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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>As filed with the Securities and Exchange Commission on
February&nbsp;3, 2006</B>
</DIV>

<DIV align="right" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Registration
No.&nbsp;<FONT style="white-space: nowrap">333-&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 6pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT></B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QUATRX PHARMACEUTICALS COMPANY</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>(Exact name of Registrant as specified in its charter)</I>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>2834</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>38-3566182</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>777 East Eisenhower Parkway, Suite&nbsp;100</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>Ann Arbor, Michigan 48108</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>(734)&nbsp;913-9900</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>(Address, including zip code and telephone number, including
area code,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>of Registrant&#146;s principal executive offices)</I>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Robert L. Zerbe,&nbsp;M.D.</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>Chief Executive Officer</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>777 East Eisenhower Parkway, Suite&nbsp;100</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>Ann Arbor, Michigan 48108</B>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff;">
<B>(734)&nbsp;913-9900</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>(Name, address, including zip code and telephone number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Copies to:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="center" valign="top">
    <B>Stephen M. Davis,&nbsp;Esq.<BR>
    Peter DiIorio,&nbsp;Esq.<BR>
    Heller Ehrman LLP<BR>
    Times Square Tower, 7 Times Square<BR>
    New York, New York 10036<BR>
    Phone: (212)&nbsp;832-8300<BR>
    Fax: (212)&nbsp;763-7600</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Jeffery M. Brinza,&nbsp;Esq.<BR>
    QuatRx Pharmaceuticals Company<BR>
    777 East Eisenhower Parkway, Suite&nbsp;100<BR>
    Ann Arbor, Michigan 48108<BR>
    Phone: (734)&nbsp;913-9900<BR>
    Fax: (734)&nbsp;913-0743</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Danielle Carbone,&nbsp;Esq.<BR>
    Shearman&nbsp;&#38; Sterling LLP<BR>
    599 Lexington Avenue<BR>
    New York, New York 10022<BR>
    Phone: (212) 848-4000<BR>
    Fax: (212) 848-7179</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to
public:</B> As soon as practicable after this Registration
Statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box:&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering:&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering:&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
If this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering:&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of Each Class of</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Aggregate</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price(1)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, $0.01&nbsp;par value per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $86,250,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $9,229</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule&nbsp;457(o) of the Securities Act of 1933,
    as amended.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT style="font-size: 9pt" color="#D81E05" face="helvetica,arial">The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.</FONT><FONT style="font-size: 9pt" face="helvetica,arial">
<BR>


</FONT>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<FONT color="#D81E05">SUBJECT TO COMPLETION, DATED
FEBRUARY&nbsp;3, 2006
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Prospectus
</DIV>

<DIV align="center" style="font-size: 15pt;color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="v16003v1600300.gif" alt="(QUATRX LOGO)">
</DIV>

<DIV align="center" style="font-size: 15pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT face="helvetica,arial">Common Stock</FONT></B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx Pharmaceuticals Company is
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. This is our initial public offering, and no
public market currently exists for our shares. We anticipate
that the initial public offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. After the offering, the market price for our shares may
be outside this range.
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have applied to list our common stock on the Nasdaq National
Market under the symbol &#147;QTRX&#148;.
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in our common stock involves a high degree of risk.
See &#147;Risk Factors&#148; beginning on page&nbsp;8.</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discounts and commissions to underwriters</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Offering proceeds to QuatRx Pharmaceuticals Company, before
    expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal
offense.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted the underwriters the right to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock to cover any over-allotments. The
underwriters can exercise this right at any time within
30&nbsp;days after the offering. The underwriters expect to
deliver the shares on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006.
</DIV>

<DIV align="left" style="font-size: 16pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left"><B><FONT face="helvetica,arial">Banc of America Securities LLC</FONT></B></TD>
    <TD align="right"><B><FONT face="helvetica,arial">SG Cowen&nbsp;&#38; Co.</FONT></B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD align="left"><B><FONT face="helvetica,arial">Lazard Capital Markets</FONT></B></TD>
    <TD align="right"><B><FONT face="helvetica,arial">Pacific Growth Equities, LLC</FONT></B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name="tocpage"></A>
</DIV>

<DIV align="left" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
<B>You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. We
are not making offers to sell or seeking offers to buy these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained in
this prospectus is accurate as of the date in the front of this
prospectus only. Our business, financial condition, results of
operations and prospectus may have changed since that date.</B>
</DIV>

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 0.5pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

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

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Forward-Looking Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Selected Consolidated Financial Data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Certain Relationships and Related Party
    Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Principal Stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Description of Capital Stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>United States Federal Income Tax
    Consequences to Non-United States Holders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>99</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Index To Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='101'></A>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Although this summary highlights information about us and our
business that we believe is important for you to read and
consider, you should read this entire prospectus carefully,
including &#147;Risk Factors&#148; beginning on page&nbsp;8 and
our consolidated financial statements and the notes to those
financial statements beginning on page F-1, before you decide to
buy our common stock. In this prospectus, all references to
&#147;QuatRx,&#148; &#147;the company,&#148; &#147;we,&#148;
&#147;us&#148; and &#147;our&#148; refer to QuatRx
Pharmaceuticals Company and its subsidiary, and all references
to &#147;Hormos&#148; refer to Hormos Medical Oy, our wholly
owned subsidiary, unless the context requires otherwise.</I>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Business</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Overview</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a pharmaceutical company focused on discovering,
licensing, developing and commercializing compounds in the
endocrine, metabolic and cardiovascular therapeutic areas. We
currently have four product candidates in clinical development
and one compound that we expect to enter clinical development in
the first half of 2006. Our two lead product candidates treat
hormone deficiencies that result from aging in men and women.
Ospemifene, our treatment for vaginal atrophy, a common problem
associated with estrogen deficiency in post-menopausal women,
has entered phase&nbsp;III clinical testing. Fispemifene, our
treatment for the symptoms of andropause in aging males, is
about to enter phase&nbsp;II clinical testing. We also have two
product candidates for the treatment of elevated cholesterol
levels, QRX-401 and QRX-431, in phase&nbsp;I clinical trials and
advanced preclinical development, respectively. Becocalcidiol,
our topical product candidate for the treatment of mild to
moderate psoriasis, has completed a phase&nbsp;IIb clinical
trial that we believe demonstrates clinical proof of efficacy.
Our management team has extensive experience in pharmaceutical
development, particularly in endocrine and cardiovascular
therapies, having participated in over 60 clinical development
programs in their careers. This team has contributed to over
30&nbsp;programs involving approved drugs, ten of which reached
annual sales in excess of $1&nbsp;billion and include the
world&#146;s best selling pharmaceutical product, Lipitor.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ospemifene is our product candidate for the treatment of
post-menopausal vaginal atrophy. Vaginal atrophy is a chronic
condition resulting from a decline in estrogen levels. The
symptoms of vaginal atrophy include vaginal dryness, burning,
irritation, itching, pain during intercourse and vaginal
discharge. It is estimated that there are 145&nbsp;million
post-menopausal women in North America, Europe and Japan, and
that between 10% and 40% of them suffer from vaginal atrophy.
Vaginal atrophy is typically treated with hormone replacement
therapies, including estrogen-based therapies. U.S.&nbsp;sales
of hormone replacement therapies for menopausal symptoms were
$1.7&nbsp;billion in 2004, but have been declining due to
concerns that the long-term use of these therapies increases the
risk of breast and uterine cancer. Ospemifene is a selective
estrogen receptor modulator, or SERM, an orally available small
molecule that binds to estrogen receptors and selectively
stimulates or blocks estrogen&#146;s activity in different
tissue types. We have completed two phase&nbsp;II clinical
trials of ospemifene in which it has demonstrated beneficial
effects on vaginal cell maturation, indicating improvement in
the symptoms of vaginal atrophy. Based on our completed clinical
and preclinical studies, we believe that, in addition to its
beneficial effect on the symptoms of vaginal atrophy, ospemifene
has a positive effect on bone density, does not increase the
risk of breast and uterine cancer, and does not appear to induce
hot flashes, a common side effect of SERMs. In January 2006, we
initiated our first phase&nbsp;III clinical trial of ospemifene
for the treatment of vaginal atrophy. The trial is expected to
take place in approximately 65 sites in the U.S. and will enroll
approximately 800&nbsp;patients.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fispemifene is our product candidate for the treatment of the
symptoms of andropause. Andropause is a condition in men caused
by a gradual decline in testosterone levels that occurs
naturally as men age. The symptoms of andropause include muscle
wasting, enlarged breasts, urinary tract problems and sexual
dysfunction. Patients receiving treatment for andropause
typically utilize testosterone replacement therapy.
U.S.&nbsp;sales of testosterone replacement products reached
$538&nbsp;million in 2004, a growth rate of 40% versus the prior
year. Unlike testosterone replacement therapies that are
typically topical or injection therapies,
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">1

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
fispemifene is an oral treatment and is not a formulation of
testosterone. Rather, fispemifene is a novel SERM that utilizes
the body&#146;s normal feedback mechanism to increase
testosterone levels. In a multiple dose phase&nbsp;I trial,
subjects treated with fispemifene demonstrated an increase in
testosterone levels. In the first half of 2006, we plan to
initiate a phase&nbsp;II trial with fispemifene in older men
with low testosterone levels.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QRX-401 and QRX-431 are our two product candidates for the oral
treatment of elevated levels of low-density lipoprotein
cholesterol, or LDL cholesterol, the so-called &#147;bad
cholesterol.&#148; Elevated LDL cholesterol levels have been
shown to increase a person&#146;s risk of heart disease. In
2004, treatments for lowering cholesterol had worldwide sales of
approximately $26&nbsp;billion. In preclinical studies with
monkeys, QRX-401 demonstrated the ability to lower LDL
cholesterol as well as lipoprotein(a), also referred to as
Lp(a), high levels of which are associated with an increased
risk of stroke and coronary artery disease. We are currently
conducting a phase&nbsp;I clinical program of QRX-401. In our
phase&nbsp;I studies to date, QRX-401 has been well-tolerated
and no safety issues were observed, although we have not
observed consistent LDL cholesterol lowering in normal
volunteers. Our second product candidate for the treatment of
elevated cholesterol levels, QRX-431, has demonstrated the
ability to reduce LDL cholesterol and Lp(a) levels and cause
weight loss in monkeys. We expect to file an IND for QRX-431 in
the first half of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Becocalcidiol is our topical product candidate for the treatment
of mild to moderate psoriasis. Psoriasis is a chronic disease of
the skin characterized by red patches covered with white scales
that can occur on any part of the body. Ten million people in
the United States, Japan, France, Germany, Italy, Spain and the
United Kingdom have been diagnosed with psoriasis and
approximately 81% of them are receiving treatment with a variety
of prescription and
<FONT style="white-space: nowrap">over-the</FONT>-counter
topical therapies, according to 2004 estimates. Global sales of
topical psoriasis therapies were estimated at $532&nbsp;million
for the twelve months ended October 2005. We have successfully
completed a phase&nbsp;IIb trial of becocalcidiol in which it
demonstrated a statistically significant improvement in both the
Physicians&#146; Global Assessment of psoriasis and the
Psoriasis Symptom Score, two standard methods for assessing
efficacy of topical treatments for psoriasis in clinical trials.
Because becocalcidiol is outside our core therapeutic areas, we
are evaluating alternatives for continued development of this
product candidate, including seeking a partner for further
development and commercialization.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our Strategy</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our goal is to build a successful pharmaceutical company that
develops and commercializes products in the endocrine, metabolic
and cardiovascular therapeutic areas. Our strategy is to
leverage our extensive management expertise in order to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Build and maintain a portfolio of product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Utilize focused criteria to select product candidates that we
    believe have a high likelihood of clinical success;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Focus on product candidates that have a large commercial
    opportunity; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Develop product opportunities in therapeutically aligned areas.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Risk Factors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to a number of risks of which you should be aware
before you decide to buy our common stock. These risks are more
fully described under the heading &#147;Risk Factors.&#148; All
of our product candidates are in the development stage. Neither
we nor our collaborative partners have received regulatory
approval for, or generated commercial revenues from, any of our
product candidates. If we do not successfully obtain regulatory
approval for, or commercialize any of our product candidates, we
will be unable to achieve our business objectives. Since
inception, we have incurred net losses. As of September&nbsp;30,
2005, we had an accumulated deficit of $64.0&nbsp;million. We
expect to continue to incur increasing losses over the next
several years, and we may never become profitable.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">2

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

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Corporate Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were incorporated in Delaware on November&nbsp;20, 2000. In
May 2005, we acquired Hormos Medical Oy, a privately held
Finnish company. Our principal executive offices are located at
777 East Eisenhower Parkway, Suite&nbsp;100, Ann Arbor, Michigan
48108, and our telephone number is (734)&nbsp;913-9900. Our
website address is www.quatrx.com. Information contained in our
website is not a part of this prospectus. We have included our
website address as a factual reference and do not intend it to
be an active link to our website.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&#147;QUATRX&#148; is our registered United States trademark.
Other service marks, trademarks and trade names referred to in
this prospectus are the property of their respective owners.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">3

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
THE OFFERING
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by QuatRx</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    if the underwriters&#146; over-allotment option is fully
    exercised)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after this offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    if the underwriters&#146; over-allotment option is fully
    exercised)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We intend to use the net proceeds from this offering for the
    development of our product candidates, research and development
    of our preclinical programs and the remainder, if any, for
    working capital and other general corporate purposes, which may
    include in-licensing or acquiring additional product candidates.
    See &#147;Use of Proceeds.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed Nasdaq National Market symbol</TD>
    <TD></TD>
    <TD valign="top">
    QTRX</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="top">
    See &#147;Risk Factors&#148; and the other information in this
    prospectus for information you should consider before deciding
    whether to invest in shares of our common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of shares of common stock to be outstanding after
this offering is based on 13,526,154&nbsp;shares of common stock
outstanding as of September&nbsp;30, 2005, and except as
otherwise indicated:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    gives effect to a
    1-for- &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse
    stock split to be effected prior to the closing of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    gives effect to our amended and restated certificate of
    incorporation, which we will file immediately prior to the
    closing of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    gives effect to the automatic conversion of all outstanding
    shares of our preferred stock into 48,408,823&nbsp;shares of
    common stock upon the closing of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    gives effect to the required release upon the closing of this
    offering of 3,446,305&nbsp;shares of common stock held in escrow
    in connection with the Hormos acquisition which are not
    reflected in our outstanding shares, including
    1,066,274&nbsp;shares of common stock issued upon the conversion
    of 1,066,274&nbsp;shares of preferred stock held in such
    escrow;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    assumes no exercise by the underwriters of their option to
    purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock in this offering to cover over-allotments.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as otherwise indicated, all information in this
prospectus excludes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    6,438,490&nbsp;shares of common stock issuable upon the exercise
    of options outstanding as of September&nbsp;30, 2005, with
    exercise prices ranging from $0.20 to $0.35&nbsp;per share and a
    weighted average exercise price of $0.29&nbsp;per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    806,769 additional shares of common stock reserved for future
    grants under our Amended and Restated 2005 Stock Incentive Plan
    as of September&nbsp;30, 2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    shares issuable upon the exercise of a warrant issued by us in
    connection with a credit facility we entered into in January
    2006, with respect to which the number of underlying shares and
    exercise price will be established at the closing of this
    offering pursuant to a formula agreed upon with the lender.
    Under this formula, at an assumed initial public offering price
    of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share and assuming a closing date
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006, this warrant would be exercisable
    for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">4

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
SUMMARY CONSOLIDATED FINANCIAL DATA
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the summary consolidated financial data
presented below in conjunction with our consolidated financial
statements and the related notes, &#147;Selected Consolidated
Financial Data,&#148; and &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
included elsewhere in this prospectus. The summary consolidated
financial data presented below for the years ended
December&nbsp;31, 2002, 2003 and 2004 and for the period from
inception (November&nbsp;20, 2000) to December&nbsp;31, 2004 and
as of December&nbsp;31, 2003 and 2004 have been derived from our
audited consolidated financial statements included elsewhere in
this prospectus. The summary consolidated financial data for the
nine months ended September&nbsp;30, 2004 and 2005 and for the
period from inception (November&nbsp;20, 2000) to
September&nbsp;30, 2005 and as of September&nbsp;30, 2005 are
unaudited, and have been derived from our audited and unaudited
consolidated financial statements that are included elsewhere in
this prospectus and have been prepared on the same basis as our
consolidated financial statements. In the opinion of management,
the unaudited summary consolidated financial data presented
below reflect all adjustments, which include only normal and
recurring adjustments, necessary to state fairly our results of
operations for and as of the periods presented. Historical
results are not necessarily indicative of the results of
operations to be expected for future periods.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The pro forma consolidated statement of operations data for the
year ended December&nbsp;31, 2004 and the nine months ended
September&nbsp;30, 2005 give effect to the acquisition of Hormos
as if the acquisition occurred on January&nbsp;1, 2004, and
should be read in conjunction with our Unaudited Pro Forma
Condensed Combined Financial Statements included elsewhere in
this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">5

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B>Nine Months Ended September&nbsp;30,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Cumulative</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Period From</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Period From</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Inception</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Inception</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(November&nbsp;20,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(November&nbsp;20,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Pro Forma</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2000) to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Pro Forma</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2000) to</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>for</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>for</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>September&nbsp;30,</B></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Acquisition</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Acquisition</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2005</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" align="center" nowrap><B>(in thousands, except share and per share data)</B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,797</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchased in- process research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,984</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,430</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,258</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,448</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,743</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,828</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,994</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,715</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59,984</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Income (Expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consulting income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(353</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,495</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,390</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,964</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,304</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,992</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,253</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,942</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,237</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,245</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of redeemable convertible preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,504</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,428</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,818</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,780</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,468</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,624</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,311</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(26,613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,694</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(66,307</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Loss Per Share, Basic and Diluted:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7.57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used to compute basic and diluted net loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,382,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,319,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,680,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma for conversion basic and diluted net loss per share
    available to common stockholders(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used to compute pro forma basic and diluted net loss per
    share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,841,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,212,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Pro forma for conversion basic and diluted net loss per common
    shares is calculated to give effect to the conversion of all
    outstanding shares of our preferred stock into
    48,408,823&nbsp;shares of common stock upon the completion of
    this offering, excluding 1,066,274&nbsp;shares of preferred
    stock held in escrow in connection with the Hormos acquisition
    that will convert into common stock upon the completion of this
    offering.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">6
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a summary of our balance sheet as
of September&nbsp;30, 2005:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an actual basis;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma basis to give effect to the automatic conversion
    of all of our outstanding preferred stock into
    48,408,823&nbsp;shares of our common stock upon the completion
    of this offering;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma as adjusted basis to give further effect to
    (1)&nbsp;the required release upon the closing of this offering
    of 3,446,305&nbsp;shares of common stock held in escrow in
    connection with the Hormos acquisition, including
    1,066,274&nbsp;shares of common stock issued upon the conversion
    of 1,066,274&nbsp;shares of preferred stock held in such escrow,
    (2)&nbsp;$6.0&nbsp;million of indebtedness incurred by us in
    connection with a debt facility we entered into in January 2006
    and (3)&nbsp;the sale of shares of common stock by us in this
    offering at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting underwriting discounts and commissions
    and estimated offering costs to be paid by us.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Working capital(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Convertible preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deficit accumulated during the development stage</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Represents current assets less current liabilities.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">7

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='102'></A>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Before you invest in our common stock, you should understand
the high degree of risk involved. You should consider carefully
the following risks and other information in this prospectus,
including our historical financial statements and related notes,
before you decide to purchase shares of our common stock. If any
of the following risks actually occur, our business, financial
condition and operating results could be adversely affected. As
a result, the trading price of our common stock could decline
and you could lose part or all of your investment.</I>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Drug Discovery, Development and
Commercialization</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Clinical trials may fail to adequately demonstrate the
    safety or efficacy of our existing product candidates or any
    future product candidates we may seek to develop, preventing or
    significantly delaying their regulatory approval and
    commercialization.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will not be able to commercialize any of our product
candidates until we obtain applicable regulatory approvals. To
satisfy FDA or foreign regulatory approval standards for the
commercial sale of our product candidates, we must demonstrate
in adequate and controlled clinical trials that our product
candidates are safe and effective.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Clinical trial programs are expensive, time-consuming and
typically take years to complete. We do not expect to receive
approval for marketing of any of our product candidates for
several years, if at all. In connection with clinical trials, we
face the risks that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the product candidate may not prove to be efficacious;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the results may not confirm positive results in earlier clinical
    or preclinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the product candidate may not be well-tolerated, may cause
    harmful side effects or may be subject to adverse or undesirable
    interaction when used with other drugs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    patients may die or suffer other adverse medical events for
    reasons that may or may not be related to the product candidate
    being tested;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    clinical research organizations or other suppliers we contract
    with may not perform as we expect;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the results may not meet the level of statistical significance
    required by the FDA or other regulatory agencies;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the FDA or other regulatory agencies may place a clinical hold
    on studies of our product candidates.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2006, we initiated a randomized, double-blind,
placebo-controlled, parallel group pivotal study of ospemifene
in the treatment of vaginal atrophy. The primary efficacy
endpoints will be assessed at week 12 and are a change in the
vaginal cell maturation index, change in vaginal pH and
improvement of the most bothersome symptom. Ospemifene is a
selective estrogen receptor modulator, or SERM. No SERM so far
has been approved by the FDA to treat vaginal atrophy. In
addition, some SERMs have been shown to increase the risk of
abnormal thickening of the endometrium, which is the lining of
the uterus, and of deep veinous thrombosis, which are blood
clots in a deep vein of an extremity. Some SERMs have also been
shown to cause increased incidence of hot flashes. We cannot
assure you that these side effects will not be demonstrated with
ospemifene. Lasofoxifene (Oporia), a SERM under development by
Pfizer for the treatment of osteoporosis and vaginal atrophy,
received a non-approvable letter from the FDA for the
osteoporosis indication. The reasons for the FDA&#146;s decision
are not publicly known. The FDA has not yet publicly issued a
decision regarding the approval of Oporia for the treatment of
vaginal atrophy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the case of fispemifene, initial phase&nbsp;I trials have
demonstrated that fispemifene raises testosterone levels in
older men, but these trials were not specific to the target
population for this product candidate, men with low
testosterone. Testosterone replacement therapy increases
prostate size and may raise prostate specific
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">8

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
antigen, or PSA, levels, a marker for prostate cancer. We cannot
assure you that prostate enlargement and elevated PSA levels
will not be shown in any trials we may conduct with fispemifene.
There is no long-term safety data regarding administration of
SERMs in men, nor has the FDA ever approved a SERM for use in
men. In addition, fispemifene uses the body&#146;s normal
feedback mechanism to increase testosterone levels. To date, our
clinical trials have only studied fispemifene in patients with
normal testosterone levels, and we have not yet confirmed that
fispemifene is effective in patients with low testosterone
levels. We cannot assure you that further clinical trials of
fispemifene will not raise safety or efficacy concerns.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT style="white-space: nowrap">QRX-401</FONT> is in
phase&nbsp;I clinical trials to assess safety and preliminary
indications of efficacy. To date, we have not observed
consistent LDL cholesterol lowering in normal volunteers
following administration of
<FONT style="white-space: nowrap">QRX-401</FONT> in our trials.
These trials are not yet complete and there can be no assurance
that the results of these trials will demonstrate that the use
of <FONT style="white-space: nowrap">QRX-401</FONT> is safe or
effective. <FONT style="white-space: nowrap">QRX-431</FONT> is
in preclinical studies and has not yet been tested in human
clinical trials. The FDA may not allow us to test
<FONT style="white-space: nowrap">QRX-431</FONT> in humans,
which would prevent us from further developing this product
candidate. As a result, we cannot yet assess the potential
safety or efficacy of
<FONT style="white-space: nowrap">QRX-431</FONT> in humans.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Success in preclinical testing and early clinical trials does
not ensure that later clinical trials will be successful. In
addition, our preclinical product candidates may not demonstrate
sufficient efficacy or safety to allow us to progress to
clinical testing. A number of companies in the pharmaceutical
industry have suffered significant setbacks in advanced clinical
trials, even after obtaining promising results in earlier
clinical trials. Future clinical trials may indicate previously
undetected side effects or fail to demonstrate efficacy in a
statistically significant manner. If we fail to achieve the
primary endpoints in our clinical trials or the results are
ambiguous, we will have to determine whether to redesign our
trials and protocols and continue with additional testing, or
cease development of the product candidate. Redesigning programs
could be extremely costly and time-consuming. Even if we are
able to achieve the primary endpoints of our trials, we may need
positive results from additional clinical trials to support the
filing of a new drug application, or NDA, with the FDA or a
similar application with regulatory authorities in other
countries seeking marketing approval for a product candidate. We
cannot predict how long any additional trial that might be
required by the FDA or regulatory authorities in other countries
will take or what the cost will be. If our clinical trials for
our product candidates are not completed, are significantly
delayed or fail to demonstrate that the product candidates are
safe and effective, our business prospects would be harmed and
our stock price would likely decline.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Delays in clinical trials could result in increased costs
    to us and delay our ability to obtain regulatory approval and
    commercialize our product candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant delays in clinical trials could materially affect
our product development costs and delay regulatory approval of
our product candidates. We do not know whether planned clinical
trials will begin on time, will need to be redesigned or will be
completed on schedule, if at all. Clinical trials can be delayed
for a variety of reasons, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays or failures in obtaining regulatory approval to commence
    a trial;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays or failures in obtaining clinical materials and
    manufacturing sufficient quantities of the product candidate for
    use in trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an inability to find a sufficient number of clinical
    investigators capable of running our clinical trials, or
    clinical research organizations and other suppliers of materials
    or services capable of providing support for our clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays or failures in reaching agreement on acceptable clinical
    trial agreement terms with prospective sites;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays or failures in obtaining approval of our clinical trial
    protocol from an institutional review board to conduct a study
    at a prospective site;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays in recruiting patients to participate in a study;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure of our clinical investigation sites and related
    facilities to be in compliance with the applicable protocol or
    applicable legal and regulatory requirements, including the
    FDA&#146;s Good Clinical Practices;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    unforeseen safety issues;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    inability to monitor patients adequately during or after
    treatment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    difficulty monitoring multiple clinical sites;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure of our third-party clinical trial managers and other
    suppliers of material or services to satisfy their contractual
    duties, comply with regulations or meet expected deadlines.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Completion of clinical trials depends, among other things, on
our ability to enroll a sufficient number of patients who remain
in a study until its conclusion, which depends on many factors,
including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the patient eligibility criteria defined in the applicable
    protocol;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the size of the patient population required for analysis of the
    trial&#146;s therapeutic endpoints;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the proximity of patients to clinical sites;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the adherence of patients to the applicable protocol;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the design of the applicable protocol;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to recruit clinical trial investigators with the
    appropriate competencies and experience;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to obtain and maintain patient consents;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    competition for patients by clinical trial programs for other
    treatments.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Difficulties in enrolling patients in our clinical trials could
increase the costs or affect the timing or outcome of clinical
trials.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If we fail to obtain regulatory approvals in the United
    States for our product candidates, we will not be able to
    generate revenue in the United States market from the
    commercialization of our product candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must receive FDA approval for our product candidates for an
indication at a particular dose before we can commercialize or
sell these product candidates in the United States for that
indication. The FDA can limit, delay or deny its approval for
many reasons, including:
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a product candidate may be found to be unsafe or ineffective;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    regulators may interpret data from preclinical testing and
    clinical trials differently and less favorably than we do;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    regulators may not approve the manufacturing processes or
    facilities that we use;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    regulators may change or initiate new requirements for approval
    at any time, many of which are unwritten.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may incur additional costs from any significant delay in
obtaining FDA approval and delays may diminish any competitive
advantages that we have. Even if we obtain FDA approval, our
product candidates may not be approved for all indications that
we request, which could limit the uses of our products and
adversely impact our potential royalties and product sales. If
FDA approval of a product is granted, such approval will be
limited to the indicated uses for which the product may be
marketed and may require costly post-marketing
<FONT style="white-space: nowrap">follow-up</FONT> studies, and
the FDA approved labeling may carry warnings or restrictions
that detract from the market acceptance of the product.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If we fail to obtain regulatory approvals in countries
    outside of the United States for our product candidates, we will
    not be able to generate revenue in such countries from the
    commercialization of product candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to market our products outside of the United States, we
must comply with numerous and varying regulatory requirements of
other countries. Approval procedures vary among countries and
can involve additional product testing and additional
administrative review periods. Additional separate pricing
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
approval procedures may be required prior to commercialization
in such countries. The time required to obtain approval in other
countries might differ from that required to obtain FDA approval
in the United States. The regulatory approval process in other
countries may include all of the risks detailed above regarding
FDA approval as well as additional risks. Regulatory approval in
one country does not ensure regulatory approval in another, but
a failure or delay in obtaining regulatory approval in one
country may negatively impact the regulatory process in others.
Failure to obtain regulatory approval in other countries or any
delay or setback in obtaining such approval could have the same
adverse effects detailed above regarding FDA approval in the
United States.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Even if we obtain regulatory approval, our marketed
    products will be subject to ongoing regulatory review. If we
    fail to comply with continuing United States and foreign
    regulations, we could lose approvals to market our products and
    our business would be seriously harmed.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following initial regulatory approval of any products we may
develop, we and our suppliers will be subject to continuing
regulatory review, including review of adverse drug experiences
and clinical results that are reported after our products become
commercially available. These post-approval clinical results
would include results from any post-marketing tests or vigilance
required as a condition of approval. The subsequent discovery of
previously unknown problems with the product, such as an adverse
side effect, may result in restrictions on the product or
withdrawal of the product from the market. The labeling,
packaging, storage, disposal, advertising, promotion and record
keeping related to the product will also continue to be subject
to extensive regulation. In addition, the manufacturer and
manufacturing facilities we use to make any of our product
candidates will be subject to periodic review and inspection by
the FDA and foreign regulatory agencies. If a previously unknown
problem or problems with a product or a manufacturing or
laboratory facility used by us is discovered, the FDA and any
foreign regulatory agency may impose restrictions on that
product or on the manufacturing facility, including requiring us
to withdraw the product from the market. Any changes to an
approved product, including the way it is manufactured or
promoted, often require regulatory approval before the product,
as modified, can be marketed. If we, our contract manufacturers
or any of our other suppliers fail to comply with applicable
regulatory requirements, a regulatory agency may:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    issue warning letters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    impose civil or criminal penalties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    suspend or withdraw our regulatory approval;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    seize or detain products or require a product recall;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    suspend any of our ongoing clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    impose restrictions on our operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    refuse to approve pending applications or supplements to
    approved applications filed by us; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    close the facilities of our contract manufacturers.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Even if we receive regulatory approval to market our
    product candidates, the market may not be receptive to our
    products, which would negatively affect our ability to achieve
    profitability.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If approved for marketing, the commercial success of our product
candidates will depend upon their acceptance by physicians and
the medical community, patients, and private, government and
third-party payors as clinically useful, safe and cost-effective
therapeutics. The degree of market acceptance of any of our
approved products will depend upon a number of factors,
including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the indication for which the product is approved, as well as its
    approved labeling;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the establishment and demonstration in the medical community of
    the safety and efficacy of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prevalence and severity of adverse side effects;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">11

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the potential advantages of such products over existing and
    future treatment methods;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the relative convenience, tolerability and ease of
    administration of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the strength of sales, marketing and distribution support;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the price and cost-effectiveness of the product;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the willingness of third parties to include the product on their
    drug formularies;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    sufficient third-party reimbursement.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are aware that a significant number of product candidates are
currently under development and may become available in the
future for the treatment of endocrine diseases of aging,
elevated cholesterol levels and psoriasis, and may be approved
prior to any of our products coming to market. Even if our
products achieve market acceptance, we may not be able to
maintain that market acceptance over time if new therapeutics
are introduced that are safer or more effective than our
products or are more favorably received than our products. In
addition, market acceptance can be impacted if previously
unknown problems with our products are subsequently discovered.
If our products do not achieve and maintain market acceptance,
we will not be able to generate sufficient revenue from product
sales to attain profitability.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have no experience selling, marketing or distributing
    products and have minimal capabilities to do so.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we receive regulatory approval to commence commercial sales
of any of our product candidates, we will need to establish a
sales and marketing organization with appropriate technical
expertise and distribution capability or identify collaborators
who have sales and marketing organizations. At present, we have
a Chief Business Officer who has marketing experience, but we
have no other sales or marketing employees. Factors that may
impede our efforts to commercialize our products through our own
sales and marketing organization include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    significant costs associated with building a sales, marketing
    and distribution organization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    difficulty recruiting and retaining adequate numbers of
    effective sales and marketing personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the inability of sales personnel to obtain access to, or
    persuade adequate numbers of, physicians to prescribe our
    products; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the lack of complementary products to be offered by sales
    personnel, which may put us at a competitive disadvantage to
    companies with broader product lines.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Even if we are able to develop our own sales and marketing
organization, we may not be able to compete effectively against
our competitors, many of which will include pharmaceutical
companies with substantially greater resources and larger sales
and marketing staffs than we are likely to have.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As an alternative to establishing our own sales and marketing
organization, we may attempt to engage pharmaceutical or other
health care companies with existing distribution systems and
direct sales and marketing organizations to assist us. If we
were to seek marketing partners or collaborators, we may not be
able to negotiate favorable distribution or partnering
arrangements, if at all. To the extent we enter co-promotion,
co-marketing or other licensing arrangements, the amount of
revenues we receive from the sale of our products will depend on
the efforts of third parties and will not be under our control.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Financial Performance and Operations</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have a history of losses, and we may never achieve
    profitability.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since our inception, we have incurred significant net losses,
including net losses of $36.2&nbsp;million and $9.3&nbsp;million
for the nine months ended September&nbsp;30, 2005 and the year
ended December&nbsp;31, 2004, respectively. As of
September&nbsp;30, 2005, our cumulative net loss was
$58.5&nbsp;million. We have not yet completed the development,
including obtaining regulatory approvals, of any of our product
candidates and, consequently, have not generated revenues from
the sale of products. Even if we succeed in developing and
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
commercializing one or more of our product candidates, we expect
to incur substantial losses for the foreseeable future. We also
anticipate that our expenses will increase substantially in the
foreseeable future as we:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    continue the development of our product candidates and
    preclinical programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    begin clinical development of our preclinical programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prepare for commercialization of our product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    expand our portfolio of product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    increase our administrative functions;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    hire additional personnel.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also expect to experience negative cash flow from operations
for the foreseeable future as we fund our operating losses. We
will need to generate significant revenues to achieve
profitability. We may not be able to generate significant
revenues, and we may never achieve profitability. Our failure to
fund our continuing losses or achieve profitability would
negatively impact the market price of our common stock. Even if
we do become profitable, we may not be able to sustain or
increase profitability on a quarterly or annual basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If we cannot raise additional capital on acceptable terms,
    we may be unable to complete planned clinical and preclinical
    trials, obtain regulatory approvals or commercialize our product
    candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our existing cash reserves, together with
available borrowings under our credit facility and proceeds from
this offering, will fund our planned activities for at least the
next 18&nbsp;months. We will require substantial future capital
in order to continue to conduct the research and development,
preclinical and clinical programs and regulatory activities
necessary to bring our product candidates to market. During the
nine months ended September&nbsp;30, 2005, our net cash used in
operating activities was $10.4&nbsp;million. We expect our rate
of cash used in operating activities will increase as we
undertake large and costly phase&nbsp;III trials for ospemifene
and continue to advance other product candidates. Our future
capital requirements depend on many factors, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the progress of preclinical development and clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the number of product candidates we pursue or the expansion of
    existing product candidates to new indications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the discovery, in-licensing or acquisition of additional product
    candidates or technologies that require financial commitments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the time and costs involved in obtaining regulatory approvals,
    and the number of different regulatory agencies we seek approval
    from;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays that may be caused by evolving requirements of regulatory
    agencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our plans to establish sales, marketing and distribution
    capabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the cost and timing of securing manufacturing capabilities for
    our product candidates and commercial products, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the terms and timing of any collaborative, licensing and other
    arrangements we may establish;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the costs involved in filing, maintaining and prosecuting patent
    applications and enforcing or defending patent claims;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our revenues, if any, from successful development and
    commercialization of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the costs of being a public company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the number of additional employees we hire.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">13

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may seek additional funding through private or public sales
of our equity securities, debt financing or corporate
collaborations or licensing arrangements. To the extent that we
raise additional funds by issuing equity securities, our
existing stockholders may experience dilution. Debt financing
may subject us to restrictive covenants that could limit our
flexibility in conducting future business activities. To the
extent that we raise additional funds through collaboration or
licensing agreements, it will be necessary to relinquish some
commercial rights to our clinical product candidates. Our
ability to raise additional funds will depend on financial,
economic and market conditions in the pharmaceutical industry,
general market conditions and other factors, many of which are
beyond our control. We may not be able to obtain additional
funding on favorable terms, or at all. If we cannot obtain
adequate funds, we may:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delay, reduce the scope or eliminate some of our preclinical
    development or clinical trials for one or more of our product
    candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delay establishment of, or decide not to establish,
    manufacturing, sales, marketing and distribution capabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    curtail significant product development programs that are
    designed to identify new product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    be unable to acquire technologies or pursue other business
    opportunities that require financial commitments; and/or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    sublicense certain patents and patent applications, cease the
    prosecution and maintenance of certain patents and applications
    on a country-by-country basis, or otherwise relinquish some or
    all rights to our product candidates.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our research and development program is funded in part by
    Finnish government agencies, and in order to maintain this
    funding and obtain additional funding from these agencies, we
    are required to comply with their requirements. If we fail to
    comply, we may lose government funding for our research and
    development programs in Finland.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Tekes, the National Technology Agency of Finland, is one of the
main public financers of technology research and development
programs in Finland. Tekes provides financial aid and loans on
favorable terms to qualifying companies in Finland. These loans
are granted on a project-by-project basis, generally carry
interest at below market rates and generally are not required to
be repaid for several years. Under Finnish law, interest and
principal on these loans are not repayable unless we have
adequate equity capital. As of September&nbsp;30, 2005, we had
approximately $15.5&nbsp;million in principal and accrued
interest outstanding with respect to these loans and
$2.4&nbsp;million in outstanding advances from Tekes that relate
to several separate projects. The terms, conditions and
reporting requirements of the loans are set forth in loan
documents entered into with respect to each separate project
loan, and in the general terms and conditions published by
Tekes. Some of the loan terms may be subject to interpretation
by Tekes and us and may not provide definitive guidance as to
whether we are in compliance with them. Under the terms of the
loans, Tekes has the right to accelerate the loans in whole or
in part under a number of circumstances, including if:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    significant changes in the funded programs occur;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in the conditions required by the research work occur
    such that continuing the research work is not expedient;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we use the funding for purposes other than those for which they
    were granted;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we otherwise fail to comply with the loan terms.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe we are in compliance in all material respects with
all these requirements. However, if Tekes were to find that we
are not in compliance with the terms of the loans or the other
requirements, Tekes may have the right to stop funding loans and
to require repayment of outstanding loans. If Tekes were to
require us to repay all of the outstanding loans, it could have
a material adverse effect on us. If Tekes were to refuse to
provide additional funding, we would be required to seek
alternative funding for our research and development programs in
Finland and if such funding were not available, to reduce the
scope or eliminate
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
some of our research and development programs. Such alternative
funding may not be available to us on acceptable terms, or at
all.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our secured loan agreement contains various covenants that
    may restrict our business and financing activities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;26, 2006, we entered into an $18.0&nbsp;million
secured loan agreement with a third party lender. Loans under
the agreement are secured by substantially all of our assets
other than our intellectual property rights, and additionally,
the agreement contains covenants that, among other things,
restrict our ability to:
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    borrow money;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pay cash dividends on our capital stock, including on the shares
    of our common stock sold in this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    repurchase or redeem our capital stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make certain types of investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    create liens;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    use assets as security in other transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    sell certain assets;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    enter into certain transactions with our employees, officers or
    directors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These restrictions may limit our operational flexibility. Any
failure to comply with the restrictions of the secured loan
agreement may result in an event of default. Such default may
allow the lender to accelerate maturity of our obligations under
the agreement. If our debt were to be accelerated, we cannot
assure you that we would be able to repay it. In addition, our
default could give our lenders the right to terminate any
commitments they had made to provide us with additional funds.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

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    <TD></TD>
    <TD>
    <B><I>We may have difficulty managing the integration of Hormos
    and we may be exposed to liabilities from its prior
    operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we completed the acquisition of Hormos, a privately
held Finnish company focused on discovering and developing novel
hormonal therapies for age-related endocrine deficiencies in men
and women. The Hormos acquisition provided us with over 30
employees based in Finland, as well as multiple office locations
in Finland. The process of integrating Hormos has required and
continues to require a significant amount of resources and
management attention which detracts from attention to our
<FONT style="white-space: nowrap">day-to</FONT>-day business.
Our ability to manage the continued integration of Hormos will
require us to continue to improve our operational, financial and
management information systems and controls. If we fail to
manage the integration of Hormos effectively it could have a
material adverse effect on our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, as a result of the Hormos acquisition, we may be
subject to contingent liabilities resulting from Hormos&#146;s
operations before we acquired it, including liabilities
resulting from the operation of Finnish law. Although we may
have some recourse to the sellers of the business under our
acquisition agreements, we may not be fully covered for
contingent liabilities.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If we are unable to retain any of our key executives or if
    we are unable to recruit and retain other qualified personnel as
    we grow our business, it may be more difficult for us to execute
    our business strategy.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that one of our strengths lies in the drug
development and commercialization skills and experience of our
senior management. Accordingly, we are highly dependent on our
four founders: Chief Executive Officer, Robert Zerbe,&nbsp;M.D.,
Chief Scientific and Regulatory Officer, Stuart
Dombey,&nbsp;M.B., Chief Medical Officer, Randall
Whitcomb,&nbsp;M.D. and Chief Business Officer, Christopher
Nicholas. We have key-man insurance on these members of our
management team, but we do not have employment agreements with
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
them. The loss of any of our key employees and our inability to
fill these positions with equally qualified employees could
impede the achievement of our development objectives. As we grow
our business, our success will also depend on our ability to
hire additional qualified personnel. We may be unable to attract
and retain personnel on acceptable terms given the competition
for experienced scientists among biotechnology, pharmaceutical
and health care companies, universities and non-profit research
institutions. If we are unsuccessful in our recruitment efforts,
we may be unable to execute our strategy.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We will need to increase the size of our organization, and
    we may encounter difficulties managing our growth.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2005, we had 19 employees in Ann Arbor
and 39&nbsp;employees in Finland. We plan to hire several
additional employees as required each year to add depth and
specialized expertise to our scientific and management team. We
expect that any substantial growth would place a strain on our
administrative and operational infrastructure. If the product
candidates that we are developing continue to advance in
clinical trials, we will need to expand our development,
regulatory, manufacturing, quality, sales, marketing and
distribution capabilities or contract with third parties to
provide these capabilities for us. As our operations expand, we
expect that we will need to develop additional relationships
with various collaborators, contract research organizations,
suppliers, manufacturers and other organizations. We may not be
able to establish such relationships or may incur significant
costs to do so. Our ability to manage our growth will also
require us to continue to improve our operational, financial and
management controls, reporting systems and procedures, which
will further increase our operating costs.
</DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>In addition to our operations in Ann Arbor, Michigan, we
    operate two facilities in Finland. If we are unable to manage
    the challenges associated with our international operations, the
    growth of our business could be limited.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we acquired our wholly owned subsidiary Hormos, a
Finnish company. Prior to acquiring Hormos, we had never
conducted operations outside of the United States. We are
subject to a number of risks and challenges that specifically
relate to these international operations. Our international
operations may not be successful if we are unable to meet and
overcome these challenges, which could limit the growth of our
business and may have an adverse effect on our business and
operating results. These risks include:
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    difficulty managing operations in multiple locations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    local regulations that may make it more difficult to conduct our
    research and development activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    foreign protectionist laws and business practices that favor
    local competition;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    failure of local laws to provide the same degree of protection
    against infringement of our intellectual property;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    understanding legal requirements that differ from those of the
    United States and keeping abreast of changes in those
    requirements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos conducts business in Euros. However, we fund a portion of
the operations of Hormos through intercompany financing
denominated in United States dollars. We are exposed to
fluctuations in exchange rates, which could result in losses and
have an adverse impact on our results of operations. We have no
control over the factors that generally affect these risks, such
as economic, financial and political events and the supply and
demand for the applicable currencies. Because we have foreign
operations, fluctuations in foreign exchange rates could have a
material effect on our operating results.
</DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Because we have operated as a private company, we have no
    experience complying with public company obligations, including
    the Sarbanes-Oxley Act. Complying with these requirements will
    increase our costs and require additional management
    resources.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a small company with limited resources. We have operated
as a private company, not subject to the requirements applicable
to public companies. We will need to expand our staff when we
become a public
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
company, and we may encounter difficulty attracting qualified
staff with requisite experience due to the high level of
competition for experienced personnel.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As directed by Section&nbsp;404 of the Sarbanes-Oxley Act, the
SEC adopted rules requiring public companies to include a report
of management on the company&#146;s internal controls over
financial reporting in their annual reports on
Form&nbsp;<FONT style="white-space: nowrap">10-K.</FONT> In
addition, the public accounting firm auditing the company&#146;s
financial statements must attest to and report on
management&#146;s assessment of the effectiveness of the
company&#146;s internal controls over financial reporting. This
requirement will first apply to our annual report on
Form&nbsp;<FONT style="white-space: nowrap">10-K</FONT> for our
fiscal year ending December&nbsp;31, 2007. We may be unable to
comply with applicable deadlines. In addition, if we are unable
to conclude that we have effective internal controls over
financial reporting or, if our independent auditors are unable
to provide us with an unqualified report as to the effectiveness
of our internal controls over financial reporting as required by
Section&nbsp;404 of the Sarbanes-Oxley Act, investors could lose
confidence in the reliability of our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Dependence on Third Parties</B>
</DIV>

