="#ffffff">
                <td colspan="2"><font style="FONT-FAMILY: Times New Roman" size="1">&#160;</font></td>
                <td align="left">
                  <hr style="COLOR: #000000" align="left" noshade size="2" width="80%"><strong><font size="2">Ron
                  Bentsur</font></strong></td>
              </tr>
              <tr valign="top" bgcolor="#ffffff">
                <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
                <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Vice
                  President, Finance and Investor
                  Relations</strong></font></td>
              </tr>

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{"company-data": {"conformed-name": "KERYX BIOPHARMACEUTICALS INC", "cik": "0001114220", "assigned-sic": "2834", "irs-number": "134087132", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-30929", "film-number": "051295057"}, "business-address": {"street1": "750 LEXINGTON AVENUE", "street2": ".", "city": "NEW YORK", "state": "NY", "zip": "10022", "phone": "212-531-5965"}}
Unassociated Document
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): December 27, 2005
Keryx
        Biopharmaceuticals, Inc.
(Exact
        Name of Registrant as Specified in Charter)
Delaware
(State
                  or Other Jurisdiction
of
                  Incorporation)
000-30929
(Commission
                  File Number)
13-4087132
(IRS
                  Employer Identification No.)
750
        Lexington Avenue
New
        York, New York 10022
(Address
        of Principal Executive Offices)
(212)
        531-5965
(Registrant's
        telephone number, including area code)
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:
£
Written
                  communications pursuant to Rule 425 under the Securities
                  Act.
£
Soliciting
                  material pursuant to Rule 14a-12 under the Exchange
                  Act.
£
Pre-commencement
                  communications pursuant to Rule 14d-2b under the Exchange
                  Act.
£
Pre-commencement
                  communications pursuant to Rule 13e-4(c) under the Exchange
                  Act.
Item
        1.01.
Entry
        into a Material Definitive Agreement.
On
        December 27, 2005, the Compensation Committee of the Board of Directors of
        Keryx
        Biopharmaceuticals, Inc. (the "Company") approved base salaries for fiscal 2006
        for each named executive officer. The table below indicates each named executive
        officer's base salary for fiscal 2006:
Executive
                  officer
Base
                  salary for
2006
Michael
                  S. Weiss, Chairman and Chief Executive Officer
$
375,000
I.
                  Craig Henderson, President
$
300,000
Ron
                  Bentsur, Vice President, Finance and Investor Relations
$
225,000
(1)
_____________
(1)
        As
        previously announced, Mr. Bentsur has accepted the position of Chief Executive
        Officer of XTL Biopharmaceuticals, Ltd. He will remain as Vice President,
        Finance and Investor Relations of the Company until a successor is named.
        As a
        result, his base salary will be prorated in accordance with the amount of
        time
        he dedicates to his position at the Company.
Item
        8.01.
Other
        Events.
(a)
Rule
          10b5-1 Plan
On
          December 30, 2005, Michael S. Weiss, Chairman and Chief Executive Officer
          of the
          Company, adopted a Rule 10b5-1 trading plan (the "Plan") with a brokerage firm
          to exercise stock options issued to Mr. Weiss pursuant to his employment
          agreement and the Company's stock option plans and to sell the common stock
          underlying such options. Mr. Weiss entered into the Plan to facilitate
          the
          exercise of stock options and as part of his personal long-term investment
          strategy for asset diversification and liquidity. Mr. Weiss will have no
          control
          over the timing of the option exercises or stock sales under the
          Plan.
Pursuant
          to the Plan, the brokerage firm may exercise employee stock options of
          up to
          1,000,000 shares of common stock (representing approximately 15% of Mr.
          Weiss's
          holdings) beginning in February 2006. The Plan is scheduled to terminate
          in
          February 2008, whether or not the total number of shares is sold. The stock
          options will be exercised monthly and the shares of common stock will be
          sold on
          a monthly basis pursuant to the following formula:
Share
                    price on date of sale
Number
                    of shares to be sold in month
$0
                    - $7.49
0
$7.50
                    - $12.49
10,000
$12.50
                    - $17.49
40,000
$17.50
                    - $22.49
80,000
Equal
                    to or greater than $22.50
120,000
Any
          transactions under the Plan will be reported by Mr. Weiss through Form
          4 filings
          with the Securities and Exchange Commission (the "SEC"). The Plan is intended
          to
          comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended
          (the
          "Exchange Act"), and the Company's insider trading policy.
(b)
Annual Report for the year ended December 31, 2004 on Form
                  10-K
As
        part
        of
the
        the
        SEC's regular review of reports filed under the Exchange Act,
the
        SEC
        requested that the Company revise the disclosure provided in its annual report
        on Form 10-K regarding the Company's significant assumptions used in valuing
        in-process research and development and the estimated costs and time to complete
        the current stage of the Company's products under development.
The
        Company and the SEC agreed that such disclosure would be made in the Company's
        annual report on a going forward basis and that the Company would also file
        the
        disclosure on a Form 8-K to make the revised disclosure immediately available
        to
        investors. References to the relevant section of Form 10-K have been made
        for
        each disclosure item for the reader's convenience.
2
Revised
          Disclosure for the "Critical Accounting Policies" portion of the Management's
          Discussion and Analysis of Financial Condition and Results of Operations
          section
          of the Company's annual report on Form 10-K (Item 7):
Accounting
          Related to the Valuation of Acquired In-Process Research and
          Development.
As
          required by Financial Accounting Standards Board Interpretation No. 4,
          "Applicability of Financial Accounting Standards Board Statement No. 2 to
          Business Combinations Accounted for by the Purchase Method," or FIN 4,
          we
          recorded a charge of $18,800,000 for the estimate of the portion of the
          ACCESS
          Oncology, Inc., or ACCESS Oncology, purchase price allocated to acquired
          in-process research and development.
A
          project-by-project valuation using the guidance in Statement of Financial
          Accounting Standards No. 141, "Business Combinations" and the AICPA Practice Aid
"Assets Acquired in a Business Combination to Be Used In Research and
          Development Activities: A Focus on Software, Electronic Devices and
          Pharmaceutical Industries" was performed with the assistance of independent
          valuation specialists to determine the fair value of research and development
          projects of ACCESS Oncology which were in-process, but not yet
          completed.