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    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We rely on independent clinical investigators and contract
    research organizations to conduct clinical trials, and they may
    not be diligent, careful or timely, which may delay development
    and commercialization of our product candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We rely almost exclusively on independent clinical investigators
and contract research organizations (CROs) to conduct our
clinical trials and to perform data collection and analysis.
These investigators are not our employees, and we cannot control
the amount of time or resources that they devote to our product
development programs. These investigators may fail to devote
sufficient time and resources to our programs, fail to enroll
patients as rapidly as expected, or otherwise fail to perform in
a satisfactory manner, potentially delaying regulatory approval
of our product candidates. Failure of the CROs to meet their
obligations under our agreements could adversely affect clinical
development of our product candidates. These independent
investigators and CROs may also have relationships with other
commercial entities, some of which may compete with us.
</DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We rely on third party manufacturers to manufacture our
    product candidates. If these third party manufacturers fail to
    manufacture product candidates of satisfactory quality, in a
    timely manner, in sufficient quantities or at acceptable costs,
    development and commercialization of our product candidates
    could be delayed.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have no manufacturing facilities, and we have no experience
in the commercial manufacturing of drugs or in designing drug
manufacturing processes. We have contracted with third party
manufacturers to produce our product candidates for clinical
trials. We have limited supplies of our product candidates for
clinical trials. If our supplies are damaged or destroyed,
either during storage or shipping or otherwise, our clinical
trials may be delayed, which could have a material adverse
effect on our business. We intend to rely on third party
contract manufacturers to manufacture, supply, store and
distribute commercial quantities of our product candidates. We
will also rely on our third party manufacturing partners to work
with us to complete the Chemistry, Manufacturing and Control, or
CMC, section of any NDAs or other marketing approval
applications we may file.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Contract manufacturers are obliged to operate in accordance with
government mandated obligations, including FDA-mandated current
good manufacturing practices, or cGMPs. A failure of any of our
contract manufacturers to establish and follow cGMPs or to
document their adherence to such practices may lead to
significant delays in the availability of material for clinical
trials and may delay or prevent filing or approval of marketing
applications for our products.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changing contract manufacturers may be difficult, and the number
of potential manufacturers is limited. Changing manufacturers
requires re-validation of the manufacturing processes and
procedures in accordance with government mandated obligations,
including FDA-mandated cGMPs. Such re-validation may be costly
and time-consuming. It may be difficult or impossible for us to
find replacement manufacturers on acceptable terms quickly, if
at all. Either of these factors could delay or prevent the
completion of our clinical trials, the
</DIV>

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approval of our product candidates by the FDA or other
regulatory agencies, or the commercialization of our products,
result in higher costs, or cause a decline in potential product
revenues.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Drug manufacturers are subject to on-going, periodic unannounced
inspections by the FDA and corresponding state and foreign
agencies to ensure strict compliance with cGMPs, other
government regulations and corresponding foreign standards.
While we are obligated to audit the performance of third party
contractors, we do not have control over our third party
manufacturers&#146; compliance with these regulations and
standards. Failure by our third party manufacturers or us to
comply with applicable regulations could result in sanctions
being imposed on us, including fines, injunctions, civil
penalties, failure of the government to grant market approval of
drugs, delays, suspension of clinical trials, withdrawal of
approvals, seizures, detentions or recalls of product, operating
restrictions and criminal prosecution.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To date, our product candidates have been manufactured in small
quantities by third party manufacturers for preclinical and
clinical trials. In order to obtain marketing approval for any
of these product candidates, we will need to enter into
long-term supply agreements with our existing or new third party
manufacturers and demonstrate that we can manufacture sufficient
quantities for commercial sale. Our third party manufacturers
may not be able to successfully increase their manufacturing
capacity or apply at commercial scale the current manufacturing
process for any of our product candidates in a timely or
economic manner, or at all. This may require seeking out
additional manufacturing partners who may have different
equipment requiring additional validation studies, which the
relevant government regulator must review and approve. If we are
unable to successfully increase the manufacturing capacity for a
product candidate, the regulatory approval or commercial launch
of that product candidate may be delayed or there may be a
shortage in the supply of the product candidate. Our product
candidates require precise, high-quality manufacturing. The
failure of our third party manufacturers to achieve and maintain
these high manufacturing standards, including the incidence of
manufacturing errors, could result in patient injury or death,
product recalls or withdrawals, delays or failures in product
testing or delivery, cost overruns or other problems that could
seriously harm our business.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We may not succeed in entering into collaborations with
    partners at the later stages of developing our product
    candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business strategy, in part, includes entering into
collaborations, licenses or marketing and distribution
arrangements with corporate partners, primarily pharmaceutical
companies, for later stage development, commercialization,
marketing and distribution of certain of our product candidates.
To date, we have not entered into any collaboration agreements.
We intend to seek collaborators in cases where a product
candidate is not within the endocrine, metabolic or
cardiovascular therapeutic areas or where we think the product
candidate would benefit from the resources of a larger
pharmaceutical company. For instance, because becocalcidiol is
outside our core therapeutic areas, we are evaluating
alternatives for further developing this product candidate,
including seeking a partner for further development and
commercialization. We have been in discussions with potential
partners for becocalcidiol, but have not yet reached an
agreement. We cannot assure you that we will be able to reach an
agreement on commercially reasonable terms, if at all. If we
fail to reach agreement with collaborators, we will have to
incur substantial additional costs to complete development of
our product candidates and begin commercialization. If we
determine that we do not have access to sufficient cash or
funding to meet these costs, we may be forced to stop developing
these product candidates, either temporarily or permanently,
which would adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we are successful in entering into collaborations, we will
face the following risks:
</DIV>

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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    collaborators may under-fund or not commit sufficient resources
    to the testing, marketing, distribution or development of our
    product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    collaborators may fail to perform their obligations with respect
    to the testing, marketing, distribution or development of our
    product candidates;</TD>
</TR>

</TABLE>

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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    collaborators may not properly maintain or defend our
    intellectual property rights, or they may utilize our
    proprietary information in such a way as to invite litigation
    that could jeopardize or potentially invalidate our proprietary
    information or expose us to potential liability;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    collaborators may encounter conflicts of interest, changes in
    business strategy or other business issues, which could
    adversely affect their willingness or ability to fulfill their
    obligations to us;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    disputes may arise between us and our collaborators delaying or
    terminating the research, development or commercialization of
    our product candidates, resulting in significant litigation or
    arbitration that could be time-consuming and expensive, or
    causing collaborators to act in their own self-interest and not
    in our interest.</TD>
</TR>

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    <TD>
    <B><I>If we fail to enter into additional in-licensing or
    acquisition agreements or if these arrangements are
    unsuccessful, our business and operations might be adversely
    affected, and if we engage in any acquisition or in-licensing,
    we will incur a variety of costs, and we may never realize the
    anticipated benefits of the transaction.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since our inception, we have in-licensed or acquired all of our
product candidates. One of our strategies for expanding our
business is the in-licensing and acquisition of products and
additional product candidates. The success of this strategy
depends upon our ability to identify, select and acquire the
right pharmaceutical product candidates and products. We may be
unable to enter into any additional in-licensing or acquisition
agreements because suitable products or product candidates that
are within our expertise may not be available to us on terms
that are acceptable to us or because competitors with greater
resources seek to in-license the same products or product
candidates. Product candidates that we would like to develop may
not be available to us because they are controlled by
competitors who are unwilling to license the rights to the
product or product candidate to us. If we are unable to enter
into additional agreements to license products or product
candidates, or if these arrangements are unsuccessful, our
ability to execute our business strategy could be adversely
affected.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Although we currently have no commitments or agreements with
respect to any acquisitions, if we undertake an acquisition, the
process of integrating the acquired business, technology,
services, product or programs may result in unforeseen operating
difficulties and expenditures and may divert significant
management attention from our on-going business operations.
Moreover, we may fail to realize the anticipated benefits of any
acquisition for a variety of reasons, such as an acquired
product candidate proving to not be safe or effective in later
clinical trials. We may fund any future acquisition by issuing
equity or equity-linked securities, which could dilute the
ownership percentage of our equity holders. We may also incur
debt to pay for an acquisition. The holders of the debt would
have priority over equity holders in the event of a subsequent
liquidation or bankruptcy, which would impair value for our
equity holders. Acquisition efforts can require substantial
expenditures, which could detract from our other programs. In
addition, we may devote resources to potential acquisitions that
are never completed.
</DIV>

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<B>Risks Related to Our Intellectual Property</B>
</DIV>

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    <B><I>If we are unable to protect our intellectual property
    rights, our competitors may develop and market products with
    similar features and our ability to commercialize our potential
    products could suffer.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following factors are important to our success:
</DIV>

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    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    receiving patent protection for our product candidates;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    maintaining patent protection for products or product candidates
    we have licensed and enforcing our license agreements;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    preventing others from infringing our intellectual property
    rights;&nbsp;and</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    maintaining our patent and trademark rights and trade secrets.</TD>
</TR>

</TABLE>

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We will be able to protect our intellectual property rights from
unauthorized use by third parties only to the extent that such
intellectual property rights are covered by valid and
enforceable patents and trademarks or are effectively maintained
as trade secrets.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We try to protect our proprietary position by filing U.S. and
foreign patent applications related to our important proprietary
technology, inventions and improvements. Because the patent
position of pharmaceutical companies involves complex legal,
administrative and factual questions, the issuance, scope,
validity and enforceability of patents cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated,
circumvented or rendered unenforceable. U.S.&nbsp;patents and
patent applications may also be subject to interference
proceedings, U.S.&nbsp;patents may be subject to reexamination
or reissue proceedings in the U.S.&nbsp;Patent and Trademark
Office, or PTO, and foreign patents may be subject to opposition
or comparable proceedings in corresponding foreign patent
offices. These proceedings could result in either loss of the
patent or denial of the patent application or loss or reduction
in the scope of one or more of the claims of the patent or
patent application. In addition, such interference,
reexamination, reissue and opposition proceedings may be costly.
Thus, any patents that we own or license from others may not
provide any protection against competitors. Furthermore, an
adverse decision in an interference proceeding can result in a
third party receiving the patent rights sought by us, which in
turn could affect our ability to market a potential product to
which that patent filing was directed.
</DIV>

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Our pending patent applications, those we may file in the
future, or those we may license from third parties, may not
result in patents being issued. The issuance of a patent is not
conclusive as to its validity or its enforceability and may not
provide us with proprietary protection or competitive advantages
against competitors with similar compounds. Furthermore, others
may independently develop more effective compounds, designs or
methods. We also rely on third party payment services for the
payment of patent annuities and other fees. Non-payment or delay
in payment of such fees, whether intentional or unintentional,
may result in loss of patents or patent rights important to our
business.
</DIV>

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In addition, our ability to enforce our patent rights depends on
our ability to detect infringement. It is difficult to detect
infringers who do not advertise the compounds that are used in
their products. Moreover, it may be difficult or impossible to
detect infringement in a competitor&#146;s or potential
competitor&#146;s product. Any litigation to enforce or defend
our patent rights, even if we were to prevail, could be costly
and time-consuming and would divert the attention of our
management and key personnel from our business operations.
</DIV>

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    <B><I>We also rely on our licensors to protect our intellectual
    property rights, and if our licensors fail to adequately protect
    this intellectual property or if we do not have exclusivity for
    the marketing of our products, our ability to commercialize
    products could suffer.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a party to a number of licenses that give us rights to
third party intellectual property that is necessary for our
business. In some of these cases, our licensors have retained
the right to prosecute and defend the intellectual property
rights licensed to us. We depend in part on the ability of our
licensors to obtain, maintain and enforce patent protection for
our licensed intellectual property. Our licensors may not
successfully prosecute the patent applications that we have
licensed. Even if patents issue in respect of these patent
applications, our licensors may fail to maintain these patents,
may determine not to pursue litigation against other companies
that are infringing these patents, or may pursue such litigation
less aggressively than we would. Without protection for the
intellectual property we license, other companies might be able
to offer substantially identical products for sale, which could
adversely affect our competitive business position and harm our
business prospects.
</DIV>

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    <TD>
    <B><I>We are dependent on patents and proprietary technology
    licensed from others. If we lose our licenses for any of our
    product candidates, we may not be able to continue developing
    such product candidates.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have obtained many of our product candidates pursuant to
licenses that give us rights to third party intellectual
property that is necessary or useful to our business. The
license agreements covering our product candidates impose
various diligence, commercialization, royalty and other
obligations on us. One or more of our licensors may allege that
we have breached our license agreement with them, and
accordingly seek to
</DIV>

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terminate our license. If we materially breach the obligations
in our license agreements, the licensor typically has the right
to terminate the license and we may not be able to market
products that were covered by the license, which could adversely
affect our competitive business position and harm our business
prospects. In addition, any claims brought against us by our
licensors could be costly and time-consuming and would divert
the attention of our management and key personnel from our
business operations.
</DIV>

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    <TD>
    <B><I>Claims that we infringe a third party&#146;s intellectual
    property may give rise to burdensome litigation, result in
    potential liability for damages or stop our development and
    commercialization efforts.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Third parties may assert patent or other intellectual property
infringement claims against us with respect to technologies used
in our potential products. While we have conducted patent
searches to determine whether our product candidates infringe
patents held by third parties, due to the inherent uncertainty
in conducting patent searches, we cannot assure you that all
relevant patents were identified. In addition, we expect that
numerous patent applications are currently pending and may be
filed in the future for products generally related to our
product candidates, including many patent applications that
remain confidential after filing. Due to these factors, we
cannot assure you that our product candidates do not infringe
the patent rights of third parties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A third party holds an issued United States patent related to
the use of an anti-estrogen for use in the treatment of androgen
deficiency and related disorders. Zonagen, Inc., a
pharmaceutical company also developing a treatment for
testosterone deficiency in men using a compound that is named in
the patent, requested a reexamination of this patent from the
PTO on the grounds that the claims of the third party&#146;s
patent were invalid because they were disclosed in printed
publications before the date of the invention. In June 2005, the
PTO determined that the claims, as amended during this
reexamination, were patentable in view of the publications under
consideration. Zonagen has subsequently stated in its public
filings that it intends to seek further reexamination of this
third party patent based on additional prior art publications
not previously considered by the PTO. If, as a result of this
further reexamination, the patentability of the claims is
confirmed by the PTO, the patent&#146;s scope could cover our
intended use of fispemifene. If Zonagen is not successful in its
attempt to invalidate all of the claims of the patent, our
intended use may be covered by any surviving claims. The patent
holder could bring a claim against us alleging that our
fispemifene product candidate infringes the patent. We believe
we would have valid defenses to any such claim; however,
notwithstanding any defenses we may assert, if such an
infringement claim were successful, we would need to obtain a
license from the patent holder in order to commercialize
fispemifene in the United States. If such a license were
necessary but not available to us on acceptable terms or at all,
we may not be able to commercialize fispemifene at all in the
United States.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The owners or licensees of this or other patents may file one or
more infringement actions against us. Patent litigation can
involve complex factual and legal questions, and its outcome is
uncertain. Any claim relating to infringement of patents that is
successfully asserted against us may require us to pay
substantial damages for past use of the asserted intellectual
property and a royalty going forward if we are forced to take a
license. Even if we were to prevail, any litigation could be
costly and time-consuming and would divert the attention of our
management and key personnel from our business operations. As a
result of a patent infringement suit brought against us, we may
be forced to stop or delay developing, manufacturing or selling
potential products that are claimed to infringe a third
party&#146;s intellectual property unless that party grants us
rights to use its intellectual property and we may be subject to
damages. In such cases, we may be required to obtain licenses to
patents or proprietary rights of others in order to continue to
commercialize our products. However, we may not be able to
obtain any required licenses on acceptable terms, or at all.
Even if we were able to obtain rights to the third party&#146;s
intellectual property, these rights may be non-exclusive,
thereby giving our competitors access to the same intellectual
property, and any license may be royalty bearing. As a result of
third party claims, we may be forced to redesign or rename our
products to avoid infringing the intellectual property rights of
third parties, which may not be possible and could be costly and
time-consuming if it is possible to do. Ultimately, we may be
unable to commercialize some of our product candidates or may
have to discontinue development of product candidates or cease
some of our business
</DIV>

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operations as a result of patent infringement claims or due to
our failure to license essential technology, which could
severely diminish our commercial prospects and harm our
financial condition.
</DIV>

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    <TD>
    <B><I>We are subject to the patent laws of countries other than
    the United States, which may not offer the same level of patent
    protection and may require us to pay royalties to employee
    inventors that are not yet determinable.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many countries, including certain countries in Europe, have
compulsory licensing laws under which a patent owner may be
compelled to grant licenses to third parties (for example, the
patent owner has failed to &#147;work&#148; the invention in
that country, or the third party has patented improvements). In
addition, many countries limit the enforceability of patents
against government agencies or government contractors. In these
countries, the patent owner may have limited remedies, which
could materially diminish the value of the patent. Moreover, the
legal systems of certain countries, particularly certain
developing countries, do not favor the aggressive enforcement of
patent and other intellectual property protection which makes it
difficult to stop infringement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish law, current and former employees of Hormos are
entitled to &#147;fair and reasonable compensation&#148; upon
commercialization of intellectual property developed by them and
transferred to Hormos. Hormos has a policy in place for the
calculation of the royalties due to employees that we believe
conforms to the statutory requirements. The potential royalty
payments depend on the type of assignment and the stage of
development of the invention, among other things. We believe
that all current employees of Hormos are bound by the policy of
Hormos which determines the amount of royalties due. However,
under Finnish law, an employee cannot be bound to accept a
certain level of compensation before the invention is made,
therefore Hormos may be required to negotiate &#147;fair and
reasonable compensation&#148; with its former employees if the
inventions of these former employees are ever commercialized. An
employee has a ten-year period, calculated from the date when
Hormos acquired the rights from the employee, to make claims
based on the employee&#146;s inventions. Current and former
employees may seek royalties that are not acceptable to us, or
may refuse to accept our offer or may challenge the formula
itself. In case of an impasse in the negotiations, the parties
have the right under Finnish law to bring a claim in front of a
special &#147;employee invention board&#148; with
representations of both employer and employee organizations. We
have no experience in these types of proceedings, and any
determination adverse to us, such as the imposition of a royalty
payment that we believe is excessive, could increase our
expenses.
</DIV>

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    <TD>
    <B><I>We rely on trade secrets and other forms of non-patent
    intellectual property protection. If we are unable to protect
    our trade secrets, other companies may be able to compete more
    effectively against us.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also rely on trade secrets, know-how and technology, which
are not protected by patents, to maintain our competitive
position. We try to protect this information by entering into
confidentiality agreements with parties that have access to it,
such as our strategic partners, collaborators, employees and
consultants. Any of these parties may breach these agreements
and we may not have adequate remedies for any specific breach.
In addition, our trade secrets may otherwise become known or be
independently discovered by competitors. To the extent that our
commercial partners, collaborators, employees and consultants
use intellectual property owned by others in their work for us,
disputes may arise as to the rights in related or resulting
know-how and inventions. If any of our trade secrets, know-how
or other technologies not protected by a patent were to be
disclosed to or independently developed by a competitor, our
business, financial condition and results of operations could be
materially adversely affected.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We may be subject to damages resulting from claims that we
    or our employees have wrongfully used or disclosed alleged trade
    secrets of their former employers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many of our employees were previously employed at other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although no claims against
us are currently pending, we may be subject to claims that these
employees or we have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend
against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial
costs and be a distraction to management. If we fail in
defending such claims, in addition to
</DIV>

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paying money claims, we may lose valuable intellectual property
rights or personnel. A loss of key personnel or their work
product could hamper or prevent our ability to commercialize
certain product candidates, which would adversely affect our
commercial development efforts.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Industry</B>
</DIV>

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    <TD>
    <B><I>Competition in the biotechnology and pharmaceutical
    industries is intense, and even if our product candidates are
    approved and commercialized, competitive products may impede
    market acceptance of our products.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business is characterized by extensive research and
development efforts, rapid developments and intense competition.
Our competitors may have or may develop superior technologies or
approaches to treat the diseases or conditions targeted by our
product candidates, which may provide them with competitive
advantages. Our product candidates may not compete successfully.
The success of our product candidates will depend upon factors
such as product efficacy, safety, reliability, availability,
timing, scope of regulatory approval, acceptance and price,
among other things. If our competitors enter the marketplace
before we do with less expensive or favorably differentiated
drugs, our product candidates, if approved for
commercialization, may not be profitable to sell or continue to
develop.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pharmaceutical technologies have undergone rapid and significant
change, and we expect that they will continue to do so. Any
compounds, products or processes that we develop may become
obsolete or uneconomical before we recover any expenses incurred
in connection with their development.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If ospemifene and fispemifene are approved and commercialized,
they will have significant competition. Vaginal atrophy is
generally treated with estrogen-based therapies, either oral or
topical, such as Premarin, Prempro and Premarin Vaginal Cream,
marketed by Wyeth, and Vagifem, marketed by Novo Nordisk. Other
products in development for this condition include bazedoxifene,
being developed by Wyeth, and Oporia, being developed by Pfizer,
which are both SERMs. Testosterone deficiency is most frequently
treated with topical gels or patches, such as Solvay
Pharmaceuticals&#146; Androgel and Watson Pharma&#146;s
Androderm. Products in development include Acapodene and
Ostarine, both being developed by GTx and Androxal, being
developed by Zonagen.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If <FONT style="white-space: nowrap">QRX-401</FONT> and
<FONT style="white-space: nowrap">QRX-431</FONT> are approved
and commercialized, they will also have significant competition.
In the treatment of lipid disorders, statins are the most
frequently prescribed products, examples of which include
Lipitor, marketed by Pfizer, Zocor and Mevacor, both marketed by
Merck&nbsp;&#38; Co., Crestor, marketed by AstraZeneca and
Pravachol, marketed by Bristol-Myers Squibb. Other competitors
include non-statin products, such as Zetia, marketed by
Merck/Schering-Plough, Tricor, marketed by Abbott, and Niaspan,
marketed by Kos; combinations of statins with other agents, for
example Vytorin, marketed by Merck/Schering-Plough and Advicor,
marketed by Kos; and new products in development, such as
KaroBio&#146;s KB2115.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Becocalcidiol, if approved and commercialized, will face
competition from several marketed topical psoriasis products or
products under development, specifically topical calcitriol
analogues. These include Dovonex, marketed by Warner Chilcott,
Talconex, to be marketed by Warner Chilcott,<B>
</B>tisocalcitate, in development by Schering AG, and CTA018, in
development by Cytochroma.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our competitors, including many of those listed above,
have substantially greater capital resources, research and
development staffs, facilities and experience in conducting
clinical trials and obtaining regulatory approvals, as well as
in manufacturing and marketing pharmaceutical products. As a
result, they may achieve earlier product commercialization or
patent protection. In addition to the branded competitive
products listed above, if our product candidates receive
regulatory approval they may face competition from generic
drugs, and the availability of generic drugs may adversely
affect the market for our products.
</DIV>

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    <TD>
    <B><I>Any drugs we develop may become subject to unfavorable
    third party reimbursement practice, pricing regulations or
    health care reform initiatives, thereby harming our
    business.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The commercial success of our product candidates is
substantially dependent on whether third party reimbursement is
available for our product candidates. Medicare, Medicaid, health
maintenance organizations and other third party payors may not
cover or provide adequate payment for our potential products.
They may not view our product candidates as cost-effective and
reimbursement may not be available to consumers or may not be
sufficient to allow our potential products to be marketed on a
competitive basis. Changes in reimbursement policies or health
care cost containment initiatives that limit or restrict
reimbursement for our products may cause our revenue to decline.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Legislative or regulatory efforts to control or reduce health
care costs or reform government health care programs could
result in lower prices or rejection of product candidates that
we may commercialize. Federal legislation enacted in December
2003 added an outpatient prescription drug benefit to Medicare,
effective January 2006. In the interim, Congress has established
a discount drug card program for Medicare beneficiaries. Both
benefits will be provided primarily through private entities,
which will attempt to negotiate price concessions from
pharmaceutical manufacturers. These negotiations may increase
pressure to lower prescription drug prices. While the new law
specifically prohibits the U.S.&nbsp;government from interfering
in price negotiations between manufacturers and Medicare drug
plan sponsors, some members of Congress are pursuing legislation
that would permit the U.S.&nbsp;government to use its enormous
purchasing power to demand discounts from pharmaceutical
companies, thereby creating de facto price controls on
prescription drugs. In addition, the new law contains triggers
for Congressional consideration of cost containment measures for
Medicare in the event Medicare cost increases exceed a certain
level. These cost containment measures could include limitations
on prescription drug prices. This Medicare prescription drug
coverage legislation, as well as additional healthcare
legislation that may be enacted at a future date, could reduce
our sales and adversely affect our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Another development that may affect the pricing of drugs is
Congressional action regarding drug reimportation into the
United States. The Medicare Prescription Drug Plan legislation,
which became law in December 2003, requires the Secretary of
Health and Human Services to promulgate regulations for drug
reimportation from Canada into the United States under some
circumstances, including when the drugs are sold at a lower
price than in the United States. The Secretary retains the
discretion not to implement a drug reimportation plan if he
finds that the benefits do not outweigh the cost. Proponents of
drug reimportation may attempt to pass legislation that would
directly allow reimportation under certain circumstances. If
legislation or regulations were passed allowing the
reimportation of drugs, they could decrease the price we receive
for any products that we may develop, negatively affecting our
anticipated revenues and prospects for profitability.
</DIV>

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    <TD>
    <B><I>State pharmaceutical marketing compliance and reporting
    requirements may expose us to regulatory and legal action by
    state governments or other government authorities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In recent years, several states, including California, Maine,
Minnesota, New Mexico, Vermont and West Virginia, have enacted
legislation requiring pharmaceutical companies to establish
marketing compliance programs and file periodic reports with the
state on sales, marketing, pricing and other activities. For
example, California has enacted a statute requiring
pharmaceutical companies to adopt a comprehensive compliance
program that is in accordance with the Office of Inspector
General of the Department of Health and Human Services
Compliance Program Guidance for Pharmaceutical Manufacturers.
This compliance program must include policies for compliance
with the Pharmaceutical Research and Manufacturers of America
Code on Interactions with Healthcare Professionals, as well as a
specific annual dollar limit on gifts or other items given to
individual healthcare professionals in California. The law
requires posting policies on a company&#146;s public web site
along with an annual declaration of compliance.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Maine, Minnesota, New Mexico, Vermont and West Virginia have
also enacted statutes of varying scope that impose reporting and
disclosure requirements upon pharmaceutical companies pertaining
to drug pricing and payments and costs associated with
pharmaceutical marketing, advertising and promotional
activities, as
</DIV>

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well as restrictions upon the types of gifts that may be
provided to healthcare practitioners. Similar legislation is
being considered in other states. Many of these requirements are
new and uncertain and the penalties for failure to comply with
these requirements are unclear.
</DIV>

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    <TD>
    <B><I>We face potential product liability exposure far in excess
    of our limited insurance coverage.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The use of any of our product candidates in clinical trials, and
the sale of any approved products, may expose us to product
liability claims. These claims might be made directly by
consumers, health care providers, pharmaceutical companies or
others selling our products. We have obtained limited product
liability insurance coverage for our clinical trials. However,
our insurance may not reimburse us or may not be sufficient to
reimburse us for expenses or losses we may suffer. Moreover,
insurance coverage is becoming increasingly expensive, and we
may not be able to maintain insurance coverage at a reasonable
cost or in sufficient amounts to protect us against losses due
to liability. If we obtain marketing approval for any of our
product candidates, we intend to expand our insurance coverage
to include the sale of commercial products, but we may be unable
to obtain commercially reasonable product liability insurance
for any products approved for marketing. On occasion, juries
have awarded large judgments in class action lawsuits based on
drugs that had unanticipated side effects. In addition, the
pharmaceutical and biotechnology industries, in general, have
been subject to significant product liability litigation. A
product liability claim or series of claims brought against us
would decrease our cash reserves and could cause our stock price
to fall, and, if a claim against us is successful, it could have
a material adverse effect on our financial condition.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>If we do not comply with laws regulating the protection of
    the environment and health and human safety, our business could
    be adversely affected.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our research and development involves the use of hazardous
materials and chemical compounds. We maintain quantities of
various toxic chemicals in our facilities in Finland that are
required for our research and development activities. We believe
our procedures for storing, handling and disposing of these
materials in our Finnish facility comply with the standards
mandated by applicable Finnish laws and guidelines. Although we
believe that our safety procedures for handling and disposing of
these materials comply with the standards mandated by applicable
regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. If an accident occurs, we
could be held liable for resulting damages, which could be
substantial. We are also subject to numerous environmental,
health and workplace safety laws and regulations, including
those governing laboratory procedures, exposure to blood-borne
pathogens and the handling of biohazardous materials.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We may not be able to conduct, or contract with others to
    conduct, animal testing in the future, which could harm our
    research and development activities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain laws and regulations relating to drug development
require us to test our product candidates on animals before
initiating clinical trials involving humans. Animal testing
activities have been the subject of controversy and adverse
publicity. Animal rights groups and other organizations and
individuals have attempted to stop animal testing activities by
pressing for legislation and regulation in these areas and by
disrupting these activities through protests and other means. To
the extent the activities of these groups are successful and we
or our contract research organizations are unable to conduct
animal testing, our research and development activities may be
interrupted or delayed.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Common Stock</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>We expect that our stock price will fluctuate
    significantly.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, you could not buy or sell our common
stock publicly. An active public market for our common stock may
not develop or be sustained after this offering. We will
negotiate and determine the initial public offering price with
the underwriters based on several factors. This price may vary
from the market price of our common stock after this offering.
You may be unable to sell your shares of common stock at or
above the initial offering price. The market price of
pharmaceutical and biotechnology stocks is
</DIV>

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subject to significant volatility. The volatility of
pharmaceutical and biotechnology stocks often does not relate to
the operating performance of the companies represented by the
stock. Factors that could cause volatility in the market price
of our common stock include:
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the timing and the results from our clinical trial programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the timing and results from our preclinical studies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the discovery, in-licensing or acquisition of additional product
    candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    FDA or international regulatory actions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    announcements of new products by our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    market conditions in the pharmaceutical and biotechnology
    sectors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developments concerning intellectual property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any litigation against us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any public concern about the safety of our potential products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    comments by securities analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    actual and anticipated fluctuations in our quarterly operating
    results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    deviations in our operating results from the estimates of
    securities analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    rumors relating to us or our competitors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    additions or departures of key personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    third party reimbursement policies;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developments concerning current or future strategic alliances.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These and other factors may cause the market price and demand
for our common stock to fluctuate substantially, which may limit
or prevent investors from readily selling their shares of common
stock and may otherwise negatively affect the liquidity of our
common stock. In addition, in the past, when the market price of
a stock has been volatile, holders of that stock have instituted
securities class action litigation against the company that
issued the stock. If any of our stockholders brought a lawsuit
against us, we could incur substantial costs defending the
lawsuit. Such a lawsuit could also divert the time and attention
of our management.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>Upon the issuance of additional securities or the exercise
    of outstanding options, the ownership interests of our existing
    stockholders will be diluted. In addition, future sales of
    common stock by us or our stockholders may cause our stock price
    to fall.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may issue additional securities to raise capital or make
acquisitions. We also have made and expect to continue to make
grants of stock options to retain and motivate employees,
officers and directors. Upon the issuance of additional
securities and options and the exercise of outstanding options,
your percentage ownership may be diluted both in terms of book
value and voting percentage. In addition, the market price of
our common stock could decline as a result of issuances by us,
or sales by our existing stockholders, of shares of common stock
in the market following the completion of this offering, or the
perception that these sales could occur. The
<FONT style="white-space: nowrap">lock-up</FONT> agreements with
Banc of America Securities LLC executed by us, our executive
officers and directors and substantially all of our stockholders
and optionholders, provide that Banc of America Securities LLC
may release those parties, at any time or from time to time and
without notice, from their obligation not to dispose of shares
of common stock for a period of 180&nbsp;days after the date of
this prospectus (which period could be extended for up to an
additional 34&nbsp;days under certain circumstances). Banc of
America Securities LLC has no pre-established conditions to
waiving the terms of the
<FONT style="white-space: nowrap">lock-up
</FONT>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">26

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
agreements. Any decision by it to waive those conditions would
depend on a number of factors, which may include market
conditions, the performance of our common stock in the market
and our financial condition at that time. Based on shares
outstanding at September&nbsp;30, 2005, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding upon the completion of this
offering. This includes
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock that we are selling in this offering, which may
be resold in the public market immediately. The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock upon completion of this
offering, will be restricted as a result of securities laws or
<FONT style="white-space: nowrap">lock-up</FONT> agreements.
Based on shares outstanding as of September&nbsp;30, 2005,
taking into account the
<FONT style="white-space: nowrap">lock-up</FONT> agreements, and
assuming Banc of America Securities LLC does not release
stockholders from these agreements prior to the expiration of
the <FONT style="white-space: nowrap">180-day</FONT>
<FONT style="white-space: nowrap">lock-up</FONT> period, the
following shares will be eligible for sale in the public market
at the following times:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    that are not subject to the
    <FONT style="white-space: nowrap">lock-up</FONT> agreements
    discussed above may be sold immediately after completion of this
    offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares that are not subject to the
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT> period
    described above may be sold beginning 90&nbsp;days after the
    effective date of the offering; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares may be sold upon expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT> period
    described above.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Following the expiration of the
<FONT style="white-space: nowrap">lock-up</FONT> period, holders
of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will have the right to require us to
register these shares under the Securities Act pursuant to a
registration rights agreement. See &#147;Description of Capital
Stock&nbsp;&#151; Registration Rights.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our directors and management will exercise significant
    control over our company.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After this offering, our directors and executive officers and
their affiliates will collectively control
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock, assuming that the
underwriters&#146; over-allotment is not exercised. These
stockholders, if they act together, will be able to influence
our management and affairs and all matters requiring stockholder
approval, including the election of directors and approval of
significant corporate transactions. This concentration of
ownership may have the effect of delaying or preventing a change
in control of our company and might affect the market price of
our common stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We will have broad discretion in how we use the proceeds
    of this offering, and we may not use these proceeds effectively,
    which could affect our results of operations and cause our stock
    price to decline.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will have considerable discretion in the application of the
net proceeds of this offering. We currently intend to use the
net proceeds of this offering for general corporate purposes,
including clinical trials, research and development expenses,
general and administrative expenses, and potential acquisitions
of companies, products and technologies that complement our
business. We have not yet finalized the amount of net proceeds
that we will use specifically for each of these purposes. We may
use the net proceeds for corporate purposes that do not yield a
significant return or any return at all for our stockholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Provisions of Delaware law or our charter documents could
    delay or prevent an acquisition of our company, even if the
    acquisition would be beneficial to our stockholders, and could
    make it more difficult for you to change management.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a merger, acquisition or other
change in control that stockholders may consider favorable,
including transactions in which stockholders might otherwise
receive a premium for their shares. This is because these
provisions may prevent or frustrate attempts by stockholders to
replace or remove our current management or members of our board
of directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These provisions include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a prohibition on stockholder action through written consent;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a requirement that special meetings of stockholders be called
    only by the Chairman of the board of directors, the Chief
    Executive Officer, or the board of directors pursuant to a
    resolution adopted by a majority of the total number of
    authorized directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

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

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a requirement that
    66<FONT style="font-size: 70%"><SUP>2</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
    of stockholders approve certain amendments to our certificate of
    incorporation and amendments to our bylaws;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the authority of the board of directors to issue preferred stock
    with such terms as the board of directors may determine.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result, these provisions and others available under
Delaware law could limit the price that investors are willing to
pay in the future for shares of our common stock.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We have never paid dividends on our capital stock, and we
    do not anticipate paying any dividends in the foreseeable
    future.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have paid no dividends on any of our classes of capital stock
to date and we currently intend to retain our future earnings,
if any, to fund the development and growth of our businesses. In
addition, our secured loan agreement prohibits us from paying
cash dividends. As a result, capital appreciation, if any, of
our common stock will be your sole source of gain for the
foreseeable future.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Investors in this offering will pay a much higher price
    than the book value of our common stock.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you purchase common stock in this offering, you will pay more
for your shares than the amounts paid by existing stockholders
for their shares. You will incur immediate and substantial
dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, representing the difference between our pro forma as
adjusted net tangible book value per share after giving effect
to this offering and an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. In the past, we issued options and warrants to acquire
common stock at prices significantly below the assumed initial
public offering price. To the extent these outstanding options
or warrants are ultimately exercised, you will sustain further
dilution.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='103'></A>
</DIV>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus, including the sections entitled
&#147;Prospectus Summary,&#148; &#147;Risk Factors,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and
&#147;Business,&#148; contains forward-looking statements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Forward-looking statements include, but are not limited to,
statements about:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the progress, timing and completion of our research, development
    and clinical trials for product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to successfully complete preclinical studies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our receipt of regulatory approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to market, commercialize and achieve market
    acceptance for product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to contract for and maintain third party
    manufacturing services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    whether any product candidates we commercialize are safer or
    more effective than other marketed products, treatments or
    therapies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to enter into collaborative or strategic
    relationships to assist in the clinical development or
    commercialization of our product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to maintain the licenses relating to our product
    candidates or in-license or acquire new product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to protect our intellectual property and operate our
    business without infringing upon the intellectual property
    rights of others;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to build an internal sales and marketing
    infrastructure;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    implementation of our business strategy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our use of the proceeds from this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our estimates for future operating and financial
    performance;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our estimates regarding anticipated operating losses, future
    revenues, capital requirements and our needs for additional
    financing.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These statements relate to future events or our future financial
performance, and involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different
from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements. These risks and other factors include those listed
under &#147;Risk Factors&#148; and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by
terminology such as &#147;may,&#148; &#147;will,&#148;
&#147;should,&#148; &#147;expects,&#148; &#147;intends,&#148;
&#147;plans,&#148; &#147;anticipates,&#148;
&#147;believes,&#148; &#147;estimates,&#148;
&#147;predicts,&#148; &#147;potential,&#148;
&#147;continue&#148; or the negative of these terms or other
comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We undertake no duty to
update any of the forward-looking statements after the date of
this prospectus or to conform these statements to actual
results. Neither the Private Securities Litigation Reform Act of
1995 nor Section&nbsp;27A of the Securities Act of 1933 provides
any protection for statements made in this prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">29

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='104'></A>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that we will receive net proceeds from the sale of
shares of our common stock in this offering of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
($&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
if the underwriters exercise their over-allotment option in
full), based upon an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and after deducting underwriting discounts and commissions
and estimated offering expenses payable by us. We expect to use
the net proceeds as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
    for the development of ospemifene, fispemifene, QRX-401, QRX-431
    and becocalcidiol, and research and development of preclinical
    programs;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the remainder, if any, for working capital and for other general
    corporate purposes, which may include in-licensing or acquiring
    product candidates.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have no current agreements or commitments with respect to any
future acquisitions or in-licensing.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the date of this prospectus, we cannot specify with
certainty all of the particular uses for the net proceeds to be
received upon the completion of this offering. Accordingly, our
management will have broad discretion in the application of the
net proceeds, and investors will be relying on the judgment of
our management regarding the application of the proceeds of this
offering. Pending these uses, we plan to invest the net proceeds
in short-term, interest-bearing obligations, investment-grade
instruments, certificates of deposit or direct or guaranteed
obligations of the United States. The goal with respect to the
investment of these net proceeds is capital preservation and
liquidity so that funds are readily available to fund our
research and development operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='105'></A>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have never declared or paid cash dividends on our capital
stock. We do not anticipate paying any cash dividends on our
capital stock in the foreseeable future. We currently intend to
retain all available funds and any future earnings to fund the
development and growth of our business.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">30

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='106'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our capitalization as of
September&nbsp;30, 2005:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an actual basis;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma basis, reflecting the conversion of all of our
    preferred stock into an aggregate of 48,408,823&nbsp;shares of
    common stock immediately prior to the closing of this
    offering;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma as adjusted basis, reflecting the pro forma
    adjustment noted above and reflecting (1)&nbsp;the required
    release upon the closing of this offering of
    3,446,305&nbsp;shares of common stock held in escrow in
    connection with the Hormos acquisition, including
    1,066,274&nbsp;shares of common stock issued upon the conversion
    of 1,066,274&nbsp;shares of preferred stock held in such escrow,
    (2)&nbsp;$6.0&nbsp;million of indebtedness incurred by us in
    connection with a debt facility we entered into in January 2006
    and (3)&nbsp;the sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in this offering at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting underwriting discounts and commissions
    and estimated offering expenses payable by us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read this table in conjunction with the sections of
this prospectus entitled &#147;Selected Consolidated Financial
Data&#148; and &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and with
our financial statements and related notes.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma as Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands, except share data)</B></TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loan&nbsp;advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Convertible preferred stock, $0.01&nbsp;par value; actual,
    70,060,092&nbsp;shares authorized, 47,600,946&nbsp;shares issued
    and outstanding; pro forma and pro forma as adjusted, no shares
    authorized, no shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stockholders&#146; equity (net capital deficiency):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value; actual, 94,919,416 shares
    authorized and 13,526,154 shares issued and outstanding; pro
    forma, 94,919,416 shares authorized and 61,934,977 shares issued
    and outstanding; pro forma as
    adjusted, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares authorized
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deficit accumulated during the development stage</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (net capital deficiency)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">31

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The actual number of shares of common stock shown as issued and
outstanding in the table above excludes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    6,438,490&nbsp;shares of common stock issuable upon the exercise
    of options outstanding as of September&nbsp;30, 2005, with
    exercise prices ranging from $0.20 to $0.35&nbsp;per share and a
    weighted average exercise price of $0.29&nbsp;per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    806,769 additional shares of common stock reserved for future
    grants under our Amended and Restated 2005 Stock Incentive Plan
    as of September&nbsp;30, 2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    shares issuable upon the exercise of a warrant issued by us in
    connection with a credit facility we entered into in January
    2006, with respect to which the number of underlying shares and
    exercise price will be established at the closing of this
    offering pursuant to a formula agreed upon with the lender.
    Under this formula, at an assumed initial public offering price
    of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share and assuming a closing date
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006, this warrant would be exercisable
    for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">32

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='107'></A>
</DIV>

<!-- link1 "DILUTION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our historical net tangible book value as of September&nbsp;30,
2005 was approximately
$(&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding as of September&nbsp;30, 2005.
Historical net tangible book value per share is determined by
dividing our total tangible assets less total liabilities and
convertible preferred stock by the actual number of outstanding
shares of our common stock. Our pro forma net tangible book
value as of September&nbsp;30, 2005 was approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding after giving effect to the
conversion of all outstanding shares of our convertible
preferred stock into common stock upon the closing of this
offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After giving effect to our sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering based on an assumed initial
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, less underwriting discounts and commissions and offering
expenses payable by us, the conversion of the outstanding shares
of convertible preferred stock into common stock and the release
of shares held in escrow in connection with our Hormos
acquisition, our pro forma as adjusted net tangible book value
as of September&nbsp;30, 2005 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. This represents an immediate increase in net tangible
book value per share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
existing stockholders and immediate dilution in net tangible
book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors purchasing our common stock in the
offering at the initial public offering price. Dilution per
share to new investors is determined by subtracting pro forma as
adjusted net tangible book value per share after this offering
from the assumed initial public offering price per share paid by
a new investor. The following table illustrates the per share
dilution without giving effect to the over-allotment option
granted to the underwriters:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial public offering price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Historical net tangible book value per share as of
    September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase per share due to the conversion of all shares of
    preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net tangible book value per share as of
    September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase per share attributable to new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma as adjusted net tangible book value per share after
    the offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share to new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes on a pro forma basis, as of
September&nbsp;30, 2005, the number of shares of our common
stock purchased from us, the total cash consideration paid to us
and the average price per share paid to us by existing
stockholders and to be paid by new investors purchasing shares
of our common stock in this offering, before deducting
underwriting discounts and commissions and estimated offering
expenses payable by us:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the underwriters exercise their over-allotment option in
full, our existing shareholders will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
and our new investors will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our shares of common stock outstanding after this offering.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">33

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The above discussion and tables are based on
13,526,154&nbsp;shares of common stock issued and outstanding as
of September&nbsp;30, 2005 and excludes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    6,438,490&nbsp;shares of common stock issuable upon the exercise
    of options outstanding as of September&nbsp;30, 2005, with
    exercise prices ranging from $0.20 to $0.35&nbsp;per share and a
    weighted average exercise price of $0.29&nbsp;per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    806,769 additional shares of common stock reserved for future
    grants under our Amended and Restated 2005 Stock Incentive Plan,
    as of September&nbsp;30, 2005;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    shares issuable upon the exercise of a warrant issued by us in
    connection with a credit facility we entered into in January
    2006, with respect to which the number of underlying shares and
    exercise price will be established at the closing of this
    offering pursuant to a formula agreed upon with the lender.
    Under this formula, at an assumed initial public offering price
    of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share and assuming a closing date
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006, this warrant would be exercisable
    for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent the outstanding options are, or the warrant is,
exercised, you will experience further dilution. In addition, we
may choose to raise additional capital due to market conditions
or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To
the extent that additional capital is raised through the sale of
equity or convertible debt securities, the issuance of these
securities could result in further dilution to our stockholders.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">34

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='108'></A>
</DIV>

<!-- link1 "SELECTED CONSOLIDATED FINANCIAL DATA" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SELECTED CONSOLIDATED FINANCIAL DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the selected consolidated financial data
presented below in conjunction with our consolidated financial
statements and the related notes and &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; included elsewhere in this prospectus. The
selected consolidated financial data presented below for the
years ended December&nbsp;31, 2002, 2003 and 2004 and for the
period from inception (November&nbsp;20, 2000) to
December&nbsp;31, 2004 and as of December&nbsp;31, 2003 and
2004, have been derived from our audited consolidated financial
statements included elsewhere in this prospectus. The selected
consolidated financial data as of December&nbsp;31, 2001 and
2002, have been derived from our audited consolidated financial
statements not included in this prospectus. The selected
consolidated financial data for the nine-months ended
September&nbsp;30, 2004 and 2005 and for the period from
inception (November&nbsp;20, 2000) to September&nbsp;30, 2005
and as of September&nbsp;30, 2005 are unaudited, and have been
derived from unaudited and audited consolidated financial
statements that are included elsewhere in this prospectus and
have been prepared on the same basis as our consolidated
financial statements. The selected consolidated financial data
for the period from inception (November&nbsp;20, 2000) to
December&nbsp;31, 2000 and as of December&nbsp;31, 2000 are
unaudited, and have been derived from unaudited consolidated
financial statements not included elsewhere in this prospectus
and have been prepared on the same basis as our consolidated
financial statements. In the opinion of management, the
unaudited selected consolidated financial data presented below
reflect all adjustments, which include only normal and recurring
adjustments, necessary to state fairly our results of operations
for and as of the periods presented. Historical results are not
necessarily indicative of the results of operations to be
expected for future periods.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The pro forma consolidated statement of operations data for the
year ended December&nbsp;31, 2004 and the nine months ended
September&nbsp;30, 2005 give effect to the acquisition of Hormos
as if the acquisition occurred on January&nbsp;1, 2004 and
should be read in conjunction with our Unaudited Pro Forma
Combined Financial Statements included elsewhere in this
prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">35

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period&nbsp;From</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Nine Months Ended September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>for</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma for</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="42" align="center" nowrap><B>(in thousands, except share and per share data)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Statements of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating Expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,797</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchased in- process research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,984</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(692</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,430</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,258</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,448</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,743</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,828</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,994</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,715</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59,984</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Income (Expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consulting income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(353</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,495</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,390</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,964</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,304</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,992</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,253</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,942</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,237</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,245</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58,489</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of redeemable convertible preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,504</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,428</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,818</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(741</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,780</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,468</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,624</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,311</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(26,613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,370</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,694</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,702</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(66,307</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Loss Per Share, Basic and Diluted:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.25</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7.57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used to compute basic and diluted net loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>219,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>595,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,382,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,319,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,680,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma basic and diluted net loss per share available to
    common stockholders(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares used to compute pro forma basic and diluted net loss per
    share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,841,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,212,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Pro forma basic and diluted net loss per common shares is
    calculated to give effect to the conversion of all outstanding
    shares of our preferred stock into 48,408,823&nbsp;shares of
    common stock upon the completion of this offering, excluding
    1,066,274&nbsp;shares of preferred stock held in escrow in
    connection with the Hormos acquisition that will convert into
    common stock upon the completion of this offering.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 7pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,785</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,932</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,608</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Convertible preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,736</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deficit accumulated during the development stage</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,984</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,432</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,056</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,924</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,393</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,016</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">36

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>You should read the following discussion of our financial
condition and results of operations in conjunction with the
financial statements and the notes to those statements included
elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties.
As a result of many factors, such as those set forth under the
section entitled &#147;Risk Factors&#148; and elsewhere in this
prospectus, our actual results may differ materially from those
anticipated in these forward-looking statements.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a pharmaceutical company focused on discovering,
licensing, developing and commercializing compounds in the
endocrine, metabolic and cardiovascular therapeutic areas. We
currently have four product candidates in clinical development
and one compound that we expect to enter clinical development in
the first half of 2006. Our two lead product candidates treat
hormone deficiencies that result from aging in men and women. We
also have two product candidates for the treatment of elevated
cholesterol levels, one in phase&nbsp;I and one in advanced
preclinical development. Becocalcidiol, our topical product
candidate for the treatment of mild to moderate psoriasis, has
completed a phase&nbsp;IIb clinical trial that we believe
demonstrates clinical proof of efficacy. In addition to our drug
development programs, we have two research programs for targeted
endocrine therapies.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our strategy is to build and maintain a portfolio of product
candidates; utilize focused criteria to select product
candidates that we believe have a high likelihood of clinical
success; focus on product candidates that have a large
commercial opportunity; and develop product candidates in
therapeutically aligned areas. In certain cases, we expect that
we will build our own sales and marketing infrastructure to
market some of our products. In other cases, we expect that we
will enter into collaborations to develop and commercialize
product candidates that are either not in our core therapeutic
areas or for which the sales and marketing infrastructure
required to maximize the value of the product is larger than is
practical for a company of our size.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2005, we completed the acquisition of Hormos Medical Oy,
a privately held Finnish company focused on discovering and
developing novel pharmaceutical compounds involving the tissue
specific regulation of estrogen effects for the treatment of
certain age-related diseases. In connection with the acquisition
of Hormos, which was accounted for as a purchase of assets and
assumption of liabilities, we assumed $20.3&nbsp;million in
liabilities and debt and issued 857,145&nbsp;shares of our
Series&nbsp;D Preferred Stock, 3,408,025&nbsp;shares of our
Series&nbsp;D-1 Preferred Stock, and 9,520,154&nbsp;shares of
our common stock, collectively valued at $8.8&nbsp;million.
Contingent consideration associated with the acquisition
includes an additional 321,415&nbsp;shares and
1,277,995&nbsp;shares of Series&nbsp;D and
Series&nbsp;<FONT style="white-space: nowrap">D-1</FONT>
Preferred Stock, respectively, and 3,570,046&nbsp;shares of
common stock with an aggregate value of $3.3&nbsp;million, held
in escrow and payable upon the occurrence of certain future
events. One-third of the contingent shares secure
indemnification obligations of the Hormos selling shareholders
and will be released to the Company in satisfaction of an
indemnification claim or to the Hormos shareholders one year
after the closing date of the acquisition. The remaining
contingent shares will generally be released to Hormos selling
shareholders upon the first to occur of the closing of a
qualified public offering of our common stock, including this
offering, or the dosing of the first patient in a second
phase&nbsp;III clinical trial of ospemifene. Additional purchase
consideration, with an aggregate value of $2.2&nbsp;million,
will be recorded as the contingent consideration is released.
The additional purchase consideration will be allocated to the
assets acquired based upon their relative fair value and will
result in additional expense for in-process research and
development of $0.6&nbsp;million and accrued contingent
consideration totaling $1.6&nbsp;million will be reclassified to
stockholders&#146; equity. The operating results of Hormos are
included in our results of operations as of the May 2005 date of
acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our expenditures to date have been to license and
develop our product candidate portfolio. Research and
development expenditures through September&nbsp;30, 2005
primarily were related to the licensing and development of
<FONT style="white-space: nowrap">QRX-401</FONT> and
<FONT style="white-space: nowrap">QRX-431,</FONT> our product
candidates for treating elevated cholesterol levels,
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
and becocalcidiol, our psoriasis product candidate. We outsource
a substantial portion of our preclinical study efforts and our
clinical trial and manufacturing development activities to third
parties to maximize efficiency and minimize our internal
overhead.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since our inception in November 2000, we have generated
significant losses while we in-licensed, acquired and advanced
our product candidates and research programs. To date, we have
not generated significant product revenues and have funded our
operations primarily through proceeds of $53.3&nbsp;million from
private placements of preferred stock. As of September&nbsp;30,
2005, we had an accumulated deficit of $64.0&nbsp;million.
Historically, Hormos has used Finnish government sponsored loans
which bear below-market interest rates to help fund its
operations. We assumed these loans as part of our acquisition of
Hormos and we intend to continue to apply for additional loans
in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to incur substantial and increasing losses for the
next several years as we expand our research and development
activities and move our product candidates into later stages of
development and potential commercialization. These efforts
include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ongoing phase&nbsp;III clinical trials for ospemifene, our
    product candidate for the treatment of vaginal atrophy, a
    common, chronic condition of post-menopausal women;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    phase&nbsp;II clinical trials starting in 2006 for fispemifene,
    our product candidate for the treatment of the symptoms of
    andropause;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    continued clinical development of
    <FONT style="white-space: nowrap">QRX-401,</FONT> a non-statin
    compound for lowering LDL cholesterol and lipoprotein(a);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    IND filing for and clinical development of
    <FONT style="white-space: nowrap">QRX-431,</FONT> also a
    non-statin compound for lowering LDL cholesterol and
    lipoprotein(a), with phase&nbsp;I clinical trials expected to
    begin in 2006;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    additional development of becocalcidiol, a topical treatment for
    mild to moderate psoriasis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    advancement of our preclinical research programs for targeted
    endocrine therapies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    acquisition or in-licensing of additional technology or products
    which complement our portfolio;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    preparations for commercialization.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>International Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of February&nbsp;1, 2006, we had 58&nbsp;employees located in
the United States and Finland. We coordinate program management,
drug development, clinical and regulatory activities from our
corporate offices in Ann Arbor, Michigan and our drug discovery
effort primarily is conducted in Turku and Oulu, Finland.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Research and Development</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since our inception, we have been focused primarily on drug
development programs. Our research and development expenses
include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    employee expenses, including salaries and benefits;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    formulation and synthesis costs of our product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    third-party manufacturing costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    licensing payments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    preclinical study costs including toxicology study costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    clinical trial costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    costs related to the regulatory approvals process;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    research laboratory costs.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our product development programs are at an early stage;
therefore, the successful development of our product candidates
is highly uncertain and may not result in approved products.
Completion dates and completion costs can vary significantly for
each product candidate and are difficult to predict. Product
candidates that may appear promising at early stages of
development may not reach the market for a number of reasons.
Product candidates may be found ineffective or cause harmful
side effects during clinical trials, may take longer to progress
through clinical trials than anticipated, may fail to receive
necessary regulatory approvals or may prove impractical to
manufacture in commercial quantities at reasonable cost and with
acceptable quality. We rely on third parties to conduct our
clinical trials. If these third parties do not perform as
contractually required or expected, we may not be able to obtain
regulatory approval for or commercialize our product candidates.
The lengthy process of seeking regulatory approvals requires the
expenditure of substantial resources. Any failure by us to
obtain, or any delay in obtaining, regulatory approvals could
materially adversely affect our product development efforts. Our
strategy includes entering into collaborations with third
parties to participate in the development and commercialization
of at least some of our product candidates. We cannot forecast
with certainty which of our product candidates, if any, will be
subject to future collaborations, when any such collaborations
may occur, or how such arrangements would affect our development
plans or capital requirements. As a result of these
uncertainties, we are unable to determine the timing, duration
and completion costs of our research and development projects or
when and to what extent we will generate revenues from the
commercialization and sale of any of our product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Research and Development Cost Allocations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have many research and development projects ongoing at any
one time and we have the ability to utilize our financial and
human resources across several research and development
projects. Our internal resources, employees and infrastructure
are not directly tied to any individual research or development
project and are typically deployed across multiple projects. We
generally do not record or maintain information regarding the
costs incurred for our research and development programs on a
program specific basis.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of our consolidated financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of our financial
statements as well as the reported revenues and expenses. We
base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While our significant accounting policies are described in
Note&nbsp;1 to our financial statements appearing at the end of
this prospectus, we believe the following critical accounting
policies are important to understanding and evaluating our
reported financial results.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Accrued Expenses.</I> As part of the process of preparing
financial statements, we are required to estimate accrued
expenses. This process involves communicating with appropriate
personnel to identify services that have been performed on our
behalf and estimating the scope of service performed and the
associated cost incurred when we have not yet been invoiced or
otherwise notified of the actual cost. The majority of our
service providers invoice us monthly in arrears for services
performed. We make estimates of our accrued expenses as of each
balance sheet date in our financial statements based on facts
and circumstances known to us. Examples of our estimated accrued
expenses include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    fees paid to contract research organizations for preclinical and
    toxicology studies and clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    fees paid to investigative sites in connection with clinical
    trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    fees paid to contract manufacturers in connection with the
    production of clinical trial materials;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    professional service fees.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We base our expenses related to clinical trials on our estimates
of the services received and efforts expended pursuant to
contracts with multiple research institutions and clinical
research organizations that conduct and manage clinical trials
on our behalf. The financial terms of these agreements are
subject to negotiation, vary from contract to contract, and may
result in uneven payment flows. Payments under some of these
contracts depend on factors such as the successful enrollment of
patients and the completion of clinical trial milestones. In
accruing service fees, we estimate the time period over which
services will be performed and the level of effort to be
expended in each period. If the actual timing of the performance
of services or the level of effort varies from our estimate, we
will adjust the accrual accordingly. If we do not identify costs
that we have begun to incur or if we underestimate or
overestimate the level of services, our actual expenses could
differ from our estimates.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Valuation of Intangibles and Other Long-lived Assets.</I> We
are required to periodically assess the impairment of
intangibles and other long-lived assets which requires us to
make assumptions and judgments regarding the carrying value of
these assets. The assets are considered to be impaired if we
determine that the carrying value may not be recoverable based
upon our assessment of the following events or changes in
circumstances:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a determination that the carrying value of such assets can not
    be recovered through undiscounted cash flows;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    loss of legal ownership or title to the assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    significant changes in our strategic business objectives and
    utilization of the assets;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the impact of significant negative industry or economic trends.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the assets are considered to be impaired, the impairment we
recognize is the amount by which the carrying value of the
assets exceeds the fair value of the assets. In addition, we
base the useful lives and related amortization or depreciation
expense on our estimate of the useful life of the assets. If a
change were to occur in any of the factors or estimates above,
the likelihood of a material change in our reported results
would increase.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stock-based Compensation.</I> We account for employee stock
options using the intrinsic-value method in accordance with
Accounting Principles Board, or APB, Opinion No.&nbsp;25,
Accounting for Stock Issued to Employees, and Financial
Accounting Standards Board Interpretation, or FIN, No.&nbsp;44,
Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB No.&nbsp;25, and have
adopted the disclosure-only provisions of Statement of Financial
Accounting Standards, or SFAS&nbsp;No.&nbsp;123, Accounting for
Stock-Based Compensation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information regarding net loss as required by
SFAS&nbsp;No.&nbsp;123, presented in Note&nbsp;1 to our
financial statements, has been determined as if we had accounted
for our employee stock options under the fair value method of
SFAS&nbsp;No.&nbsp;123. The resulting effect on net loss to date
pursuant to SFAS&nbsp;No.&nbsp;123 is not likely to be
representative of the effects on net loss pursuant to
SFAS&nbsp;No.&nbsp;123(R), which will be effective for years
beginning January&nbsp;1, 2006, since future years are likely to
include additional grants and the irregular impact of future
years&#146; vesting and because of the differing requirements of
SFAS&nbsp;No.&nbsp;123(R).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock-based compensation for options granted to employees is
measured as the excess, if any, of the estimated fair value of
our common stock on the date the options were granted above the
exercise price of the option. Given the absence of an active
market for our common stock, the fair value of our common stock
has periodically been estimated using several criteria,
including progress and milestones achieved in our business
development and performance, the price per share of our
convertible redeemable preferred stock offerings, estimates of
the sale value of our company to a buyer, estimates of a
potential price per share in an initial public offering of our
common stock and, beginning in November 2004, periodic
contemporaneous independent valuations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For stock options granted to non-employees, the fair value of
the stock options is estimated using the Black-Scholes valuation
model. This model utilizes the estimated fair value of common
stock and requires that, at the date of grant, we make
assumptions with respect to the expected life of the option, the
volatility
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
of the fair value of our common stock, risk-free interest rates
and expected dividend yields of our common stock. We have to
date assumed that non-employee stock options have an expected
life of four years, representing about half of their contractual
life, and assumed common stock volatility of 70%. Higher
estimates of volatility and expected life of the option increase
the value of an option and the resulting expense.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Purchased In-process Research and Development.</I> In our
acquisition of Hormos, we acquired technology that we expect to
utilize in our research and development activities. We account
for the costs associated with acquired technology in accordance
with FASB Statement No.&nbsp;2, Accounting for Research and
Development Costs. Under this standard, we are required to
determine whether the technology relating to a particular
research and development project we acquire has an alternative
use. If we determine that the technology has no alternative
uses, the amount is expensed as incurred. Otherwise, the costs
are capitalized and amortized over their estimated useful life.
In conjunction with our acquisition of Hormos, we determined
that in-process research and development with respect to
ospemifene and fispemifene had no alternative use and we
recorded an expense of $25.8&nbsp;million in the second quarter
of 2005 to write-off the fair value of this purchased in-process
research and development. The fair value of each of the
in-process research and development projects was determined on
an income-based approach which attempts to estimate the
income-producing capability of the asset.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The comparisons which follow compare actual results for the
applicable periods and do not reflect any pro forma adjustments
for our acquisition of Hormos in May 2005. The results of Hormos
are included in our financial results from the date of
acquisition.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nine Months Ended September&nbsp;30, 2005 Compared to Nine
    Months Ended September&nbsp;30, 2004</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and Development Expenses.</I> We group our research
and development activities into three major categories:
&#147;outsourced research and development,&#148; &#147;research
and development operations,&#148; and &#147;license fees.&#148;
Outsourced research and development costs include the cost of
clinical research organizations and third party manufacturing
costs. The costs from research and development operations
consist primarily of salaries and employee benefits for our
research and development staff and related travel and support
costs. License fees consist of fees and milestone payments due
to licensors of our product candidates. Of the total research
and development expenses for the nine months ended
September&nbsp;30, 2005 and 2004, the costs associated with
outsourced research and development, research and development
operations and license fees were:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outsourced research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>964</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    License fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,050</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Outsourced research and development expenses increased
$3.4&nbsp;million for the nine months ended September&nbsp;30,
2005 compared to the same period in 2004. This increase is due
primarily to higher costs as
<FONT style="white-space: nowrap">QRX-401</FONT> advanced in
phase&nbsp;I clinical trials,
<FONT style="white-space: nowrap">QRX-431</FONT> entered
toxicology and other preclinical studies, and work began on
ospemifene and fispemifene in preparation for phase&nbsp;III and
phase&nbsp;II studies, respectively. We acquired ospemifene and
fispemifene as a result of the Hormos acquisition in May 2005.
Expenses in 2004 primarily consisted of clinical trials for
becocalcidiol and preclinical and clinical development of
<FONT style="white-space: nowrap">QRX-401.
</FONT>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">41

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenses from our research and development operations increased
$1.0&nbsp;million for the nine months ended September&nbsp;30,
2005 compared to the same period in 2004. The increase in
expenses in 2005 is largely related to increased employee
expenses, particularly salaries and benefits, as we added
research and development operations personnel to work on and
manage the increased number and size of research projects and
development programs in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
License fees paid by us decreased by $1.0&nbsp;million for the
nine months ended September&nbsp;30, 2005 compared to the same
period in 2004. License fees and milestone payments for product
candidates we have in-licensed vary widely from compound to
compound. Milestone payments usually are dependent on the
successful advancement of the licensed compound to
pre-determined milestones. License fees in 2005 relate to fees
for initial licensing of
<FONT style="white-space: nowrap">QRX-431,</FONT> while license
fees in 2004 are comprised of a milestone payment for
<FONT style="white-space: nowrap">QRX-401.
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and Administrative Expenses.</I> General and
administrative expenses consist primarily of salaries and
benefits for administrative, finance, business development and
legal personnel. In addition, general and administrative
expenses include insurance costs, professional services and
facilities costs. General and administrative expenses increased
$1.1&nbsp;million to $2.2&nbsp;million for the nine months ended
September&nbsp;30, 2005 compared to $1.1&nbsp;million for the
same period in 2004. The increase in 2005 primarily resulted
from additional personnel and the related increase in salaries,
benefits and facilities expenses as the scope of our operations
expanded in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Purchased In-process Research and Development.</I> In
connection with the acquisition of Hormos and in accordance with
the related valuation and purchase price allocation of Hormos,
we determined that $25.8&nbsp;million of the purchase price
related to in-process research and development that had not
reached technological feasibility and had no alternative future
use. The principal technology we acquired related to ospemifene
and fispemifene. Accordingly, we recorded an expense of
$25.8&nbsp;million in the second quarter of 2005 to write-off
the fair value of this acquired in-process research and
development. The fair value of each of the in-process research
and development projects was determined on an income-based
approach which attempts to estimate the income-producing
capability of the asset.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Contract Research Income.</I> Contract research income of
$0.8&nbsp;million for the nine months ended September&nbsp;30,
2005 primarily consists of contract research performed for a
pharmaceutical company by Hormos. There were no corresponding
amounts for the same period in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Income.</I> Interest income increased by
$0.4&nbsp;million to $0.5&nbsp;million for the nine months ended
September&nbsp;30, 2005 compared to $52,000 for the same period
in 2004. The increase was due to higher average cash balances
and higher prevailing interest rates in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Expense.</I> Interest expense consists of interest
incurred on debt held by Hormos. Hormos holds loans from
agencies of the Finnish government that bear interest at
below-market rates. In connection with the acquisition of Hormos
and in accordance with the related purchase price allocation,
the loans were recorded at their estimated fair value which
resulted in a discount of $2.1&nbsp;million. The discount is
being amortized over the lives of the underlying loans.
Amortization expense related to this discount totaled
$0.2&nbsp;million for the nine months ended September&nbsp;30,
2005 and is recorded as interest expense. There were no
corresponding amounts for the same period in 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2004 Compared to Year Ended
    December&nbsp;31, 2003</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and Development Expenses.</I> Research and
development expenses decreased $0.6&nbsp;million to
$7.7&nbsp;million in 2004 from $8.4&nbsp;million in 2003. The
decrease largely resulted from the $2.5&nbsp;million initial
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">42

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
licensing fee paid for
<FONT style="white-space: nowrap">QRX-401</FONT> and related
compounds in 2003. The following table summarizes the changes in
the components of research and development expense between 2003
and 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outsourced research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>332</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    License fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Outsourced research and development expenses increased $21,000
in 2004. The increase reflects continuing clinical development
of becocalcidiol and preclinical and clinical work on
<FONT style="white-space: nowrap">QRX-401</FONT> and related
compounds. Phase&nbsp;I clinical studies for
<FONT style="white-space: nowrap">QRX-401</FONT> began in the
second quarter of 2004 with single-dose studies using a small
number of volunteers. Phase&nbsp;II clinical trials for
becocalcidiol began in 2003 and continued in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenses from our research and development operations increased
$0.3&nbsp;million in 2004 compared to 2003. The increase in
expenses in 2004 was largely related to increased employee
related expenses, particularly salaries and benefits, as we
added research and development operations personnel to work on
and manage the increased number and size of research projects
and development programs in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
License fees decreased by $1.0&nbsp;million in 2004. License
fees in 2004 related to a milestone payment for
<FONT style="white-space: nowrap">QRX-401,</FONT> while license
fees in 2003 were comprised of initial in-licensing fees for
<FONT style="white-space: nowrap">QRX-401</FONT> and related
compounds.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and Administrative Expenses.</I> General and
administrative expenses increased $0.8&nbsp;million to
$1.7&nbsp;million in 2004 compared to $0.9&nbsp;million in 2003.
The increase in 2004 primarily resulted from additional
personnel and the related increase in salaries and benefits
expenses as the scope of our operations expanded in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Consulting Income.</I> No consulting activity was undertaken
by us in 2004. Consulting income of $0.2&nbsp;million in 2003
consisted of fees received for study design consultation we
performed for an unrelated company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Income.</I> Interest income increased by $71,000 to
$144,000 in 2004 from $73,000 in 2003. The increase was due
largely to higher average cash balances.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2003 Compared to Year Ended
    December&nbsp;31, 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Research and Development Expenses.</I> Research and
development expenses increased $5.7&nbsp;million to
$8.4&nbsp;million in 2003 from $2.7&nbsp;million in 2002. The
increase largely resulted from the $2.5&nbsp;million licensing
fee paid for QRX-401 and related compounds in 2003 and increased
outsourced research and development activity as a result of the
addition of preclinical work for QRX-401 and related compounds
in 2003 and
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">43

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
continuing phase&nbsp;II clinical trials for becocalcidiol. The
following table summarizes the changes in the components of
research and development expenses between 2003 and 2002.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outsourced research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,734</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    License fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,659</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Outsourced research and development expenses increased
$2.7&nbsp;million in 2003. The increase was largely due to our
expanding portfolio of research and development projects with
the in-licensing of
<FONT style="white-space: nowrap">QRX-401</FONT> and related
compounds in the second quarter of 2003 and expenses of
phase&nbsp;II clinical trials for becocalcidiol which began in
2003. In 2002, we conducted preclinical work for becocalcidiol.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Expenses from research and development operations increased
$0.4&nbsp;million in 2003 compared to 2002. The increase in
expenses in 2003 is largely related to increased employee
related expenses, particularly salaries and benefits, as we
added research and development operations personnel to manage
the increased number and size of research projects and
development programs in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
License fees increased by $2.5&nbsp;million in 2003. License
fees in 2003 consisted of initial in-licensing fees for
<FONT style="white-space: nowrap">QRX-401</FONT> and related
compounds. No license fees were paid by us in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>General and Administrative Expenses.</I> General and
administrative expenses increased $0.2&nbsp;million to
$0.9&nbsp;million in 2003 compared to $0.7&nbsp;million in 2002.
The increase in 2003 primarily resulted from additional
personnel and the related increase in salaries and benefits
expenses as the scope of our operations expanded in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Consulting Income.</I> Consulting income was
$0.2&nbsp;million in 2003 and $1,000 in 2002 and consisted of
fees received for study design consultation we performed for an
unrelated company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest Income.</I> Interest income increased by $34,000 to
$73,000 in 2003 from $39,000 in 2002. The increase was due
largely to higher average cash balances.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to our significant research and development expenditures and
the lack of approved products to generate revenue, we have not
been profitable and have generated operating losses since we
were incorporated in November 2000. We have funded our
operations primarily through sales of our convertible preferred
stock. As of September&nbsp;30, 2005, we had received aggregate
net proceeds of $53.3&nbsp;million from sales of preferred
stock. As of September&nbsp;30, 2005, we had unrestricted cash
and cash equivalents of $22.9&nbsp;million compared to
$31.1&nbsp;million as of December&nbsp;31, 2004. In addition, as
of September&nbsp;30, 2005 we had $0.1&nbsp;million of cash
deposits with a financial institution collateralizing a letter
of credit in favor of our landlord in the event of a breach of
our Ann Arbor, Michigan facility lease which expires in 2011.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos historically has financed a portion of its research and
development activities with loans and grants from Finnish
governmental agencies, Tekes and Sitra, as well as contract
research, fees from a product license arrangement and interest
earned on investments. The Finnish government loans are granted
on a project-by-project basis and generally carry interest at
below-market rates. If a project fails or does not reach
commercial success, under certain circumstances repayment of the
loan can be forgiven. At the date of acquisition, Hormos had
$15.1&nbsp;million in loans from Finnish governmental agencies
and $2.4&nbsp;million in advances related to future loans, which
we assumed. The loans carry interest at 1% to 3% below the
Finnish
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">44

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
base rate as set by the Bank of Finland at the date the loan was
issued with a minimum interest rate of 1% to 3%. The loans are
unsecured and generally are subordinated with a loan period of
seven to ten years. Generally, the first several years of the
loan are free of repayment. Under applicable Finnish law,
interest or principal related to the notes can only be repaid
when the company has adequate equity capital. Because Hormos
lacks the requisite equity capital, no amounts outstanding under
these loans are currently repayable. We intend to continue to
pursue this source of funding in the future though we cannot
assure you that the funding will continue to be available.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2005, Tekes notified Hormos that repayment would not
be required for certain loans totaling $2.6&nbsp;million,
including principal and accrued interest, associated with a
research project which did not reach commercial feasibility.
Also in December 2005, Sitra notified Hormos that a loan
totaling $0.1&nbsp;million, including principal and accrued
interest, would not be required to be repaid.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2006, we entered into an $18.0&nbsp;million debt
agreement with a third-party lender. At closing, we borrowed
$6.0&nbsp;million under the agreement with $12.0&nbsp;million
available for future borrowings through the end of 2006. Loans
under the agreement bear interest at prime plus 3% with
interest-only payments due during the first 12&nbsp;months of
each loan. Principal is repaid over 36&nbsp;months after the
interest-only period, with a balloon payment due at the end of
the repayment period. Loans under the agreement are secured by
substantially all of our assets other than our intellectual
property rights. In addition, the debt agreement contains
covenants restricting our ability to incur further indebtedness,
pay dividends or make investments, subject to exceptions
specified in the agreement. In connection with the debt
agreement, we issued a warrant to the lender to purchase shares
of our preferred stock, which will convert to a warrant for
common stock upon the completion of this offering. The number of
shares and exercise price in the warrant will be determined by a
formula based on the timing and price of the next round of
equity invested in our company, which we expect to be this
offering. The warrant is exercisable for seven years from the
date of issue, or three years after an initial public offering
of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our policy is to invest in cash equivalents,
U.S.&nbsp;government obligations, high-grade municipal and
corporate notes and commercial paper. Our investment objectives
are, primarily, to assure liquidity and preservation of capital
and, secondarily, to obtain investment income. Wherever
possible, we seek to minimize the potential effects of
concentration and degrees of risk. All of our investments in
debt securities are recorded as available-for-sale and are
recorded at cost plus accrued interest which approximates fair
value due to their short duration.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Cash Flows for Nine Months Ended September&nbsp;30, 2005
Compared to September&nbsp;30, 2004</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our cash flow information for the
nine months ended September&nbsp;30, 2005 and 2004.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash flows from:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7,116</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,084</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes on cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,144</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,116</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at January 1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,582</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at September&nbsp;30</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,466</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in operating activities increased
$3.3&nbsp;million to $10.4&nbsp;million for the nine months
ended September&nbsp;30, 2005 compared to $7.1&nbsp;million in
the same period in 2004. The increase in cash used in
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">45

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
operations in 2005 is due to a higher net loss from increased
operating costs as QRX-401 advanced in phase&nbsp;I clinical
trials, QRX-431 was licensed and entered toxicology and other
preclinical trials and as work began on ospemifene and
fispemifene, in preparation for phase&nbsp;III and phase&nbsp;II
studies, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities decreased $28,000 to near
zero for the nine months ended September&nbsp;30, 2005 compared
to the same period in 2004. Underlying the decrease in use of
cash for investing activities in 2005 were $0.9&nbsp;million
used for acquisition costs, $1.0&nbsp;million acquired in the
acquisition of Hormos and $0.1&nbsp;million used in the purchase
of property and equipment. Cash used in investing activities for
the same period in 2004 consisted of $28,000 for purchases of
property and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities increased by
$2.1&nbsp;million for the nine months ended September&nbsp;30,
2005 compared to the same period in 2004. The increase resulted
primarily from the sale of $1.4&nbsp;million of preferred stock
and a $0.7&nbsp;million increase in long-term borrowings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Annual Cash Flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our cash flow information for the
years ended December&nbsp;31, 2004, 2003 and 2002.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Change</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>vs. 2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>vs. 2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash flows from:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,308</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,152</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,011</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,844</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(859</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(39</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(803</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,062</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of exchange rate changes on cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,399</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at January 1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at December&nbsp;31</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,582</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Year Ended December&nbsp;31, 2004 Compared to Year Ended
December&nbsp;31, 2003</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in operating activities increased
$0.9&nbsp;million to $9.0&nbsp;million in 2004 compared to
$8.2&nbsp;million in 2003. The increase in cash used in
operations is due primarily to drug development and clinical
trial expenses associated with QRX-401 and becocalcidiol.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in investing activities increased
$0.8&nbsp;million to $39,000 in 2004 compared to net cash
provided by investing activities of $0.8&nbsp;million in 2003.
This increase resulted primarily from reduced maturities of our
short-term investments in 2004 compared to 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities increased
$13.1&nbsp;million in 2004 compared to 2003. The increase in
2004 is due to proceeds of approximately $29.6&nbsp;million from
the sale of shares of our Series&nbsp;C and D Preferred Stock in
2004 compared with proceeds of approximately $16.6&nbsp;million
from the sale of shares of our Series&nbsp;B and C Preferred
Stock in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Year Ended December&nbsp;31, 2003 Compared to Year Ended
December&nbsp;31, 2002</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash used in operating activities increased
$4.8&nbsp;million to $8.2&nbsp;million in 2003 from
$3.3&nbsp;million in 2002. The increase in cash used in
operations is due primarily to licensing and drug development
expenses associated with QRX-401 and drug development and
clinical trial expenses associated with becocalcidiol.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">46

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by investing activities increased
$0.8&nbsp;million in 2003 compared to 2002. The increase
resulted from an increase in maturities of our short-term
investments in 2003 compared to 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net cash provided by financing activities increased
$14.4&nbsp;million in 2003 compared to 2002. The increase in
2003 resulted from proceeds of approximately $16.6&nbsp;million
from the sale of shares of our Series&nbsp;B and C Preferred
Stock in 2003 compared to proceeds of approximately
$2.1&nbsp;million from the sale of shares of our Series&nbsp;B
Preferred Stock in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Contractual Obligations and Commitments</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our future contractual obligations at December&nbsp;31, 2004
were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payments Due by Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2006-2007</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2008-2009</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After 2009</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>179</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our commitments under operating leases consist of payments
relating to our real estate lease in Ann Arbor, Michigan which
expires in 2011.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into a number of license agreements for our
product candidates. Generally these license agreements include
initial licensing payments, milestone payments, royalties on
future sales and patent maintenance costs. Future milestone
payments are generally due on the achievement of certain
development and regulatory milestones. Future milestone
obligations under licensing agreements total $59.2&nbsp;million,
including a date-specific milestone payment of $0.1&nbsp;million
due in 2006. The achievement and timing of reaching prescribed
milestones under these agreements and determination of royalties
on future sales is uncertain.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the time of our acquisition of Hormos in May 2005, it had
$15.1&nbsp;million in loans from Finnish governmental agencies,
Tekes and Sitra, and $2.4&nbsp;million in advances related to
future Tekes loans, which we assumed. The loans are unsecured
and generally are subordinated with a loan period of seven to
ten years. Generally, the first several years of the loan are
free of repayment. Under applicable Finnish law, interest or
principal related to the notes can only be repaid when the
company has adequate equity capital. Because Hormos lacks the
requisite equity capital, no amounts outstanding under these
loans are currently repayable. In December 2005, Tekes notified
Hormos that repayment would not be required for certain loans
totaling $2.6&nbsp;million, including principal and accrued
interest, associated with a research project which did not reach
commercial feasibility. Also in December 2005, Sitra notified
Hormos that a loan totaling $0.1&nbsp;million, including
principal and accrued interest, would not be required to be
repaid.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos is a party to five separate real estate leases of office
and laboratory space in Turku, Finland and Oulu, Finland. Two of
these leases are long-term leases through 2011 which require
monthly payments totaling approximately $0.8&nbsp;million
annually. The remaining facility leases require 15&nbsp;months
or less to terminate and have monthly payments totaling
approximately $28,000 annually.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Funding Requirements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to devote substantial resources to continue our
research, development and commercialization efforts. Our funding
requirements will depend on a number of forward-looking factors.
These factors include, but are not limited to, the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the progress of preclinical development and clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the number of product candidates we pursue or the expansion of
    existing product candidates to new indications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the discovery, in-licensing or acquisition of additional
    technologies or product candidates that require financial
    commitments;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">47

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the time and costs involved in obtaining regulatory approvals,
    and the number of different regulatory agencies we seek approval
    from;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delays that may be caused by evolving requirements of regulatory
    agencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our plans to establish sales, marketing and distribution
    capabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the cost and timing of securing manufacturing capabilities for
    our product candidates and commercial products, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the terms and timing of any collaborative, licensing and other
    arrangements we may establish;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the costs involved in filing, maintaining and prosecuting patent
    applications and enforcing or defending patent claims;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our revenues, if any, from successful development and
    commercialization of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the costs of being a public company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the number of additional employees we hire.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following completion of this offering we anticipate incurring
increased general and administrative expenses for directors and
officers insurance, investor relations and professional fees
associated with operating as a publicly traded company.
Increases in general and administrative expenses will also
likely include the hiring of additional personnel.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that our existing capital resources, including
available borrowings of up to $12.0&nbsp;million under our
existing debt facility, and the net proceeds from this offering,
together with interest thereon, will be sufficient to meet our
projected operating requirements for at least the next
18&nbsp;months. We have based this estimate on assumptions that
may prove to be wrong, and we could utilize our available
capital resources sooner than we currently expect. Our
projection of financial requirements involves risks and
uncertainties and actual results could vary as a result of a
number of factors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we need to raise funds in the future, we may be required to
raise those funds through public or private financings,
strategic relationships or other arrangements. We also intend to
continue to pursue loans from Finnish government agencies. We
cannot assure you that these funding sources, if needed, will be
available on terms attractive to us, or at all. Furthermore, any
additional equity financing may be dilutive to stockholders and
debt financing, if available, may involve restrictive covenants.
To the extent that we raise additional capital through licensing
arrangements or arrangements with collaborative partners, we may
be required to relinquish, on terms that are not favorable to
us, rights to some of our technologies or product candidates
that we would otherwise seek to develop or commercialize
ourselves. Our failure to raise capital as and when needed could
have a negative impact on our financial condition and our
ability to pursue our business strategy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Recent Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Financial Accounting Standards Board
issued SFAS&nbsp;No.&nbsp;123(R), <I>Share-based Payment</I>,
which amends SFAS&nbsp;No.&nbsp;123. The standard set forth in
SFAS&nbsp;No.&nbsp;123(R) requires that all share-based payments
to employees, including grants of employee stock options, be
recognized in the consolidated financial statements of
operations based on their fair values. The pro forma disclosure
previously permitted under SFAS&nbsp;No.&nbsp;123 will not be an
acceptable alternative to recognition of expenses in the
financial statements. The standard is effective for public
companies for annual periods beginning after June&nbsp;15, 2005.
The adoption of SFAS&nbsp;No.&nbsp;123(R) may have a material
impact on our results of operations and net loss per share. We
are currently in the process of evaluating the extent of such
impact.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Off-Balance Sheet Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since inception, we have not engaged in any off-balance sheet
activities, including the use of structured finance, special
purpose entities, or variable interest entities.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">48

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Quantitative and Qualitative Disclosure About Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary objective of our investment activities is to
preserve principal. We also seek to maximize income from our
investments without incurring significant risk. Some of the
securities we invest in may have market risk. This means that a
change in prevailing interest rates may cause the principal
amount of the marketable securities to fluctuate. To minimize
this risk, we maintain our portfolio of cash, cash equivalents,
and short-term investments in a variety of interest-bearing
instruments, including United States government and agency
securities, high-grade corporate bonds, commercial paper, and
money market funds. We have not used derivative financial
instruments for speculation or trading purposes. Due to the
short duration of our investment portfolio, we believe an
immediate 10% change in interest rates would not be material to
our financial condition or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Approximately 30% of the costs and expenses of our Finnish
subsidiary are denominated in Euros. If exchange rates
change&nbsp;10%, the impact on our net loss and cash used in
operations would be $0.7&nbsp;million. We do not hedge our
foreign currency exposures.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">49