The
        fair
        value was determined using the income approach on a project-by-project basis.
        This method starts with a forecast of the expected future net cash flows.
        These
        cash flows are then adjusted to present value by applying an appropriate
        discount rate that reflects the project's stage of completion and
other
        risk factors. These other risk factors can include the nature of the product,
        the scientific data associated with the technology, the current patent situation
        and market competition.
The
        forecast of future cash flows required the following assumptions to be
        made:
·
revenue
                  that is likely to result from specific in-process research and
                  development
                  projects, including estimated patient populations, estimated selling
                  prices, estimated market penetration and estimated market share
                  and
                  year-over-year growth rates over the product life
                  cycles;
·
cost
                  of sales related to the potential products using industry data
                  or other
                  sources of market data;
·
sales
                  and marketing expense using industry data or other market
                  data;
·
general
                  and administrative expenses; and
·
research
                  and development expenses.
The
        valuations are based on information that was available as of the acquisition
        date and the expectations and assumptions deemed reasonable by our management.
        No assurance can be given, however, that the underlying assumptions or events
        associated with such assets will occur as projected. For example, the following
        changes in our assumptions would have yielded the indicated change in the
        total
        amount of the acquired in-process research and development charge:
·
if
                  the growth rate regarding the revenue assumptions for the three
                  drugs
                  under development and included in the assumptions on future cash
                  flows
                  were increased by 10%, the result on the aggregate amount of the
                  charge
                  would have been approximately $4,500,000, yielding a total charge
                  of
                  approximately $23,300,000, or if the growth rate were decreased
                  by 5%, the
                  result on the aggregate amount of the charge would have been approximately
                  $2,200,000, yielding a total charge of approximately
                  $16,600,000;
·
if
                  the discount rate used to bring the estimated future cash flows
                  to a
                  present value amount (which was based on a 55% rate) were reduced
                  by 10%,
                  the total charge would have increased to approximately $33,000,000,
                  and if
                  the discount rate were increased by 10%, the total charge would
                  have
                  decreased to approximately $11,000,000.
Additionally,
        if it was assumed that the research and development activity of the least
        developed of the three drugs under development acquired with ACCESS Oncology
        was
        going to be terminated for any reason and had no alternative future use,
        including inconclusive clinical results, the amount of the in-process research
        and development charge would have been reduced, possibly creating
        a
        situation where the Company would have recognized goodwill.
In
        each
        of the above scenarios, the change in the in-process research and development
        charge would have required an equal change in contingent equity rights, or
        if a
        significant decrease, goodwill would have been recorded.  Contingent
        equity
        rights represent the lesser of negative goodwill and the maximum value of
        the
        contingent consideration at the date of the acquisition.  Changes
        in the
        acquired in-process research and development charge do not change the amount
        or
        the value of the contingent consideration that could ultimately be paid.
3
Additional
        Disclosure for the "Overview" portion of the Management's Discussion and
        Analysis of Financial Condition and Results of Operations section of the
        Company's annual report on Form 10-K (Item 7):
Research
        and development expenses consist primarily of salaries and related personnel
        costs, fees paid to consultants and outside service providers for clinical
        and
        laboratory development, facilities-related and other expenses relating to
        the
        design, development, testing, and enhancement of our product candidates and
        technologies, as well as expenses related to in-licensing of new product
        candidates. We expense our research and development costs as they are incurred.
        Other research and development expenses, which excludes non-cash compensation
        and acquired in-process research and development expenses, for the years
        ended
        December 31, 2004, 2003 and 2002 were $9,805,000, $5,996,000 and $9,523,000,
        respectively.
The
        following table sets forth the other research and development expenses per
        project for the periods presented.
Years
                  ended December 31,
2004
2003
2002
Cumulative,
as
                  of
December
                  31, 2004
KRX-101
$
6,064,000
$
2,074,000
$
2,215,000
$
14,204,000
KRX-0401
2,230,000
N/A
N/A
2,230,000
Other
                  clinical stage oncology compounds
623,000
N/A
N/A
623,000
Other
888,000
3,922,000
7,308,000
22,655,000
Total
$
9,805,000
$
5,996,000
$
9,523,000
$
39,712,000
Revised
        Disclosure for the "Products Under Development" portion of the Business section
        of the Company's annual report on Form 10-K (Item 1):
PRODUCTS
        UNDER DEVELOPMENT
KRX-101
Overview
Our
        lead
        compound under development is KRX-101 (sulodexide). We own the exclusive
        rights
        to use KRX-101 for the treatment of diabetic nephropathy in North America,
        Japan
        and certain other markets outside of Europe. Diabetic nephropathy is a long-term
        complication of diabetes in which the kidneys are progressively damaged.
        KRX-101, our lead drug candidate, is a glycosaminoglycan compound with
        structural similarities to the broad family of marketed heparins and low
        molecular weight heparins. Specifically, KRX-101 is comprised of heparan
        sulfate, also referred to as fast-moving heparin, dermatan sulfate and
        slow-moving heparin. This drug has been marketed in a number of European,
        Asian
        and South American countries for many years by our licensor for certain
        cardiovascular conditions and has a well established safety profile at the
        doses
        used for such indications. Additionally, it has been demonstrated in multiple
        clinical trials conducted in Europe and the U.S., including two randomized,
        double-blind, placebo-controlled Phase II studies, that KRX-101 can reduce
        urinary protein excretion in patients with diabetic nephropathy. KRX-101
        is in a
        pivotal Phase III and Phase IV clinical program under a Special Protocol
        Assessment, or SPA, with the Food & Drug Administration, or FDA. These
        trials are being conducted by the Collaborative Study Group, or the CSG,
        the
        world's largest standing renal clinical trial group.
4
We
        plan
        to develop KRX-101 in the United States, and possibly other countries where
        we
        have exclusive rights under our license, for the treatment of diabetic
        nephropathy and potentially for other indications.
Market
        Opportunity
According
        to the American Diabetes Association, or the ADA, there are 18.2 million
        people
        in the United States, or approximately 6.3% of the population, who have
        diabetes. Of this population, approximately 13 million have been diagnosed,
        of
        whom approximately 90-95% have been diagnosed with Type II diabetes. Type
        II
        diabetes results from the combination of insulin deficiency and the body's
        relative insensitivity to the insulin present, as opposed to Type I diabetes,
        in
        which severe insulin deficiency results from destruction of the
        insulin-producing beta cells of the pancreas. Moreover, an August 2003 study
        published by Datamonitor estimates that approximately 50% of all diabetics
        in
        the U.S., or approximately nine million people, have diabetic nephropathy.
        Diabetes is the most common cause of End Stage Renal Disease, or ESRD, in
        the
        United States and in many other developed nations and represents approximately
        45% of all new cases of ESRD in the United States. Despite advances in clinical
        care, including improvements in glycemic or blood sugar control and blood
        pressure control, the number of Type I and Type II diabetes-related cases
        of
        ESRD continues to rise. In particular, the incidence of Type II diabetes-related
        ESRD is rapidly increasing. Approximately 20% of diabetics on dialysis in
        the
        United States survive for five years, making the mortality of end-stage renal
        failure in this group higher than most forms of cancer. Unfortunately, renal
        transplantation is an option for less than 15% of diabetics with ESRD, as
        compared to 35-40% of non-diabetics, principally due to age and concomitant
        vascular disease. Despite recent advances, diabetic nephropathy remains a
        potentially catastrophic illness for which partial but insufficient treatment
        is
        currently available.
Scientific
        Background
Both
        Type
        I and Type II diabetes are characterized by insufficient insulin effect upon
        insulin-requiring tissues. As insulin is required for normal metabolism of
        glucose, fat and protein, diabetes is accompanied by abnormal blood levels
        of
        these substances. In the short term, hyperglycemia, or elevated blood glucose,
        causes the classic symptoms of diabetes: excessive thirst, frequent urination
        and weight loss. In the long term, hyperglycemia, as well as other effects
        resulting from insufficient insulin effect, can progressively damage critical
        anatomic structures resulting in chronic diabetic complications. We are
        developing KRX-101 for the treatment of diabetic nephropathy, a long-term
        complication of diabetes in which the kidneys are progressively damaged.
        This
        progressive damage results in diminished kidney function progressing to ESRD,
        which ultimately leads to death unless treated by dialysis and/or renal
        transplant.
5
The
        kidney consists of two anatomically and functionally distinct components
        placed
        in serial configuration. The first component is the glomerulus, which performs
        the critical filtering function of the kidney. Blood is passed through delicate
        microscopic glomerular capillary loops, which, acting as sieves, allow waste
        chemicals and excess water to pass through into the glomerular filtrate while
        retaining desirable components, such as blood cells and albumin, within the
        blood. One of the key components of the glomerular capillary filtering membrane
        is highly anionic, or negatively charged, glycosaminoglycan molecules that
        are
        similar to the chemical components of KRX-101. The glomerular filtrate, which
        is
        the precursor of what will eventually be excreted as urine, flows into the
        next
        serial component, the tubular interstitial structure. In the tubules, further
        water is extracted from the filtrate and minerals and other body chemicals
        are
        absorbed from or secreted into the filtrate.
In
        diabetic nephropathy, it is the delicate glomerular loops that first sustain
        damage as a result of the diabetic state. These harmful effects
        include:
·
The
                  delicate filtering membranes of the glomerular loops thicken and
                  their
                  crucial anionic glycosaminoglycan molecules are either depleted
                  or altered
                  and lose some or all of their negative charge. As the glycosaminoglycan
                  negative charge provides normal filtering selectivity to the glomerular
                  membranes, their loss of negative charge results in the release
                  of
                  protein, usually albumin, from the blood into the filtrate and
                  urine. The
                  releases of abnormal amounts of protein or albumin into the urine
                  are
                  called proteinuria and albuminuria,
                  respectively.
·
In
                  addition, hyperglycemia induced overproduction of TGF beta, a regulatory
                  protein, by the kidney induces scar formation in the area surrounding
                  the
                  glomerular capillaries. Over time, the extrinsic pressure of this
                  scar
                  tissue causes collapse of individual glomeruli, loss of functionality
                  and
                  release of albumin into the filtrate and
                  urine.
In
        normally functioning kidneys, interstitial structures are not exposed to
        albumin. It is believed that the exposure of the interstitial structures
        to
        albumin ultimately leads to a potent inflammatory and scarring response
        (mediated in part by TGF beta) in the tubules, as well as in the surrounding
        interstitial tissues. This scarring results in progressive diminution in
        kidney
        function. As might be expected, increasing urinary albumin excretion closely
        parallels this drop in kidney function. In ESRD, kidney function declines
        to the
        point where dialysis or transplantation becomes necessary to sustain
        life.
KRX-101
        belongs to a proposed new class of nephroprotective, or kidney protecting,
        drugs, known as the glycosaminoglycans. A variety of members of this chemical
        family have been shown to decrease pathological albumin excretion in diabetic
        nephropathy in humans. Some of the members of this chemical family include
        the
        following approved drugs: standard heparin, low molecular weight heparin
        and
        danaparoid. However, these agents all require therapy by injection and are
        all
        potent anticoagulants, which are blood thinners capable of inducing bleeding.
        KRX-101, on the other hand, is given orally and, in this form, has demonstrated
        little, if any, anticoagulant effects to date.
Pre-Clinical
        and Clinical Data
Pre-Clinical
        Data
6
In
        pre-clinical studies, glycosaminoglycan components similar or identical to
        those
        that make up KRX-101 have been evaluated using well accepted rodent models
        of
        diabetic nephropathy, in both preventive protocols where the drug was given
        at a
        time when diabetes was induced and prior to kidney damage, and treatment
        protocols, where the drug was given after diabetic kidney damage was already
        present. These glycosaminoglycans diminished the thickening of glomerular
        capillary filtering membranes, replenished the crucial anionic, or albumin
        repelling, charge, lowered urinary albumin leakage and decreased kidney
        expression of the specific scar protein collagen IV, both in the preventive
        and
        the treatment protocols, returning these parameters nearly to their normal
        levels. In addition, data demonstrated that KRX-101 suppresses the
        hyperglycemia-induced, or high glucose-induced, overproduction of TGF beta,
        one
        of the most specific inducers of kidney scarring in diabetic and other kidney
        diseases. Thus, glycosaminoglycans similar or identical to the components
        of
        KRX-101 in pre-clinical models have prevented or reversed the hallmark
"upstream" pathological abnormalities that drive the engine of progressive
        kidney dysfunction. Furthermore, data was presented at the 2005 American
        Society
        of Nephrology's Renal Week that demonstrated that KRX-101 inhibited heparanase,
        an enzyme that is over-expressed in diabetic nephropathy patients and is
        believed to be a contributing factor to the long-term damage to the kidneys
        as a
        result of diabetes.