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='110'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a pharmaceutical company focused on discovering,
licensing, developing and commercializing compounds in the
endocrine, metabolic and cardiovascular therapeutic areas. We
currently have four product candidates in clinical development
and one compound that we expect to enter clinical development in
the first half of 2006. Our two lead product candidates treat
hormone deficiencies that result from aging in men and women.
Ospemifene, our treatment for vaginal atrophy, a common problem
associated with estrogen deficiency in post-menopausal women,
has entered phase&nbsp;III clinical testing. Fispemifene, our
treatment for the symptoms of andropause in aging males, is
about to enter phase&nbsp;II clinical testing. We also have two
product candidates for the treatment of elevated cholesterol
levels, <FONT style="white-space: nowrap">QRX-401</FONT> and
<FONT style="white-space: nowrap">QRX-431,</FONT> in
phase&nbsp;I clinical trials and advanced preclinical
development, respectively. Becocalcidiol, our topical product
candidate for the treatment of mild to moderate psoriasis, has
completed a phase&nbsp;IIb clinical trial that we believe
demonstrates clinical proof of efficacy. Our management team has
extensive experience in pharmaceutical development, particularly
in endocrine and cardiovascular therapies, having participated
in over 60 clinical development programs in their careers. This
team has contributed to over 30 programs involving approved
drugs, ten of which reached annual sales in excess of
$1&nbsp;billion and include the world&#146;s best selling
pharmaceutical product, Lipitor.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ospemifene is our product candidate for the treatment of
post-menopausal vaginal atrophy. Vaginal atrophy is a chronic
condition resulting from a decline in estrogen levels. The
symptoms of vaginal atrophy include vaginal dryness, burning,
irritation, itching, pain during intercourse and vaginal
discharge. It is estimated that there are 145&nbsp;million
post-menopausal women in North America, Europe and Japan, and
that between 10% and 40% of them suffer from vaginal atrophy.
Vaginal atrophy is typically treated with hormone replacement
therapies, including estrogen-based therapies. U.S.&nbsp;sales
of hormone replacement therapies for menopausal symptoms were
$1.7&nbsp;billion in 2004, but have been declining due to
concerns that the long-term use of these therapies increases the
risk of breast and uterine cancer. Ospemifene is a selective
estrogen receptor modulator, or SERM, an orally available small
molecule that binds to estrogen receptors and selectively
stimulates or blocks estrogen&#146;s activity in different
tissue types. We have completed two phase&nbsp;II clinical
trials of ospemifene in which it has demonstrated beneficial
effects on vaginal cell maturation, indicating improvement in
the symptoms of vaginal atrophy. Based on our completed clinical
and preclinical studies, we believe that, in addition to its
beneficial effect on the symptoms of vaginal atrophy, ospemifene
has a positive effect on bone density, does not increase the
risk of breast and uterine cancer, and does not appear to induce
hot flashes, a common side effect of SERMs. In January 2006, we
initiated our first phase&nbsp;III clinical trial of ospemifene
for the treatment of vaginal atrophy. The trial is expected to
take place in approximately 65&nbsp;sites in the U.S. and will
enroll approximately 800&nbsp;patients.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fispemifene is our product candidate for the treatment of the
symptoms of andropause. Andropause is a condition in men caused
by a gradual decline in testosterone levels that occurs
naturally as men age. The symptoms of andropause include muscle
wasting, enlarged breasts, urinary tract problems and sexual
dysfunction. Patients receiving treatment for andropause
typically utilize testosterone replacement therapy.
U.S.&nbsp;sales of testosterone replacement products reached
$538&nbsp;million in 2004, a growth rate of 40% versus the prior
year. Unlike testosterone replacement therapies that are
typically topical or injection therapies, fispemifene is an oral
treatment and is not a formulation of testosterone. Rather,
fispemifene is a novel SERM that utilizes the body&#146;s normal
feedback mechanism to increase testosterone levels. In a
multiple dose phase&nbsp;I trial, subjects treated with
fispemifene demonstrated an increase in testosterone levels. In
the first half of 2006, we plan to initiate a phase&nbsp;II
trial with fispemifene in older men with low testosterone levels.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT style="white-space: nowrap">QRX-401</FONT> and
<FONT style="white-space: nowrap">QRX-431</FONT> are our two
product candidates for the oral treatment of elevated levels of
low-density lipoprotein cholesterol, or LDL cholesterol, the
<FONT style="white-space: nowrap">so-called</FONT> &#147;bad
cholesterol.&#148; Elevated LDL cholesterol levels have been
shown to increase a person&#146;s risk of heart disease. In
2004, treatments for lowering cholesterol had worldwide sales of
over $26&nbsp;billion. In preclinical studies with monkeys,
QRX-401 demonstrated the ability to lower LDL cholesterol as
well as lipoprotein(a), also referred to as Lp(a), high levels
of which are associated with an increased risk of stroke and
coronary artery disease. We are currently
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
conducting a phase&nbsp;I clinical program of
<FONT style="white-space: nowrap">QRX-401.</FONT> In our
phase&nbsp;I studies to date,
<FONT style="white-space: nowrap">QRX-401</FONT> has been
well-tolerated and no safety issues were observed, although we
have not observed consistent LDL cholesterol lowering in normal
volunteers. Our second product candidate for the treatment of
elevated cholesterol levels,
<FONT style="white-space: nowrap">QRX-431,</FONT> has
demonstrated the ability to reduce LDL cholesterol and Lp(a)
levels and cause weight loss in monkeys. We expect to file an
IND for <FONT style="white-space: nowrap">QRX-431</FONT> in the
first half of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Becocalcidiol is our topical product candidate for the treatment
of mild to moderate psoriasis. Psoriasis is a chronic disease of
the skin characterized by red patches covered with white scales
that can occur on any part of the body. Ten million people in
the United States, Japan, France, Germany, Italy, Spain and the
United Kingdom have been diagnosed with psoriasis and
approximately 81% of them are receiving treatment with a variety
of prescription and
<FONT style="white-space: nowrap">over-the</FONT>-counter
topical therapies, according to 2004 estimates. Global sales of
topical psoriasis therapies were estimated at $532&nbsp;million
for the twelve months ended October 2005. We have successfully
completed a phase&nbsp;IIb trial of becocalcidiol in which it
demonstrated a statistically significant improvement in both the
Physicians&#146; Global Assessment of psoriasis and the
Psoriasis Symptom Score, two standard methods for assessing
efficacy of topical treatments for psoriasis in clinical trials.
Because becocalcidiol is outside our core therapeutic areas, we
are evaluating alternatives for continued development of this
product candidate, including seeking a partner for further
development and commercialization.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our goal is to build a successful pharmaceutical company that
develops and commercializes products in the endocrine, metabolic
and cardiovascular therapeutic areas. Our strategy is to
leverage our extensive management expertise in order to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B>&#149;&nbsp;</B></TD>
    <TD align="left">
    <B>Build and maintain a portfolio of product candidates.</B> We
    believe that taking a portfolio approach to drug development
    balances risk by reducing our dependence on any one product
    candidate&#146;s clinical or commercial success. Our objective
    is to have between three and five product candidates in clinical
    development at any time. We also seek to maintain a portfolio of
    product candidates at different stages of development in order
    to ensure that our clinical pipeline continues to have multiple
    product candidates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B>&#149;&nbsp;</B></TD>
    <TD align="left">
    <B>Utilize focused criteria to select product candidates that we
    believe have a high likelihood of clinical success.</B> Our
    management team has experience in all aspects of developing and
    commercializing drugs, including preclinical development,
    regulatory strategy, clinical trial management and
    commercialization. Part of our strategy is to utilize these
    skills to identify and in-license or acquire product candidates
    that we believe will have a high likelihood of success. We seek
    product candidates that:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 4pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;<FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">have measurable, objective
    clinical endpoints that provide the ability to demonstrate proof
    of concept in human subjects early in the development process;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;<FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">have established precedents for
    regulatory approval;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;<FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">fall within the areas of expertise
    of the management team.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B>&#149;&nbsp;</B></TD>
    <TD align="left">
    <B>Focus on product candidates that have a large commercial
    opportunity.</B> We seek product candidates that will provide a
    substantial return on our investment. To achieve these returns
    we seek to identify and develop product candidates that meet the
    following criteria:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 4pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;<FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">serve large markets with unmet
    medical needs;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;<FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">are favorably differentiated from
    existing therapies;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;<FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">have a sufficiently long period of
    exclusivity to justify development.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B>&#149;&nbsp;</B></TD>
    <TD align="left">
    <B>Develop product opportunities in therapeutically aligned
    areas.</B> We focus on developing treatments for endocrine,
    metabolic and cardiovascular therapeutic diseases. We believe
    that by having product candidates in therapeutically aligned
    areas we will be best positioned to leverage our clinical</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    development expertise and regulatory knowledge. In addition,
    concentration in therapeutically aligned areas gives us the
    opportunity in the future to build sales and marketing
    infrastructure that can be utilized to sell multiple products.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Using this strategy, we have built our current portfolio of four
clinical stage product candidates and an advanced preclinical
program. As we continue to build our company, we intend to
extend our strategy by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Developing our current portfolio of product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Leveraging our management expertise to expand our product
    pipeline;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Utilizing out-licensing and partnering opportunities, when
    appropriate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Continuing to build our management capacity and capabilities as
    our needs expand;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Developing sales and marketing capabilities, either on our own
    or in partnership with others, in order to commercialize our
    product candidates and maximize their value.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Product Pipeline</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our product pipeline:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Product Candidate</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Initial Indication</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Development Stage</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Marketing Rights</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <BR>
    Ospemifene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Vaginal Atrophy</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Phase&nbsp;III</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Worldwide*</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <BR>
    Fispemifene</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Symptoms of Andropause</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Phase&nbsp;II</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Worldwide*</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <BR>
    QRX-401</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Elevated LDL</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Phase&nbsp;I</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Worldwide</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <BR>
    QRX-431</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Elevated LDL</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Preclinical</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Worldwide</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <BR>
    Becocalcidiol</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Mild to Moderate Psoriasis</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Phase&nbsp;II</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <BR>
    Worldwide</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    Subject to our licensor&#146;s right to negotiate exclusive
    marketing rights in Denmark, Estonia, Finland, Iceland, Latvia,
    Lithuania, Norway, Russia and Sweden.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Ospemifene&nbsp;&#151; A Treatment for Vaginal
Atrophy</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Description of Condition</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In North America, Europe and Japan, it is estimated that there
are 145&nbsp;million post-menopausal women, a number that is
projected to increase as the median age of the population
increases. Post-menopausal women suffer from a number of
conditions as a result of a decline in estrogen levels. These
conditions include decreased bone density, known as
osteoporosis, hot flashes and vaginal atrophy. It is estimated
that between 10% and 40% of post-menopausal women suffer from
vaginal atrophy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Vaginal atrophy is a common, chronic condition of
post-menopausal women and is characterized by vaginal dryness,
burning, irritation, itching, vaginal discharge and feeling of
pressure. Dryness and irritation accompanying decreases in
vaginal secretions and lubrication can often cause pain and/or
bleeding during sexual intercourse. Associated urinary symptoms
can include urinary frequency, pain on urination, urinary tract
infections and incontinence. In contrast to hot flashes, which
eventually disappear, vaginal atrophy persists as women age.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Vaginal atrophy results from a decline in estrogen levels that
causes thinning of the vaginal cell lining. This condition leads
to a fragile vaginal mucous membrane characterized by decreased
elasticity, paleness and disappearance of the small folds found
in the vaginal wall. Vaginal secretions and blood flow to the
vagina decrease, resulting in decreased lubrication. The decline
in estrogen levels also leads to an increase in vaginal pH,
creating an environment more susceptible to infection.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Product Candidate Characteristics</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ospemifene is our product candidate for the treatment of vaginal
atrophy. We have completed two phase&nbsp;II clinical trials of
ospemifene in which it has demonstrated beneficial effects on
vaginal cell
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
maturation, indicating improvement in vaginal atrophy symptoms
in post-menopausal women. Based on our completed clinical and
preclinical studies, we believe that, in addition to its
beneficial effect on vaginal atrophy, ospemifene improves bone
density, does not increase the risk of breast and uterine
cancer, and does not appear to induce hot flashes. In January
2006, we initiated our first phase&nbsp;III clinical trial of
ospemifene for vaginal atrophy. The trial is expected to take
place in approximately 65 sites in the U.S. and will enroll
approximately 800&nbsp;patients.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ospemifene is differentiated from hormone replacement therapies
such as estrogen. Ospemifene is a next generation selective
estrogen receptor modulator, or SERM, which is a small molecule
that selectively binds to estrogen receptors and either
stimulates or blocks estrogen&#146;s activity in different
tissue types. SERMs block the actions of estrogen in certain
tissues by occupying the estrogen receptors that transmit
signals for cells to grow and divide. SERMs in development have
been shown to mimic estrogen&#146;s beneficial action in bone
tissue but do not stimulate estrogen&#146;s harmful effects in
the breast and uterus which increases the risk of cancer.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Market Opportunity</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormone replacement therapy has long been the standard treatment
for menopause related conditions, including vaginal atrophy.
Hormone replacement therapy consists of treatment using
medications containing one or more female hormones, most
commonly estrogen and progestin.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormone replacement therapy is effective in alleviating symptoms
of vaginal atrophy but, after long-term use, increases the risk
of breast and uterine cancer. In 1991, the National Heart, Lung
and Blood Institute of the National Institutes of Health
(NIH)&nbsp;launched the Women&#146;s Health Initiative, a
<FONT style="white-space: nowrap">15-year</FONT>
U.S.&nbsp;national health study involving over 161,000 women
aged 50 to 79. The Women&#146;s Health Initiative focused on
strategies for preventing heart disease, breast cancer,
colorectal cancer and osteoporosis in healthy post-menopausal
women and included two clinical trials designed to test the
effects of oral estrogen plus progestin and of oral estrogen
alone on heart disease, osteoporotic fractures and breast and
colorectal cancer risk. These studies were stopped early in July
2002 and February 2004, respectively, as the accumulated
evidence suggested the overall health risks of long-term hormone
replacement therapy outweighed the benefits from the therapy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, U.S.&nbsp;hormone replacement therapies sales for
menopausal conditions were approximately $1.7&nbsp;billion. This
represents a 30% decline from the level of sales prior to
publication of the findings of the clinical studies from the
Women&#146;s Health Initiative. Sales of hormone replacement
products containing estrogen alone dropped from
$1.5&nbsp;billion in 2002 to $1.1&nbsp;billion in 2004 in the
United States, although still accounting for approximately 75%
of total 2004 oral hormone replacement prescriptions. Estrogen
therapy is often combined with other hormones, typically
progestin, which is used to decrease the estrogen-related risk
of uterine cancer. These combination therapies constituted
approximately 25% of all U.S. oral hormone replacement
prescriptions and had U.S.&nbsp;sales of $391&nbsp;million in
2004, down from sales of $783&nbsp;million in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Women and their physicians seeking alternatives to systemic
hormone replacement therapies to treat vaginal atrophy typically
turn to topical prescription-based hormone treatments. These
products include vaginal delivery of estrogen in the form of
creams, medicated vaginal suppositories and a hormone-releasing
ring. Sales in the U.S.&nbsp;of prescription topical treatments
for vaginal atrophy have increased by 35% to $232&nbsp;million
from 2002 to 2004. Vaginal delivery of estrogen diminishes, but
does not eliminate, the risks of systemic exposure to estrogen.
<FONT style="white-space: nowrap">Over-the</FONT>-counter
topical vaginal lubricants and moisturizers are also commonly
used, but these therapies are messy to apply. Further, over the
counter topical treatments do not fundamentally change the
mucous membrane of the vagina, and as a result offer only
temporary relief of vaginal atrophy, little relief of associated
local urinary symptoms, and can actually increase vaginal
dryness after the lubricant dries.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SERMs may offer another alternative to hormone replacement
therapies because they have not been shown to increase the risk
of breast or uterine cancer. The therapeutic effects of SERMs
depend on the tissue specificity of each compound. Raloxifene,
marketed as Evista by Eli Lilly, is the first and only approved
SERM for non-oncological treatment. Raloxifene is effective in
treatment of osteoporosis because it is selective to bone
tissue, but it has no effect on vaginal tissue and therefore
does not treat vaginal atrophy.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Further, according to its product label, raloxifene may increase
the incidence of hot flashes. Lasofoxifene (Oporia), currently
in clinical development by Pfizer for the treatment of vaginal
atrophy, appears, based on published clinical data, to
effectively treat osteoporosis and vaginal atrophy, but it also
induces hot flashes. There are no published data on the
treatment of vaginal atrophy using bazedoxifene, a SERM being
developed by Wyeth.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our product candidate, ospemifene, has been shown in
phase&nbsp;II studies to have beneficial effects on bone density
and vaginal atrophy and did not appear to induce hot flashes
when compared to placebo. As a result of the limitations of
current therapies, we believe that an oral therapeutic that
effectively treats the symptoms of post-menopausal vaginal
atrophy without increasing the risk of breast and uterine cancer
and which does not induce hot flashes would be an important
addition to the therapeutic choices of patients and their
physicians.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Completed Clinical Trials</I>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;II Clinical Trial&nbsp;&#151; Comparison with
    Placebo</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2001, we completed a randomized, double-blind,
parallel group study of ospemifene versus placebo in
159&nbsp;post-menopausal women at two study sites in Finland. In
this trial, three dose levels of ospemifene (30, 60 or
90&nbsp;mg once daily) were compared to placebo when
administered for 12&nbsp;weeks. This study was designed
primarily to examine the effect of ospemifene on bone markers in
blood and urine. We also measured other parameters including
change in the vaginal maturation index, thickness of the uterine
lining and blood hormone levels.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This trial demonstrated that ospemifene had an estrogen-like
effect on vaginal cells. Statistically significant changes were
observed in the decrease in parabasal and increase in
superficial cells as reflected in the vaginal maturation index
compared to placebo for all doses except that no statistically
significant changes were observed for superficial cells with the
30&nbsp;mg dose. Further evidence of the positive effect of
ospemifene was the improvement in vaginal dryness, particularly
in patients receiving the 60&nbsp;mg dose. In addition,
ospemifene was found to be superior to placebo in reducing bone
turnover. Bone turnover is the rate at which the bone builds up
and breaks down. After menopause, women generally experience an
increase in bone turnover, as bone is resorbed faster than it is
replaced resulting in an increased rate of bone loss and
increased risk of fractures. In this study, ospemifene was
well-tolerated, no safety issues were observed and the reported
adverse events represented an expected range of common symptoms
and ailments not significantly different than placebo.
Ospemifene did not increase the frequency of hot flashes or
sweating when compared to placebo.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;II Clinical Trial&nbsp;&#151; Comparison with
    Raloxifene</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2000, we completed a randomized, double-blind study
of ospemifene versus raloxifene in 118 post-menopausal women at
seven study sites in Finland. In this trial, three dose levels
of ospemifene (30, 60 or 90&nbsp;mg once daily) were compared to
raloxifene 60&nbsp;mg once daily when administered for
12&nbsp;weeks. This trial demonstrated that all ospemifene dose
levels had an estrogen-like effect on vaginal cells. Ospemifene
caused statistically significant relative decreases in parabasal
cells and increases in superficial cells, as reflected in the
vaginal maturation index, as compared to raloxifene for all dose
levels except that no statistically significant changes were
observed for parabasal cells with 60&nbsp;mg of ospemifene.
Raloxifene did not induce changes in the vaginal maturation
index. Ospemifene had similar effects on bone turnover to
raloxifene. In this study, ospemifene was well-tolerated and no
safety issues were observed.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;I Clinical Trials</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ospemifene has been the subject of five completed phase&nbsp;I
clinical trials with a total of 121&nbsp;volunteers. These
trials included single and multi-dose escalating studies and
food effect studies. In these studies, ospemifene was well
tolerated and no safety issues were observed.
</DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Ongoing Phase&nbsp;III Clinical Trials</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2005, we had an End of Phase&nbsp;II Meeting with the
Division of Reproductive and Urologic Drug Products of the FDA
to discuss the future development of ospemifene. Based on this
meeting, we are conducting a phase&nbsp;III program to seek FDA
approval of ospemifene for the treatment of vaginal atrophy. Our
phase&nbsp;III program will consist of at least two
phase&nbsp;III trials, the first of which was initiated in
January 2006. The phase&nbsp;III clinical trial program may also
include additional supportive trials examining bone markers and
the potential for treatment of hot flashes. In addition, in
order to file an NDA, we will be required to complete two
two-year carcinogenicity studies that we expect to initiate in
2006 and will run in parallel with our phase&nbsp;III trials.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our first phase&nbsp;III clinical trial is a randomized,
double-blind, placebo-controlled, parallel group pivotal study
of ospemifene in the treatment of vaginal atrophy. We expect to
enroll approximately 800 post-menopausal women in this study at
approximately 65 study sites in the United States. Patients will
receive 30 or 60&nbsp;mg of ospemifene or placebo for
12&nbsp;weeks. Following the treatment phase of the study,
patients will be eligible to participate in a one-year extension
study.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In designing our phase&nbsp;III clinical program for ospemifene,
we have followed FDA published guidance for clinical evaluation
of estrogen/progestin drug products used for hormone replacement
therapy. This guidance is intended to provide recommendations
for studies of estrogen/progestin drug products for the
treatment of moderate to severe vaginal atrophy symptoms
associated with menopause. The guidance recommends that three
primary efficacy analyses demonstrate a statistically
significant improvement versus placebo from baseline to week 12
in all three of the following parameters:
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;vaginal maturation index, with an improvement reflected
    by a decrease of parabasal vaginal cells and increase in
    superficial vaginal cells;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;vaginal pH, with an improvement reflected by a lowering
    of vaginal pH;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (3)&nbsp;the moderate to severe symptom identified by the
    patient as being most bothersome to her.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our meeting with the FDA, the FDA confirmed to us that these
endpoints would also apply to clinical trials involving SERMs,
and specifically to ospemifene. In our phase&nbsp;II studies, we
have shown a statistically significant improvement in the
vaginal maturation index. In our phase&nbsp;III studies, our
goal is to confirm improvement in the vaginal maturation index
and achieve the vaginal pH and most bothersome symptoms
endpoints.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Fispemifene&nbsp;&#151; A Treatment for the Symptoms of
Andropause</I></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Description of Condition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Andropause is a result of a gradual decline in testosterone
levels that occurs naturally as men age, a phenomenon similar to
menopause in women. Testosterone, an androgen, is the
predominant male sex hormone. According to a recent World Health
Organization report, testosterone progressively declines as men
age, with 20% of men aged 60 to 80 and 33% of men over 80 having
lower than normal levels of testosterone. Andropause is linked
to a range of conditions including fatigue, reduced interest in
sexual activity, erectile dysfunction, reductions in muscle
mass, strength and agility, mood changes, hair loss, and breast
enlargement. Other longer term medical issues have also been
associated with low testosterone including reduced sperm
production and infertility, osteoporosis, depression and heart
disease. The severity and type of andropause symptoms and the
age at which symptoms first occur can differ greatly among men.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The production of testosterone in men is controlled by the
hypothalamus and pituitary gland. Under normal circumstances,
the release of two hormones, luteinizing hormone (LH)&nbsp;and
follicle stimulating hormone (FSH), stimulates production of
testosterone and estrogen from the testes. Testosterone and
estrogen in turn feedback to the hypothalamus and pituitary
gland. When adequate amounts of testosterone and estrogen have
been produced, the hypothalamus and pituitary recognize this and
decrease the release of LH and FSH. When either estrogen or
testosterone feedback is blocked, an increase in LH and FSH
occurs, stimulating the testes to produce more testosterone.
</DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Product Candidate Characteristics</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fispemifene is our product candidate for the treatment of the
symptoms of andropause. Unlike testosterone replacement
therapies, fispemifene utilizes the body&#146;s normal feedback
mechanism to increase testosterone levels into, but not beyond,
the normal range. Under normal circumstances, testosterone and
estrogen secretion from the testes are regulated by the
pituitary hormones, LH and FSH. Testosterone and estrogen in
turn feed back to the hypothalamus and pituitary to prevent
excessive secretion. By blocking estrogen feedback to the
pituitary with a drug like fispemifene, the pituitary increases
LH and FSH secretion which increases testosterone secretion. As
these rising testosterone levels feed back to the pituitary, LH
and FSH secretion return toward normal and testosterone reaches
a new, albeit higher, steady state level. Based on this
mechanism of action, fispemifene is being studied for the
treatment of androgen deficiency and associated symptoms in
aging men. We believe that increased production of testosterone
may treat many of the symptoms of andropause. In a multiple-dose
phase&nbsp;I study we conducted in healthy men, fispemifene
increased total testosterone levels after 28&nbsp;days of
treatment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Fispemifene&#146;s direct effect on tissues other than the
hypothalamus and pituitary gland may provide additional benefits
in patients with andropause. Because fispemifene has selective
tissue effects, it has estrogen-blocking effects in some tissue,
while having estrogen-like effects in other tissue. For example,
fispemifene&#146;s direct estrogen blocking effects on breast
may be useful in treatment of breast enlargement, while its
direct estrogen-like effect on bone may increase bone mass. In
addition, we have demonstrated preclinically the estrogen
blocking effects of fispemifene on the prostate, which may help
reduce certain risks associated with estrogen, including
prostate cancer and increase in prostate size.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Market Opportunity</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Recent advances in the sensitivity of testing for bioavailable
testosterone have significantly enhanced the ability of
physicians to diagnose and treat andropause. In addition, the
growth of the aging population is driving a significant increase
in the number of older male patients that may benefit from
treatments for the symptoms of andropause. The symptoms of
andropause are most commonly treated with testosterone
replacement therapy. The current market for testosterone
replacement consists primarily of topical or injectable
products. Testosterone replacement products are designed to
provide exogenous testosterone to supplement the low levels of
testosterone seen in aging men but do not address the mechanism
which causes andropause.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, gel and patch formulations of testosterone are the
most commonly prescribed replacement therapies. In the United
States alone, sales for this topical category reached
$538&nbsp;million in 2004, a growth of 40% compared to 2003, and
almost doubling since 2002. In the same two-year period,
U.S.&nbsp;prescriptions grew 25%, from 1.9&nbsp;million in 2002
to nearly 2.4&nbsp;million in 2004. Androgel, marketed by
Solvay, is the U.S.&nbsp;market leader with a nearly 60% market
share of prescriptions and sales of almost $400&nbsp;million in
2004. Approximately half of patients prescribed topical
testosterone products are between 46 and 65&nbsp;years old.
Topical products have certain cosmetic and practical
limitations, such as messiness. Intramuscular injections of
testosterone are effective but are painful and inconvenient.
Oral testosterone therapy is rarely used because of the
potential risk of life-threatening liver toxicity.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The therapeutic goal of testosterone replacement therapy is to
normalize the blood serum testosterone concentration in men to
mid to low young adult serum levels and to avoid elevated
testosterone levels. In spite of this goal, elevated
testosterone levels do occur with replacement therapy and can
lead to problems including prostate enlargement and clinically
meaningful elevations in blood hemoglobin levels that can
increase the risk of vascular problems, including stroke. We
believe that an oral therapeutic option that could elevate
testosterone levels into the normal physiologic range without
increasing the risk of prostate enlargement and elevated blood
hemoglobin levels would be an important therapeutic option for
the treatment of the symptoms of andropause.
</DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Completed Clinical Trials</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;I Clinical Trial&nbsp;&#151; Multiple Dose
    Tolerance Study</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In September 2002, we completed a randomized, double-blind,
placebo-controlled, ascending multiple-dose study of fispemifene
in 31 healthy older male subjects at a single site in Finland.
This study demonstrated that fispemifene was well tolerated at
doses of&nbsp;10, 30, 100 and 300&nbsp;mg administered once
daily for 28&nbsp;days. As secondary objectives, the
pharmacokinetics and pharmacodynamics (serum hormone levels) of
fispemifene were also studied. The increase of the mean total
testosterone over baseline on days 15, 22 and 28 was
approximately 75% with 300&nbsp;mg of fispemifene, which
constituted a statistically significant change (see Figure A
below). The increase of the mean total testosterone level with
doses of fispemifene lower than 300&nbsp;mg was not
statistically significant and has been omitted from the graph.
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Figure A. Testosterone Values Observed in Phase&nbsp;I
Clinical Trial</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Multiple Dose Tolerance Study</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="v16003v1600301.gif" alt="(LINE GRAPH)">
</DIV>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
*&nbsp;&nbsp;&nbsp;&nbsp;Measurements at days 15, 22 and 28 were
statistically significant (p &#60; 0.05).
</DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;I Clinical Trial&nbsp;&#151; Single Dose Tolerance
    Study</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2001, we completed a randomized, double-blind,
placebo-controlled, ascending single dose alternating group
study of fispemifene in 20 healthy male volunteers at a single
site in the United Kingdom. The primary objective was to study
the safety and tolerability of the drug. As secondary
objectives, the pharmacokinetics and pharmacodynamics of
fispemifene were studied. Six dose levels were included in the
study: 10&nbsp;mg, 30&nbsp;mg, 100&nbsp;mg, 300&nbsp;mg,
600&nbsp;mg, and 1200&nbsp;mg. Fispemifene was well tolerated at
all dose levels and there was no evidence of dose or
treatment-related trends in the number or severity of adverse
events.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Planned Phase&nbsp;II Clinical Trial&nbsp;&#151; Study of
    Patients with Low Testosterone</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To date, all clinical studies of fispemifene have occurred
outside of the United States. In November 2005, we submitted an
initial IND filing to the FDA for fispemifene in the treatment
of low testosterone in aging men. In the first quarter of 2006,
we will initiate a randomized, double-blind, placebo-controlled,
parallel group phase&nbsp;II study of fispemifene in the
treatment of low testosterone in older men. This study will seek
to enroll approximately 100 older men with low testosterone
levels at approximately 20 study sites in the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
United States. Patients will receive either 100, 200, or
300&nbsp;mg fispemifene or placebo for 28&nbsp;days. The primary
efficacy parameter will be testosterone increases relative to
baseline. Safety parameters will include assessment of prostate
volume in addition to routine safety monitoring. Our
phase&nbsp;II program for fispemifene will include multiple
phase&nbsp;II trials.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<FONT style="white-space: nowrap"><B><I>QRX-401</FONT> and
<FONT style="white-space: nowrap">QRX-431&nbsp;</FONT>&#151;
Treatments of Elevated LDL Cholesterol and Lp(a) Levels</I></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Description of Condition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Approximately 70&nbsp;million people in the United States have
one or more forms of cardiovascular disease, including coronary
heart disease. Coronary heart disease is the leading cause of
death in the United States, responsible for over 479,000 deaths
in 2003. Coronary heart disease is caused by deposition of
cholesterol, a type of lipid, in the coronary arteries leading
to coronary arteriosclerosis, a condition that may lead to chest
pain, heart attack or debilitating and potentially fatal heart
disease. At least 13.2&nbsp;million Americans alive today have
suffered from such conditions. In addition, arteriosclerosis can
occur in other blood vessels, particularly those supplying blood
to the brain, leading to stroke and other cerebrovascular
conditions. High levels of LDL cholesterol, the so-called
&#147;bad cholesterol,&#148; which can result from various
factors including a genetic predisposition, a diet high in
saturated fats, lack of exercise or diabetes, have been
conclusively shown to be a major cause of coronary heart disease.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A series of recent landmark clinical trials using drugs that
inhibit cholesterol production in the liver, called statins,
confirmed that decreasing high LDL cholesterol reduces the risk
of coronary artery disease and stroke. In 1985, the United
States National Heart, Lung, and Blood Institute of the NIH
launched the National Cholesterol Education Program
(NCEP)&nbsp;with the goal of reducing coronary heart disease by
reducing the percentage of Americans with high cholesterol.
Treatment guidelines issued by the NCEP have advocated
increasingly lower LDL cholesterol treatment targets as new
scientific data has emerged. Despite this awareness, in the
major pharmaceuticals markets, over 300&nbsp;million people have
cholesterol disorders and of these, almost 180&nbsp;million
remain undiagnosed, and less than 32% are receiving any form of
lipid drug treatment, according to 2003 estimates. It is
expected that the number of patients needing
cholesterol-lowering therapy will continue to grow because of an
aging population and the increasing number of people with
diabetes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to lowering LDL cholesterol levels, therapies are
being developed to lower triglycerides, a different form of fat,
to increase HDL cholesterol, the so-called &#147;good
cholesterol,&#148; and to lower other lipoproteins that may
contribute to coronary heart disease and strokes. Lipoproteins
are proteins which transport fatty substances in the blood
stream to and from the liver. One of these lipoproteins is
Lp(a), which has a shape similar to blood clotting proteins and
may encourage blood to clot when Lp(a) levels are high. Lp(a)
has been shown to be an important independent variable for
prediction of risk of cardiovascular disease after LDL
cholesterol and HDL cholesterol, as demonstrated in patients
with coronary heart disease, stroke and premature peripheral
vascular disease and in the aging. Epidemiological studies
indicate that high levels of Lp(a) are associated with an
increased frequency of stroke and coronary heart disease. Large
studies confirming the effect of lowering Lp(a) have not yet
been conducted. To date, there are no drugs approved for the
treatment of elevated Lp(a) levels. Nevertheless, it is
generally believed that lowering Lp(a) could be beneficial and
contribute to a further reduction of the incidence of stroke and
coronary heart disease.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Product Candidate Characteristics</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <FONT style="white-space: nowrap"><I>QRX-401</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are developing
<FONT style="white-space: nowrap">QRX-401</FONT> as a potential
new therapy for the treatment of patients with elevated LDL
cholesterol levels.
<FONT style="white-space: nowrap">QRX-401</FONT> appears to be
unique in its mechanism for lowering LDL cholesterol and Lp(a).
The liver synthesizes cholesterol, converting it into either
bile acids or particles such as LDL cholesterol. The farnesyl X
receptor, or FXR, indirectly regulates this conversion of
cholesterol into bile acids by the liver.
<FONT style="white-space: nowrap">QRX-401</FONT> has been shown
in preclinical studies to be an FXR antagonist, which means that
it blocks the stimulation of the FXR. Blocking the stimulation
of the FXR causes an increase in bile acid formation and a
consequent decrease in the amount of cholesterol available for
LDL cholesterol formation by the liver. Other
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
mechanisms may also contribute to the observed effects of
<FONT style="white-space: nowrap">QRX-401</FONT> on LDL
cholesterol and Lp(a) in animal models. We have not yet
demonstrated that this mechanism for LDL cholesterol lowering is
effective in normal, healthy volunteers.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <FONT style="white-space: nowrap"><I>QRX-431</FONT></I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also developing
<FONT style="white-space: nowrap">QRX-431</FONT> for the
treatment of elevated levels of LDL cholesterol and Lp(a).
<FONT style="white-space: nowrap">QRX-431</FONT> activates the
thyroid beta receptor, which is a known mechanism for lowering
LDL cholesterol and Lp(a). The naturally occurring thyroid
hormone, T3, has been shown to lower LDL cholesterol and Lp(a)
through its effects on the thyroid beta receptor, but T3 also
stimulates the thyroid alpha receptor which produces potentially
harmful increases in heart rate. This lack of tissue specificity
renders T3 unacceptable as a therapy to lower cholesterol
because of the elevation in heart rate.
<FONT style="white-space: nowrap">QRX-431</FONT> is selective to
the thyroid beta receptor and, as a result, has been shown in
our preclinical studies to lower LDL cholesterol and Lp(a) and
not affect heart rate. Further, in preclinical monkey studies,
<FONT style="white-space: nowrap">QRX-431</FONT> was observed to
be selectively taken up by the liver relative to the heart,
which provides added protection to the heart. We believe that
<FONT style="white-space: nowrap">QRX-431</FONT> may also have
the potential to act as a weight loss therapy. In the monkey
studies, <FONT style="white-space: nowrap">QRX-431</FONT> caused
an average weight loss of 3% to 4% after seven days of treatment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Preclinical studies with
<FONT style="white-space: nowrap">QRX-431</FONT> have also
demonstrated that this product candidate stimulates reverse
cholesterol transport, or RCT. RCT is an important protective
mechanism involving the transport of cholesterol from the
arteries, including plaques which may cause strokes, back to the
liver. <FONT style="white-space: nowrap">QRX-431</FONT>
stimulates several steps in RCT including stimulation of the HDL
receptor <FONT style="white-space: nowrap">SR-B1</FONT> and
increasing bile acid synthesis and removal. This suggests that
<FONT style="white-space: nowrap">QRX-431</FONT> might be a
candidate for treatment and prevention of cardiovascular disease
in humans independent of its effects on LDL cholesterol and
Lp(a).
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Market Opportunity</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, the market for prescription lipid disorder treatments
reached approximately $26&nbsp;billion worldwide, making it the
single largest pharmaceutical category. Much of this growth was
driven by statins, which accounted for approximately 87% of
sales. Non-statin therapies, including fibrates, niacin and
cholesterol absorption inhibitors, have also seen an increase in
use, in particular in combination with low dose statins, a
recent example being Vytorin, a cholesterol absorption inhibitor
marketed by Merck/Schering-Plough.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The lowering of LDL cholesterol continues to be the primary
focus of current therapeutic strategies aimed at reducing the
risk of cardiovascular events in patients with elevated
cholesterol. A significant gap remains, however, between the
number of patients who would benefit from therapy and those who
are actually achieving treatment goals. For example, a recent
survey in the United States reported that 37% of patients at
high risk of developing coronary heart disease and only 18% of
patients with established coronary heart disease actually
achieved the LDL cholesterol values recommended by the NCEP
guidelines.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Among currently available cholesterol lowering therapies,
statins are the most widely used because they are considered to
be the most effective. Troublesome or serious side effects may
limit the utility of statins in some patients. Muscle pain
resulting from statin therapy, while not considered a serious
complication, may affect quality of life and lead to lack of
compliance, treatment at less than optimal doses or withdrawal
from therapy. Rare serious side effects such as muscle damage, a
breakdown of skeletal muscle cells and liver toxicity preclude
the use of statins in older individuals or in patients with
kidney or liver disease.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Statins are sometimes combined with other therapies to limit the
statin dose in patients who cannot tolerate higher doses and to
achieve LDL cholesterol target levels in patients for whom use
of statins alone is not sufficient. Combining statin therapy
with some other types of cholesterol lowering drugs may cause
adverse side effects resulting from the interaction of statins
with the other drugs. In addition, certain of the drugs that are
used in combination with statins have adverse side effects
themselves, including adverse liver and gastrointestinal effects
and facial flushing. Because of these side effects, new
treatments to use in combination with statins are being sought.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
While statin therapy has proven to be safe and effective in the
majority of patients for lowering LDL cholesterol, it does not
address all cardiovascular risk factors. Statins have only small
beneficial effects on
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
elevated triglycerides and HDL cholesterol and no effect on
Lp(a). We believe a drug that reduces LDL cholesterol and Lp(a)
and that can be used either alone or in combination with statins
would produce additional benefits over existing therapies.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Development Program&nbsp;&#151;
    <FONT style="white-space: nowrap">QRX-401</FONT></I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;I Clinical Trials&nbsp;&#151; Single and Multiple
    Dose Tolerance Studies</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2004 we began our initial single dose tolerance
phase&nbsp;I study with
<FONT style="white-space: nowrap">QRX-401.</FONT> Since that
time, we have conducted a total of four single and multiple dose
tolerance studies with a total of 144 normal volunteers with
doses of up to 250&nbsp;mg/day for 14&nbsp;days. In all of these
studies, <FONT style="white-space: nowrap">QRX-401</FONT> has
been well-tolerated and no safety issues were observed. Although
we are still analyzing data from these studies, which were not
designed primarily to demonstrate efficacy, to date we have not
observed consistent LDL cholesterol lowering in normal
volunteers following administration of
<FONT style="white-space: nowrap">QRX-401.
</FONT>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;I Clinical Trial&nbsp;&#151; Food Effect Study</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2005, we completed a single-center, randomized,
balanced, single-dose, crossover study of the pharmacokinetics
of 150&nbsp;mg <FONT style="white-space: nowrap">QRX-401</FONT>
in fed and fasted healthy male subjects. This trial demonstrated
that <FONT style="white-space: nowrap">QRX-401</FONT> was
rapidly absorbed and metabolized. In addition, the trial showed
that safety and tolerability parameters were similar between the
fasted and fed states.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Ongoing Phase&nbsp;I Clinical Trial&nbsp;&#151; Statin
    Interaction Study</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are currently conducting a multiple-dose pharmacokinetic drug
interaction between
<FONT style="white-space: nowrap">QRX-401</FONT> and
simvastatin, a commonly used statin marketed as Zocor by
Merck&nbsp;&#38; Co., in healthy male volunteers to evaluate the
potential for a pharmacokinetic drug interaction of
<FONT style="white-space: nowrap">QRX-401</FONT> on simvastatin
as well as to assess the safety, tolerance and pharmacodynamic
effects of the co-administration of
<FONT style="white-space: nowrap">QRX-401</FONT> and simvastatin
when administered once daily for two weeks. A secondary
objective is to evaluate the potential for a pharmacokinetic
drug interaction of simvastatin on
<FONT style="white-space: nowrap">QRX-401</FONT> as compared to
historical single dose 250&nbsp;mg
<FONT style="white-space: nowrap">QRX-401</FONT> pharmacokinetic
data. The results from this study are expected in the second
quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Development Program&nbsp;&#151;
<FONT style="white-space: nowrap">QRX-431</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Preclinical Studies</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A preclinical study of
<FONT style="white-space: nowrap">QRX-431</FONT> in cynomolgus
monkeys was published in 2004. The monkeys were treated either
with the natural T3 hormone or
<FONT style="white-space: nowrap">QRX-431</FONT> once daily for
seven&nbsp;days. The group treated with
<FONT style="white-space: nowrap">QRX-431</FONT> demonstrated no
statistically significant increase in heart rate. Reductions in
LDL cholesterol and Lp(a) levels and a 3% to 4% weight reduction
in this group were observed. The differences between the
<FONT style="white-space: nowrap">QRX-431</FONT> group and the
T3 group were statistically significant for each of the markers.
The results of the study are shown in Figure&nbsp;B below
comparing T3 to <FONT style="white-space: nowrap">QRX-431</FONT>
(referred to as <FONT style="white-space: nowrap">GC-1</FONT> in
the graph).
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Figure B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7 Day Treatment in
Cynomolgus Monkeys</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="v16003v1600303.gif" alt="(BAR GRAPH)">
</DIV>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>*&nbsp;Measurements were statistically significant
(p&#60;0.05)</B>
</DIV>