European
        Clinical Data
There
        have been approximately 20 studies published assessing the safety and efficacy
        of KRX-101 in humans. KRX-101 has been administered to more than 3,000 patients
        in clinical trials conducted in Europe for the treatment of certain diabetic
        and
        non-diabetic conditions and, to our knowledge, has not demonstrated any
        significant side effects at the doses tested for those uses.
European
        researchers, with the support of a grant by Alfa Wassermann S.p.A., or Alpha
        Wasserman, the licensor of KRX-101, conducted a randomized, double-blind,
        placebo-controlled, Phase II study of the use of KRX-101 to treat diabetic
        nephropathy in 223 patients in Europe between 1996 and 1999. In this study,
        also
        known as the DiNAS study, Type I and Type II diabetics with diabetic nephropathy
        were treated daily for four months with 50, 100 and 200 milligram gelcaps
        of
        KRX-101. These patients showed substantial dose-dependent reduction in
        proteinuria or pathological urinary albumin excretion rates. In this study,
        the
        higher the dose administered daily, the greater the demonstrated decrease
        in
        albumin excretion. The DiNAS study was published in the June 2002 issue of
        the
        Journal of the American Society of Nephrology.
U.S.-based
        Clinical Data
Our
        recently completed, U.S.-based Phase II multi-center clinical trial study
        was
        conducted by the CSG. This randomized, double-blind, placebo-controlled study
        compared two doses (200mg and 400mg daily) of KRX-101 versus placebo for
        the
        treatment of diabetic nephropathy in 149 patients between 2003 and 2005.
        We
        announced the positive results of this study at the American Society of
        Nephrology's Renal Week in November 2005. Interim positive results from this
        study had been previously announced at the National Kidney Foundation's Spring
        Clinical Meeting in May 2005. The results of the study are presented
        below.
Design
        of the Phase II Study
The
        Phase
        II study was designed as a pilot for the fully-powered pivotal Phase III
        study,
        which is currently ongoing. In this Phase II study, two doses of KRX-101
        (200 mg
        and 400 mg) were compared to placebo in patients with diabetic microalbuminuria
        on maximal therapy with an angiotensin converting enzyme inhibitor, called
        an
        ACEi, or a angiotensin receptor blocker, known as an ARB. Patients were treated
        with KRX-101 or placebo for six months and followed for an additional two
        months
        post-treatment. Patients were randomized 1:1:1, placebo, 200mg and 400mg
        of
        KRX-101, respectively.
7
In
        this
        Phase II study, the primary endpoint for the study was the percentage of
        patients achieving "Therapeutic Success" at six months. This is also the
        endpoint in the protocol for the KRX-101 Phase III clinical trial now recruiting
        patients, and which was agreed to with the FDA under a SPA. A patient is
        considered a "Therapeutic Success" if they achieve one of the following outcomes
        following the six months in the study:
(1)
50%
                  reduction in albumin to creatinine ratio or "ACR"— ACR is a standard
                  measurement used to assess the level of kidney disease in these
                  patients.
                  ACR measures the level of albumin protein in urine, also referred
                  to as
                  "albuminuria," or
(2)
Normalization
                  of ACR with at least a 25% reduction in ACR—in this study the normal
                  laboratory range for albuminuria was defined as less than 20mg
                  of albumin
                  to 1g of creatinine.
Phase
        II Data Analysis
A
        total
        of 149 patients were randomized into the study. All patients evaluable for
        Therapeutic Success at six months (i.e. all patients with a baseline ACR
        and a
        six-month ACR) were included in the Intent to Treat analysis, for a total
        of 136
        patients. All patients in the Intent to Treat population that at baseline
        were
        within the target eligibility range of microalbuminuria as defined in the
        protocol (ACR 20mg/G to 200mg/G) were included in the Per Protocol analysis,
        for
        a total population of 117 patients.
All
        of
        the primary and secondary analyses shown were pre-specified. For the primary
        endpoint analysis, statistical nominal p values have been provided for
        informational purposes only since this Phase II study, as a pilot study,
        had
        less than a 20% power to show statistically significant results for these
        endpoints.
The
        data
        is being presented in two ways. First, the 200mg arm is compared to placebo
        because the 200mg is the dose in our Phase III and Phase IV protocols, as
        agreed
        to with the FDA under the SPA. Next, the data is presented as Active (200mg
        and
        400mg) vs. Placebo; this was the primary endpoint defined by the Phase II
        protocol. Information on the effects of the 400mg arm alone can be found
        in the
        footnotes to the tables. The dose response relationship of KRX-101 previously
        demonstrated up to 200mg was not observed from 200mg to 400mg in this study.
8
Table
        1—Primary Endpoint Analysis (Therapeutic Success at six months) (200mg vs.
        Placebo)
Number
                  of Patients
(Placebo/200mg)
Placebo
200mg
p
                  value
Fisher's
                  Exact Test (2-sided)
Per
                  Protocol
36/36
11.0%
33.0%
P=.045
Intent
                  to Treat
42/44
14.0%
32.0%
P=.074
Table
        2—Primary Endpoint Analysis (Therapeutic Success at six months) (200mg and
        400mg
(1)
vs.
        Placebo)
Number
                  of Patients
(Placebo/Active)
Placebo
Active
(200mg
                  and 400mg
)
1
p
                  value
Fisher's
                  Exact Test (2-sided)
Per
                  Protocol
36/81
11%
25%
P=.136
Intent
                  to Treat
42/94
14%
26%
P=.180
_____________
1
        For the
        400mg group alone, the Therapeutic Success was 18% on a per protocol basis
        and
        20% on intent to treat basis.