<DIV align="left" style="font-size: 8pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>G. J. Grover, D.M.&nbsp;Egan, P.G.&nbsp;Sleph,
B.C.&nbsp;Beehler, G.&nbsp;Chiellini, N.&nbsp;Nguyen,
J.D.&nbsp;Baxter and T.S.&nbsp;Scanlan, &#147;Effects of the
Thyroid Hormone Receptor Agonist
<FONT style="white-space: nowrap">GC-1</FONT> on Metabolic Rate
and Cholesterol in Rats and Primates: Selective Actions Relative
to&nbsp;3,5,39- Triiodo-L-Thyronine,&#148; Endocrinology, April
2004 (4), 145, 1656 -1661. Copyright 2004 by The Endocrine
Society.</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Planned Clinical Trial</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We plan to submit an initial IND filing for
<FONT style="white-space: nowrap">QRX-431</FONT> in the
treatment of lipid disorders in the first half of 2006 and
initiate a phase&nbsp;I trial shortly thereafter. Supportive
toxicology and safety pharmacology studies have been conducted
and are currently being summarized. The phase&nbsp;I clinical
program will consist of single and multiple rising dose
tolerance studies, a food effect study, and a drug interaction
study with a statin product.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Becocalcidiol&nbsp;&#151; A Topical Treatment for
Psoriasis</I></B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Description of Condition</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Psoriasis is a chronic disease of the skin characterized by red
patches covered with white scales, or plaques, that can occur on
any part of the body. Psoriasis usually develops in individuals
between 15 and 35&nbsp;years of age, but can develop at any
time. In addition to its cosmetic aspect, psoriasis can have a
profound effect on quality of life depending on location on the
body and how much of the body is affected. Psoriasis is a very
common condition. According to 2004 sources, it is estimated
that 1% to 3% of the adult population have the disease with
various forms of severity and that over 18&nbsp;million people
in the United States, Japan, France, Germany, Italy, Spain and
the United Kingdom suffer from the disease. In these markets, it
is estimated that approximately 10&nbsp;million patients are
currently diagnosed with psoriasis and that approximately 81% of
these patients receive treatment with topical therapies. In the
United States, it is estimated that approximately
4.5&nbsp;million patients are currently diagnosed with psoriasis
and that approximately 87% of these patients receive topical
therapy treatments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Product Candidate Characteristics</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Becocalcidiol is our product candidate for the treatment of mild
to moderate psoriasis. Becocalcidiol is a novel topical
calcitriol analog. Topical calcitriol and its analogs have been
shown for many years to be effective in the treatment of
psoriasis. Based on our completed phase&nbsp;IIb study,
becocalcidiol was statistically superior to vehicle in reducing
plaque and did not result in excessive blood calcium levels, a
side effect of existing calcitriol topical treatments for
psoriasis. This allows the potential for use of becocalcidiol at
higher doses and/or on larger body surface areas than can be
achieved with existing calcitriol topical products. We believe
that the ability to treat patients with higher doses may in turn
offer the potential for enhanced
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
efficacy. In our clinical and preclinical studies, becocalcidiol
has been well tolerated with a low incidence of skin irritation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Becocalcidiol has been formulated into an ointment, and has
undergone preliminary formulation work for cream, mousse and
lotion forms that all appear feasible and which could provide a
range of presentation options to address different patient
needs. Becocalcidiol has also successfully undergone
pre-formulation feasibility work for combination with a topical
steroid and a topical retinoid, two existing treatments for
psoriasis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Market Opportunity</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Global sales of topical products for the treatment of psoriasis
were $532&nbsp;million for the twelve month period ended October
2005, with almost 70% of these sales coming from existing
topical vitamin D-based products. Other available topical agents
include corticosteroids, keratolytics, anthralin, coal tar and
retinoids. While each of these existing topical treatments has
been shown to produce some clinical benefit, each has also been
associated with undesirable side effects, including skin
irritation, odor and staining of the skin. Physicians often
switch or rotate therapies to try to avoid such problems or
improve efficacy. Topical products are mainly used for mild to
moderate psoriasis; recently, new systemic products have been
approved for the treatment of moderate to severe psoriasis. As
use of these much more expensive therapies increases, the
overall value of the total market for psoriasis products is
projected to grow significantly.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Corticosteroids and calcitriol analogs, either alone or in
combination, are the most popular of topical treatments.
Steroids can quickly clear lesions, but they typically do not
produce long remissions and repeated use can be associated with
a thinning of the outer layers of the skin and other undesired
skin changes. All currently marketed calcitriol based products
have reported cases of excessive blood levels of calcium, which
can result in kidney and other potentially serious problems.
These existing products are also reported to exhibit frequent
skin irritation that may reduce patient compliance and encourage
switching of therapies. Calcipotriol, a topical calcitriol
analog marketed by Warner Chilcott as Dovonex, and
calcipotriene/betamethason dipropionate, a calcipotrol with a
topical steroid to be marketed by Warner Chilcott as Taclonex,
are the only topical calcitriol products available in the United
States. In Europe, other topical calcitriol agents are also
available, as is a combination of calcipotriol with a topical
steroid.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Completed Clinical Trials</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;IIb Clinical Trial&nbsp;&#151; Whole Body Proof of
    Concept Study</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, we completed a randomized, double-blind, parallel
group, vehicle-controlled study of becocalcidiol in
185&nbsp;patients with mild to moderate chronic psoriasis at 12
centers in the United States. In this trial, two dose regimens
of becocalcidiol ointment, 75 mg/g ointment applied once daily
(low dose) and 75 mg/g ointment applied twice daily (high dose),
were compared to a vehicle ointment not containing any drug. The
primary study endpoints were a Physician&#146;s Global
Assessment (PGA)&nbsp;reflecting the percentage of patients with
all plaques on body cleared or almost cleared, and a Psoriasis
Symptom Score (PSS)&nbsp;based on two to four target plaques
selected at baseline. Efficacy was assessed following eight
weeks of therapy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This trial demonstrated that treatment with high dose and low
dose becocalcidiol resulted in a statistically significant
improvement in PGA score compared to vehicle. In addition, all
plaques were cleared or almost cleared in 31% and 20% of
patients treated in this trial with high and low dose
becocalcidiol, respectively, compared to 6% patients treated
with vehicle. Patients in the high dose becocalcidiol group
achieved a statistically significant improvement in PSS score
from baseline as compared to patients in the vehicle group.
Becocalcidiol was generally well-tolerated in this study with a
low incidence of skin irritation and no change in blood calcium
levels.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Phase&nbsp;IIa Clinical Trials</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2003, we completed two phase&nbsp;IIa clinical
trials. These two trials enrolled a total of 152&nbsp;patients.
Patients were treated for two weeks in one study and
12&nbsp;weeks in the other study. These studies
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
were conducted at low doses compared to our phase&nbsp;IIb trial
described above. We observed initial indications of efficacy
that demonstrated the need to proceed to the higher doses. We
have now studied higher doses in our phase&nbsp;IIb trial.
Becocalcidiol was generally well-tolerated in both of these
phase&nbsp;IIa studies. No clinically significant changes in
blood or urine calcium levels were observed.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Planned Development</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because becocalcidiol is outside our core therapeutic areas, we
are evaluating alternatives for continued development of this
product candidate, including seeking a partner for further
development and commercialization. We are also currently working
on improved synthetic manufacturing methods for becocalcidiol.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Preclinical and Discovery Programs</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our preclinical and discovery programs are primarily conducted
by Hormos, our wholly owned Finnish subsidiary which we acquired
in May 2005. Over the last seven years, Hormos has built a drug
discovery capability that is focused on discovering and
developing novel pharmaceutical compounds involving the tissue
specific regulation of estrogen effects for the treatment of
certain age-related diseases. Hormos&#146;s discovery efforts
are aided by the potential for Finnish government research loans
and grants offered for drug discovery in Finland.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are focusing our research on SERMs and
17b&nbsp;hydroxysteroid dehydrogenases, or HSDs. We are
enhancing and following the work already completed with
ospemifene and fispemifene in the SERM area, and particularly
focusing on the treatment of hot flashes in women. We have built
up a SERM library in which several molecules show no
estrogen-like effect in breast or uterine tissue, but
estrogen-like effect in the central nervous system, which should
have a positive effect in treating hot flashes in menopausal
women. HSDs are selective inhibitors to prevent the conversion
of estrone to estradiol and therefore cause relative estrogen
deficiency in selected tissues. We believe HSDs could be useful
for endometriosis and uterine fibroids in women and may have
applications for shrinking prostate size in men.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have nine scientists and eight technicians working in our
chemistry and pharmacology laboratories at our research division
in Finland. Senior members of our research division have
extensive experience in drug discovery and development at
companies such as Farmos, Orion and Schering and with a wide
variety of products, including hormonal products. Prior to
joining Hormos, certain members of this research team discovered
the SERM compound toremifene, marketed as Fareston by GTx, and
participated in its worldwide development for the treatment of
breast cancer. Our resources in Finland enable us to focus on
the most critical elements of drug discovery, namely developing
and running key high throughput screening of compound libraries
and optimizing lead compounds. We also have access to a state of
the art animal facility allowing key small scale in vivo
experiments to be done in a timely manner.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos also supports our clinical development activities by
providing expertise and resources in pharmacokinetics,
pharmaceutical product development and project management. The
development staff consists of ten members, eight of whom are
scientists. Bioanalytics is done in our
<FONT style="white-space: nowrap">GLP-approved</FONT>
laboratory. Our GMP approved
<FONT style="white-space: nowrap">in-house</FONT> resource
allows tablet development and stability studies and release of
products for clinical studies. The team leader for our GMP work
has extensive experience in product development, outsourcing of
manufacturing and NDA filings relating to hormonal products.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Sales and Marketing</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not have sales or marketing personnel. In order to
commercialize any products that are approved for commercial
sale, we must either build a sales and marketing infrastructure
or collaborate with third parties with sales and marketing
experience. We expect that we may build our own sales and
marketing infrastructure to market some of our product
candidates. We expect that we will
<FONT style="white-space: nowrap">out-license</FONT> or enter
into collaboration agreements for the commercialization of other
product candidates, particularly in the case of product
candidates, such as our product candidates for treating elevated
cholesterol levels, where the sales and marketing infrastructure
required to maximize their value is larger than is practical for
a company of our size.
</DIV>

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<B>Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our policy is to protect the technology that we consider
important to our business. We will be able to protect our
technology from unauthorized use by third parties only to the
extent it is effectively maintained as a trade secret or is
covered by valid and enforceable patents and trademarks.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Individual patents extend for varying periods depending on the
date of filing of the patent application or the date of patent
issuance and the legal term of patents in the countries in which
they are obtained. Generally, patents issued in the United
States are effective for: (a)&nbsp;20&nbsp;years from the
earliest effective filing date, if the patent application was
filed on or after June&nbsp;8, 1995, or (b)&nbsp;17&nbsp;years
from the issue date or 20&nbsp;years from the earliest effective
filing date, whichever is later, if the patent application was
filed prior to June&nbsp;8, 1995. The length of these effective
terms assume all maintenance fees are paid.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, in certain instances, a patent term can be extended
to recapture a portion of the term effectively lost as a result
of the FDA regulatory review period. The duration of foreign
patents varies in accordance with provisions of applicable local
law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The actual protection afforded by a patent varies on a product
by product basis, from country to country and depends upon many
factors, including the type of patent, the scope of its
coverage, the availability of regulatory related extensions, the
availability of legal remedies in a particular country and the
validity and enforceability of the patents.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We actively seek to obtain patent protection on the technology
that we consider important to our business, including chemical
species, compositions and forms, their methods of use and
processes for their manufacture. In addition to seeking patent
protection in the United States, we generally file patent
applications in Australia, Canada, Western European countries,
Japan, Mexico and additional foreign countries on a selective
basis in order to further protect the inventions that we
consider potentially important to the development of our
business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For ospemifene, we have obtained an issued patent covering the
use of ospemifene for the treatment of climacteric disorders in
women during or after menopause. The patent will expire,
assuming all maintenance fees or annuities are paid, in the
United States in 2020, in Australia in 2021, in New Zealand in
2021 and in South Africa in 2021. A patent on the subject matter
has also been approved for issue in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have a license from Orion under its patents covering the
use of ospemifene in a dosage formulation suitable for use in a
variety of indications. The patent will expire, assuming all
maintenance fees or annuities are paid, in the United States in
2015, in Europe in 2015, in Australia in 2015, in Israel in
2015, in Norway in 2015, in New Zealand in 2015 and in South
Africa in 2015. The license from Orion also grants us rights
under Orion&#146;s patent claiming the use of ospemifene as a
serum cholesterol lowering agent. This patent expires, assuming
all maintenance fees or annuities are paid, in the United States
in 2017, in Australia in 2017, in Europe in 2017 and in New
Zealand in 2017. Our license rights from Orion are exclusive
worldwide, subject to a right of first refusal retained by Orion
for Denmark, Estonia, Finland, Iceland, Latvia, Lithuania,
Norway, Russia and Sweden.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For fispemifene, we have obtained an issued patent covering
triphenylalkene derivatives (including fispemifene) and their
use as selective estrogen receptor modulators. Orion owns an
undivided interest in this patent and we have entered into a
license agreement with Orion under this patent. Our license
rights from Orion are exclusive worldwide, subject to a right of
first refusal retained by Orion for Denmark, Estonia, Finland,
Iceland, Latvia, Lithuania, Norway, Russia and Sweden. This
patent will expire, assuming all maintenance fees or annuities
are paid, in the United States on November&nbsp;15, 2020. This
patent will also expire in Indonesia in 2020, in New Zealand in
2020, in Singapore in 2020, in Taiwan in 2020 and in South
Africa in 2020.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A third party holds an issued United States patent related to
the use of an anti-estrogen for use in the treatment of androgen
deficiency and related disorders. Zonagen, Inc., a
pharmaceutical company also developing a treatment for
testosterone deficiency in men using a compound that is named in
the patent, requested a reexamination of this patent from the
PTO on the grounds that the claims of the third party&#146;s
</DIV>

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patent were invalid because they were disclosed in printed
publications before the date of the invention. In June 2005, the
PTO determined that the claims, as amended during this
reexamination, were patentable in view of the publications under
consideration. Zonagen has subsequently stated in its public
filings that it intends to seek further reexamination of this
third party patent based on additional prior art publications
not previously considered by the PTO. If, as a result of this
further reexamination, the patentability of the claims is
confirmed by the PTO, the patent&#146;s scope could cover our
intended use of fispemifene. Even if Zonagen is not successful
in its attempt to invalidate all of the claims of the patent,
our intended use may be covered by any surviving claims. The
patent holder could bring a claim against us alleging that our
fispemifene product candidate infringes the patent. We believe
we would have valid defenses to any such claim; however,
notwithstanding any defenses we may assert, if such an
infringement claim were successful, we would need to obtain a
license from the patent-holder in order to commercialize
fispemifene in the United States. If such a license were
necessary but not available to us on acceptable terms or at all,
we may not be able to commercialize fispemifene at all in the
United States.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For <FONT style="white-space: nowrap">QRX-401,</FONT> we have a
license from Genzyme Corporation (formerly Ilex Products, Inc.)
under its patent claiming the composition of matter of
<FONT style="white-space: nowrap">QRX-401</FONT> and its use as
a cholesterol lowering agent. This patent expires in the United
States in 2021. Our rights under this patent are worldwide and
exclusive in the field of lipid disorders, atherosclerosis and
all other cardiovascular related diseases.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For <FONT style="white-space: nowrap">QRX-431,</FONT> we have a
license from EndoChem, Inc. under patents it licensed from the
University of California claiming the composition of
<FONT style="white-space: nowrap">QRX-431</FONT> and its use in
the treatment of hyperlipidemia, obesity and diabetes. This
patent expires in 2017. Our rights under this patent are
exclusive and worldwide for all therapeutic applications.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For becocalcidiol, we have a license from Deltanoid
Pharmaceuticals, Inc. under its patent rights obtained from the
Wisconsin Alumni Research Foundation claiming the composition of
becocalcidiol and its use in the treatment of psoriasis. Our
rights under these patents are worldwide. These patents expire
in 2022. Our license rights under these patents are limited to
this compound and are for topical treatments of skin diseases.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the foregoing patents, we or our licensors, have
also filed various patent applications in certain countries to
obtain additional patent protection relating to ospemifene,
fispemifene, <FONT style="white-space: nowrap">QRX-401,</FONT>
<FONT style="white-space: nowrap">QRX-431</FONT> and
becocalcidiol.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to patents, we rely upon unpatented trade secrets
and <FONT style="white-space: nowrap">know-how</FONT> to develop
and maintain our competitive position. We also have
confidentiality agreements or invention assignment agreements
with some of our commercial partners and consultants. These
agreements are designed to protect our proprietary information
and, in the case of the invention assignment agreements, to
grant us ownership of technologies that are developed through a
relationship with a third party.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Licenses and Collaborative Relationships</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have established and intend to continue to pursue licenses
from and collaborative relationships with pharmaceutical and
biotechnology companies and academic institutions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Orion</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have two license agreements with Orion Corporation, one
relating to ospemifene and one relating to fispemifene.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under a license agreement with Orion relating to ospemifene, we
received an exclusive, worldwide license to Orion&#146;s
undivided interest in patents with respect to osteoporosis,
vaginal atrophy and cholesterol lowering in women. We separately
own an undivided interest in such patents. This license to
Orion&#146;s interest in the patents is limited to
pharmaceutical products containing ospemifene as its sole active
ingredient. The agreement includes the right to grant
sublicenses to third parties. Orion retained a right of first
refusal to become the exclusive importer and market seller and
distributor of ospemifene in Denmark, Estonia, Finland, Iceland,
Latvia, Lithuania, Norway, Russia and Sweden. Under the terms of
the agreement, we paid Orion a
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
license fee of 400,000&nbsp;Euros and also agreed to pay Orion
development milestone payments of up to $750,000 for two
milestones, and of up to an additional 1,100,000&nbsp;Euros for
the remaining milestones, plus a royalty based on net sales of
products resulting under the agreement. The term of our license
from Orion continues on a country-by-country basis until the
expiration or invalidation of the last to expire or be
invalidated of the licensed patents, or 15&nbsp;years from the
date of the agreement, whichever is longer. In the case of a
payment default, Orion has the right to terminate the license
upon 15&nbsp;days prior written notice and failure to cure
within such 15&nbsp;day period. In all other cases, each party
has the right to terminate the license upon 30&nbsp;days prior
written notice in the case of material breach and failure to
take action to cure such a breach within such 30&nbsp;day
period. Orion also has the right to terminate the agreement
immediately in the event that we fail to launch ospemifene in
the United States, Germany, the United Kingdom and France before
December&nbsp;31, 2015.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under a license agreement with Orion relating to fispemifene, we
received an exclusive, worldwide license to Orion&#146;s
undivided interest in patents with respect to fispemifene. We
separately own an undivided interest in such patents. The
agreement includes the right to grant sublicenses to third
parties. Orion retained a right of first refusal to become the
exclusive importer and market seller and distributor of
fispemifene in Denmark, Estonia, Finland, Iceland, Latvia,
Lithuania, Norway, Russia and Sweden. Under the terms of the
agreement, we paid Orion an initial license fee of
50,000&nbsp;Euros and also agreed to pay Orion combined
development milestone payments of up to 900,000&nbsp;Euros and a
royalty based on net sales of products resulting under the
agreement. The term of the license from Orion continues on a
country-by-country basis until the expiration or invalidation of
the last to expire or be invalidated of the licensed patents.
Each party has the right to terminate the license upon
30&nbsp;days prior written notice in the case of material breach
and failure to take action to cure such a breach within such
30&nbsp;day period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Tess Diagnostics and Pharmaceuticals</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our former development partner for ospemifene, Tess Diagnostics
and Pharmaceuticals, Inc. has assigned to us all of its license
rights under certain patents for the use of ospemifene. In
consideration for that assignment and Tess&#146; earlier
contribution to the development of ospemifene, we made a payment
of $700,000 to Tess. We have also agreed to pay a royalty out of
ospemifene net sales of each product and a share of milestones
received from third parties depending on the implemented
commercialization model. Our requirement to pay royalties
continues on a country-by-country basis until the expiration of
the last to expire of an ospemifene patent covering such
product. If we have a change in control and we determine to
develop and commercialize ospemifene without giving an exclusive
license to a third party, then we must pay to Tess combined
milestone payments of up to $8.5&nbsp;million. If we have a
change in control and we grant royalty bearing licenses to third
parties, we must pay to Tess a share of the payments received
from third parties. If we decide to permanently discontinue our
development and commercialization of ospemifene, we have the
right to terminate our license from Tess upon written notice to
Tess.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Genzyme Corporation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under an exclusive license agreement with Genzyme Corporation
(formerly Ilex Products, Inc.), we have a license to develop and
market certain compounds for the treatment of lipid disorders,
atherosclerosis and all other cardiovascular related disorders
on a worldwide basis. These compounds include
<FONT style="white-space: nowrap">QRX-401.</FONT> We have the
right to grant sublicenses to third parties. Under the terms of
the agreement, we paid Genzyme Corporation an initial license
fee of $2.5&nbsp;million. With respect to
<FONT style="white-space: nowrap">QRX-401,</FONT> we have agreed
to pay Genzyme Corporation combined development milestone
payments of up to $39&nbsp;million, a share of sublicense
revenue and a royalty based on net sales of products resulting
under the agreement. Milestone payments made to date have
totaled $1.5&nbsp;million. Our requirement to pay royalties
continues on a country-by-country basis until the expiration of
the last to expire of the licensed patents that claim the
products or for the period of non-patent marketing exclusivity
in that country. We may terminate the agreement for any reason
upon 90&nbsp;days written notice. Genzyme Corporation may
terminate the agreement if we are in material breach and fail to
cure such a breach within 60&nbsp;days of written notice of such
breach by Genzyme.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>EndoChem</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under an exclusive license agreement with EndoChem, Inc., we
have a license to develop and market
<FONT style="white-space: nowrap">QRX-431</FONT> for all human
therapeutic applications on a worldwide basis. We have the right
to grant sublicenses to third parties, however this right may
only be granted to the extent reasonably necessary for the
development and commercialization of products and sublicensees
who have received a direct sublicense from us may grant further
sublicenses without further rights to sublicense. Under the
terms of the agreement, we owe EndoChem an initial license fee
of $800,000, of which $450,000 has been paid, $100,000 is due
within seven&nbsp;days of the one year anniversary of the date
of the agreement and $250,000 is due within seven&nbsp;days of
the filing of an Investigational New Drug application for
commencement of phase&nbsp;I clinical trials with the FDA. We
have also agreed to pay EndoChem combined development milestone
payments of up to $3.25&nbsp;million, a royalty based on net
sales of products resulting under the agreement and a percentage
of sublicensing revenues other than net sales. This agreement
also requires us to make specified minimum annual royalty
payments of $100,000 beginning in the first year of sales, and
in any event, beginning in 2012, even if sales have not occurred
by then. Our requirement to pay royalties continues on a
country-by-country basis until the expiration of the last to
expire of the licensed patents that covers the sale of the
product in such country. We may terminate the agreement for any
reason upon 90&nbsp;days written notice. EndoChem may terminate
the agreement upon written notice if we are in material breach
and fail to cure such a breach within 45&nbsp;days of the notice
for monetary defaults and 75&nbsp;days of the notice for any
other default. The rights licensed to us by EndoChem were
licensed by EndoChem from the Regents of the University of
California and our rights are therefore subject to the
continuation of the license between EndoChem and the University
of California. We have received an affirmation from the
University of California providing that notwithstanding the
termination or expiration of the license between EndoChem and
the University of California, the University shall permit us to
exercise all rights granted to EndoChem under its license with
EndoChem and sublicensed to us provided that we are not in
default in our license with EndoChem at the time of termination
or expiration, and that we agree in writing to the terms of the
University&#146;s license with EndoChem.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Deltanoid Pharmaceuticals</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under an exclusive license agreement with Deltanoid
Pharmaceuticals, Inc., we have a license to develop and market
becocalcidiol for topical treatments of skin diseases, including
psoriasis, on a worldwide basis. We have the right to grant
sublicenses to third parties. Under the terms of the agreement,
we have paid Deltanoid Pharmaceuticals an initial license fee
and have agreed to pay Deltanoid Pharmaceuticals development
milestone payments up to $3.5&nbsp;million and a royalty based
on net sales of products resulting under the agreement. Our
requirement to pay royalties continues on a country-by-country
basis until the expiration of the last to expire of the licensed
patents that covers the sale of the products in that country. We
may terminate the agreement for any reason upon 90&nbsp;days
written notice. Deltanoid Pharmaceuticals may terminate the
agreement if we are in breach and fail to cure such a breach
within 30&nbsp;days of written notice of such breach. The rights
licensed to us by Deltanoid Pharmaceuticals were licensed by
Deltanoid Pharmaceuticals from the Wisconsin Alumni Research
Foundation and our rights are therefore subject to the
continuation of the license between Deltanoid and the Wisconsin
Alumni Research Foundation. As such, we have entered into an
agreement with the Foundation providing that if the license
between the Foundation and Deltanoid Pharmaceuticals is
terminated, and we are not in default in our license with
Deltanoid Pharmaceuticals, then we will be deemed to have
entered into a license directly with the Foundation on the same
terms and conditions as those set forth in our license with
Deltanoid.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>University of Turku</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under a patent assignment agreement with the University of
Turku, we have rights to a patent relating to the method of use
of fispemifene for treatments for lower urinary tract symptoms
or pelvic pain. Under the terms of the agreement, we paid patent
application and patent approval fees to the inventors and a
signing fee to the University that totaled 11,400&nbsp;Euros. We
have also agreed to pay a 10,000&nbsp;Euros milestone payment
and to pay a royalty based on net income. Our requirement to pay
royalties continues on a country-by-country
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
basis until the expiration of the licensed patent in that
country. We have further agreed to pay a percentage of any
purchase price we receive for the outright license or assignment
to a third party of the applicable patent. Each party has the
right to terminate the license on 30&nbsp;days prior written
notice in the case of breach and failure to cure such a breach
within such 30&nbsp;day period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Linnea</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We entered into a Manufacturing, Sales and Distribution License
Agreement with Linnea S.A. whereby Linnea received an exclusive,
worldwide license to our HMRlignan technology for nutraceutical
use. Under this agreement, Linnea has the right to develop,
manufacture and commercialize HMRlignan as an active ingredient
in dietary supplement products. Linnea has the right to grant
sublicenses to third parties. We retained a non-exclusive right
to market HMRlignan in finished forms in the United States. We
also retained the right to develop, manufacture, commercialize
and license to third parties HMRlignan for prescription
pharmaceutical applications. Under the terms of the agreement,
Linnea is required to pay a royalty on sales of HMR bulk
ingredient by Linnea to its customers after April&nbsp;1, 2007
and on revenues for sublicenses granted by Linnea. Linnea must
maintain certain minimum sales volumes in order to maintain its
exclusive rights under the agreement. We granted Linnea an
option to the right to sell HMRlignan products approved under
(i)&nbsp;the Generally Recognized As Safe regulatory clearance
by the FDA and (ii)&nbsp;the criteria stated in the European
Union for sale of novel food items, upon payment of an option
fee of $500,000 for each such use. Linnea has paid an initial
signing fee of 400,000&nbsp;Euros. Linnea has the right to
terminate the agreement at any time upon 4&nbsp;months prior
written notice. Either party has the right to terminate the
agreement if the other party is in material breach and fails to
cure such breach within 30&nbsp;days from the date the written
notice of breach is dispatched. The term of this agreement
expires on the expiration of US patent 6,451,849 which expires
in 2019.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our major competitors are public and private pharmaceutical and
biotechnology companies, both in the United States and abroad,
which are engaged in the discovery and development of products
that would compete directly with our therapeutic compound
candidates in the fields of endocrine, metabolic and
cardiovascular diseases, as well as psoriasis. Many of these
companies have greater financial resources and expertise than we
have in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory
approvals and marketing. These entities also compete with us in
recruiting and retaining qualified scientific and management
personnel, as well as in acquiring technologies complementary
to, or necessary for, our programs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any compound candidates that we successfully develop and
commercialize will compete with existing therapies and new
therapies that are likely to become available in the future. It
is possible that competing companies will develop drug
candidates and market drugs that are less expensive and more
effective than any drugs we may successfully develop or that
will render any drugs we develop obsolete. It is also possible
that these companies will commercialize competing drugs before
we or any of our partners can launch any drugs developed from
our product candidates. In addition to branded competitive
products, if our product candidates receive regulatory approval
they may face competition from generic drugs and the
availability of generic drugs may adversely affect the market
for our products.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Vaginal atrophy is generally treated with estrogen-based
therapies either oral or topical, such as Premarin, Prempro and
Premarin Vaginal Cream, marketed by Wyeth, and Vagifem, marketed
by Novo Nordisk. Other products in development for this
condition include bazedoxifene, being developed by Wyeth, and
Oporia, being developed by Pfizer, which are both SERMs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Testosterone deficiency is most frequently treated with topical
gels or patches, such as Solvay Pharmaceuticals&#146; Androgel
and Watson Pharma&#146;s Androderm. Products in development
include Acapodene and Ostarine, both being developed by GTx, and
Androxal, being developed by Zonagen.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the treatment of lipid disorders, statins are the most
frequently prescribed products, examples of which include
Lipitor, marketed by Pfizer, Zocor and Mevacor, both marketed by
Merck&nbsp;&#38; Co., Crestor, marketed
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
by AstraZeneca and Pravachol, marketed by Bristol-Myers Squibb.
Other competitors include non-statin products, such as Zetia,
marketed by Merck/ Schering-Plough, Tricor, marketed by Abbott,
and Niaspan, marketed by Kos; combinations of statins with other
agents, for example Merck/ Schering-Plough&#146;s Vytorin and
Kos&#146; Advicor; and new products in development, such as
KaroBio&#146;s KB2115.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Competing marketed topical psoriasis products or products under
development, specifically topical calcitriol analogues, include
Dovonex marketed by Warner Chilcott, Taclonex to be marketed by
Warner Chilcott, tisocalcitate, in development by Schering AG,
and CTA018 in development by Cytochroma.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Regulatory</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FDA and comparable regulatory agencies in foreign countries,
as well as local and state or other regional governmental
agencies, impose substantial requirements upon the clinical
development, manufacture and marketing of pharmaceutical
products. These agencies and other federal, state and local
entities regulate research and development activities and the
testing, manufacture, quality control, safety, effectiveness,
labeling, storage, record keeping, approval, advertising and
promotion of our products.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The process required by the FDA before product candidates may be
marketed in the United States generally involves the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    preclinical laboratory and animal tests;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    submission of an investigational new drug application, or IND
    application, which must become effective before clinical trials
    may begin;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    adequate and well-controlled human clinical trials to establish
    the safety and efficacy of the proposed drug for its intended
    use;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pre-approval inspection of manufacturing facilities, company
    regulatory files, and selected clinical investigators;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    FDA approval of a new drug application, or NDA, or FDA approval
    of an NDA supplement in the case of a new indication if the
    product is already approved for another indication.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The testing and approval process requires substantial time,
effort and financial resources, and we cannot be certain that
any new approvals for our product candidates will be granted on
a timely basis, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to commencing the first human clinical trial, we must
submit an IND application to the FDA. The IND application
automatically becomes effective 30&nbsp;days after receipt by
the FDA, unless the FDA, within the
<FONT style="white-space: nowrap">30-day</FONT> time period,
raises concerns or questions about the preclinical drug testing
or nonclinical safety evaluation in animals, or the design or
conduct of the first proposed clinical trial, and places the
study on clinical hold. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical
trial may begin. Our submission of an IND application may result
in the FDA&#146;s denial of authorization to commence a clinical
trial. A separate submission to the existing IND application
must be made for each successive clinical trial conducted during
product development, and the FDA must not object to the
submission before each clinical trial may start and continue.
Further, an independent institutional review board for
investigation in human subjects within each medical center in
which the clinical trial will be conducted must review and
approve the preclinical drug testing and nonclinical safety
evaluation and efficacy in animals or prior human trials as well
as the design and goals of the proposed clinical trial before
the clinical trial commences at that center. Regulatory
authorities or an institutional review board or the sponsor may
suspend a clinical trial at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of NDA approval, human clinical trials are
typically conducted in three sequential phases that may overlap.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Phase&nbsp;I:</I> Phase&nbsp;I clinical studies are initially
conducted in a limited population to evaluate the product
candidate for safety, dosage tolerance, absorption, metabolism,
distribution and excretion in healthy subjects.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Phase&nbsp;II:</I> Phase&nbsp;II clinical studies are
conducted in a limited patient population to further identify
and measure possible adverse effects or other safety risks, to
determine the initial efficacy of the product for specific
targeted diseases and to determine dosage tolerance and optimal
dosage. Multiple phase&nbsp;II clinical trials may be conducted
by the sponsor to obtain information prior to beginning larger
and more expensive phase&nbsp;III clinical trials. The first,
limited phase&nbsp;II clinical trials may be termed
&#147;phase&nbsp;IIa&#148; trials to denote that only a few
patients are enrolled in order to obtain preliminary safety and
efficacy data. Later, larger phase&nbsp;II clinical trials may
be termed &#147;phase&nbsp;IIb&#148; trials to denote that
preliminary evidence of safety and efficacy has already been
obtained, and the current trial is intended to confirm the
finding of the earlier trial, as well as to enroll additional
patients in order to further refine the estimate of the optimal
dose and to detect less common side effects. In some instances,
a phase&nbsp;IIb trial may be declared acceptable by a
regulatory agency, such as the FDA, as one of the
&#147;pivotal&#148; trials necessary for purposes of obtaining
marketing authorization for a drug.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Phase&nbsp;III:</I> When phase&nbsp;II clinical evaluations
demonstrate that a dosage range of the product appears to be
effective and has an acceptable safety profile, phase&nbsp;III
clinical trials are undertaken in large patient populations to
further evaluate dosage, to confirm clinical efficacy and to
evaluate safety in yet larger and more diverse patient
populations at multiple clinical trial sites.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FDA may require, or companies may pursue, additional
clinical trials after a product is approved. These so-called
phase&nbsp;IV clinical studies may be made a condition to be
satisfied after a drug receives approval. The results of
phase&nbsp;IV clinical studies may confirm the effectiveness of
a product and may provide important safety information to
augment the FDA&#146;s voluntary adverse drug reaction reporting
system.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The results of product development, preclinical studies and
clinical trials are submitted to the FDA as part of an NDA, or
as part of an NDA supplement. The FDA may deny approval of an
NDA or NDA supplement if the applicable regulatory criteria are
not satisfied, or it may require additional clinical data or an
additional pivotal phase&nbsp;III clinical trial. Even if such
data are submitted, the FDA may ultimately decide that the NDA
or NDA supplement does not satisfy the criteria for approval.
The FDA may move to withdraw product approval, once issued, if
ongoing regulatory standards are not met or if safety problems
occur after the product reaches the market. In addition, the FDA
may require testing and surveillance programs to monitor the
effect of approved products that have been commercialized, and
the FDA may move to prevent or limit further marketing of a
product based on the results of these post-marketing programs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Satisfaction of FDA requirements or similar requirements of
state, local and foreign regulatory agencies typically takes
several years and the actual time required may vary
substantially based upon the type, complexity and novelty of the
product or disease. Typically, if a drug product is intended to
treat a chronic condition, as is the case with some of the
product candidates we are developing, safety and efficacy data
must be gathered over an extended period of time, which can
range from one to three years or more. Government regulation may
delay or prevent marketing of product candidates for new
indications for a considerable period of time and impose costly
procedures upon our activities. The FDA or any other regulatory
agency may not grant approvals for new indications for our
product candidates on a timely basis, if at all. Success in
preclinical testing and early clinical trials does not ensure
that later clinical trials will be successful. A number of
companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after
obtaining promising results in earlier clinical trials. Future
clinical trials may indicate previously undetected side effects
or fail to demonstrate efficacy in a statistically significant
manner. Data obtained from clinical activities is not always
conclusive and may be susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. Even if
a product candidate receives regulatory approval, the approval
may be significantly limited to specific disease states, patient
populations and dosages. Further, even after regulatory approval
is obtained, later discovery of previously unknown problems with
a product may result in restrictions on the product or even
complete withdrawal of the product from the market. Delays in
obtaining, or failures to obtain, additional regulatory
approvals for our products would harm our business. In addition,
we cannot predict what adverse governmental regulations may
arise from future U.S.&nbsp;or foreign governmental action.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any products manufactured or distributed by us pursuant to FDA
approvals are subject to continuing regulation by the FDA,
including record-keeping requirements and reporting of adverse
experiences with the drug. Drug manufacturers and their
subcontractors are required to register their establishments
with the FDA
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies
for compliance with good manufacturing practices, which impose
certain procedural and documentation requirements upon us and
our third party manufacturers. We cannot be certain that we or
our present or future suppliers will be able to comply with the
good manufacturing practices regulations and other FDA
regulatory requirements. If our present or future suppliers are
not able to comply with these requirements, the FDA may halt our
clinical trials, require us to recall a drug from distribution,
or withdraw approval of the NDA for that drug.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FDA closely regulates the marketing and promotion of drugs.
A company is permitted to make only those claims relating to
safety and efficacy that are approved by the FDA. Failure to
comply with these requirements can result in adverse publicity,
warning letters, corrective advertising and potential civil and
criminal penalties. Physicians may prescribe legally available
drugs for uses that are not described in the product&#146;s
labeling and that differ from those tested by us and approved by
the FDA. Such off-label uses are common across medical
specialties. Physicians may believe that such off-label uses are
the best treatment for many patients in varied circumstances.
The FDA does not regulate the behavior of physicians in their
choice of treatments. The FDA does, however, restrict
manufacturers&#146; communications on the subject of off-label
use.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The FDA&#146;s policies may change, and additional government
regulations may be enacted which could prevent or delay
regulatory approval of our product candidates or approval of new
diseases for our product candidates. We cannot predict the
likelihood, nature or extent of adverse governmental regulation
that might arise from future legislative or administrative
action, either in the United States or abroad.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Manufacturing</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have no manufacturing facilities and we do not intend to
build manufacturing facilities of our own in the foreseeable
future. We have entered into arrangements with various third
parties for the formulation and manufacture of our clinical
supplies. These suppliers and their manufacturing facilities
must comply with regulations, current good laboratory practices,
or cGLPs, and current good manufacturing practices, or cGMPs,
enforced by the FDA. We currently have sufficient drug supplies
to complete our ongoing and planned clinical trials. We plan to
continue to outsource the formulation and manufacturing of our
clinical supplies. Although we have no long-term drug supply
contracts for our clinical trial supplies, we maintain good
relationships with the suppliers of our current drug supply and
we believe there are alternative manufacturers available to
produce clinical trial supplies if necessary. Prior to seeking
approval for any of our product candidates, we will need to
enter into a long-term supply agreement with a third-party
manufacturer who can formulate and manufacture supplies of our
product candidate on a commercial scale and who will work with
us to complete the Chemistry, Manufacturing and Controls, or
CMC, section of our NDA filing.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are not involved in any material legal proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Facilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently lease and occupy approximately 9,742&nbsp;square
feet of office space in Ann Arbor, Michigan under a lease
expiring in May, 2011. We also lease a total of approximately
3,111&nbsp;square meters of office and laboratory space in
Turku, Finland and Oulu, Finland under five separate leases, two
of which expire in 2011 and the other three of which allow us to
terminate them upon prior notice of 15&nbsp;months or less. We
believe our facilities are adequate for our present operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of February&nbsp;1, 2006, we had 19&nbsp;employees in the
United States and 39&nbsp;employees in Finland. Certain of our
employees in Finland are covered by a collective bargaining
agreement. We believe our relations with our employees are good.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">71

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='111'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Executive Officers, Directors and Key Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our executive officers, directors and key employees, as of
February&nbsp;1, 2006, are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Positions</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Executive Officers:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Zerbe,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Executive Officer, President and Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stuart Dombey,&nbsp;M.B.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Scientific and Regulatory Officer</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randall Whitcomb,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Medical Officer</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Nicholas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Business Officer</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gary Onn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Financial Officer</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Key Employees:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jeffery Brinza</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    General Counsel</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Constance Keyserling</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Head of Development Operations</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Risto Lammintausta</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Managing Director of Hormos Medical Oy</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Non-Management Directors:</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Caley Castelein,&nbsp;M.D.(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher B. Ehrlich</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard P. Fox(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Greene,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patrick Heron(1)(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Moller,&nbsp;Ph.D.(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nicholas Simon&nbsp;III(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    August M. Watanabe,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anders P. Wiklund</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Member of the audit committee.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Member of the compensation committee.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Executive Officers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Robert Zerbe,&nbsp;M.D.</B> co-founded QuatRx in
November&nbsp;2000 and has served as our Chief Executive Officer
and President and as a member of our board of directors since
inception. Dr.&nbsp;Zerbe has extensive experience in regulatory
affairs and global clinical development at Eli Lilly in the
United States and the United Kingdom, where he held a variety of
research and development positions, including Managing Director,
Lilly Research Center U.K., and Vice President of Clinical
Investigation and Regulatory Affairs, from 1982 to 1993. He
joined Parke-Davis in 1993, becoming Senior Vice President of
Worldwide Clinical Research and Development, during which time
he oversaw the successful development programs for Lipitor,
Neurontin and other key products. He serves on the boards of AP
Pharma, Corgentech and Aastrom Bioscience. Dr.&nbsp;Zerbe earned
his medical degree at Indiana University in 1975 and did post
graduate training in internal medicine, endocrinology and
neuroendocrinology at Indiana University and the National
Institutes of Mental Health.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Stuart Dombey,&nbsp;M.B.</B> co-founded QuatRx in
November&nbsp;2000 and has served as our Chief Scientific and
Regulatory Officer since inception. Dr.&nbsp;Dombey is a
<FONT style="white-space: nowrap">U.K.-trained</FONT> physician
with more than 25&nbsp;years of experience in the pharmaceutical
industry and 13&nbsp;years of international regulatory
experience. He initially worked for Hoechst as Medical Advisor
in the United Kingdom and then for Squibb, first as
U.K.&nbsp;Medical Director and then transferred to the United
States in 1987 as Vice President, Regulatory Liaison. He joined
Parke-Davis in the United States in 1990 as Vice President of
International Regulatory Affairs, where he had responsibility
for all regulatory activities on Parke-Davis products outside
the United States and the development and implementation of
innovative regulatory strategies for Parke-Davis compounds. Most
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
recently, he was Vice President of R&#38;D in Japan.
Dr.&nbsp;Dombey received his M.B. and Ch.B. degrees from the
University of Liverpool Medical School in 1971.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Randall Whitcomb,&nbsp;M.D.</B> joined QuatRx in
January&nbsp;2001 as a co-founder and has served as our Chief
Medical Officer since that time. Dr.&nbsp;Whitcomb came to
QuatRx from Parke-Davis, where he was a Senior Director and
subsequently Vice President within Worldwide Clinical Research
and Drug Development from 1992 to 2000. His work involved the
development and approval of products for women&#146;s health
care and diabetes, and the oversight of earlier-stage compounds
for diabetic neuropathy, osteoporosis, inflammation and
gastrointestinal diseases. Dr.&nbsp;Whitcomb serves on the board
of Insmed. He was on the faculty of Massachusetts General
Hospital and Harvard Medical School prior to joining Parke-Davis
in 1992. Dr.&nbsp;Whitcomb received his medical degree at the
University of Kansas and research training at the National
Institutes of Health.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Christopher Nicholas </B>co-founded QuatRx in November 2000
and has served as our Chief Business Officer since inception.
Mr.&nbsp;Nicholas has more than 25&nbsp;years of global
pharmaceutical marketing, business development and general
management experience at companies such as Bayer,
Hoechst/Roussel and Parke-Davis. He joined Parke-Davis in the
U.K. in 1980, and was ultimately responsible for the United
Kingdom marketing team before moving to the United States
headquarters in 1987. As Vice President of Global Marketing at
Parke-Davis, he was responsible for several major products,
notably the worldwide launch of Lipitor, and he chaired the
co-promotion/co-development partnership on Lipitor with Pfizer.
He also had responsibility for Parke-Davis business development.
He held Vice President and General Manager positions for
Parke-Davis in Benelux from April&nbsp;1997 to April&nbsp;1999
and Japan from April&nbsp;1999 to September&nbsp;2000.
Mr.&nbsp;Nicholas received B.Sc. honors degrees in chemistry and
business administration and a diploma in industrial studies in
chemistry and biology from Loughborough University in 1976.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Gary Onn </B>has served as our Chief Financial Officer since
November&nbsp;2003. Mr.&nbsp;Onn is a Certified Public
Accountant in the state of Washington with over 20&nbsp;years of
finance and management experience. From January&nbsp;2003 to
November&nbsp;2003, Mr.&nbsp;Onn served as a financial
consultant to early-stage businesses. From June&nbsp;2001 to
January&nbsp;2003, he served as the Chief Financial Officer and
interim Chief Executive Officer of Aculight Corporation, a laser
development company, and from July&nbsp;2000 to June&nbsp;2001,
he was the Chief Financial Officer of RevX.net, a software
developer. In 1994, Mr.&nbsp;Onn joined Heartstream, a publicly
listed developer of automatic external defibrillators, where he
served in the position of director of finance and later, Chief
Financial Officer. In 1990 he joined publicly listed software
developer Aldus Corporation as Financial Reporting Manager
responsible for external and internal financial reporting from
Aldus&#146;s domestic, European, and Asia-Pacific operations.
Prior to that, Mr.&nbsp;Onn spent nearly seven years as an
auditor with the public accounting firm of Ernst&nbsp;&#38;
Young, including two years as an audit manager. Mr.&nbsp;Onn
received his B.A. in business administration from the University
of Washington in 1983.
</DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Key Employees</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Jeffery Brinza</B> has served as our General Counsel since
June&nbsp;2005. Mr.&nbsp;Brinza has 19&nbsp;years of experience
as a corporate and transactional attorney. In 1993, he joined
Warner-Lambert Company as associate counsel. From 1998 to 2000,
he served as vice president and assistant general counsel at
Warner-Lambert Company. From February&nbsp;2001 to
September&nbsp;2001, Mr.&nbsp;Brinza served as a Senior
Associate at the law firm of Butzel Long. From
September&nbsp;2001 to June&nbsp;2005, Mr.&nbsp;Brinza served as
a partner at Brinza&nbsp;&#38; Associates, providing legal
representation for various pharmaceutical, life science and
technology companies. Mr.&nbsp;Brinza received his B.A. in
Economics and Computer Science from the University of Michigan
in 1983 and his J.D. from the University of Michigan in 1986.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Constance Keyserling</B> has served as our Head of
Development Operations since April&nbsp;2002.
Ms.&nbsp;Keyserling has nearly 20&nbsp;years of global clinical
development experience at Parke-Davis, Pfizer and Esperion
Therapeutics. As Director of Clinical Operations from December
2000 to October 2001 and Senior Director of Operations at
Esperion from October 2001 to April 2002, her responsibilities
included clinical program design and management, project
management, clinical outsourcing, regulatory operations and SOP
systems development, in addition to co-chairing one of three
product development teams. Her roles at Parke-
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Davis from October 1986 to November 2000 spanned biometrics and
anti-infective clinical development in the United States and
Europe, and she was the Director of Clinical Operations for
Pfizer Global Research and Development from December 1998 to
November 2000. Ms.&nbsp;Keyserling received her M.S. in
Biostatistics from Harvard University in 1984. Prior to joining
the pharmaceutical industry in 1986, she performed biomedical
research at the Dana-Farber Cancer Institute and the University
of Michigan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Risto Lammintausta,&nbsp;M.D.,&nbsp;Ph.D.</B> co-founded
Hormos Medical Oy in 1997 and has served as its Chief Executive
Officer since that time. Mr.&nbsp;Lammintausta joined us in
May&nbsp;2005 in connection with our acquisition of Hormos.
Previously, he was Vice President for new drug development at
Orion Corporation from 1992 to 1997 and Research Director at
Farmos Group Ltd. from 1981 to 1991. In these positions he had
responsibility for new compound discovery and development.
Dr.&nbsp;Lammintausta served as a member of the Medical Research
Council of the Academy of Finland between 1995 and 2000 and is
Chairman of the Pharma Cluster Finland. He serves as a member of
the board of directors of Juvantia Pharma, Innomedica and the
Finnish Cancer Research Foundation. Dr.&nbsp;Lammintausta is a
medical doctor and holds a Ph.D. in Pharmacology from the
University of Turku.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Non-Management Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Caley Castelein,&nbsp;M.D.</B> has served as a member of our
board of directors since October 2004. Dr.&nbsp;Castelein became
a founding member of Thomas Weisel Healthcare Venture Partners
in March 2003. Since October 2000, Dr.&nbsp;Castelein has served
as a principal at ABS Ventures. Prior to that,
Dr.&nbsp;Castelein received a medical degree from the University
of California San&nbsp;Francisco in 1999, and was a resident in
the general surgery program from 1999 to 2000. He began his
career in corporate finance at Hambrecht&nbsp;&#38; Quist, where
he served in the position of analyst from 1993 to 1994.
Dr.&nbsp;Castelein graduated Magna Cum Laude from Harvard
College in 1993.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Christopher B. Ehrlich </B>has served as a member of our
board of directors since October 2004. He is currently a partner
at InterWest Partners, a diversified venture capital firm, which
he joined in August 2000. Before InterWest, Mr.&nbsp;Ehrlich was
Director, Licensing&nbsp;&#38; Business Development at Purdue
Pharma, a private pharmaceutical firm based in Stamford, CT.
Mr.&nbsp;Ehrlich worked in business development at Genentech,
Inc., in venture capital at The U.S.&nbsp;Russia Investment
Fund, and in biotechnology strategy development at LEK
Consulting. He also currently serves on the boards of BioMimetic
Pharmaceuticals, KAI Pharmaceuticals, Carbylan BioSurgery,
TransOral Pharmaceuticals and Xenon Pharmaceuticals. Mr. Ehrlich
earned his Bachelor&#146;s degree from Dartmouth College, cum
laude and an M.B.A. from the J.L. Kellogg Graduate School of
Management where he serves as an instructor and advisor to the
Biotech Program.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Richard P. Fox </B>has served as a member of our board of
directors since January 2006. Since October 2001, Mr.&nbsp;Fox
has served as a consultant and outside board member to
entrepreneurs and the financial services industry. From April
2000 to September 2001, he was an officer of CyberSafe, an IT
security company, serving as President and Chief Operating
Officer from January 2001 to September 2001. Mr.&nbsp;Fox spent
28&nbsp;years with Ernst&nbsp;&#38; Young, last serving as
Managing Partner of the Seattle office. He serves on the board
of directors of Premera, a Blue Cross managed care provider,
aQuantive, an online marketing company, Flow International, a
machine tool manufacturer, Isothermal Systems, and Shurgard
Storage Centers, Inc., a real estate investment trust. In
addition, he serves as Treasurer and is on the Board of Trustees
of the Seattle Foundation and is on the Board of Visitors of the
Fuqua School of Business, Duke University. Mr.&nbsp;Fox received
a B.B.A. degree from Ohio University and an M.B.A. from the
Fuqua School of Business, Duke University. He is a Certified
Public Accountant in Washington State.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>William Greene,&nbsp;M.D.</B> has served on our board of
directors since May 2003. Dr.&nbsp;Greene joined MPM Capital in
January&nbsp;2002, and is a General Partner. From June&nbsp;1998
to January&nbsp;2002, Dr.&nbsp;Greene was a senior Clinical
Scientist at Genentech, where he had responsibility for drug
development activities in several therapeutic areas. Previously,
from 1991 to 1998, he was in academic medicine at Yale Medical
School. He currently serves on the board of directors of Alsius
Corporation, Archus Orthopedics, EndoGastric Solutions and
Synergia Pharma. Dr.&nbsp;Greene received his medical degree at
the University of California San&nbsp;Francisco, where he is an
assistant professor of medicine and a B.A., with honors, from
Wesleyan University.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Patrick Heron </B>helped found QuatRx and has served as a
member of our board of directors since our inception in November
2000. Through Frazier Healthcare Ventures, he was a founding
investor in QuatRx. Mr.&nbsp;Heron has held various positions
with Frazier Healthcare Ventures since September 1999, and is
currently a general partner. Fraizer Healthcare Ventures manages
venture capital funds that invest in early, mid and late stage
biopharma, medical device and healthcare service companies.
Prior to Frazier Healthcare Ventures, Mr.&nbsp;Heron was with
McKinsey&nbsp;&#38; Co.&#146;s biotechnology consulting practice
from 1992 to 1999, working on corporate strategy, M&#38;A,
product launch, corporate partnering and research
prioritization. Mr.&nbsp;Heron obtained a B.A. from, and was a
Morehead Scholar at, the University of North Carolina at Chapel
Hill and holds an M.B.A. from Harvard Business School. In
addition to QuatRx, he also serves on the boards of Avera
Pharmaceuticals, Chimerix, Cerexa Pharmaceuticals, GenoSpectra,
Informed Medical Communications and Trubion Pharmaceuticals.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Christopher Moller,&nbsp;Ph.D.</B> has served as a member of
our board of directors since December 2000 and, through
TL&nbsp;Ventures, was a founding investor in QuatRx. In 1990,
Dr.&nbsp;Moller joined Radnor Venture Partners, a
TL&nbsp;Ventures predecessor fund, and has been leading the
biotechnology group since 1992, having responsibility for
selecting, evaluating and managing all the biotechnology
companies in TL&nbsp;Ventures&#146; portfolio. Dr.&nbsp;Moller
currently serves as a director of Sopherion Therapeutics,
PharmaStem Therapeutics and CombinatoRx. Dr.&nbsp;Moller holds a
Ph.D. in immunology from the University of Pennsylvania.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Nicholas Simon&nbsp;III </B>has served as a member of our
board of directors since May 2003. Mr.&nbsp;Simon has been a
Managing Director of Clarus Ventures, a life sciences focused
venture capital firm, since February 2005. Mr.&nbsp;Simon has
also been a General Partner in MPM Bioventures III since October
2001. From 2000 to July 2001, Mr.&nbsp;Simon was the Chief
Executive Officer, founder and a director of Collabra Pharma, a
pharmaceutical development company. From 1989 to March 2000,
Mr.&nbsp;Simon served in various management positions with
Genentech including Vice President of Business and Corporate
Development. He currently serves on the board of directors of
several biopharmaceutical companies, including ARYx
Therapeutics, Barrier Therapeutics, Inc. and CoTherix, Inc., as
well as several private companies. He also serves on the
Advisory Board of Gladstone Foundation, a private
<FONT style="white-space: nowrap">not-for</FONT>-profit research
institute affiliated with UCSF. Mr.&nbsp;Simon holds a B.S. in
microbiology from the University of Maryland and an M.B.A. from
Loyola College.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>August M. Watanabe,&nbsp;M.D.</B> has served on our board of
directors since September 2003. From March 1990 to his
retirement in June 2003, Dr.&nbsp;Watanabe was with Eli Lilly
and Company, where he served as the Director and Executive Vice
President of Science and Technology at Eli Lilly and President
of Lilly Research Laboratories from 1994 to 2003. Prior to Eli
Lilly, from July 1971 to March 1990, Dr.&nbsp;Watanabe was a
full-time faculty member of the Department of Medicine of
Indiana University School of Medicine, and Professor and
Chairman of the Department of Internal Medicine at Indiana
University School of Medicine. He has co-authored more than 100
scientific publications. Dr.&nbsp;Watanabe has served as an
officer in several national academic organizations, including
the American College of Cardiology and the American Heart
Association, and as a consultant to the U.S.&nbsp;Food and Drug
Administration and the U.S.&nbsp;Public Health Service&#146;s
National Institutes of Health. Dr.&nbsp;Watanabe serves on the
boards of other biopharmaceutical companies, including Guidant
Corporation, Reliant, Endocyte, Kalypsys and Ambrx.
Dr.&nbsp;Watanabe received his medical degree from the Indiana
University School of Medicine.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Anders Wiklund </B>has served on our board of directors since
October 2005. Mr.&nbsp;Wiklund has been a principal of Wiklund
International Inc., a biotechnology advisory firm, since January
1997, and serves on the boards of several other
biopharmaceutical companies, including Medivir AB, EffRx, Gyros
AB and Insite Vision Inc. Mr.&nbsp;Wiklund was also on the board
and was a co-founder of Esperion Therapeutics. Previously, from
January 1996 to December 1996, Mr.&nbsp;Wiklund led corporate
business development at Pharmacia Inc. (later
Pharmacia&nbsp;&#38; Upjohn). Prior to that, Mr.&nbsp;Wiklund
was chief executive officer and president of KabiVitrum Inc. and
Kabi Pharmacia Inc., as well as president of KabiVitrum
International in Stockholm, Sweden. Mr.&nbsp;Wiklund received
his Masters of Pharmacy from the Pharmaceutical Institute in
Stockholm, Sweden and studied business administration at the
University of Stockholm.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Scientific Advisory Board</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Scientific Advisory Board was initially formed in early
2004. The purpose of this Board is to provide input on our
compounds in development. As such, we ask them to review and
comment on data as requested. We have met with them as
individuals and as a group on several occasions since that time.
When the Board was originally formed, the focus of the portfolio
was lipids and therefore the Board is heavily weighted with
expertise in the lipid area. We are currently meeting with
additional experts and will be adding additional expertise in
the endocrine area consistent with our current portfolio of
product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following individuals are members of our Scientific Advisory
Board:
</DIV>

<CENTER>
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<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Current Positions</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christie M. Ballantyne,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director, Center for Cardiovascular Disease Prevention,
    Methodist DeBakey Center; Professor, Section of Atherosclerosis,
    Department of Medicine, Baylor College of Medicine</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert H. Knopp,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director, the Northwest Lipid Research Clinic; Professor of
    Medicine, University of Washington School of Medicine</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel J. Rader,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director, Preventive Cardiology and Lipid Clinic; Associate
    Professor of Medicine, University of Pennsylvania School of
    Medicine.</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan R. Saltiel,&nbsp;Ph.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director, Life Sciences Institute, Professor of Internal
    Medicine and Physiology, University of Michigan School of
    Medicine</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    August M. Watanabe,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Retired Executive Vice President of Science and Technology,
    Director of Eli Lilly and Company, and President of Lilly
    Research Laboratories</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Composition of our Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to this offering, our board of directors will
be divided into three staggered classes of directors of the same
or nearly the same number and each of our directors will be
assigned to one of the three classes. At each annual meeting of
stockholders, a class of directors will be elected for a
three-year term to succeed the directors of the same class whose
terms are then expiring. The terms of the directors will expire
upon election and qualification of successor directors at the
annual meeting of stockholders to be held during the years 2007
for the Class&nbsp;I directors, 2008 for the Class&nbsp;II
directors and 2009 for the Class&nbsp;III directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation and bylaws provide that the
number of our directors shall be fixed from time to time by a
resolution of the majority of our board of directors. Any
additional directorships resulting from an increase in the
number of directors will be distributed among the three classes
so that, as nearly as possible, each class shall consist of one
third of the directors. There are no family relationships among
any of our directors or executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The division of our board of directors into three classes with
staggered three-year terms may delay or prevent stockholder
efforts to effect a change of our management or a change in
control.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of our directors currently serves on the board of directors
pursuant to a voting agreement. The voting agreement will
terminate upon the closing of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Committees of our Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors has established a compensation committee
and an audit committee and intends, in conjunction with this
offering, to establish a nominating and corporate governance
committee.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Compensation Committee.</I> Our compensation committee is a
standing committee of, and will operate under a written charter
to be adopted by, our board of directors. Our compensation
committee consists of Patrick Heron, Christopher Moller and
Nicholas Simon. The compensation committee makes decisions and
recommendations regarding cash and other compensation for our
directors and executive officers, and
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">76

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
administers our incentive compensation and benefit plans,
including our Amended and Restated 2005 Stock Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Audit Committee.</I> Our audit committee is a standing
committee of, and operates under a written charter adopted by,
our board of directors. Our audit committee consists of Patrick
Heron, Caley Castelein and Richard Fox. The audit committee
reviews and monitors our accounting practices and financial
statements; appoints, determines funding for, and oversees our
independent auditors; reviews the results and scope of audits;
approves the retention of the independent auditors to perform
any proposed permissible non-audit services; and reviews and
evaluates our audit and control functions. We believe that each
member of our audit committee satisfies the requirements for
members established by the Nasdaq National Market and the
Securities and Exchange Commission. Our board of directors has
determined that Mr.&nbsp;Fox is an audit committee financial
expert as currently defined under SEC rules.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Nominating and Corporate Governance Committee.</I> In
conjunction with this offering, we intend to establish a
nominating and corporate governance committee of our board of
directors and adopt a written charter for the committee. The
nominating and corporate governance committee will be authorized
to identify and approve individuals qualified to serve as
members of our board of directors, select director nominees for
our annual meetings of stockholders, evaluate our board&#146;s
performance and develop and recommend to our board corporate
governance guidelines and provide oversight with respect to
corporate governance and ethical conduct.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Committees.</I> Our board of directors may establish
other committees as it deems necessary or appropriate from time
to time.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Compensation Committee Interlocks and Insider
Participation</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of the members of our compensation committee has at any
time been one of our officers or employees. None of our
executive officers currently serves, or in the past fiscal year
has served, as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving on our board of directors or
compensation committee.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Director Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We reimburse our directors who are not employees for their
reasonable expenses incurred in attending meetings of the board
of directors. Our directors are eligible to participate in our
Amended and Restated 2005 Stock Incentive Plan. Our outside
directors, Anders Wiklund, August Watanabe and Richard Fox,
receive payments of $1,500 for each meeting of our board of
directors attended in person, and $750 for each meeting of our
board attended telephonically.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Limitation of Liability and Indemnification of Officers and
Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our certificate of incorporation limits the liability of
directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not
be personally liable for monetary damages for breach of their
fiduciary duties as directors, except liability for:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any breach of their duty of loyalty to the corporation or its
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    acts or omissions not in good faith or which involve intentional
    misconduct or a knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    unlawful payments of dividends or unlawful stock repurchases or
    redemptions;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by law, including if he
or she is serving as a director, officer, employee or agent of
another company at our request. We believe that indemnification
under our bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer,
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">77

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
director, employee or other agent for any liability arising out
of his or her actions in connection with their services to us,
regardless of whether our bylaws permit such indemnification.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conjunction with this offering, we intend to enter into
separate indemnification agreements with our directors and
executive officers, in addition to the indemnification provided
for in our bylaws. These agreements, among other things, will
provide that we will indemnify our directors and executive
officers for certain expenses (including attorneys&#146; fees),
judgments, fines and settlement amounts incurred by a director
or executive officer in any action or proceeding arising out of
such person&#146;s services as one of our directors or executive
officers, or any of our subsidiaries or any other company or
enterprise to which the person provides services at our request.
We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive
officers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There is no pending litigation or proceeding involving any of
our directors or executive officers as to which indemnification
is required or permitted, and we are not aware of any threatened
litigation or proceeding that may result in a claim for
indemnification.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Executive Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding the
compensation that we paid to our Chief Executive Officer and
each of our other four most highly compensated executive
officers during the year ended December&nbsp;31, 2005. We refer
to these officers in this prospectus as the &#147;named
executive officers.&#148;
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long-Term</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Annual Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Zerbe,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>260,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,059,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Chief Executive Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stuart Dombey,&nbsp;M.B.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>515,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Chief Scientific and<BR>
     Regulatory Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randall Whitcomb,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>559,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Chief Medical Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Nicholas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>522,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Chief Business Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gary Onn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <I>Chief Financial Officer</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    In accordance with the rules of the SEC, the compensation
    described in this table does not include medical, group life
    insurance or other benefits which are available generally to all
    of our salaried employees and certain perquisites and other
    personal benefits received which do not exceed the lesser of
    $50,000 or 10% of any named executive officer&#146;s salary and
    bonus disclosed in this table.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">78

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Stock Option Grants in Last Fiscal Year</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information regarding grants of
stock options to each of our named executive officers during the
fiscal year ended December&nbsp;31, 2005. The percentage of
options granted was based on aggregate grants of options to
purchase common stock totaling 4,187,710&nbsp;shares granted to
employees during 2005. Potential realizable values are net of
exercise price before taxes, and are based on the assumption
that our common stock appreciates at the annual rate shown,
compounded annually, from the date of grant until expiration of
the ten-year term.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Individual Grants</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Potential Realizable</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Value at Assumed</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Annual Rates of</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Stock Price</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Appreciation for</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Option Terms</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Option</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>FY 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Share(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Date</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5%</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>10%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Zerbe,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,414</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.356%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,027</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.723%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,949</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.858%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>726,745</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.355%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stuart Dombey,&nbsp;M.B.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,848</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.856%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,835</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.641%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,384</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.630%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>426,592</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.187%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randall Whitcomb,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,521</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.735%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,858</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.740%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,384</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.630%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>346,076</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.26%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Nicholas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,848</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.856%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,072</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.646%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,851</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.808%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425,723</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.166%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gary Onn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,000</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.433%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,864</TD>
    <TD align="left" valign="bottom" nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.665%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>246,029</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.815%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>April&nbsp;17, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)</TD>
    <TD align="left">
    There was no public trading market for our common stock during
    fiscal 2005. Accordingly, these exercise prices are based on our
    board of directors&#146; determination of the fair market value
    of the underlying shares as of the dates of grant.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)</TD>
    <TD align="left">
    A total of 25% of these options vested on May&nbsp;20, 2005 and
    the remaining options vest monthly in equal installments over
    the following 36&nbsp;months.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)</TD>
    <TD align="left">
    41,517.5&nbsp;of these options vested on the date of grant;
    6,156.50&nbsp;options vested on July&nbsp;20, 2005;
    513.04&nbsp;options vest monthly on and after August&nbsp;20,
    2005;&nbsp;and 1,710.13&nbsp;options vest monthly on and after
    May&nbsp;1, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)</TD>
    <TD align="left">
    4,229&nbsp;of these options vested on the date of grant and the
    remaining 31,720&nbsp;options vested on May&nbsp;20, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)</TD>
    <TD align="left">
    A total of
    <FONT style="font-size: 70%"><SUP>5</SUP></FONT>/<FONT style="font-size: 60%">36</FONT>
    of these options vested on the date of grant and the remaining
    options vest monthly in equal installments over the following
    31&nbsp;months.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)</TD>
    <TD align="left">
    12,585.67&nbsp;of these options vested on the date of grant;
    1,209.75&nbsp;options vested on July&nbsp;20, 2005;
    100.81&nbsp;options vest monthly on and after August&nbsp;20,
    2005; and 336.08&nbsp;options vest monthly on and after
    May&nbsp;1, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)</TD>
    <TD align="left">
    1,841 of these options vested on the date of grant and the
    remaining 24,543 options vested on May&nbsp;20, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)</TD>
    <TD align="left">
    27,336.5&nbsp;of these options vested on the date of grant;
    3,865&nbsp;options vested on July&nbsp;20, 2005;
    322.08&nbsp;options vest monthly on and after August&nbsp;20,
    2005; and 1,073.63&nbsp;options vest monthly on and after
    May&nbsp;1, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)</TD>
    <TD align="left">
    12,822.67&nbsp;of these options vested on the date of grant;
    1,209.75&nbsp;options vested on July&nbsp;20, 2005;
    100.81&nbsp;options vest monthly on and after August&nbsp;20,
    2005; and 336.08&nbsp;options vest monthly on and after
    May&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(10)</TD>
    <TD align="left">
    1,916 of these options vested on the date of grant and the
    remaining 31,935 options vested on May&nbsp;20, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)</TD>
    <TD align="left">
    21,250 of these options vested on the date of grant and
    <FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">48</FONT>
    of the total number of options vest monthly on and after
    May&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">79

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

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(12)</TD>
    <TD align="left">
    10,449 of these options vested on the date of grant and the
    remaining 17,415&nbsp;options vested on May&nbsp;20, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
The potential realizable value is calculated based on the
ten-year term of the stock option at the time of grant. The
assumed 5% and 10% rates of stock price appreciation are
provided in accordance with the rules of the SEC based on an
assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and do not represent our estimate or projection of our
future stock price. The potential realizable values at 5% and
10% appreciation are calculated by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    multiplying the number of shares of common stock subject to a
    given stock option by the assumed initial public offering price
    of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    assuming that the aggregate stock value derived from that
    calculation compounds at the annual 5% or 10% rate shown in the
    table until the expiration of the option;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    subtracting from that result the aggregate option exercise price.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the number and value of
securities underlying options held as of December&nbsp;31, 2005
by each of our named executive officers. Options shown as
exercisable in the table below are immediately exercisable.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Value of Unexercised</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Underlying Unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>In-the-Money Options at</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquired</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Options at Fiscal Year-End</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Fiscal Year-End(1)</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Realized(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unexercisable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Zerbe,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>407,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>452,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>958,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stuart Dombey,&nbsp;M.B.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randall Whitcomb,&nbsp;M.D.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>249,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>531,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Nicholas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>222,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>369,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gary Onn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>356,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>377,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    These values have been calculated based on an assumed initial
    public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, less
    the applicable exercise price per share, multiplied by the
    underlying shares, without taking into account any taxes that
    may be payable in connection with the transaction.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Employment Agreements and Change of Control Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into an employment agreement dated as of
September&nbsp;29, 2003 with Gary Onn, our Chief Financial
Officer. The agreement provides for an employment at-will
arrangement and can be terminated by Mr.&nbsp;Onn or us at any
time. Pursuant to his employment agreement, Mr.&nbsp;Onn is
entitled to a base salary of $175,000&nbsp;per year. In 2004,
our board of directors authorized an increase in
Mr.&nbsp;Onn&#146;s annual salary to $187,250. Under the
agreement, we granted Mr.&nbsp;Onn an option to purchase up to
400,000&nbsp;shares of our common stock at a price of
$0.20&nbsp;per share. According to the vesting schedule in
Mr.&nbsp;Onn&#146;s employment agreement, 100,000&nbsp;shares of
the option vested on November&nbsp;1, 2004, and an additional
8,333.34&nbsp;shares vested or will vest in each subsequent
month of Mr.&nbsp;Onn&#146;s employment. The vesting schedule
will accelerate if Mr.&nbsp;Onn&#146;s employment is terminated
without cause, or upon a dissolution or liquidation or change of
control involving us or sale of all or substantially all of our
assets. Under Mr.&nbsp;Onn&#146;s employment agreement, if we
terminate Mr.&nbsp;Onn&#146;s employment without cause, he is
entitled to his then annual salary for nine months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Benefit Plans</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Amended and Restated 2005 Stock Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain a stock incentive plan which allows for the grant of
incentive stock options, nonqualified stock options, stock
bonuses, stock appreciation rights and rights to acquire
restricted stock to our employees, directors
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
and consultants. The plan has a ten year term that commenced on
April&nbsp;18, 2005 and terminates on April&nbsp;17, 2015,
unless it is terminated earlier as approved by our stockholders.
The plan may be administered by our board of directors or any
committee of one or more members of the board appointed by the
board. We have reserved 5,851,979&nbsp;shares of our common
stock, increased by up to 2,323,280&nbsp;shares issued under our
2000 Equity Incentive Plan that are forfeited to us (i.e., in
connection with the termination of the holder&#146;s employment)
or that were subject to options granted by us pursuant to the
2000 Equity Incentive Plan which terminate or expire or become
unexercisable for any reason without having been exercised in
full after April&nbsp;14, 2005, for issuance pursuant to awards
under this plan. As of December&nbsp;31, 2005, options to
purchase a total of 5,576,671&nbsp;shares of common stock, with
a weighted average price of $0.31 per share, were outstanding
under this plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Administration.</I> The administrative committee selects the
individuals to receive awards under the stock incentive plan and
sets the terms and conditions of each award. The administrative
committee has plenary authority to interpret the stock incentive
plan and to make all determinations relating to the plan. After
the date that awards under this plan are no longer exempt from
the provisions of Section&nbsp;162(m) of the Internal Revenue
Code, the maximum number of shares of our common stock that may
be subject to awards of options or stock appreciation rights for
any single individual in any year cannot exceed 1.5&nbsp;million
shares, except that awards covering up to an additional
1&nbsp;million shares may be granted to an individual during
their first year of service as an employee, director or
consultant.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Term of Awards; Transferability.</I> The term of each award
is set by the administrative committee, provided that, in the
case of an option, no term can exceed ten years, or ten and
one-half years (or a shorter period) in the case of options
granted to employees in certain jurisdictions outside the United
States, from the date of grant. Awards may expire earlier upon
an optionee&#146;s termination of employment. Awards under the
plan are non-assignable and otherwise non-transferable except as
determined by the administrative committee or by will or the
laws of descent and distribution.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stock Options.</I> Options granted under the stock incentive
plan may be &#147;incentive stock options&#148; as defined under
Section&nbsp;422 of the Internal Revenue Code or nonqualified
stock options. Incentive stock options may only be granted to
employees. The exercise price and vesting schedule for options
will be set by the administrative committee at the time of
grant, provided that the per share exercise price for incentive
stock options and nonqualified stock options intended to be
exempt from the provisions of Section&nbsp;162(m) of the
Internal Revenue Code cannot be less than the fair market value
of a share of our common stock on the date of grant. Fair market
value is defined in the stock incentive plan as the closing
price of our common stock on the Nasdaq Stock Market, or such
national securities exchange upon which our common stock is
listed, on the date of determination. If our common stock is not
publicly traded, the administrative committee determines the
fair market value in a manner it deems reasonable in good faith.
The exercise price of an option may be reduced, or options
cancelled and regranted in order to reduce the applicable
exercise price, without stockholder approval. Upon exercise, the
exercise price for an option may be paid in cash, by bank check
or wire transfer or, in the discretion of the administrative
committee, through delivery of shares of our common stock having
an aggregate value equal to the aggregate exercise price, or
through a brokered exercise procedure or other procedure not in
violation of any law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Other Stock-based Awards.</I> The administrative committee
may grant other cash, stock or stock-related awards under the
stock incentive plan, including stock appreciation rights and
stock units. The terms and conditions of any such other
stock-based awards will be determined by the administrative
committee, in its sole discretion. Shares of restricted stock
granted under the stock incentive plan will be subject to
forfeiture upon the termination of employment. The holder of a
restricted stock award will generally have the rights and
privileges of a stockholder after the shares are issued,
including the right to vote such shares. Cash and stock
dividends on such shares, if any, may be distributed to the
holder of a restricted stock award or held for the account of
the holder, as determined by the administrative committee.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Adjustments.</I> All outstanding awards under the stock
incentive plan, the maximum number of shares available under the
stock incentive plan and the maximum number of shares of our
common stock available pursuant to the grant of options and
stock appreciation rights to any single person in any year, if
applicable,
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
are subject to adjustment or substitution, as determined by the
administrative committee in the event of certain corporate
transactions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Restrictions on Shares.</I> In an award agreement, we may
reserve a right of first refusal to purchase all shares that a
participant proposes to transfer to a third party. Our right of
first refusal terminates upon the initial public offering of our
common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amendment.</I> The stock incentive plan may be terminated or
amended at any time by the administrative committee, subject to
the approval of our stockholders as required by law, provided
that without stockholder approval no such amendment may:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    materially increase the number of shares of our common stock for
    which awards may be granted under the stock incentive plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reduce the minimum exercise price at which options may be
    granted under the incentive stock plan;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    change the class of persons eligible to receive awards under the
    plan without stockholder approval.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except for adjustments subject to certain corporate transactions
and amendments, suspensions or termination of the plan that do
not impair the rights of an award, alterations to outstanding
awards under the stock incentive plan may be made only with the
consent of the award recipient.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2000 Equity Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our 2000 Equity Incentive Plan, or the 2000 Plan, was adopted by
our board of directors. The 2000 Plan has a ten-year term that
commenced on December&nbsp;19, 2000 and terminates on
December&nbsp;18, 2010 unless it is terminated earlier as
approved by our stockholders. We no longer expect to grant
options under this plan, but as of December&nbsp;31, 2005,
non-qualified options to purchase a total of
1,328,961&nbsp;shares of common stock, with a weighted average
exercise price of $0.20 per share, were outstanding under this
plan. The 2000 Plan allowed for the grant or sale of stock
options and restricted stock awards to employees, officers,
directors and consultants.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Administration.</I> The 2000 Plan is administered by the
committee appointed by our board of directors or administered by
our board of directors acting as the committee. The
administrative committee selected individuals to receive awards
under the 2000 Plan and sets the terms and conditions of each
award. The administrative committee also has the authority to
interpret the 2000 Plan, set rules and regulations relating to
it, and make all other determinations for the administration of
the 2000 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Payment for Share Purchase.</I> Payment for shares purchased
under the 2000 Plan may be made in cash by check, or, where
expressly approved for the participant by the administrative
committee and where permitted by law, by cancellation of any
debt owned by us, shares of our common stock (with some
restriction), full recourse promissory note having such terms as
approved by the administrative committee, waiver of compensation
or, if the shares are purchased on exercise of an option, the
2000 Plan also permits payment to be made by broker-assisted
same day sales or margin commitment, or by surrender of shares
then issuable upon exercise of the option. The administrative
committee may help the participant pay for shares purchased
under the 2000 Plan by authorizing a guarantee by us of a third
party loan to the participant.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Rights and Privileges; Transferability.</I> No participant
will have any rights of a shareholder until the shares are
issued to the participant. After the issuance, the participant
will be a shareholder and have all the rights of a shareholder
with respect to such shares, including the right to vote and
receive dividends or other distributions. If the shares issued
are restricted stock, then any new, additional or different
securities the participant receives by virtue of stock dividend,
stock split or any other changes in our corporate or capital
structure will be subject to the same restrictions as the
restricted stock. Awards granted under the 2000 Plan are not
transferable or assignable by participant, and may not be made
subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution.
However, the administrative committee may provide that the
awards granted under the 2000 Plan (other than an incentive
stock option) be transferable, without consideration, to a
participant&#146;s immediate family members.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Restrictions on Shares.</I> In an award agreement, we may
reserve a right of first refusal to purchase all shares that a
participant proposes to transfer to a third party. Our right of
first refusal terminates upon the initial public offering of our
common stock. In an award agreement, we may also reserve a right
to repurchase the unvested shares held by a participant for cash
and/or cancellation of purchase money indebtedness, following
such participant&#146;s termination at any time within
90&nbsp;days after his termination date and the date the
participant purchases shares, whichever is later.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Exchange and Buyout.</I> With the consent of participants,
the administrative committee may authorize us to issue new
awards in exchange for the surrender and cancellation of
outstanding awards. The administrative committee may buy from a
participant an award previously granted with payment in cash,
shares of our common stock (including restricted stock) or other
consideration, based on the terms and conditions agreed by the
administrative committee and the participant.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amendment.</I> The 2000 Plan may be amended by the
administrative committee. However, without stockholder approval,
no such amendment may increase the number of shares reserved for
issuance under the 2000 Plan. Our board of directors may suspend
the 2000 Plan at any time; however, such suspension must not
adversely affect any outstanding benefit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Vesting and Exercise Price of Stock Options.</I> The vesting
schedule and exercise price for options granted under the 2000
Plan were determined by the administrative committee and set
forth in a stock option agreement. In no event is an option
exercisable after 10&nbsp;years from the grant date. The
exercise price of the non-qualified options was not less than
85% of the fair market value of the shares on the date of grant.
Since our common stock was not publicly traded at the time of
the grants under the 2000 Plan, the administrative committee
determined the fair market value in a manner it deemed
reasonable and in good faith.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Termination.</I> If a participant of the 2000 Plan is
terminated because of death or disability, then the
participant&#146;s option is exercisable only to the extent that
it is exercisable on the termination date, and the option must
be exercised by the participant no later than 12&nbsp;months
after the termination date. If a participant is terminated for
cause, then the participant&#146;s option will expire on the
termination date, or at such later time determined by the
administrative committee. If a participant is terminated for any
reason except death, disability or for cause, then the
participant&#146;s option is exercisable only to the extent that
it is exercisable on the termination date, and the option must
be excised no later than 3&nbsp;months after the termination
date. In any event, no option may be exercised after the
expiration date of the options.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Modification, Extension or Renewal.</I> The administrative
committee may modify, extend or renew outstanding options and
authorize the grant of new options in substitution for the
outstanding options, however, such action may not, without the
written consent of a participant, impair the participant&#146;s
rights under any option previously granted. The administrative
committee may reduce the exercise price of outstanding options
without the consent of participants affected by a written notice
to them; however, the exercise price may not be reduced below
the minimum exercise price that would be permitted under the
2000 Plan.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>401(k) Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have established a tax-qualified employee savings and
retirement plan for all employees who satisfy certain
eligibility requirements, including requirements relating to age
and length of service. Under our 401(k) plan, employees may
elect to reduce their current compensation by up to 15% or the
statutory limit, $13,000 in 2004, whichever is less, and have us
contribute the amount of this reduction to the 401(k) plan. In
addition, we contribute an amount equal to 3% of certain
eligible employees&#146; compensation as a nonelective
contribution to our 401(k) plan. As of December&nbsp;31, 2005 we
had 12 employees eligible for participation in our 401(k) plan.
We will make contributions of $26,000 for 2005 to the plan for
certain eligible employees.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend for the 401(k) plan to qualify under Section&nbsp;401
of the Internal Revenue Code so that contributions by employees
or by us to the 401(k) plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from
the 401(k) plan. Our contributions, if any, will be deducted by
us when made.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">83

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='112'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a description of transactions since
January&nbsp;1, 2003 to which we were or are a party in which
the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our capital stock
or any member of such person&#146;s immediate family had or will
have a direct or indirect material interest, other than
compensation agreements, which are described under the caption
&#147;Management&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Purchases of Securities</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since January&nbsp;1, 2003, the following executive officers,
directors, holders of more than 5% of our capital stock and
members of such person&#146;s immediate family purchased
securities in the amounts and as of the dates shown below.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Series&nbsp;B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Series&nbsp;C</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Series&nbsp;D</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Series&nbsp;D-1</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name of Purchaser</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>5% Stockholders affiliated with Directors:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities associated with Fraizer Healthcare Ventures(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,070,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,428,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities associated with InterWest Partners(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,385,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,285,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities associated with MPM BioVentures III(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,456,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,857,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thomas Weisel Healthcare Venture Partners, L.P.(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities associated with TL Ventures(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,508,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other 5% Stockholders:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Biomedical Venture&nbsp;III Ltd.(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,920,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,271,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Directors and Executive Officers:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Caley Castelein,&nbsp;M.D.(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher B. Ehrlich(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Greene,&nbsp;M.D.(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patrick Heron(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Moller,&nbsp;Ph.D.(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    August Watanabe,&nbsp;M.D.(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Zerbe,&nbsp;M.D.(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>407,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stuart Dombey,&nbsp;M.B.(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randall Whitcomb,&nbsp;M.D.(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>264,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Nicholas(11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)</TD>
    <TD align="left">
    Represents shares held by Frazier Healthcare,&nbsp;III L.P. and
    Frazier Affiliates,&nbsp;III, L.P. Patrick Heron, a member of
    our board of directors, is a venture capitalist with Frazier
    Healthcare Ventures where he holds the title of General Partner.
    Entities affiliated with Frazier Healthcare Ventures serve as
    the general partners of Frazier Healthcare&nbsp;III, LP and
    Frazier Affiliates&nbsp;III, LP. During 2003, entities
    associated with Frazier Healthcare Ventures purchased
    700,000&nbsp;shares of our Series&nbsp;B Preferred Stock at
    $1.50&nbsp;per share. During 2003 and 2004, entities associated
    with Frazier Healthcare Ventures purchased 3,070,176&nbsp;shares
    of our Series&nbsp;C Preferred Stock at $1.14&nbsp;per share,
    and in 2004 and 2005, entities associated with Frazier
    Healthcare Ventures purchased 1,428,571&nbsp;shares of our
    Series&nbsp;D Preferred Stock at $1.40&nbsp;per share.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)</TD>
    <TD align="left">
    Represents shares held by InterWest Investors VIII, L.P.,
    InterWest Investors Q VIII, L.P. and InterWest Partners VIII,
    L.P. Christopher Ehrlich, a member of our board of directors, is
    a Partner at InterWest Partners. During 2003 and 2004, entities
    associated with InterWest Partners purchased
    4,385,964&nbsp;shares of our Series&nbsp;C Preferred Stock at
    $1.14&nbsp;per share. During 2004 and 2005, entities associated
    with InterWest Partners purchased 4,285,714&nbsp;shares of our
    Series&nbsp;D Preferred Stock at $1.40&nbsp;per share.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)</TD>
    <TD align="left">
    Represents shares held by MPM Asset Management Investors 2003
    BVIII LLC, MPM Bioventures&nbsp;III GmbH&nbsp;&#38; Co.
    Beteiligungs KG, MPM Bioventures&nbsp;III Parallel Fund, L.P.,
    MPM Bioventures&nbsp;III, L.P., MPM Bioventures III-QP, L.P.,
    MPM Bioventures Strategic Fund, L.P. William Greene,&nbsp;M.D.
    and Nicholas Simon&nbsp;III, members of our board of directors,
    are General Partners of</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">84

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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">MPM Bioventures&nbsp;III. During
    2003 and 2004, entities associated with MPM Bioventures&nbsp;III
    purchased 13,456,140&nbsp;shares of our Series&nbsp;C Preferred
    Stock at $1.14&nbsp;per share and 7,857,142&nbsp;shares of our
    Series&nbsp;D Preferred Stock at $1.40&nbsp;per share.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">(4)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Caley Castelein,&nbsp;M.D., a
    member of our board of directors, is a Managing Partner of
    Thomas Weisel Healthcare Partners LLC, the General Partner of
    Thomas Weisel Healthcare Venture Partners, L.P. During 2004 and
    2005, Thomas Weisel Healthcare Venture Partners LLC purchased
    5,000,000&nbsp;shares of our Series&nbsp;D Preferred Stock at
    $1.40&nbsp;per share.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">(5)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Represents shares held by TL
    Ventures V Interfund, L.P. and TL Ventures V L.P. Christopher
    Moller,&nbsp;Ph.D., a member of our board of directors, is a
    member and on the board of directors of TL Ventures&nbsp;V LLC,
    the General Partner of TL Ventures&nbsp;V Interfund L.P. and TL
    Ventures&nbsp;V Management L.P., the General Partner of TL
    Ventures&nbsp;V L.P. During 2003, entities associated with TL
    Ventures purchased 700,000&nbsp;shares of our Series&nbsp;B
    Preferred Stock at $1.50&nbsp;per share. During 2003 and 2004,
    entities associated with TL Ventures purchased
    3,508,772&nbsp;shares of our Series&nbsp;C Preferred Stock at
    $1.14&nbsp;per share, and in 2004 and 2005, entities associated
    with TL Ventures purchased 2,500,000&nbsp;shares of our
    Series&nbsp;D Preferred Stock at $1.40&nbsp;per share.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">(6)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">In May 2005, we issued
    200,003&nbsp;shares of our Series&nbsp;D Preferred Stock,
    795,217&nbsp;shares of our Series&nbsp;D-1 Preferred Stock and
    1,920,827&nbsp;shares of our common stock to Biomedical
    Venture&nbsp;III Ltd. in exchange for shares of Hormos
    representing all the outstanding capital stock of Hormos and all
    securities or other instruments convertible into or exercisable
    for capital stock of Hormos held by Biomedical Venture&nbsp;III
    Ltd. Between June 2005 and October 2005, Biomedical
    Venture&nbsp;III Ltd. purchased 1,071,428.57&nbsp;shares of our
    Series&nbsp;D Preferred Stock at $1.40&nbsp;per share.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">(7)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">August Watanabe,&nbsp;M.D., a
    member of our board of directors, exercised stock options to
    purchase&nbsp;30,000&nbsp;shares of our common stock at an
    exercise price of $0.20&nbsp;per share in 2005 and exercised
    options to purchase 15,000&nbsp;shares of our common stock at an
    exercise price of $0.20 in 2006.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">(8)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">During 2005, Robert
    Zerbe,&nbsp;M.D., our Chief Executive Officer, exercised options
    to purchase&nbsp;407,893&nbsp;shares of our common stock at an
    exercise price of $0.20&nbsp;per share.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">(9)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">During 2005, Stuart
    Dombey,&nbsp;M.B., our Chief Scientific and Regulatory Officer,
    exercised options to purchase&nbsp;109,667&nbsp;shares of our
    common stock at an exercise price of $0.20&nbsp;per share.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    During 2005, Randall Whitcomb,&nbsp;M.D., our Chief Medical
    Officer, exercised options to purchase&nbsp;264,554&nbsp;shares
    of our common stock at an exercise price of $0.20&nbsp;per share.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    During 2005, Christopher Nicholas, our Chief Business Officer,
    exercised options to purchase&nbsp;111,247&nbsp;shares of our
    common stock at an exercise price of $0.20&nbsp;per share.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Indemnification Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our certificate of incorporation and
bylaws that authorize and require us to indemnify our officers
and directors to the full extent permitted under Delaware law,
subject to limited exceptions. See &#147;Management&nbsp;&#151;
Limitation of Liability and Indemnification of Officers and
Directors.&#148; In addition, in conjunction with this offering,
we intend to enter into separate indemnification agreements with
our directors and executive officers, in addition to the
indemnification provided for in our bylaws.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Fourth Amended and Restated Investor Rights Agreement, as
amended</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and our preferred stockholders have entered into an investor
rights agreement under which our preferred stockholders have
registration rights with respect to their shares of common
stock, rights of first refusal on certain new issues of our
capital stock and rights to purchase shares in this offering.
These rights have been waived with respect to this offering and
the rights of first refusal shall terminate immediately prior to
the closing of this offering. Upon closing of this offering, all
our currently outstanding shares of preferred stock will be
converted into shares of our common stock. See &#147;Description
of Capital Stock&nbsp;&#151; Registration Rights&#148; for a
further description of the terms of this agreement.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">85

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='113'></A>
</DIV>

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PRINCIPAL STOCKHOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents information concerning the
beneficial ownership of the shares of our common stock as of
December&nbsp;31, 2005, by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each person we know to be the beneficial owner of 5% or more of
    our outstanding shares of our capital stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our named executive officers listed on the Summary
    Compensation Table;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our directors;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all of our executive officers and directors as a group.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The information set forth in the table gives effect to the
conversion of all of our preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beneficial ownership is determined under the rules of the SEC
and generally includes voting or investment power over
securities. Except in cases where community property laws apply
or as indicated in the footnotes to this table, we believe that
each stockholder identified in the table possesses sole voting
and investment power over all shares of common stock shown as
beneficially owned by the stockholder. Percentage of beneficial
ownership is based on 77,403,623&nbsp;shares of common stock
outstanding as of December&nbsp;31, 2005 (as adjusted to reflect
as of that date the conversion of all shares of our preferred
stock outstanding into common stock),
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding after the completion of this
offering. Shares of common stock subject to options that are
currently exercisable or exercisable within 60&nbsp;days of
December&nbsp;31, 2005, are considered outstanding and
beneficially owned by the person holding the options for the
purpose of computing the percentage ownership of that person but
are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Unless indicated
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">86