Table
        3—Secondary Endpoint Analysis at Six months (Intent to Treat)
Placebo
n=42
200mg
n=44
Active
(200mg
                  and 400mg
1
)
n=94
>50
                  % reduction in ACR
12.0%
27.0%
22.0%
Normalization
                  of ACR
9.0%
23.0%
17.0%
_____________
1
        For the
        400mg group alone, the 50% reduction and normalization were 18% and 10%,
        respectively.
Table
        4—Average Changes of ACR Over Time (Intent to Treat)
1
200mg
                  vs. Placebo
Placebo
                  vs. Baseline
200mg
                  vs. Baseline
Two
                  months
-17.00%
-4.0%
-21.00%
Four
                  months
-25.78%
7.5%
-18.28%
Six
                  months
-28.03%
12.57%
-15.46%
Eight
                  months
(Two
                  months off therapy)
-28.98%
18.5%
-10.48%
_____________
1
        The
        average changes from baseline over time for the 400mg dose group were 3.4%,
        3.24%, 5.59% and 12.59%, respectively.
There
        were no serious adverse events, or SAEs, that were deemed by the investigators
        to be related, probably related or possibly related to the study drug. A
        full
        analysis of the safety database will be conducted in the coming
        months.
9
Development
        Status
In
        June
        2000, we filed an investigational new drug application, or IND, with the
        FDA for
        permission to conduct a clinical trial for the treatment of patients with
        diabetic nephropathy. In 2001, KRX-101 was granted Fast-Track designation
        for
        the treatment of diabetic nephropathy, and, in 2002, we announced that the
        FDA
        had agreed, in principle, to permit us to avail ourselves of the accelerated
        approval process under subpart H of the FDA's regulations governing applications
        for the approval to market a new drug. Generally, subpart H allows for the
        use
        of surrogate endpoints in Phase III trials to support the approval of an
        NDA
        with confirmatory studies completed post-approval, and could greatly reduce
        the
        development time to market.
In
        the
        fourth quarter of 2003, we initiated the Phase II portion of our Phase II/III
        clinical program for KRX-101, and in the third quarter of 2004, we completed
        the
        target enrollment for the Phase II portion of the clinical program.
In
        January 2005, we announced that the CSG recommended that we proceed to the
        Phase
        III portion of our Phase II/III clinical program of KRX-101. This recommendation
        was based on the completion, by an independent Data Safety Monitoring Committee,
        or DSMC, on January 4, 2005, of a safety evaluation of the first interim
        analysis from the 149 patient, randomized, double-blind, placebo-controlled
        Phase II clinical trial of KRX-101 discussed above, and an efficacy assessment
        of the same data set conducted by the CSG.
In
        March
        2005, we announced that we had finalized a SPA agreement with the FDA for
        the
        Phase III and Phase IV clinical trials of KRX-101.
In
        June
        2005, we announced the initiation of our pivotal Phase III and Phase IV clinical
        program for KRX-101. We are conducting both of these trials under our SPA
        with
        the FDA. This clinical plan consists of: a single Phase III trial in patients
        with microalbuminuria based on the surrogate marker of regression of
        microalbuminuria as the primary endpoint; supportive data from previously
        conducted clinical studies; and substantial recruitment into our Phase IV
        confirmatory study that will measure clinical outcomes in patients with overt
        nephropathy, or macroalbuminuria. The Phase III portion of the program is
        a
        randomized, double-blind, placebo-controlled study comparing a 200 milligram
        daily dose of KRX-101 versus a placebo in patients with persistent
        microalbuminuria. The Phase IV portion of the program is a randomized,
        double-blind, placebo-controlled study comparing a 200 milligram daily dose
        of
        KRX-101 versus a placebo in patients with persistent macroalbuminuria. The
        CSG
        is conducting the pivotal Phase III and Phase IV clinical program of KRX-101
        for
        the treatment of diabetic nephropathy.
In
        November 2005, we announced positive final results from our Phase II study
        of
        KRX-101 for diabetic nephropathy at the American Society of Nephrology's Renal
        Week. As discussed in detail above, the Phase II study compared two oral
        doses
        of KRX-101, 200 and 400 milligrams, versus a placebo in patients with diabetic
        microalbuminuria who were receiving an ACE inhibitor or ARB. In this study,
        patients were treated with KRX-101 or a placebo for six months and were
        monitored for an additional two months post-treatment. The primary endpoint
        for
        the study was "therapeutic success" of the two dose levels combined versus a
        placebo at six months. Therapeutic success was a binary composite endpoint
        defined as: conversion from microalbuminuria to normoalbuminuria (with at
        least
        a 25% reduction in microalbuminuria) as measured by the ACR; or at least
        a 50%
        reduction in the ACR level relative to baseline.
10
KRX-0401
Overview
We
        are
        also developing KRX-0401 (perifosine), which is a novel, first-in-class,
        oral
        anti-cancer agent that modulates Akt, a protein in the body associated with
        tumor survival and growth, and a number of other key signal transduction
        pathways, including the JNK and MAPK pathways, which are pathways associated
        with programmed cell death, cell growth, cell differentiation and cell
        survival.
This
        compound has demonstrated preliminary single agent anti-tumor activity and
        is
        currently in a Phase II clinical program where it is being studied both as
        a
        single agent and in combination with other anti-cancer treatments for multiple
        forms of cancer.
KRX-0401
        is the prototype of a new group of anti-cancer drugs referred to as
        alkylphosphocholines that block proliferation and induce the apoptosis of
        cancer
        cells. This effect is relatively specific for cancer cells compared to normal
        cells. The mechanism of action for these drugs is not clear. They are known
        to
        modulate signaling in a number of pathways known to function abnormally during
        the development of cancer. One of the pathways inhibited by the
        alkylphosphocholines is Akt, a pathway associated with tumor survival and
        growth. Akt is considered to be one of the most important cancer targets
        being
        researched today.
In
        September 2002, ACCESS Oncology, which we acquired in February 2004, entered
        into an exclusive commercial license agreement with Zentaris AG, a wholly
        owned
        subsidiary of AEterna Zentaris Inc., to acquire a license to a series of
        U.S.
        and foreign patents and patent applications relating to the composition of
        matter and use of KRX-0401 in the treatment of cancer and other conditions.
        This
        license agreement covers the United States, Canada and Mexico.