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
below, the address of each individual listed below is
c/o&nbsp;QuatRx Pharmaceuticals Company, 777 East Eisenhower
Parkway, Suite&nbsp;100, Ann Arbor, Michigan 48108.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Percentage of Shares</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Outstanding</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Prior to the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After the</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Name of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Owned(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Offering</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Stockholders owning 5% or more:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities affiliated with MPM Bioventures&nbsp;III(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,313,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.54</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities affiliated with TL Ventures(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,362,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities affiliated with InterWest Partners(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,671,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities affiliated with Frazier Healthcare(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,252,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Entities affiliated with Thomas Weisel Healthcare Venture
    Partners, L.P.(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Biomedical Venture&nbsp;III Ltd.(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,987,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Directors and Executive Officers:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Caley Castelein,&nbsp;M.D.(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher B. Ehrlich(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,671,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard P. Fox</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William Greene,&nbsp;M.D.(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,313,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Patrick Heron(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,252,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Moller,&nbsp;Ph.D.(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,362,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nicholas Simon&nbsp;III(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,313,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    August Watanabe,&nbsp;M.D.(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Anders Wiklund</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Zerbe,&nbsp;M.D.(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,950,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Stuart Dombey,&nbsp;M.B.(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,324,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Christopher Nicholas(12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,333,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gary Onn(13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Randall Whitcomb,&nbsp;M.D.(11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>967,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All directors and executive officers as a group (13&nbsp;persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,606,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92.06</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; &nbsp;*</TD>
    <TD align="left">
    Less than 1%.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (1)</TD>
    <TD align="left">
    Includes shares of common stock issuable pursuant to options
    exercisable within 60&nbsp;days of December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (2)</TD>
    <TD align="left">
    Includes 326,238&nbsp;shares held by MPM Asset Management
    Investors 2003 BVIII LLC, 1,424,013&nbsp;shares held by MPM
    Bioventures&nbsp;III GmbH&nbsp;&#38; Co. Beteiligungs KG,
    508,879&nbsp;shares held by MPM Bioventures&nbsp;III Parallel
    Fund, L.P., 1,132,937&nbsp;shares held by MPM
    Bioventures&nbsp;III, L.P., 16,849,787&nbsp;shares held by MPM
    Bioventures <FONT style="white-space: nowrap">III-QP,</FONT>
    L.P. and 1,071,428&nbsp;shares held by MPM Bioventures Strategic
    Fund, L.P., collectively, the MPM Funds. William
    Greene,&nbsp;M.D. and Nicholas Simon&nbsp;III, members of our
    board of directors, are General Partners of
    MPM&nbsp;Bioventures&nbsp;III. Dr.&nbsp;Greene and
    Mr.&nbsp;Simon have shared voting and dispositive powers over
    the shares held by the MPM Funds. They disclaim beneficial
    ownership of the shares held by the MPM Funds, except to the
    extent of their pecuniary interest therein. The address for MPM
    BioVentures&nbsp;III LLC is 200 Clarendon&nbsp;St.,
    54th&nbsp;Floor, Boston, MA 02116.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (3)</TD>
    <TD align="left">
    Includes 159,185&nbsp;shares held by TL Ventures V Interfund,
    L.P. and 9,203,526&nbsp;shares held by TL Ventures V L.P.,
    collectively, the TL Ventures Funds. Christopher
    Moller,&nbsp;Ph.D., a member of our board of directors, is a
    member and on the board of directors of TL Ventures&nbsp;V LLC,
    the general partner of TL&nbsp;Ventures&nbsp;V Interfund L.P.
    and TL Ventures V Management L.P., the general partner of TL
    Ventures&nbsp;V&nbsp;L.P. Dr.&nbsp;Moller may be deemed to have
    shared voting and dispositive powers over the shares held by the
    TL Ventures Funds. He disclaims beneficial ownership of the
    shares held by the TL Ventures Funds, except to the extent of
    his pecuniary interest therein. The address for the TL Ventures
    Funds is 700 Building, 435 Devon Park Drive, Wayne, PA 19087.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (4)</TD>
    <TD align="left">
    Includes 66,772&nbsp;shares held by InterWest Investors VIII,
    L.P., 239,338&nbsp;shares held by InterWest Investors Q VIII,
    L.P. and 8,365,568&nbsp;shares held by InterWest Partners VIII,
    L.P, collectively, the InterWest Funds. Christopher Ehrlich, a
    member of our board of directors, is a Venture Member of
    InterWest Management Partners VIII, LLC, the general partner of
    the InterWest Funds. Mr.&nbsp;Ehrlich has shared voting and
    dispositive powers over the shares held by the InterWest Funds.
    He disclaims beneficial ownership of the shares held by the
    InterWest Funds, except to the extent of his pecuniary interest
    therein. The address for InterWest Partners is 2710 Sand Hill
    Road, Menlo Park, CA 94025.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (5)</TD>
    <TD align="left">
    Includes 8,191,086&nbsp;shares held by Frazier
    Healthcare&nbsp;III, L.P. and 61,600&nbsp;shares held by Frazier
    Affiliates,&nbsp;III, L.P., collectively, the Frazier&nbsp;III
    Funds. Patrick Heron, a member of our board of directors, is a
    venture capitalist with Frazier Healthcare Ventures</TD>
</TR>

</TABLE>

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    <TD width="5%"></TD>
    <TD width="95%"></TD>
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    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">where he holds the title of General
    Partner. Entities affiliated with Frazier Healthcare Ventures
    serve as the general partners of the Frazier&nbsp;III Funds.
    Mr.&nbsp;Heron may be deemed to have shared voting and
    dispositive powers over the shares held by the Frazier&nbsp;III
    Funds. He disclaims beneficial ownership of the shares held by
    the Frazier&nbsp;III Funds, except to the extent of his
    pecuniary interest therein. The address for the Frazier&nbsp;III
    Funds and Frazier Healthcare Ventures is 601&nbsp;Union Street,
    Suite&nbsp;3200, Seattle, WA&nbsp;98101.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">&nbsp; (6)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Caley Castelein,&nbsp;M.D., a
    member of our board of directors, is a Managing Partner of
    Thomas Weisel Healthcare Partners LLC, the general partner of
    Thomas Weisel Healthcare Venture Partners, L.P.
    Mr.&nbsp;Castelein has shared voting and dispositive powers over
    the shares held by Thomas Weisel Healthcare Venture Partners,
    L.P. He disclaims beneficial ownership of the shares held by the
    Thomas Weisel Healthcare Venture Partners, L.P., except to the
    extent of his pecuniary interest therein. The address for Thomas
    Weisel Healthcare Venture Partners is One Montgomery Street,
    San&nbsp;Francisco, CA 94101.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">&nbsp; (7)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">The address for Biomedical
    Venture&nbsp;III Ltd. is Sundkrogsgade&nbsp;7, DK-2100,
    Copenhagen, Denmark.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">&nbsp; (8)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Includes 15,000&nbsp;shares of
    common stock issuable upon the exercise of stock options
    exercisable within 60&nbsp;days of December&nbsp;31, 2005.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt">&nbsp; (9)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 8pt">Includes 547,927&nbsp;shares of
    common stock issuable upon the exercise of stock options
    exercisable within 60&nbsp;days of December&nbsp;31, 2005. Also
    includes an aggregate of 955,000&nbsp;shares held by trusts
    established by Dr.&nbsp;Zerbe for the benefit of his children
    and of which he and his wife, Linda Zerbe, are the trustees.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Includes 249,660&nbsp;shares of common stock issuable upon the
    exercise of stock options exercisable within 60&nbsp;days of
    December&nbsp;31, 2005. Also includes an aggregate of
    925,000&nbsp;shares held by trusts established by
    Dr.&nbsp;Dombey for the benefit of his children and of which he
    and his wife, Heather Jane Dombey, are the trustees and
    40,000&nbsp;shares held by a trust established by
    Dr.&nbsp;Dombey as trustee of the Stuart Lionel Dombey Trust
    u/a/d.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Includes 303,168&nbsp;shares of common stock issuable upon the
    exercise of stock options exercisable within 60&nbsp;days of
    December&nbsp;31, 2005. Also includes an aggregate of
    400,000&nbsp;shares held by trusts established by
    Dr.&nbsp;Whitcomb of which he and his wife, Rita K. Whitcomb,
    are the trustees.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Includes 257,002&nbsp;shares of common stock issuable upon the
    exercise of stock options exercisable within 60&nbsp;days of
    December&nbsp;31, 2005. Also includes 20,000&nbsp;shares held by
    Christine L. Nicholas, Mr.&nbsp;Nicholas&#146;s wife and an
    aggregate of 450,000&nbsp;shares held by trusts established by
    Mr.&nbsp;Nicholas for the benefit of his children.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Includes 385,042&nbsp;shares of common stock issuable upon the
    exercise of stock options exercisable within 60&nbsp;days of
    December&nbsp;31, 2005.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='114'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DESCRIPTION OF CAPITAL STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the completion of this offering, our authorized capital
stock will consist
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $0.01&nbsp;per share,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, par value $0.01&nbsp;per share, and there
will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding and no shares of preferred stock
outstanding. As of September&nbsp;30, 2005, we had
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;record
holders of our capital stock. All of our outstanding shares of
preferred stock will automatically convert into shares of our
common stock upon the completion of this offering. In addition,
upon completion of this offering, options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be outstanding
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be reserved for future grants under our
Amended and Restated 2005 Stock Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following description of our capital stock and provisions of
our certificate of incorporation and bylaws are summaries of
material terms and provisions and are qualified by reference to
our certificate of incorporation and bylaws, copies of which
have been filed with the SEC as exhibits to the registration
statement of which this prospectus is a part. The descriptions
of the common stock and preferred stock reflect amendments to
our certificate of incorporation and bylaws that will become
effective upon closing of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the closing of this offering, we will be authorized to
issue one class of common stock. Stockholders will be entitled
to one vote for each share of our common stock held of record on
all matters on which stockholders are entitled or permitted to
vote. Our common stock will not have cumulative voting rights in
the election of directors. As a result, holders of a majority of
the shares of our common stock voting for the election of
directors can elect all the directors standing for election.
Holders of our common stock will be entitled to receive
dividends out of legally available funds when and if declared
from time to time by our board of directors. See &#147;Dividend
Policy.&#148; In the event of our liquidation, dissolution or
winding up, the holders of our common stock will be entitled to
share ratably in all assets remaining after payment of
liabilities, subject to the rights of any then outstanding
preferred stock. The rights, preferences and privileges of
holders of our common stock will be subject to, and may be
adversely affected by, the rights of holders of shares of any
series of preferred stock that we may designate and issue in the
future. All outstanding shares of our common stock are fully
paid and nonassessable, and the shares of common stock offered
hereby will be fully paid and nonassessable.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Preferred Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the closing of this offering, all outstanding shares of our
preferred stock, including shares of preferred stock held in the
escrow established in connection with our acquisition of Hormos,
will be converted into an aggregate of 49,475,097&nbsp;shares of
common stock. Under our certificate of incorporation, upon the
closing of this offering, we will be authorized, subject to the
limits imposed by the Delaware General Corporation Law, to
issue &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock in one or more series, to establish from time
to time the number of shares to be included in each series, to
fix the rights, preferences and privileges of the shares of each
wholly unissued series and any of its qualifications,
limitations, restrictions. Our board of directors can also
increase or decrease the number of shares of any series of our
preferred stock, but not below the number of shares of that
series then outstanding, without any further vote or action by
our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors may authorize the issuance of preferred
stock with voting or conversion rights that could adversely
affect the voting power or other rights of our common
stockholders. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of delaying or
preventing our change in control and may cause the market price
of our common stock to decline or impair the voting and other
rights of the holders of our common stock. We have no current
plans to issue any shares of preferred stock.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Registration Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, the holders of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be entitled to rights with respect to the
registration of these shares under the Securities Act as
described below.
</DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Demand Registration Rights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At any time beginning 180&nbsp;days after the closing of this
offering, the holders of at least fifty percent (50%) of the
shares having registration rights can demand that we file a
registration statement for those shares so long as the demand
covers at least fifty percent (50%) of the shares subject to the
registration rights. We will use our best efforts to effect the
registration as requested, unless the underwriters if any,
decide to limit the number of shares that may be included in the
registration due to marketing factors. We are only obligated to
satisfy two demand registrations (provided that at least eighty
percent (80%) of the shares requested to be registered must be
registered in order for such demand to qualify as a demand
registration), and we may defer a registration by up to
90&nbsp;days under specified circumstances not more than once in
any <FONT style="white-space: nowrap">12-month</FONT> period. We
are not obligated to satisfy a demand registration if the
registrable shares may be immediately registered pursuant to a
registration statement on
Form&nbsp;<FONT style="white-space: nowrap">S-3,</FONT> as
described below.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Piggyback Registration Rights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we register any securities for public sale, the holders of
the shares having registration rights may include their shares
in the registration statement. The underwriters have the right
to limit the number of shares having registration rights that
may be included in the registration statement, but not below 20%
of the total number of shares included in the registration
statement. These piggyback registration rights have been waived
with respect to this offering on behalf of the holders of these
rights.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Form&nbsp;<FONT style="white-space: nowrap">S-3</FONT>
    Registration Rights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we are eligible to file a registration statement on
Form&nbsp;<FONT style="white-space: nowrap">S-3,</FONT> any
holders of the shares having registration rights can demand that
we file a registration statement on
Form&nbsp;<FONT style="white-space: nowrap">S-3</FONT> or any
similar short-form registration statement, so long as
(i)&nbsp;the aggregate amount of securities to be sold under the
registration statement on
Form&nbsp;<FONT style="white-space: nowrap">S-3</FONT> is at
least $1.0&nbsp;million and (ii)&nbsp;we have not already
effected two registrations on
Form&nbsp;<FONT style="white-space: nowrap">S-3</FONT> in any
<FONT style="white-space: nowrap">12-month</FONT> period.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Expenses of Registration</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will pay for all registration expenses, including the
reasonable legal expenses of a single counsel for the holders,
relating to any demand, piggyback or
Form&nbsp;<FONT style="white-space: nowrap">S-3</FONT>
registration, other than the underwriting discount and selling
commissions applicable to the shares of common stock held by the
holders with registration rights.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Expiration of Registration Rights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If shares having registration rights are sold either to the
public, sold pursuant to Rule&nbsp;144 or sold by a holder in a
transaction in which those rights are not assigned, then the
shares will no longer be considered registrable shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Antitakeover Effects of Delaware Law and Provisions of our
Certificate of Incorporation and Bylaws</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Delaware Takeover Statute</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to Section&nbsp;203 of the Delaware General
Corporation Law. This statute regulating corporate takeovers
prohibits a Delaware corporation from engaging in any business
combination with any
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
interested stockholder for three years following the date that
the stockholder became an interested stockholder, unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prior to the date of the transaction that resulted in the
    interested stockholder becoming an interested stockholder, the
    board of directors of the corporation approved either the
    business combination or the transaction which resulted in the
    stockholder becoming an interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    upon completion of the transaction that resulted in the
    interested stockholder becoming an interested stockholder, the
    interested stockholder owned at least 85% of the voting stock of
    the corporation outstanding at the time the transaction
    commenced, excluding for purposes of determining the number of
    shares outstanding (a)&nbsp;shares owned by persons who are
    directors and also officers, and (b)&nbsp;shares owned by
    employee stock plans in which employee participants do not have
    the right to determine confidentially whether shares held
    subject to the plan will be tendered in a tender or exchange
    offer;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on or subsequent to the date of the transaction that resulted in
    the interested stockholder becoming an interested stockholder,
    the business combination is approved by the board and authorized
    at an annual or special meeting of stockholders, and not by
    written consent, by the affirmative vote of at least
    66<FONT style="font-size: 70%"><SUP>2</SUP></FONT>/<FONT style="font-size: 60%">3</FONT>%
    of the outstanding voting stock which is not owned by the
    interested stockholder.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally, a business combination includes a merger, asset or
stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. An interested stockholder
is a person who, together with affiliates and associates, owns
or, within three years prior to the determination of interested
stockholder status, did own 15% or more of a corporation&#146;s
outstanding voting securities. We expect the existence of this
provision to have an anti-takeover effect with respect to
transactions our board of directors does not approve in advance.
We also anticipate that Section&nbsp;203 may discourage takeover
attempts that might result in a premium over the market price
for the shares of common stock held by stockholders.
</DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Certificate of Incorporation and Bylaw Provisions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provisions of our certificate of incorporation and bylaws, which
will become effective upon the closing of this offering, may
have the effect of making it more difficult for a third party to
acquire, or discourage a third party from attempting to acquire,
control of our company by means of a tender offer, a proxy
contest or otherwise. These provisions may also make the removal
of incumbent officers and directors more difficult. These
provisions are intended to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of QuatRx to first negotiate
with us. These provisions could also limit the price that
investors might be willing to pay in the future for shares of
our common stock. These provisions may make it more difficult
for stockholders to take specific corporate actions and could
have the effect of delaying or preventing a change in control.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In particular, our certificate of incorporation and bylaws will
provide for the following:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Staggered Board of Directors. </I>Our board of directors is
divided into three classes of the same or nearly the same number
of directors, each serving staggered three-year terms, which
means that only one class of directors may be elected at each
annual meeting or special meeting in lieu of such annual
meeting. These provisions may make the removal of incumbent
directors difficult and may discourage third parties from
attempting to circumvent the anti-takeover effects of our
certificate of incorporation and bylaws by removing our
incumbent directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>No Written Consent of Stockholders.</I> Any action to be
taken by our stockholders must be effected at a duly called
annual or special meeting and may not be effected by written
consent.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Special Meetings of Stockholders.</I> Special meetings of our
stockholders may be called only by (i)&nbsp;the Chairman of the
board of directors, (ii)&nbsp;the Chief Executive Officer, or
(iii)&nbsp;the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized
directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Advance Notice Requirement.</I> Stockholder proposals to be
brought before an annual meeting of our stockholders must comply
with advance notice procedures. These advance notice procedures
require timely
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
notice and apply in several situations, including stockholder
proposals relating to the nominations of persons for election to
the board of directors. Generally, to be timely, notice must be
received at our principal executive offices not less than
90&nbsp;days nor more than 120&nbsp;days prior to the first
anniversary date of the annual meeting for the preceding year.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Issuance of Undesignated Preferred Stock.</I> Our board of
directors is authorized to issue, without further action by the
stockholders, up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of undesignated preferred stock with rights and preferences,
including voting rights, designated from time to time by the
board of directors. The existence of authorized but unissued
shares of preferred stock enables our board of directors to
render more difficult or to discourage an attempt to obtain
control of us by means of a merger, tender offer, proxy contest
or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Transfer Agent and Registrar</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transfer agent and registrar for our common stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have applied for our common stock to be quoted on the Nasdaq
National Market under the trading symbol &#147;QTRX&#148;.
</DIV>

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<A name='115'></A>
</DIV>

<!-- link1 "UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNITED STATES FEDERAL INCOME TAX CONSEQUENCES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>TO NON-UNITED STATES HOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a general discussion of certain United States
federal income tax consequences of the ownership and disposition
of our common stock to a non-United States holder. For the
purpose of this discussion, a non-United States holder is any
beneficial holder of our common stock that for United States
federal income tax purposes is not a United States person. For
United States federal income tax purposes, person means:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an individual citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a corporation or other entity taxable as a corporation or a
    partnership or entity taxable as a partnership created or
    organized in the United States or under the laws of the United
    States or any state thereof;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an estate whose income is subject to United States federal
    income tax regardless of its source;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a trust (i)&nbsp;whose administration is subject to the primary
    supervision of a United States court and which has one or more
    United States persons who have the authority to control all
    substantial decisions of the trust or (ii)&nbsp;which has made
    an election to be treated as a United States person.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a partnership holds common stock, the tax treatment of a
partner will generally depend on the status of the partner and
upon the activities of the partnership. Accordingly, we urge
partnerships which hold our common stock and partners in such
partnerships to consult their tax advisors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This discussion assumes that non-United States holders will hold
our common stock issued pursuant to the offering as a capital
asset (generally, property held for investment). This discussion
does not address all aspects of United States federal income
taxation that may be relevant in light of a non-United States
holder&#146;s special tax status or special tax situations.
United States expatriates, life insurance companies, tax-exempt
organizations, dealers in securities or currency, banks or other
financial institutions, holders whose functional currency is
other than the United States dollar, &#147;controlled foreign
corporations,&#148; &#147;passive foreign investment
companies,&#148; and investors that hold common stock as part of
a hedge, straddle or conversion transaction are among those
categories of potential investors that are subject to special
rules not covered in this discussion. This discussion does not
address any tax consequences arising under the laws of any
state, local or non-United States taxing jurisdiction.
Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;), legislative history and Treasury Regulations
and administrative and judicial interpretations thereof, all as
in effect on the date hereof, and all of which are subject to
change, possibly with retroactive effect. Accordingly, we urge
each non-United States Holder to consult a tax advisor regarding
the United States federal, state, local and non-United States
income and other tax consequences of acquiring, holding and
disposing of shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Prospective purchasers are urged to consult their own tax
advisors regarding United States federal income tax
consequences, as well as other United States federal, state, and
local income and estate tax consequences, and non-United States
tax consequences, to them of acquiring, owning, and disposing of
our common stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Dividends</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have not paid any distributions on our common stock and we do
not plan to pay any distributions for the foreseeable future.
However if we do make distributions on our common stock, those
payments will constitute dividends for United States tax
purposes to the extent paid from our current or accumulated
earnings and profits, as determined under United States federal
income tax principles. To the extent those distributions exceed
our current or accumulated earnings and profits, the
distributions will constitute a return of capital and will first
reduce a holder&#146;s basis, but not below zero, and then will
be treated as gain from the sale of stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any dividend paid from our current or accumulated earnings and
profits paid to a non-United States holder of common stock
generally will be subject to United States withholding tax
either at a rate of 30% of the gross amount of the dividend or
such lower rate as may be specified by an applicable tax treaty.
In order
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
to receive a reduced treaty rate, a non-United States holder
must provide us with an IRS
Form&nbsp;<FONT style="white-space: nowrap">W-8BEN</FONT> (or
successor form) certifying, under penalty of perjury, the
holder&#146;s status as a
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>person as
defined under the Code and qualification for the reduced rate.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dividends received by a non-United States holder that are
effectively connected with a United States trade or business
conducted by the non-United States holder are exempt from such
withholding tax. In order to obtain this exemption, a non-United
States holder must provide us with an IRS
Form&nbsp;<FONT style="white-space: nowrap">W-8ECI</FONT> (or
successor form) properly certifying such exemption. Such
effectively connected dividends, although not subject to
withholding tax, are taxed at the same graduated rates
applicable to United States persons, net of certain deductions
and credits. In addition to the graduated tax described above,
dividends received by a corporate non-United States holder that
are effectively connected with a United States trade or business
of the corporate non-United States holder may also be subject to
a branch profits tax at a rate of 30% or such lower rate as may
be specified by an applicable tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A non-United States holder of common stock that is eligible for
a reduced rate of withholding tax pursuant to a tax treaty may
obtain a refund of any excess amounts currently withheld if an
appropriate claim for refund is filed with the Internal Revenue
Service, or IRS. If a non-United States holder holds common
stock through a foreign partnership or foreign intermediary, the
foreign partnership or foreign intermediary will also be
required to comply with additional certification requirements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Gain on Disposition of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A non-United States holder generally will not be subject to
United States federal income tax on any gain realized upon the
sale or other disposition of our common stock unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the gain is effectively connected with a United States trade or
    business of the non-United States holder (and if required by an
    applicable income tax treaty, is attributable to a United States
    permanent establishment of the non-United States holder);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the non-United States holder is an individual who holds his or
    her common stock as a capital asset (generally, an asset held
    for investment purposes) and who is present in the United States
    for a period or periods aggregating 183&nbsp;days or more during
    the calendar year in which the sale or disposition occurs and
    certain other conditions are met;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our common stock constitutes a United States real property
    interest by reason of our status as a &#147;United States real
    property holding corporation&#148; (&#147;USRPHC&#148;) for
    United States federal income tax purposes at any time within the
    shorter of the five-year period preceding the disposition or the
    holder&#146;s holding period for our common stock.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we are not currently, and that we will not
become, a USRPHC for United States federal income tax purposes.
If we are determined to be a USRPHC, the United States federal
income and withholding taxes relating to interests in USRPHCs
nevertheless will not apply to gains derived from the sale or
other disposition of the common stock by a non-United States
holder whose shareholdings, actual and constructive, at all
times during the applicable period, amount to 5% or less of our
common stock, provided that our common stock is regularly traded
on an established securities market. However, no assurance can
be given that we will not be a USRPHC, or that our common stock
will be considered regularly traded, when a non-United States
holder sells its shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless an applicable treaty provides otherwise, gain described
in the first bullet point above will be subject to the United
States federal income tax imposed on net income on the same
basis that applies to United States persons, as defined under
the Code, generally and, for corporate holders under certain
circumstances, the branch profits tax, but will generally not be
subject to withholding, provided any certification requirements
are met. Gain described in the second bullet point above will be
subject to a flat 30% United States federal income tax and may
be offset by United States source capital losses. Non-United
States holders should consult any applicable income tax treaties
that may alter the applicable rules.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Backup Withholding and Information Reporting</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally, we must report annually to the IRS the amount of
dividends paid, the name and address of the recipient, and the
amount, if any, of tax withheld. A similar report is sent to the
holder. Pursuant to tax treaties or other agreements, the IRS
may make its reports available to tax authorities in the
recipient&#146;s country of residence.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Payments of dividends or of proceeds on the disposition of stock
made to a non-United States holder may be subject to backup
withholding (currently at a rate of 28%) unless the non-United
States holder establishes an exemption, for example, by properly
certifying its non-United States status on a
Form&nbsp;<FONT style="white-space: nowrap">W-8BEN</FONT> or
another appropriate version of
Form&nbsp;<FONT style="white-space: nowrap">W-8.</FONT>
Notwithstanding the foregoing, backup withholding may apply if
either we or our paying agent has actual knowledge, or reason to
know, that the holder is a United States person as defined under
the Code.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale of our
common stock within the United States or conducted through
certain United States-related financial intermediaries, unless
the beneficial owner certifies under penalty of perjury that it
is a non-United States holder (and the payor does not have
actual knowledge or reason to know that the beneficial owner is
a United States person as defined under the Code), or such owner
otherwise establishes an exemption.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Backup withholding is not an additional tax. Rather, the United
States income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is timely
furnished to the IRS.
</DIV>

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<A name='116'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

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<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock, and there can be no assurance that a significant
public market for the common stock will develop or be sustained
after this offering. Future sales of substantial amounts of our
common stock, including shares issued upon exercise of
outstanding options, in the public market following this
offering could adversely affect market prices prevailing from
time to time and could impair our ability to raise capital
through the sale of our equity securities.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering and based on shares outstanding
at September&nbsp;30, 2005 and the conversion of all shares of
preferred stock into shares of common stock, we will have
outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. All the shares sold in this offering, plus any
shares issued upon exercise of the underwriters&#146; option to
purchase additional shares from us, will be freely tradable
without restriction under the Securities Act, unless purchased
by our &#147;affiliates&#148; as that term is defined in
Rule&nbsp;144 under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding are &#147;restricted
securities&#148; within the meaning of Rule&nbsp;144 under the
Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule&nbsp;701 or another exemption or
meet the safe harbor qualifications under Rule&nbsp;144 under
the Securities Act as summarized below.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our directors, officers and substantially all of our
stockholders, who combined hold
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our stock, have entered into
<FONT style="white-space: nowrap">lock-up</FONT> agreements with
the underwriters of this offering generally providing that they
will not offer, sell, contract or grant any option to sell,
pledge, transfer, establish an open put equivalent position or
liquidate or decrease a call equivalent position or otherwise
dispose of or transfer any shares of common stock, options or
warrants to acquire shares of common stock, or securities
exchangeable or exercisable for or convertible into shares of
common stock owned by them prior to this offering for a period
of 180&nbsp;days after the date of this prospectus without the
prior written consent of Banc of America Securities LLC, on
behalf of our underwriters. The
<FONT style="white-space: nowrap">lock-up</FONT> agreements do
not prohibit transfers or dispositions by our officers,
directors and stockholders as a gift or by will or intestacy, to
immediate family members or affiliates, and to any trust for the
direct or indirect benefit of the holder or his or her
immediately family. As a result of these contractual
restrictions, notwithstanding possible earlier eligibility for
sale under the provisions of Rules&nbsp;144, 144(k) and 701,
shares subject to
<FONT style="white-space: nowrap">lock-up</FONT> agreements may
not be sold until such agreements expire or are waived by Banc
of America Securities LLC, on behalf of our underwriters. Banc
of America Securities LLC has advised us that it has no current
intention to shorten or release any of the shares subject to the
<FONT style="white-space: nowrap">lock-up</FONT> agreements
prior to the expiration of the
<FONT style="white-space: nowrap">lock-up</FONT> period. Based
on shares outstanding as of September&nbsp;30, 2005, taking into
account the <FONT style="white-space: nowrap">lock-up</FONT>
agreements, and assuming Banc of America Securities LLC does not
release stockholders from these agreements prior to the
expiration of the
<FONT style="white-space: nowrap">180-day</FONT>
<FONT style="white-space: nowrap">lock-up</FONT> period, the
following shares will be eligible for sale in the public market
at the following times:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    that are not subject to the
    <FONT style="white-space: nowrap">lock-up</FONT> agreements
    discussed above may be sold immediately after completion of this
    offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares that are not subject to the
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT> period
    described above may be sold beginning 90&nbsp;days after the
    effective date of the offering; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
    shares may be sold upon expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT> period
    described above.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Rule&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144 as currently in effect, a person
who has beneficially owned restricted shares for at least one
year, including the holding period of any prior owner except an
affiliate, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    1% of the number of shares of common stock then outstanding,
    which will equal
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    immediately after this offering;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the average weekly trading volume of our common stock during the
    four calendar weeks preceding the date on which notice of the
    sale is filed.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to certain manner of
sale provisions and notice requirements and to the availability
of current public information about us. Under Rule&nbsp;144(k),
a person who is not deemed to have been an affiliate of us at
any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least
two years, including the holding period of any prior owner
except an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume
limitation or notice provisions of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Rule&nbsp;701</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any of our employees, officers, directors or consultants who
purchased shares under a written compensatory plan or contract
may be entitled to rely on the resale provisions of
Rule&nbsp;701. Rule&nbsp;701 permits affiliates to sell their
Rule&nbsp;701&nbsp;shares under Rule&nbsp;144 without complying
with the holding period requirements of Rule&nbsp;144.
Rule&nbsp;701 further provides that non-affiliates may sell such
shares in reliance on Rule&nbsp;144 without having to comply
with the holding period, public information, volume limitation
or notice provisions of Rule&nbsp;144. All holders of
Rule&nbsp;701&nbsp;shares are required to wait until
90&nbsp;days after the effective date of this offering before
selling such shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Registration Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, the holders
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, or their transferees, have rights to
require or participate in the registration of those shares under
the Securities Act pursuant to our amended and restated investor
rights agreement. For a detailed description of these
registration rights see &#147;Description of Capital
Stock&nbsp;&#151; Registration Rights.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Stock Options</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to file a registration statement under the Securities
Act covering up to 8,175,259&nbsp;shares of common stock
reserved for issuance under our 2005 Equity Incentive Plan. That
registration statement is expected to become effective upon
filing with the SEC. Accordingly, common stock registered under
that registration statement will, subject to vesting provisions
and limitations as to the volume of shares that may be sold by
our affiliates under Rule&nbsp;144 described above, be available
for sale in the open market unless the holder is subject to the
<FONT style="white-space: nowrap">180-day</FONT>
<FONT style="white-space: nowrap">lock-up</FONT> period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, options to purchase
6,438,490&nbsp;shares of common stock were issued and
outstanding at a weighted average exercise price of $0.29 per
share. Upon the expiration of the
<FONT style="white-space: nowrap">lock-up</FONT> period
described above, at
least &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be subject to vested options.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Warrant</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, there will be outstanding a
warrant to purchase shares of common stock issued in connection
with a credit facility we entered into in January 2006. The
number of shares subject to the warrant and the exercise price
will be established at the closing of this offering pursuant to
a formula agreed upon with the lender. Under this formula, at an
assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and assuming a closing date
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006, this warrant would be exercisable
for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock at an exercise price of the $&nbsp;per share.
The shares issuable upon exercise of the warrant are subject to
a <FONT style="white-space: nowrap">lock-up</FONT> agreement
with Banc of America Securities LLC. Such shares are also
entitled to the registration rights discussed above. In
addition, any shares purchased pursuant to the warrant may be
sold pursuant to the requirements of Rule&nbsp;144.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "UNDERWRITING" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are offering the shares of common stock described in this
prospectus through a number of underwriters. Banc of America
Securities LLC, SG Cowen&nbsp;&#38; Co., LLC, Lazard Capital
Markets LLC and Pacific Growth Equities, LLC are the
representatives of the underwriters. We have entered into a firm
commitment underwriting agreement with the representatives.
Subject to the terms and conditions of the underwriting
agreement, we have agreed to sell to the underwriters, and each
underwriter has agreed to purchase, the number of shares of
common stock listed next to its name in the following table:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Underwriter</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Banc of America Securities LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SG Cowen&nbsp;&#38; Co., LLC&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Lazard Capital Markets LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pacific Growth Equities, LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell
the shares to the public when and if the underwriters buy the
shares from us.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters initially will offer the shares to the public
at the price specified on the cover page of this prospectus. The
underwriters may allow a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to selected dealers. The underwriters may also allow, and
those dealers may reallow, a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to some other dealers. If all the shares are not sold at
the public offering price, the underwriters may change the
public offering price and the other selling terms. Our common
stock is offered subject to a number of conditions, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    receipt and acceptance of the common stock by the
    underwriters;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the underwriters&#146; right to reject orders in whole or in
    part.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Over-Allotment Options.</I> We have granted the underwriters
an over-allotment option to buy up to additional shares of our
common stock at the same price per share as they are paying for
the shares shown in the table above. These additional shares
would cover sales of shares by the underwriters that exceed the
total number of shares shown in the table above. The
underwriters may exercise this option at any time within
30&nbsp;days after the date of this prospectus. To the extent
that the underwriters exercise this option, each underwriter
will purchase additional shares from us in approximately the
same proportion as it purchased the shares shown in the table
above. If purchased, the additional shares will be sold by the
underwriters on the same terms as those on which the other
shares are sold.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Discount and Commissions.</I> The following table shows the
per share and total underwriting discounts and commissions to be
paid to the underwriters by us. These amounts are shown assuming
no exercise and full exercise of the underwriters&#146; option
to purchase additional shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that the expenses of the offering to be paid by us,
not including the underwriting discounts and commissions, will
be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Paid by Us</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full Exercise</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

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

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

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

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Listing.</I> We have applied to have our common stock
included for quotation on the Nasdaq National Market under the
symbol &#147;QTRX&#148;.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">99

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stabilization.</I> In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common stock, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stabilizing transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    short sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    syndicate covering transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    imposition of penalty bids;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    purchases to cover positions created by short sales.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
Stabilizing transactions may include making short sales of our
common stock, which involves the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering, and purchasing shares of common
stock from us or in the open market to cover positions created
by short sales. Short sales may be &#147;covered&#148; shorts,
which are short positions in an amount not greater than the
underwriters&#146; over-allotment option referred to above, or
may be &#147;naked&#148; shorts, which are short positions in
excess of that amount. Syndicate covering transactions involve
purchases of our common stock in the open market after the
distribution has been completed in order to cover syndicate
short positions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares pursuant to the over-allotment option.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the common stock in the open market that could
adversely affect investors who purchased in this offering. To
the extent that the underwriters create a naked short position,
they will purchase shares in the open market to cover the
position.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The representatives also may impose a penalty bid on
underwriters and dealers participating in the offering. This
means that the representatives may reclaim from any syndicate
members or other dealers participating in the offering the
underwriting discounts on shares sold by them and purchased by
the representatives in stabilizing or short covering
transactions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These activities may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market price of our common stock. As a result
of these activities, the price of our common stock may be higher
than the price that otherwise might exist in the open market. If
the underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the Nasdaq National Market, in the
<FONT style="white-space: nowrap">over-the</FONT>-counter market
or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Discretionary Accounts.</I> The underwriters have informed us
that they do not expect to make sales to accounts over which
they exercise discretionary authority in excess of 5% of the
shares of common stock being offered.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>IPO Pricing.</I> Prior to this offering, there has been no
public market for our common stock. The initial public offering
price will be negotiated between us and the representatives of
the underwriters. Among the factors to be considered in these
negotiations are:
</DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the history of, and prospects for, our company and the industry
    in which we compete;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our past and present financial performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an assessment of our management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the present state of our development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prospects for our future earnings;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">100

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prevailing conditions of the applicable United States
    securities market at the time of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    market valuations of publicly traded companies that we and the
    representatives of the underwriters believe to be comparable to
    us;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    other factors deemed relevant.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT style="white-space: nowrap"><I>Lock-up</FONT>
Agreement.</I> We, our executive officers and directors and
substantially all of our stockholders have entered into or will,
prior to the completion of this offering, enter into
<FONT style="white-space: nowrap">lock-up</FONT> agreements with
the underwriters. Under these agreements, subject to exceptions,
we may not issue any new shares of common stock, and those
holders of stock and options may not, directly or indirectly,
sell, offer, contract or grant any option to sell, pledge,
transfer or otherwise dispose of or hedge any common stock or
securities convertible into or exchangeable for shares of common
stock, or publicly announce the intention to do any of the
foregoing, without the prior written consent of Banc of America
Securities LLC for a period of 180&nbsp;days from the date of
this prospectus, subject to a potential extension of up to an
additional 34&nbsp;days under certain circumstances. This
consent may be given at any time without public notice. In
addition, during this period, we have also agreed not to file
any registration statement for any shares of our common stock
without the prior written consent of Banc of America Securities
LLC. Pursuant to the
<FONT style="white-space: nowrap">lock-up</FONT> agreements
holders of greater
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the &#147;registrable securities&#148; under our registration
rights agreement have also agreed not to make any demand for, or
exercise any right to registration of any shares of common stock
or any securities convertible into or exercisable or
exchangeable for common stock, without the prior written consent
of Banc of America Securities LLC.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification.</I> We will indemnify the underwriters
against some liabilities, including liabilities under the
Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters
may be required to make in respect of those liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conflicts/ Affiliates.</I> The underwriters and their
affiliates have provided, or may in the future provide, various
investment banking, commercial banking and other financial
services for us.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Compliance with
<FONT style="white-space: nowrap">Non-U.S.&nbsp;</FONT>Laws and
Regulations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter intends to comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers,
sells or delivers shares of our common stock or has in its
possession or distributes the prospectus.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>European Economic Area</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), with effect from and including the date on which
the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) an offer of shares to
the public may not be made in that Relevant Member State prior
to the publication of a prospectus in relation to shares which
has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant
Member State and notified to the competent authority in that
Relevant Member State, all in accordance with the Prospectus
Directive, except that it may, with effect from and including
the Relevant Implementation Date, make an offer of shares to the
public in that Relevant Member State at any time:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to legal entities which are authorized or regulated to operate
    in the financial markets or, if not so authorized or regulated,
    whose corporate purpose is solely to invest in securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to any legal entity which has two or more of (1)&nbsp;an average
    of at least 250 employees during the last financial year;
    (2)&nbsp;a total balance sheet of more than
    43,000,000&nbsp;Euros and (3)&nbsp;an annual net turnover of
    more than 50,000,000&nbsp;Euros, as shown in its last annual or
    consolidated accounts;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    in any other circumstances which do not require the publication
    by the Issuer of a prospectus pursuant to Article&nbsp;3 of the
    Prospectus Directive.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the purposes of this provision, the expression an
&#147;offer of shares to the public&#148; in relation to any
shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the shares to be offered so as to enable an
investor to decide to purchase or subscribe the shares, as the
same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and
the expression Prospectus Directive means Directive 2003/71/ EC
and includes any relevant implementing measure in each Relevant
Member State.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>France</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No prospectus (including any amendment, supplement or
replacement thereto) has been prepared in connection with the
offering of the shares that has been approved by the
<I>Autorit&#233; des march&#233;s financiers </I>or by the
competent authority of another State that is a contracting party
to the Agreement on the European Economic Area and notified to
the <I>Autorit&#233; des march&#233;s financiers</I>; no shares
have been offered or sold and will be offered or sold, directly
or indirectly, to the public in France except to permitted
investors (&#147;Permitted Investors&#148;) consisting of
persons licensed to provide the investment service of portfolio
management for the account of third parties, qualified investors
(<I>investisseurs qualifi&#233;s</I>) acting for their own
account and/or corporate investors meeting one of the four
criteria provided in Article&nbsp;1 of Decree N o
<FONT style="white-space: nowrap">2004-1019</FONT> of
September&nbsp;28, 2004 and belonging to a limited circle of
investors (<I>cercle restreint d&#146;investisseurs</I>) acting
for their own account, with &#147;qualified investors&#148; and
&#147;limited circle of investors&#148; having the meaning
ascribed to them in Article&nbsp;L.
<FONT style="white-space: nowrap">411-2</FONT> ,
<FONT style="white-space: nowrap">D.411-1,</FONT>
<FONT style="white-space: nowrap">D.411-2,</FONT>
<FONT style="white-space: nowrap">D.734-1,</FONT>
<FONT style="white-space: nowrap">D.744-1,</FONT>
<FONT style="white-space: nowrap">D754-1</FONT> and
<FONT style="white-space: nowrap">D.764-1</FONT> of the French
<I>Code Mon&#233;taire et Financier </I>and applicable
regulations thereunder; neither this prospectus, nor any other
materials related to the offering or information contained
therein relating to the shares has been released, issued or
distributed to the public in France except to Permitted
Investors; and the direct or indirect resale to the public in
France of any shares acquired by any Permitted Investors may be
made only as provided by
Articles&nbsp;<FONT style="white-space: nowrap">L.411-1,</FONT>
<FONT style="white-space: nowrap">L.411-2,</FONT>
<FONT style="white-space: nowrap">L.412-1</FONT> and
<FONT style="white-space: nowrap">L.621-8</FONT> to
<FONT style="white-space: nowrap">L.621-8-3</FONT> of the French
<I>Code Mon&#233;taire et Financier </I>and applicable
regulations thereunder.
</DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>United Kingdom</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter acknowledges and agrees that:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    it has not offered or sold and will not offer or sell any shares
    other than to persons whose ordinary activities involve them in
    acquiring, holding, managing or disposing of investments (as
    principal or as agent) for the purposes of their businesses or
    who it is reasonable to expect will acquire, hold, manage or
    dispose of investments (as principal or agent) for the purposes
    of their businesses where the issue of the shares would
    otherwise constitute a contravention of Section&nbsp;19 of the
    Financial Services and Markets Act 2000 (the &#147;FSMA&#148;)
    by the issuer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    it has only communicated or caused to be communicated and will
    only communicate or cause to be communicated an invitation or
    inducement to engage in investment activity (within the meaning
    of Section&nbsp;21 of the FSMA) received by it in connection
    with the issue or sale of the shares in circumstances in which
    Section&nbsp;21(1) of the FSMA does not apply to the
    Issuer;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    it has complied and will comply with all applicable provisions
    of the FSMA with respect to anything done by it in relation to
    the shares in, from or otherwise involving the United Kingdom.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This document is only being distributed to and is only directed
at (i)&nbsp;persons who are outside the United Kingdom or
(ii)&nbsp;to investment professionals falling within
Article&nbsp;19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the &#147;Order&#148;) or
(iii)&nbsp;high net worth entities, and other persons to whom it
may lawfully be communicated, falling within
Article&nbsp;49(2)(a) to (d)&nbsp;of the Order (all such persons
together being referred to as &#147;relevant persons&#148;). The
shares are only available to, and any invitation, offer or
agreement to subscribe, purchase or otherwise acquire such
shares will be engaged in only with, relevant persons. Any
person who is not a relevant person should not act or rely on
this document or any of its contents.
</DIV>