Pre-Clinical
        and Clinical Data
In
        vitro,
        KRX-0401 inhibits the growth of a variety of human tumor cell lines and has
        substantial activity in vivo against a number of murine tumor models and
        human
        xenografts. In model systems the drug appears to be synergistic with
        radiotherapy and additive or synergistic with cytotoxics such as cisplatin,
        adriamycin, and cyclophosphamide. In these experiments, the combination regimens
        were superior to chemotherapy alone and were well tolerated.
Pre-clinical
        studies presented at the American Society of Hematology Annual Meeting in
        December 2005 demonstrated KRX-0401's potential utility in the treatment of
        multiple myeloma and possibly other forms of hematological tumors. These
        studies
        demonstrated that KRX-0401 has activity in a variety of
in
        vitro
and
in
        vivo
multiple
        myeloma models and is synergistic with a number of agents used in the treatment
        of multiple myeloma including bortezomib (Velcade®) and dexamethasone.
Six
        Phase
        I studies of KRX-0401 have been completed, three in Europe by Zentaris and
        three
        in the U.S. by the National Cancer Institute, or NCI, a department of the
        National Institutes of Health, or NIH, as part of a Cooperative Research
        and
        Development Agreement, or CRADA, and by the Company. These trials demonstrated
        that KRX-0401 can be safely given to humans with an acceptable toxicity profile
        and no observed myelosuppression, or bone marrow suppression. The dose limiting
        toxicity in the Phase I studies was gastrointestinal: nausea, vomiting and
        diarrhea. In addition, some patients experienced fatigue, especially with
        prolonged administration. In these Phase I studies, there was single agent
        activity as evidenced by two durable partial responses (one of which lasted
        more
        than six months and the other more than 18 months) out of 10 patients with
        previously treated, evaluable soft tissue sarcomas, a tumor type relatively
        unresponsive to chemotherapy. In addition 21 patients were considered by
        the
        investigators to have had disease stabilization for two or more months,
        including patients with sarcomas (2), prostate cancer (3), non-small cell
        lung
        cancer (2), breast cancer (2), colon cancer (2), melanoma (2), renal cancer
        (2),
        ovarian cancer (1), salivary gland cancer (1), mesothelioma (2) and hepatoma
        (2). The meaning of disease stabilization in an individual patient in a Phase
        I
        study is difficult to assess because the time to progression is variable
        and may
        give a false impression of stabilization in individual patients.
11
The
        NCI
        has completed a number Phase II clinical trials studying KRX-0401 as a single
        agent, including studies in prostate, breast, head and neck and pancreatic
        cancers, as well as melanoma and sarcomas. In total, nine NCI clinical trials
        have been conducted across the six tumor types mentioned. The NCI and its
        collaborators have presented and/or published data from seven of their Phase
        II
        studies, including from Phase II studies involving prostate (2), sarcoma,
        head
        and neck, melanoma, pancreas and breast cancers. Findings from these studies
        led
        the investigators to conclude that the drug was safe and well-tolerated at
        the
        Phase II dose utilized. The studies used dosing schedules in which a large
        "bolus" dose was given on day one or once every 28 days followed by daily doses
        either continuously or on days two to 21 of a four-week cycle. Bolus doses
        ranged from 300 mg to 900 mg followed by daily doses of 100 - 150 mg. These
        studies confirm the safety profile of the bolus plus daily regimens, which
        had
        limited grade 3 and no grade 4 gastrointestinal toxicity, the dose limiting
        toxicity in most of the Phase I trials. However, studies using a single bolus
        dose of 600 mg to 900 mg on day one and continuous daily KRX-0401 at a dose
        of
        100 mg per day appeared to be better tolerated than studies that used 150
        mg per
        day on days two to 21 in each four-week cycle. In the one published Phase
        II
        sarcoma study, the investigators reported a partial response (greater than
        50%
        decrease in tumor mass) as well as several disease stabilizations. With the
        responses seen in the Phase I trials, there are now three sarcoma patients
        with
        durable partial responses. This has led us to consider exploring additional
        studies in sarcoma. On the Phase II breast cancer study, the investigators
        scored three of 15 evaluable patients as having stable disease. One of these
        patients had measurable tumor regression which failed to reach the level
        of a
        partial response by the time the patient elected to withdraw from the study
        because of gastrointestinal toxicity. The breast cancer trial utilized the
        more
        toxic of the regimens employed in these NCI Phase II studies. In the melanoma
        trial published by the National Cancer Institute of Canada, one patient with
        a
        primary mucosal melanoma of the vagina and inguinal adenopathy had a 50%
        reduction in the size of the palpable nodes after 4 cycles but developed
        new
        disease after cycle 5.
In
        May
        2005, we announced that Phase II data presented at the annual meeting of
        the
        American Society of Clinical Oncology in Orlando, Florida demonstrated the
        tolerability and potential efficacy of KRX-0401 in the treatment of patients
        with biochemically recurrent hormone-sensitive prostate cancer, or HSPC.
        The
        investigators concluded that KRX-0401 in the treatment of HSPC patients is
        feasible, well-tolerated and has been shown to reduce prostate-specific antigen,
        or PSA, levels in some patients. Because of its inhibitory effects on the
        Akt
        and related pathways, we believe that further studies of KRX-0401 in combination
        with androgen ablation and chemotherapy are warranted. In a second study
        published by investigators at the NCI, there were no radiographic responses
        or PSA declines of 50% or greater related to KRX-0401, but four patients
        had stable PSA values for 12 weeks or longer. Eleven of 14 patients, or 78%,
        in
        whom circulating tumor cells were measured pre- and post-treatment, showed
        a
        decreased number of circulating tumor cells after treatment.
Development
        Status
During
        the second quarter of 2004, we announced the initiation of a Phase II program
        utilizing KRX-0401 as a single agent and in combination with a number of
        standard anti-cancer therapies in multiple tumor types. To date, we have
        initiated a number of trials under this program, including single agent studies
        in lung cancer and sarcoma, and combination studies with a number of standard
        anti-cancer treatments, such as gemcitabine, paclitaxel, docetaxel, Herceptin®
        and endocrine therapy. We have also initiated an "all-comers" Phase II clinical
        trial evaluating KRX-0401 as a single-agent, administered either weekly or
        daily
        in a variety of tumor types. We plan to commence additional Phase II trials
        in
        2006.
12
The
        ultimate clinical timeline, and consequent cost, for further development
        of
        KRX-0401 will depend, in part, on the successful completion of our Phase
        II
        trials, and ultimate approval by the FDA.
ADDITIONAL
        PRODUCT CANDIDATES
KRX-0402
KRX-0402
        (O6-benzyl guanine or O6-BG) is a small molecule that was specifically designed
        to block the repair protein, AGT. AGT confers resistance to 06-alkylating
        agents, such as temozolomide and BCNU, that are commonly used to treat brain
        cancer, melanoma and non-Hodgkin's lymphoma. Recent research has shown that
        KRX-0402 can also potentiate the activity of other alkylating agents, such
        as
        cisplatinum and carboplatinum, through an as of yet unconfirmed mechanism.
        These
        drugs are some of the most widely used chemotherapy drugs and are commonly
        used
        to treat breast cancer, non-small cell lung cancer and ovarian cancer.
        Accordingly, we believe that KRX-0402 may have an important role in making
        cells
        more susceptible to the damaging effects of alkylating agents, and that KRX-0402
        may have utility in the treatment of multiple forms of cancer. KRX-0402 is
        usually administered intravenously. To date, approximately 400 patients have
        received KRX-0402 in multiple clinical studies. Dose limiting toxicity for
        KRX-0402 in combination with chemotherapy was bone marrow suppression. KRX-0402
        alone has no identified dose limiting toxicity. Currently, we have plans
        to
        conduct additional company-sponsored clinical trials for KRX-0402.
KRX-0403
During
        2005, we terminated development of KRX-0403.
KRX-0404
KRX-0404,
        currently in pre-clinical development, is an alkylphosphocholine, but, in
        contrast to KRX-0401, it is suitable for intravenous
        administration.
KRX-0501
KRX-0501,
        currently in pre-clinical development, is an orally available small molecule
        in
        pre-clinical development with the potential to treat neurological disorders
        via
        its unique ability to enhance nerve growth factor, a naturally occurring
        protein
        which is essential in the development and survival of certain sympathetic
        and
        sensory neurons in both the central and peripheral nervous systems.
13
COSTS
        AND TIME TO COMPLETE PRODUCT DEVELOPMENT
The
        information below provides estimates regarding the costs associated with
        the
        completion of the current development phase and our current estimated range
        of
        the time that will be necessary to complete that development phase for KRX-101.
        We also have provided information with respect to our other drug candidates.
        We
        also direct your attention to the risk factors which could significantly
        affect
        our ability to meet these cost and time estimates found in this report in
        Item
        1A under the heading "Risk Factors Associated with Our Product Development
        Efforts."
KRX-101
        is currently in Phase III and Phase IV clinical trials. We estimate that
        the
        cost to complete the Phase III will be approximately $20 million to $30 million
        and we believe that the Phase III will be completed in 2007.
With
        respect to KRX-0401 and KRX-0402, we are unable to estimate the cost to complete
        the current phase of each drug and also unable to project a time for the
        completion of the current phase. Each of KRX-0401 and KRX-0402 are in Phase
        II
        studies. Phase II clinical trials are highly unpredictable and their length
        and
        results will vary based on patient enrollment, response rates in the trials,
        and
        the potential need for additional trials or increases in patients included,
        among other factors. Due to the nature of a Phase II and our inability to
        predict the results of such studies, we cannot estimate when such a program
        will
        end, and it is equally difficult to project the cost to complete such
        phase.
KRX-0404
        and KRX-0501 are currently pre-clinical drug candidates. The timing and results
        of pre-clinical studies are highly unpredictable. Due to the nature of
        pre-clinical studies and our inability to predict the results of such studies,
        we cannot estimate when such pre-clinical development will end, and it is
        equally difficult to project the cost to complete such development.
Revised
        Disclosure for the "Risk Factors" portion of the Business section of the
        Company's annual report on Form 10-K (Item 1A):
Risk
        Factors Associated with Our Product Development
        Efforts
.
If
        we
        are unable to successfully complete our clinical trial programs, or if such
        clinical trials take longer to complete than we project, our ability to execute
        our current business strategy will be adversely affected.
Whether
        or not and how quickly we complete clinical trials is dependent in part upon
        the
        rate at which we are able to engage clinical trial sites and, thereafter,
        the
        rate of enrollment of patients. Patient enrollment is a function of many
        factors, including the size of the patient population, the proximity of patients
        to clinical sites, the eligibility criteria for the study, the existence
        of
        competitive clinical trials, and whether existing or new drugs are approved
        for
        the indication we are studying. We are aware that other companies are planning
        clinical trials that will seek to enroll patients with the same diseases
        as we
        are studying. In addition, one of our current trials for KRX-101 is designed
        to
        continue until a pre-specified number of events have occurred to the patients
        enrolled. Trials such as this are subject to delays stemming from patient
        withdrawal and from lower than expected event rates and may also incur increased
        costs if enrollment is increased in order to achieve the desired number of
        events. If we experience delays in identifying and contracting with sites
        and/or
        in patient enrollment in our clinical trial programs, we may incur additional
        costs and delays in our development programs, and may not be able to complete
        our clinical trials on a cost-effective basis.
14
Additionally,
        we have finalized with the FDA our SPA regarding a subpart H clinical
        development plan for the clinical development of KRX-101 for diabetic
        nephropathy. This clinical plan consists of: a single Phase III trial in
        patients with microalbuminuria based on the surrogate marker of regression
        of
        microalbuminuria as the primary endpoint; supportive data from previously
        conducted clinical studies; and substantial recruitment into our Phase IV
        confirmatory study that will measure clinical outcomes in patients with overt
        nephropathy, or macroalbuminuria, before filing a NDA with the FDA. The subpart
        H process is complex and requires careful execution and no assurance can
        be
        given that we will be able to meet the requirements set forth in the SPA.
        Even
        if we meet those requirements, the FDA is not obligated to grant approval
        of our
        NDA for KRX-101. If the FDA approves KRX-101 for marketing on the basis of
        our
        SPA, our Phase IV clinical trial may yield insufficient efficacy data or
        give
        rise to safety concerns, which could result in withdrawal of such approval
        or
        could cause us to withdraw the product from the market. Many companies who
        have
        been granted the right to utilize an accelerated approval approach have failed
        to obtain approval. Moreover, negative or inconclusive results from the clinical
        trials we hope to conduct or adverse medical events could cause us to have
        to
        repeat or terminate the clinical trials. Accordingly, we may not be able
        to
        complete the clinical trials within an acceptable time frame, if at
        all.
If
        Our Drug Candidates Do Not Receive The Necessary Regulatory Approvals, We
        Will
        Be Unable To Commercialize Our Drug Candidates.
We
        have
        not received, and may never receive, regulatory approval for the commercial
        sale
        of any of our drug candidates. We will need to conduct significant additional
        research and human testing before we can apply for product approval with
        the FDA
        or with regulatory authorities of other countries. Pre-clinical testing and
        clinical development are long, expensive and uncertain processes. Satisfaction
        of regulatory requirements typically depends on the nature, complexity and
        novelty of the product and requires the expenditure of substantial resources.
        Data obtained from pre-clinical and clinical tests can be interpreted in
        different ways, which could delay, limit or prevent regulatory approval.
        It may
        take us many years to complete the testing of our drug candidates and failure
        can occur at any stage of this process. Negative or inconclusive results
        or
        medical events during a clinical trial could cause us to delay or terminate
        our
        development efforts.
Furthermore,
        interim results of preclinical or clinical studies do not necessarily predict
        their final results, and acceptable results in early studies might not be
        obtained in later studies. Drug candidates in the later stages of clinical
        development may fail to show the desired safety and efficacy traits despite
        having progressed through initial clinical testing. There can be no assurance
        that the results from the Phase III study will track the data from the Phase
        II
        study, or that the results from the Phase IV study will yield sufficient
        efficacy data. Moreover, the recommendation to move into our pivotal program,
        as
        well as the announced Phase II data, may not be indicative of results from
        future clinical trials and the risk remains that the pivotal program for
        KRX-101
        may generate efficacy data that will be insufficient for the approval of
        the
        drug, or may raise safety concerns that may prevent approval of the
        drug.
Clinical
        trials also have a high risk of failure. A number of companies in the
        pharmaceutical industry, including biotechnology companies, have suffered
        significant setbacks in advanced clinical trials, even after achieving promising
        results in earlier trials. If we experience delays in the testing or approval
        process or if we need to perform more or larger clinical trials than originally
        planned, our financial results and the commercial prospects for our drug
        candidates may be materially impaired. In addition, we have limited experience
        in conducting and managing the clinical trials necessary to obtain regulatory
        approval in the United States and abroad and, accordingly, may encounter
        unforeseen problems and delays in the approval process.
15
Because
        All Of Our Proprietary Technologies Are Licensed To Us By Third Parties,
        Termination Of These License Agreements Would Prevent Us From Developing
        Our
        Drug Candidates.
We
        do not
        own any of our drug candidates. We have licensed the patent rights to these
        drugs candidates from others. These license agreements require us to meet
        development or financing milestones and impose development and commercialization
        due diligence requirements on us. In addition, under these agreements, we
        must
        pay royalties on sales of products resulting from licensed technologies and
        pay
        the patent filing, prosecution and maintenance costs related to the licenses.
        If
        we do not meet our obligations in a timely manner or if we otherwise breach
        the
        terms of our license agreements, our licensors could terminate the agreements,
        and we would lose the rights to our drug candidates.
We
        Rely On Third Parties To Manufacture Our Products. If These Third Parties
        Do Not
        Successfully Manufacture Our Products, Our Business Will Be
        Harmed.
We
        have
        no experience in manufacturing products for clinical or commercial purposes
        and
        do not have any manufacturing facilities. We intend to continue, in whole
        or in
        part, to use third parties to manufacture our products for use in clinical
        trials and for future sales. We may not be able to enter into future third-party
        contract manufacturing agreements on acceptable terms to us, if at
        all.
Contract
        manufacturers often encounter difficulties in scaling up production, including
        problems involving production yields, quality control and assurance, shortage
        of
        qualified personnel, compliance with FDA and foreign regulations, production
        costs and development of advanced manufacturing techniques and process controls.
        Our third-party manufacturers may not perform as agreed or may not remain
        in the
        contract manufacturing business for the time required by us to successfully
        produce and market our drug candidates. In addition, our contract manufacturers
        will be subject to ongoing periodic, unannounced inspections by the FDA and
        corresponding foreign governmental agencies to ensure strict compliance with,
        among other things, current good manufacturing practices, in addition to
        other
        governmental regulations and corresponding foreign standards. We will not
        have
        control over, other than by contract, third-party manufacturers' compliance
        with
        these regulations and standards. Switching or engaging multiple manufacturers
        may be difficult because the number of potential manufacturers is limited
        and,
        particularly in the case of KRX-101, the process by which multiple manufacturers
        make the drug substance must be identical at each manufacturing facility.
        It may
        be difficult for us to find and engage replacement or multiple manufacturers
        quickly and on terms acceptable to us, if at all. Moreover, if we need to
        change
        manufacturers, the FDA and corresponding foreign regulatory agencies must
        approve these manufacturers in advance, which will involve testing and
        additional inspections to ensure compliance with FDA and foreign regulations
        and
        standards.
If
        third-party manufacturers fail to deliver the required quantities of our
        drug
        candidates on a timely basis and at commercially reasonable prices, we will
        not
        be able to commercialize our products as planned.
We
        have
        entered into a relationship with a U.S.-based contract manufacturer for KRX-101
        which we believe will be adequate to satisfy our current clinical and initial
        commercial supply needs; however, as we
s
cale-up
        for commercial manufacturing, we will need to ensure that the manufacturing
        process matches the established process on a larger scale. As with all
        heparin-like compounds, the end product is highly sensitive to the manufacturing
        process utilized. Accordingly, as we scale-up, reproducibility will be required
        for the successful commercialization of KRX-101. There can be no assurance
        that
        we will be successful in this endeavor. Additionally, as we scale-up, we
        will
        incur capital expenditures to enable larger scale production.
16
SIGNATURES
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.
Keryx
                    Biopharmaceuticals, Inc.
(Registrant)
Date: December
                  30, 2005
By:
/s/
                  Ron Bentsur
Ron
                  Bentsur
Vice
                  President, Finance and Investor
                  Relations