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    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Italy</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter acknowledges and agrees that the offering of
the shares has not been cleared by the Italian Securities
Exchange Commission (Commissione Nazionale per le Societ&#224; e
la Borsa, the &#147;CONSOB&#148;) pursuant to Italian securities
legislation and, accordingly, acknowledges and agrees that the
shares may not and will not be offered, sold or delivered, nor
may or will copies of the prospectus or any other documents
relating to the shares or the prospectus be distributed in Italy
other than to professional investors (investitori
professionali), as defined in Article&nbsp;31, paragraph&nbsp;2
of CONSOB Regulation&nbsp;No.&nbsp;11522 of July&nbsp;1, 1998,
as amended (&#147;Regulation&nbsp;No.&nbsp;11522&#148;) or
pursuant to another exemption from the requirements of
Articles&nbsp;94 and seq. of Legislative Decree No.&nbsp;58 of
February&nbsp;24, 1998 (the &#147;Italian Finance Law&#148;) and
CONSOB Regulation&nbsp;No.&nbsp;11971 of May&nbsp;14, 1999
(&#147;Regulation&nbsp;No.&nbsp;11971&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter acknowledges and agrees that any offer, sale or
delivery of the shares or distribution of copies of the
prospectus or any other document relating to the shares or the
prospectus in Italy may and will be effected in accordance with
all Italian securities, tax, exchange control and other
applicable laws and regulations, and, in particular, will be:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    made by an investment firm, bank or financial intermediary
    permitted to conduct such activities in Italy in accordance with
    the Legislative Decree No.&nbsp;385 of September&nbsp;1, 1993,
    as amended (the &#147;Italian Banking Law&#148;), Legislative
    Decree No.&nbsp;58 of February&nbsp;24, 1998, as amended, CONSOB
    Regulation&nbsp;No.&nbsp;11522 of July&nbsp;1, 1998, and any
    other applicable laws and regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    in compliance with Article&nbsp;129 of the Italian Banking Law
    and the implementing guidelines of the Bank of Italy;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    in compliance with any other applicable notification requirement
    or limitation which may be imposed upon the offer of shares by
    CONSOB or the Bank of Italy.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any investor purchasing the shares in this offering is solely
responsible for ensuring that any offer or resale of the shares
it purchased in this offering occurs in compliance with
applicable laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus and the information contained herein are
intended only for the use of its recipient and are not to be
distributed to any third party resident or located in Italy for
any reason. No person resident or located in Italy other than
the original recipients of this document may rely on it or its
content.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the above (which shall continue to apply to the
extent not inconsistent with the implementing measures of the
Prospectus Directive in Italy), after the implementation of the
Prospectus Directive in Italy, the restrictions, acknowledgments
and agreements set out under the heading &#147;European Economic
Area&#148; above shall apply to Italy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='118'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The validity of the common stock offered hereby will be passed
upon for us by Heller Ehrman LLP and certain matters will be
passed upon for the underwriters by Shearman&nbsp;&#38; Sterling
LLP.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='119'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements as of December&nbsp;31, 2003 and
December&nbsp;31, 2004 and for each of the three years in the
period ended December&nbsp;31, 2004 and cumulative for the
period of inception (November&nbsp;20, 2000) through
December&nbsp;31, 2004 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements as of December&nbsp;31, 2003 and
December&nbsp;31, 2004 and for each of the two years then ended
for Hormos Medical Oy included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers Oy,
independent accountants, given on authority of said firm as
experts in auditing and accounting.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">103

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='120'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the SEC a registration statement on
Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT> under the
Securities Act that registers the shares of our common stock to
be sold in this offering. This prospectus does not contain all
of the information set forth in the registration statement and
the exhibits and schedules filed as part of the registration
statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the
exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus concerning
the contents of any contract or any other document are not
necessarily complete. If a contract or document has been filed
as an exhibit to the registration statement, we refer you to the
copy of the contract or document that has been filed. Each
statement in this prospectus relating to a contract or document
filed as an exhibit is qualified in all respects by the filed
exhibit. The reports and other information we file with the SEC
can be read and copied at the SEC&#146;s Public Reference Room
at 100&nbsp;F Street, NE, Washington D.C. 20549. Copies of these
materials can be obtained at prescribed rates from the Public
Reference Section of the SEC at the principal offices of the
SEC, 100&nbsp;F Street, NE, Washington D.C. 20549. You may
obtain information regarding the operation of the Public
Reference Room by calling
1(800)&nbsp;<FONT style="white-space: nowrap">SEC-0330.</FONT>
The SEC also maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
SEC.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will become subject to the
reporting and information requirements of the Exchange Act and,
as a result, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy
statements and other information will be available for
inspection and copying at the SEC&#146;s public reference room
and the web site of the SEC referred to above.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">104
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Index to Consolidated Financial Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>QuatRx Pharmaceuticals Company</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#300'>Report of Independent Registered Public
    Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#301'>Consolidated Balance Sheets</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#302'>Consolidated Statements of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#303'>Consolidated Statements of
    Stockholders&#146; Equity (Deficit)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#304'>Consolidated Statements of Cash Flows</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#305'>Notes to Consolidated Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Hormos Medical Oy</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#314'>Report of Independent Auditors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#306'>Income Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#307'>Balance Sheets</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#308'>Cash Flow Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-32</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#309'>Accounting Policies and Notes to Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>&nbsp;<A HREF='#313'>Unaudited Pro Forma Condensed Combined
    Financial Statements</A></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Operations for the Nine Months Ended
    September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Statement of Operations for the Year Ended December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-49</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Unaudited Pro Forma Condensed Combined Financial
    Statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-50</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-1

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='301'></A>
</DIV>

<!-- link1 "Report of Independent Registered Public Accounting Firm" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
To the Board of Directors and Shareholders of
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
QuatRx Pharmaceuticals Company
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations,
stockholders&#146; equity and cash flows present fairly, in all
material respects, the financial position of QuatRx
Pharmaceuticals Company and its subsidiary at December&nbsp;31,
2004 and 2003 and the results of its operations and its cash
flows for each of the three years in the period ended
December&nbsp;31, 2004 and, cumulatively, for the period from
November&nbsp;20, 2000 (date of inception) to December&nbsp;31,
2004 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are
the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
/s/ PricewaterhouseCoopers LLP
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
March&nbsp;21, 2005
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Detroit, Michigan
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='301'></A>
</DIV>

<!-- link1 "QuatRx Pharmaceuticals Company (A development stage company) Consolidated Balance Sheets" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Consolidated Balance Sheets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Redeemable</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Convertible</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred Stock</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and Stockholders&#146;</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equity at</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="19" align="left" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Current Assets:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,546,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,128,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,867,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>207,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>651,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,643,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,434,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,725,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>767,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangibles, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>438,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,684,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,494,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,931,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="19" align="left" valign="top">
    <B>Liabilities, Redeemable Convertible Preferred Stock and
    Stockholders&#146; Equity (Deficit)</B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Current Liabilities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loan advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,445,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>552,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>303,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued payroll and benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued contract services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>924,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,005,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,388,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>374,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,121,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,603,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,940,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,607,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued contingent consideration</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,593,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Redeemable convertible preferred stock, liquidation value of
    $56,697,445 at December&nbsp;31, 2004 and $67,224,113 at
    September&nbsp;30, 2005 (unaudited), no shares outstanding pro
    forma (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,955,812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,907,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,735,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Stockholders&#146; Equity (Deficit):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $0.01&nbsp;par value; 30,402,852, 72,502,056 and
    94,919,416&nbsp;shares authorized at December&nbsp;31, 2003,
    2004 and September&nbsp;30, 2005 (unaudited), respectively;
    3,976,000, 3,976,000 and 13,526,154&nbsp;shares issued and
    outstanding at December&nbsp;31, 2003, 2004 and
    September&nbsp;30, 2005 (unaudited), respectively;
    61,934,977&nbsp;shares outstanding pro forma (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>619,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,031,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,282,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deficit accumulated during the development stage</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,432,274</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,055,834</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(64,014,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>470,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>470,253</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total stockholders&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,392,514</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,016,074</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(62,377,491</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,358,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities, redeemable convertible preferred stock and
    stockholders&#146; equity (deficit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,684,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,494,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,931,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-3

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='302'></A>
</DIV>

<!-- link1 "QuatRx Pharmaceuticals Company (A development stage company) Consolidated Statements of Operations" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Consolidated Statements of Operations</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating Expenses:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,713,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,372,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,724,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,230,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,872,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,156,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,387,154</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>716,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>886,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,723,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,597,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,121,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,199,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,797,430</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchased in-process research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,429,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,258,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,448,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,828,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,993,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,156,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,984,584</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,429,776</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,258,461</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,448,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,828,395</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,993,808</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(37,156,189</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59,984,584</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other Income (Expense):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,303</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consulting income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>72,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>328,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>498,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(404,896</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(404,896</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>293,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>575,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>919,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,495,358</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,389,822</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,252,639</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,941,576</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,236,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58,489,226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,503,791</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,360,333</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,428,885</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457,130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,817,463</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,779,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,468,330</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,623,560</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(26,612,972</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,370,461</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,693,717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(66,306,689</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net Loss Per Share, Basic and Diluted:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per share available to common stockholders, basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7.57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,382,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,319,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,680,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net loss per share available to common stockholders
    (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares used to compute pro forma net loss per
    share available to common stockholders (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,841,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,212,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-4

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='303'></A>
</DIV>

<!-- link1 "QuatRx Pharmaceuticals Company (A development stage company) Consolidated Statements of Stockholders&#146; Equity (Deficit)" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Consolidated Statements of Stockholders&#146; Equity
(Deficit)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Common Stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>During</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-In</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Development</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stockholders&#146;</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income (Loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stage</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance&nbsp;&#151; Inception, November&nbsp;20, 2000</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of shares to founders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,405,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of stock for cash, at $0.10&nbsp;per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of option to purchase Series&nbsp;B Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>351,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>351,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized loss on investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of preferred stock to redemption value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(146,911</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(146,911</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(598,536</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2001</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,605,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(594,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(204,197</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercise of stock rights for cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Realized loss on maturity of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,332</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of preferred stock to redemption value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,389,822</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,389,822</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,389,822</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,385,490</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,984,026</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,924,184</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of preferred stock to redemption value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,483,709</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,503,791</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,432,274</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,392,514</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of preferred stock to redemption value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,055,834</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,016,074</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance or common stock upon exercise of stock option
    (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of shares in connection with acquisition (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,520,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,760,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,856,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,236,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,236,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(36,236,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of preferred stock to redemption value (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,735,360</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,721,770</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457,130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign currency translation adjustment (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>470,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>470,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>470,253</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(35,766,334</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at September&nbsp;30, 2005 (unaudited)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,526,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,031,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>470,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(64,014,191</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(62,377,491</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-5

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='304'></A>
</DIV>

<!-- link1 "QuatRx Pharmaceuticals Company (A development stage company) Consolidated Statements of Cash Flows" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Consolidated Statements of Cash Flows</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cumulative</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(November&nbsp;20,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000) to</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <B>Cash Flows from Operating Activities:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,389,822</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(22,252,639</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,941,576</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(36,236,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(58,489,226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net loss to net cash used in operating
    activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>437,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from maturity of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,475</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest expense on long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,095</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchased in-process research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in cash resulting from changes in assets and
    liabilities, net of acquisitions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181,726</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181,726</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(88,028</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(209,109</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(306,638</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(127,940</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(223,161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(529,799</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    Accounts payable</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(98,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>428,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>552,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(466,542</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,806</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued payroll and benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(60,608</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(27,596</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,265</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,358</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued contract services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>712,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,005,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(181,976</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>394,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,400,493</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(158,818</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(158,818</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,308,485</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,151,669</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,011,491</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,891,979</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,116,436</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,377,454</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31,269,433</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash Flows from Investing Activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,175,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,947,475</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,947,475</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Maturities of short-term investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,158,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>875,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,940,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,940,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(878,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(878,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash acquired in Hormos transaction</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,014,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,014,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,897</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,944</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(38,726</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(116,410</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,081</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(135,374</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(251,784</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29,897</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(38,726</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123,885</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,081</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(123,673</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash Flows from Financing Activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the issuance of preferred stock, net of issuance
    costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,078,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,570,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,632,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,898,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,298,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the issuance of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>245,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653,954</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principal payments on capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,580</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,580</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,720</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,134,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,570,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,632,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,143,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,084,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,228,034</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Effect of Exchange Rate Changes on Cash</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,704</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net Increase (Decrease) in Cash and Cash Equivalents</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,204,061</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,182,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,581,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,128,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,144,517</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,260,444</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,867,632</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash&nbsp;&#151; Beginning of Period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,567,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,546,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,546,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,128,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash&nbsp;&#151; End of Period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,363,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,546,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,128,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,128,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,401,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,867,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,867,632</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Disclosure of Non-Cash Flow Activity:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of preferred and common stock in connection with Hormos
    transaction</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,827,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,827,285</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these
consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-6

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='305'></A>
</DIV>

<!-- link1 "" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Organization and Summary of Significant Accounting
    Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Organization and Business</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx Pharmaceuticals Company (&#147;QuatRx&#148; or the
&#147;Company&#148;) was incorporated in Delaware in November
2000, and is engaged in the discovery, licensing, development
and commercialization of compounds in the endocrine, metabolic
and cardiovascular therapeutic areas. QuatRx has four product
candidates in clinical development and one product candidate
expected to enter clinical development in the first half of
2006. QuatRx&#146;s two lead product candidates treat hormone
deficiencies that result from aging in men and women.
Ospemifene, a treatment for vaginal atrophy in post-menopausal
women, will enter phase&nbsp;III clinical testing in early 2006,
and fispemifene, a treatment for the symptoms of andropause in
aging males, is expected to enter phase&nbsp;II clinical testing
in the first half of 2006. QuatRx also has two product
candidates for the treatment of elevated cholesterol levels,
QRX-401 and QRX-431, in phase&nbsp;I clinical trials and
preclinical development, respectively. Becocalcidiol, our
topical product candidate for the treatment of mild to moderate
psoriasis, has completed a phase&nbsp;IIb clinical trial which
the Company believes demonstrated clinical proof of efficacy. In
addition, QuatRx has two research programs for targeted
endocrine therapies.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;25, 2005, QuatRx completed the acquisition of Hormos
Medical Oy (&#147;Hormos&#148;), a privately held Finnish
development-stage pharmaceuticals company. Hormos focuses on the
discovery and development of novel pharmaceutical compounds
involving the tissue specific regulation of estrogen effects for
the treatment of certain age-related diseases. The acquisition
allowed QuatRx to expand its existing pipeline and technologies
to include potential therapies for endocrine deficiencies
associated with aging in men and women, including ospemifene and
fispemifene. The accompanying financial statements include the
operating results of Hormos since the date of acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx complements its internal drug development expertise by
entering into collaborations and agreements with third parties
including pharmaceutical companies, academic laboratories, and
contract service providers. In the course of its activities,
QuatRx has sustained significant operating losses and expects
such losses, which will likely increase as QuatRx expands its
research and development activities, to continue for at least
the next several years. QuatRx has not generated any product
sales or any significant revenues and has not achieved
profitable operations or positive cash flows from operations.
QuatRx&#146;s cumulative net loss during the development stage
totaled $58,489,226 through September&nbsp;30, 2005. QuatRx
plans to finance its operations with a combination of stock
issuances, Finnish government sponsored loans and grants, and
payments from license and other strategic research and
development arrangements and, if its product candidates are
commercialized, with revenues from product sales. There are no
assurances that QuatRx will be successful in obtaining an
adequate level of financing needed for the long-term development
and commercialization of its planned products.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Basis of Presentation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx has generated no revenue to date and its activities have
consisted primarily of raising capital, acquiring compounds,
planning and conducting clinical trials, recruiting personnel,
and negotiating licensing arrangements. Accordingly, QuatRx is
considered to be in the development stage as of
September&nbsp;30, 2005 as defined in Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;7,
<I>Accounting and Reporting by Development Stage Enterprises.</I>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Principles of Consolidation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Hormos, from the
date of acquisition, May&nbsp;25, 2005. All significant
intercompany balances and transactions have been eliminated.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-7

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Unaudited Pro Forma Presentation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma stockholders&#146; equity as of
September&nbsp;30, 2005 and net loss per share available to
common stockholders for the year ended December&nbsp;31, 2004
and the nine months ended September&nbsp;30, 2005 reflect the
automatic conversion of all outstanding shares of Series&nbsp;A,
Series&nbsp;B, Series&nbsp;C, Series&nbsp;D and Series&nbsp;D-1
Redeemable Convertible Preferred Stock into 43,143,653 and
48,408,823&nbsp;shares of common stock, respectively, upon the
closing of the Company&#146;s initial public offering.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Unaudited Interim Financial Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements as of September&nbsp;30,
2005, and for the nine months ended September&nbsp;30, 2004 and
2005, are unaudited and have been prepared on the same basis as
the audited consolidated financial statements and, in the
opinion of management, include all adjustments, consisting of
only normal recurring adjustments, necessary for fair
presentation of the financial position at such date, and the
operating results and cash flows for such periods, in accordance
with generally accepted accounting principles. Results for the
interim period are not necessarily indicative of the results to
be expected for any subsequent period.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Foreign Currency Translation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements of QuatRx&#146;s foreign subsidiary are
translated from Euros to U.S.&nbsp;dollars using exchange rates
in effect at period end for assets and liabilities and at
average rates during the period for results of operations. The
resulting foreign currency translation adjustment is reflected
as a separate component of stockholders&#146; equity (deficit).
Foreign currency transaction loss resulting from expenses in
foreign denominated currencies totaled approximately $32,525 for
the nine months ended September&nbsp;30, 2005, and is included
in general and administrative expense in the accompanying
consolidated statements of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Use of Estimates</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Cash and Cash Equivalents</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx considers all highly liquid investments with an original
maturity of three months or less at the date of purchase to be
cash equivalents.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Short-term Investments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investments with an original maturity of more than three months
and less than one year are considered short-term investments and
have been classified by QuatRx as securities available-for-sale.
Such investments are carried at fair value, with unrealized
gains and losses included as a separate component of
stockholders&#146; equity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Fair Value Financial Instruments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount of cash and cash equivalents, accounts
receivable, accounts payable, accrued liabilities are considered
to be representative of their respective fair values because of
the short-term nature of those instruments and obligations.
Because the Company&#146;s loans bear interest generally at
below-market rates,
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-8

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
an adjustment related to the carrying value of the loans has
been recorded to approximate fair value (see note&nbsp;2). No
significant change in value has occurred since May 2005, the
revaluation date.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Concentration of Credit Risk</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial instruments that potentially subject QuatRx to a
significant concentration of credit risk consist primarily of
cash and cash equivalents. QuatRx maintains deposits in
federally insured financial institutions in excess of federally
insured limits. Management, however, believes the Company is not
exposed to significant credit risk due to the financial position
of the depository institutions in which those deposits are held.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Property and Equipment</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment are stated at cost and are depreciated
over the estimated useful lives of the assets (ranging from
three to five years) using the straight-line method. Equipment
under capital leases is amortized over their estimated useful
lives or the remaining lease term, whichever is shorter. Repairs
and maintenance are expensed as incurred.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Impairment of Long-Lived Assets</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SFAS&nbsp;No.&nbsp;144, <I>Accounting for the
Impairment or Disposal of Long-Lived Assets</I>, if indicators
of impairment exist, QuatRx assesses the recoverability of the
affected long-lived assets by determining whether the carrying
value of such assets can be recovered through undiscounted
future operating cash flows. If impairment is indicated, QuatRx
measures the amount of such impairment by comparing the fair
value to the carrying value and reduces the carrying value
accordingly.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Contract Research Income</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Contract research income consists of a collaborative discovery
program which includes quarterly payments to QuatRx for research
performed and reimbursement of outsourced costs incurred by
QuatRx on the project. The agreement expires January 2006.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Deferred Income</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain non-core technology has been out-licensed to others. The
upfront payment of approximately $480,000 is being amortized
into income over the period of the agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Consulting Fee Income</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Consulting fee income consists of fees paid by a pharmaceutical
company to QuatRx for consultation on design, implementation,
and assessment of certain clinical trials. There has been no
consulting fee income since 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Research and Development</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Research and development expenses consist primarily of costs
associated with the clinical trials of QuatRx&#146;s product
candidates, up-front license fees and milestone obligations for
access to technology, compensation and other expenses for
research and development personnel, supplies and development
materials, costs for clinical research organizations and
contract manufacturers. Expenditures relating to research and
development, including up-front license fees and milestone
obligations, are expensed as incurred.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-9

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Clinical Trials</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx accrues and expenses costs for clinical trial activities
performed by third parties based upon estimates of the
percentage of work completed over the life of the individual
study in accordance with agreements established with contract
research organizations and clinical trial sites. QuatRx
determines the estimates through discussion with internal
clinical personnel and outside service providers as to progress
or stage of completion of trials or services and the agreed upon
fee to be paid for such services. Costs of setting up clinical
trial sites for participation in the trials are expensed
immediately as research and development expenses. Clinical trial
site costs related to patient enrollment are accrued as patients
are entered into the trial and reduced by any initial payment
made to the clinical trial site when the first patient is
enrolled.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Comprehensive Income (Loss)</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SFAS&nbsp;No.&nbsp;130, <I>Reporting
Comprehensive Income</I>, all components of comprehensive income
(loss), including, net income (loss), are reported in the
financial statements in the period in which they are recognized.
Comprehensive income (loss) is defined as the change in equity
during the period from transactions and other events and
circumstances from non-owner sources. Net income (loss) and
other comprehensive income (loss) are reported net of their
related tax effect to arrive at comprehensive income (loss). For
the period from inception (November&nbsp;20, 2000) to
September&nbsp;30, 2005, the comprehensive loss is equal to the
net loss, unrealized loss on investments and cumulative
translation adjustment as presented in the statement of
stockholders&#146; equity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stock-Based Compensation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx has elected to follow Accounting Principles Board Opinion
(&#147;APB&#148;) No.&nbsp;25, <I>Accounting for Stock Issued to
Employees</I>, and related interpretations in accounting for its
employee stock options. Under APB&nbsp;25, if the exercise price
of the Company&#146;s employee stock options equals or exceeds
the estimated fair value of the underlying stock on the date of
grant, no compensation expense is recognized. Since November
2004, the Company has used independent contemporaneous
valuations to determine the fair value of the Company&#146;s
common stock. Because QuatRx&#146;s option grants have been made
at fair value on the grant date and are fixed plan options under
APB&nbsp;25, no compensation expense has been recorded.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As required under SFAS&nbsp;No.&nbsp;123 (amended by
SFAS&nbsp;No.&nbsp;148), the pro forma effects of stock-based
compensation on net loss are estimated at the date of grant
based on the fair value method using the Black-Scholes
option-pricing model.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of these options was estimated at the date of
grant using the Black-Scholes option valuation model with the
following weighted average assumptions for the year ended
December&nbsp;31, 2003 and 2004 and the nine months ended
September&nbsp;30, 2004 and 2005: risk-free interest rate of
2.97%, 3.43%, 3.32% and 4.00%, respectively; no dividend yield,
expected volatility of 70%, and weighted-average expected lives
of the options of 4&nbsp;years. The estimated fair value of
stock options granted during 2003 and 2004, and the nine months
ended September 30, 2004 and 2005 was $0.11, $0.11, $0.11 and
$0.19, respectively. Risk-free interest rates were determined
using government securities with original maturities similar to
the respective expected option life at the date of grant.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-10

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Had employee and director compensation cost for QuatRx&#146;s
stock-based compensation plans been determined based on the fair
value at the grant dates for awards using the fair value method
prescribed by SFAS&nbsp;No.&nbsp;123, QuatRx&#146;s pro forma
net loss would be as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders as reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,779,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,468,330</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,623,560</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,370,461</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,693,717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deduct total stock-based employee compensation expense
    determined under the fair value method for all awards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(47,038</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(76,596</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(76,513</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(278,622</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,779,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,515,368</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,700,156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,446,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,972,339</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per share available to common stockholders (basic and
    diluted)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    As reported</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7.57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7.60</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.64</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

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

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx utilizes the liability method of accounting for income
taxes as required by SFAS&nbsp;No.&nbsp;109, <I>Accounting for
Income Taxes</I>. Under this method, deferred tax assets and
liabilities are determined based on differences between
financial reporting and tax reporting bases of assets and
liabilities and are measured using enacted tax rates and laws
that are expected to be in effect when the differences are
expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected
to be realized.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Net Loss Per Share</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic and diluted net loss per share amounts have been presented
in conformity with SFAS&nbsp;No.&nbsp;128, <I>Earnings Per
Share</I>, for all periods presented. The shares used to compute
basic and diluted net loss per share represent the weighted
average common shares outstanding, reduced by the weighted
average unvested common shares subject to repurchase, and
including the assumed conversion of all outstanding shares of
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-11

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
preferred stock into shares of common stock using the as-if
converted method as of January&nbsp;1, 2004 or the date of
issuance, if later.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Historical:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,389,822</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,964,539</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,941,576</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(36,236,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of redeemable convertible preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,503,791</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,428,885</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457,130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,779,969</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,468,330</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,623,560</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,370,461</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,693,717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted&nbsp;&#151;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,821,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,492,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average unvested common shares subject to repurchase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,221,326</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,593,277</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,550,408</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,656,427</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(811,796</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net weighted average common shares outstanding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,382,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,319,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,680,211</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per share available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6.30</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(7.57</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.61</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5.17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Pro forma for Conversion:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,623,560</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(39,693,717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic and diluted&nbsp;&#151;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net weighted average common shares used above</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,680,211</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma adjustment to reflect assumed weighted average effect
    of conversion of preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,416,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,532,691</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma shares used to compute basic and diluted net loss per
    share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,841,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,212,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pro forma basic and diluted net loss per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.45</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(0.75</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Pro Forma</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has excluded all common stock subject to repurchase
by the Company, convertible preferred stock and outstanding
stock options from the calculation of diluted net loss per share
because all of these securities are anti-dilutive due to the net
loss for each period. The total number of shares excluded from
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-12

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
the calculations of diluted net loss per share was 24,966,798 in
2004 and was 46,344,487 for the nine months ended
September&nbsp;30, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Recent Accounting Pronouncements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Financial Accounting Standards Board
issued SFAS&nbsp;No.&nbsp;123(R) <I>&#147;Share-Based
Payment,&#148; </I>which amends SFAS&nbsp;No.&nbsp;123. The
standard set forth in SFAS&nbsp;No.&nbsp;123(R) requires that
all share-based payments to employees, including grants of
employee stock options, be recognized in the consolidated
statements of operations based on their fair values. The pro
forma disclosure previously permitted under
SFAS&nbsp;No.&nbsp;123 will not be an acceptable alternative to
recognition of expenses in the financial statements. The
standard is effective for public companies for annual periods
beginning after June&nbsp;15, 2005. The Company expects adoption
of SFAS&nbsp;No.&nbsp;123(R) may have a material impact on its
results of operations and net loss per share. The Company is
currently in the process of evaluating the extent of such impact.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Hormos Medical Oy Acquisition</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;25, 2005, the Company completed the acquisition of
Hormos, a Finnish development-stage pharmaceuticals company.
Hormos is in the development stage and is presumed not to be a
business according to the Emerging Issues Task Force
(&#147;EITF&#148;) 98-3, <I>Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a
Business.</I> The transaction therefore was accounted for as a
purchase of assets and assumption of liabilities. In connection
with the acquisition, the Company acquired all of the
outstanding capital stock of Hormos in exchange for
857,145&nbsp;shares of Series&nbsp;D and 3,408,025&nbsp;shares
of Series&nbsp;D-1 Preferred Stock and 9,520,154&nbsp;shares of
common stock and assumed current liabilities and notes payable
totaling $20,289,423. The Company also incurred $1,000,000 in
acquisition-related costs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjustments were made to record the acquired net assets of
Hormos at fair value, including allocating a portion of the
total purchase price to in-process research and development.
Based on management&#146;s review of the analysis of the
tangible and intangible assets and liabilities of Hormos, the
purchase price has been allocated as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total acquisition costs:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of Series&nbsp;D Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,200,003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of Series&nbsp;D-1 Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,771,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,856,047</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition-related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed liabilities and notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,289,423</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,116,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allocated to assets and liabilities as follows:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,170,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>776,995</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    In-process research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work force</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>480,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Favorable loan discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,101,923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,380,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued contingent consideration</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,593,025</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,116,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-13

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Contingent consideration associated with the acquisition
includes an additional 321,415&nbsp;shares and
1,277,995&nbsp;shares of Series&nbsp;D and Series&nbsp;D-1
Preferred Stock, respectively, and 3,570,046&nbsp;shares of
common stock with an aggregate value of $3,310,188, held in
escrow and payable upon the occurrence of certain future events.
One-third of the contingent shares secure indemnification
obligations of the Hormos selling shareholders and will be
released to the Company in satisfaction of an indemnification
claim or to the Hormos shareholders one year after the closing
date of the acquisition. The remaining contingent shares will
generally be released to Hormos selling shareholders upon the
first to occur of: the closing of a qualified public offering of
QuatRx&#146;s common stock or the dosing of the first patient in
a second phase&nbsp;III clinical trial of ospemifene. Additional
purchase consideration will be recorded as the contingent
consideration is released. The additional purchase consideration
will be allocated to the assets acquired based upon their
relative fair value and will result in additional expense for
in-process research and development of $585,000, and accrued
contingent consideration totaling $1,593,000 will be
reclassified to stockholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principle technology acquired in the acquisition of Hormos
consisted of two clinical-stage compounds which were under
development for the treatment of endocrine diseases of aging. In
accordance with FASB Interpretation No.&nbsp;4, <I>Applicability
of FASB Statement No.&nbsp;2 to Business Combinations Accounted
for by the Purchase Method</I>, purchased in-process research
and development of $25,800,000 related to these two
clinical-stage compounds was expensed since ultimate
commercialization of the compounds is uncertain and the
technology has no alternative uses. The fair value of each of
the in-process research and development projects was based on an
income approach which attempts to estimate the income-producing
capability of the asset.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the date of the acquisition, Hormos had $15,078,514 in loans,
including principal and accrued interest, from agencies of the
Finnish government. These loans include below-market interest
rates ranging from 1% to 5.25% annually. The loans were revalued
using both the favorable contractual interest rates as well as
the fair market yields. The difference in value under both
interest rate assumptions is $2,101,923 related to these loans
and has been recorded as a discount to long-term debt. This
discount is being amortized, using the effective interest
method, over the remaining lives of the underlying loans,
generally one to six years. Amortization expense of $199,619 is
included in interest expense in the accompanying statement of
operations for the nine months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the acquisition, Hormos&#146;s workforce of
37 people joined the Company. Using estimated costs primarily of
recruitment and training, it was determined the fair value of
the assembled workforce represents an intangible asset of
$480,000. This asset is being amortized over approximately
4&nbsp;years based on historical employee turnover rates.
Amortization expense of $29,044 and $12,696 is included in
research and development expense and general and administrative
expense, respectively, in the accompanying statement of
operations for the nine months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management was primarily responsible for the estimates and
assumptions used in determining each of the above factors and
believes that the analysis was performed based on the most
relevant available data.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following pro forma unaudited financial data illustrates the
estimated effects of the Hormos acquisition as if it had
occurred on January&nbsp;1, 2004. For the year ended
December&nbsp;31, 2004, pro forma net loss available to common
stockholders and basic and diluted net loss per share would have
been $16,311,457 and $1.37, respectively (unaudited). For the
nine months ended September&nbsp;30, 2005, pro forma net loss
available to common stockholders and basic and diluted net loss
per share would have been $15,702,157 and $1.24, respectively
(unaudited).
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-14

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment consisted of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>At December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>At</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computer equipment (depreciable life&nbsp;&#150; 3&nbsp;years)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>129,041</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Laboratory equipment (depreciable life&nbsp;&#150; 3&nbsp;years)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>631,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Office equipment and furniture (depreciable life&nbsp;&#150;
    5&nbsp;years)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244,119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>116,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,004,480</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>237,082</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>767,398</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment held under capital lease obligations
totaled approximately $305,805 and the related accumulated
depreciation totaled approximately $46,666 at September&nbsp;30,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total depreciation expense for property and equipment totaled
$13,803, $16,894, $19,663, $13,777, $185,649 and $242,150 for
the years ended December&nbsp;31, 2002, 2003 and 2004, the nine
months ended September&nbsp;30, 2004 and 2005, and the period
from inception (November&nbsp;20, 2000) to September&nbsp;30,
2005, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Accrued Liabilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accrued liabilities consists of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>At December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>At</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>121,222</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,848</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued professional fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>374,549</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-15

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Long-Term Debt</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt consists of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>At December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>At</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subordinated notes payable, due in varying amounts with interest
    rates ranging from 3% to 5.25%, net of unamortized discount of
    $1,831,431 at September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,820,002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable, with interest rate of 1%, net of unamortized
    discount of $70,874 at September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>787,835</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital lease obligation by Hormos, payable in monthly
    installments of approximately $5,400, plus interest at 9.5%,
    through February 2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,643,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,929</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, less current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,607,837</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos finances a portion of its research and development
activities with loans from Finnish governmental agencies. These
loans are granted on a project-by-project basis and generally
carry interest at below-market rates. If a project fails or does
not reach commercial success, under certain circumstances and at
the discretion of the Finnish governmental agencies, the loan
can be forgiven.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Subordinated Notes&nbsp;Payable</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subordinated notes payable consists of 19 notes with Tekes, the
National Technology Agency in Finland, and one note with Sitra,
the Finnish National Fund for Research and Development. As of
September&nbsp;30, 2005, Hormos had subordinated notes payable
of $12,820,002, including accrued interest of $1,558,254.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terms of these unsecured subordinated loans generally
include interest at 1% below the Finnish base interest rate as
set by the Bank of Finland, but at a minimum of 3%, a loan
period of six to eight years, with no payments of principal or
interest due for the first three to five years. Repayment of
principal and accrued interest begins after the repayment-free
period. Under applicable Finnish law, interest or principal
related to subordinated notes can only be repaid when the
company has distributable retained earnings or adequate equity
capital. Because Hormos lacks the requisite retained earnings or
equity capital, no amounts outstanding under these loans is
considered currently payable.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Note&nbsp;Payable</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Note payable consists of an industrial research and development
note with Tekes. The terms of the unsecured note payable
includes interest at 3% below the Finnish base interest rate as
set by the Bank of Finland, but a minimum of 1%, a loan period
of 10&nbsp;years, with no payment of principle due for the first
five years. Repayment of principal and accrued interest begins
after the repayment-free period. Accrued interest is payable
annually.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-16

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Leases</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases its office facilities under various
noncancelable operating lease agreements. Rent expense was
$44,205, $44,205, $44,457, $33,314, $235,892 and $379,044 for
the years ended December&nbsp;31, 2002, 2003 and 2004, the nine
months ended September&nbsp;30, 2004 and 2005, and the period
from inception (November&nbsp;20, 2000) to September&nbsp;30,
2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, the Company put in place a letter of credit from a
financial institution for $126,000 in favor of the
Company&#146;s landlord in the event of a breach of the
Company&#146;s Ann Arbor, Michigan facility lease, which expires
in 2011. The letter of credit is collateralized by $126,000 of
QuatRx&#146;s deposits with the issuing financial institution.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Future minimum lease payments under these noncancelable
operating leases at December&nbsp;31, 2004 are approximately as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

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

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>98,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>133,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>827,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With the acquisition of Hormos in May 2005, the Company has
assumed additional operating leases for facilities in Finland.
Hormos is party to five separate real estate leases of office
and laboratory space in Turku, Finland and Oulu, Finland. Two of
these leases are long-term leases through 2011 which require
monthly payments totaling approximately $750,000 annually. The
remaining facility leases require 15&nbsp;months or less to
terminate and have monthly payments totaling approximately
$28,000 annually.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Licensing and Research Agreements</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Temple University</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2001, QuatRx entered into a license agreement with
Temple University for certain pharmaceutical delivery methods.
In consideration for this license, QuatRx paid an upfront
license fee of $10,000. QuatRx is obligated to pay certain
amounts for patent maintenance costs, a payment of $20,000 for a
patent improvement milestone and royalties on future net sales
of products incorporating technology covered by this license. As
of September&nbsp;30, 2005 patent maintenance costs totaled
$1,825. No patent improvement milestones or sales royalties have
been incurred under this license through September&nbsp;30,
2005. The license agreement terminates upon expiration of the
last of any patent rights to licensed products that are
developed under the agreement. This agreement was terminated by
QuatRx in November 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Deltanoid Pharmaceuticals</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2001, QuatRx entered into a license agreement with
Deltanoid Pharmaceuticals, Inc. for certain pharmaceutical
compounds for the topical treatment of skin disease. QuatRx is
obligated to make certain future payments of up to $3,500,000
based on reaching certain clinical and regulatory milestones. No
milestone or royalty expense has been incurred under this
license through September&nbsp;30, 2005. The royalty
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-17

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
provision under this license agreement terminates upon
expiration of the last to expire licensed patent under this
agreement. QuatRx may terminate this agreement at any time upon
90&nbsp;days&#146; written notice.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Topical Pharmaceutical Compounds</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2001, QuatRx entered into a license with a research
organization for certain pharmaceutical compounds for topical
application. QuatRx paid upfront license fees of $50,000 in
connection with this license and is obligated to future
milestone payments of up to $2,750,000 based on achieving
certain clinical and regulatory milestones. QuatRx also is
obligated to royalty payments on net sales of products
incorporating the licensed compound. In addition, QuatRx has
agreed to pay from $5,000 to $20,000&nbsp;per patent for costs
associated with domestic and foreign patents filed by the
research organization relating to the licensed compound.
Research and development costs incurred under this agreement in
2004 were $10,000. No costs were incurred for the nine months
ended September&nbsp;30, 2005. Total amounts paid under this
agreement through September&nbsp;30, 2005 are $50,000 in upfront
license fees and $25,000 in patent filing costs. The license
agreement terminates upon the earlier of the date that no
licensed patent under the agreement remains enforceable or the
payment of earned royalties, once begun, ceases for more than
eight calendar quarters. QuatRx has sent notification of its
intent to terminate this agreement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Genzyme Corporation (formerly Ilex Products, Inc.)</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In May 2003, QuatRx entered into a license agreement with
Genzyme Corporation (formerly Ilex Products, Inc.) for exclusive
rights to two novel classes of orally active compounds for the
treatment of lipid disorders and other cardiovascular diseases.
QuatRx paid a $2,500,000 upfront license fee under the agreement
and is obligated to future milestone and royalty payments. In
2004, QuatRx paid $1,500,000, in milestone payments under this
agreement, which is included in research and development
expense. Future milestone payments are based on achievement of
certain clinical and regulatory milestones and total up to
$37,500,000. Royalty payments are based on net sales of products
incorporating the licensed compounds. No royalty payments have
been incurred under the agreement. Under terms of the agreement,
maintenance costs of the licensed patents are the responsibility
of QuatRx. The agreement provides that patent maintenance costs
are shared equally between the licensor and QuatRx during the
first two years and 100% by QuatRx thereafter. Patent
maintenance costs paid by QuatRx under this agreement totaled
$59,792, $101,045, $88,006, none and $160,837 for the years
ended December&nbsp;31, 2003, 2004, the nine months ended
September&nbsp;30, 2004 and 2005, and the period from inception
(November&nbsp;30, 2000) to September&nbsp;30, 2005,
respectively. The royalty provision under the license terminates
when all valid claims under any patent included in the license
have expired or are no longer enforceable. QuatRx may terminate
the agreement at any time with 90&nbsp;days&#146; written notice.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>EndoChem, Inc.</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2005, QuatRx entered into a license agreement with
EndoChem, Inc. for exclusive worldwide rights to certain
compounds for all human therapeutic applications including the
treatment of lipid disorders and obesity. QuatRx paid a $450,000
upfront license fee under the agreement in 2005, which is
included in research and development expense, and is obligated
to future license fee, milestone and royalty payments. A future
license fee of $100,000 is due within seven days of the one year
anniversary date of the agreement. Future development and
regulatory milestone payments total up to $3,500,000. Royalty
payments are based on net sales of products incorporating the
licensed compounds. No royalty payments have been incurred under
the agreement. Under terms of the agreement, maintenance costs
of the licensed patents are the responsibility of QuatRx. Patent
maintenance costs paid by QuatRx under this agreement totaled
$94,715 for the nine months ended September&nbsp;30, 2005. The
royalty provision under the license terminates when all valid
claims under any patent included in the license have expired or
are no longer enforceable. QuatRx may terminate the agreement at
any time with 90&nbsp;days&#146; written notice.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-18

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Orion and Tess Diagnostics and Pharmaceuticals for
    Ospemifene</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2002, Hormos entered into two agreements with
pharmaceutical products companies for pharmaceutical compounds
involved in the treatment of certain endocrine deficiencies of
aging in women. Under an agreement with Orion, Hormos paid an
upfront license fee of approximately $482,000 and is obligated
to pay future milestones and royalties. Future milestones are
based on achievement of certain clinical and regulatory
milestones and total up to approximately $2,231,000. Royalty
payments are based on net sales of products incorporating the
licensed compounds. No royalty payments have been incurred under
the agreement. Under terms of the agreement, maintenance costs
of the licensed patents are the responsibility of Orion. The
license terminates at the later of 19&nbsp;years from date of
agreement or when all valid claims under any patent included in
the license have expired or are no longer enforceable.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under an agreement with Tess Diagnostics and Pharmaceuticals,
Hormos paid a $700,000 upfront license fee and is obligated to
future milestone and royalty payments. Future milestone payments
are based on achievement of certain clinical and regulatory
milestones and total up to $8,500,000. Royalty payments are
based on net sales of products incorporating the licensed
compounds. No royalty payments have been incurred under the
agreement. QuatRx has the right, in its sole discretion, to
terminate this agreement upon written notice.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Orion for Fispemifene</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2004, Hormos entered into a license agreement with
Orion for triphenylalkene derivatives and their use as selective
estrogen receptor modulators. Under the agreement, Hormos paid
an upfront license fee of approximately $60,000 and is obligated
to future milestone and royalty payments. Future milestone
payments are based on achievement of certain clinical and
regulatory milestones and total up to approximately $1,085,000.
Royalty payments are based on net sales of products
incorporating the licensed compounds. No royalty payments have
been incurred under the agreement. Under terms of the agreement,
maintenance costs of the licensed patents are the responsibility
of Hormos. No patent maintenance costs have been incurred under
the agreement. The license terminates on a country by country
basis when all valid claims under any patent included in the
license have expired or are no longer enforceable.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>University of Turku</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under a June 2004 patent assignment agreement with the
University of Turku, the Company was assigned rights to a patent
relating to the method of use of fispemifene for treatments for
lower urinary tract symptoms or pelvic pain. Under the terms of
the agreement, Hormos paid patent application and patent
approval fees to the inventors and a signing fee to the
University of Turku totaling approximately $13,700. The Company
has agreed to pay a milestone payment of approximately $12,100
and to pay a royalty based on net income. The requirement to pay
royalties continues on a country-by-country basis until the
expiration of the licensed patent in that country. The Company
has further agreed to pay a percentage of any purchase price
received for the outright license or assignment to a third party
of the applicable patent. The license terminates on a country by
country basis when all valid claims under any patent included in
the license have expired or are no longer enforceable.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Royalties and Research and Development Expense</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aggregate minimum royalties under licensing and research
agreements range from $250,000 to $450,000 on net sales of
products incorporating compounds under these agreements. There
were no minimum royalty payments required for the years ended
December&nbsp;31, 2002, 2003, 2004 and the nine months ended
September&nbsp;30, 2004 and 2005 (unaudited).
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-19
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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amount charged to research and development expense in
connection with these agreements was none, $2,561,617,
$1,611,045, $1,598,005, $544,715 and $4,842,377 for the years
ended December&nbsp;31, 2002, 2003 and 2004, the nine months
ended September&nbsp;30, 2004 and 2005, and for the period from
inception (November&nbsp;20, 2000) to September&nbsp;30, 2005,
respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I>Commitments and Contingencies</I></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the ordinary course of its business, QuatRx makes certain
indemnities, commitments and guarantees under which it may be
required to make payments in relation to certain transactions.
These include indemnities of clinical investigators,
consultants, and contract research organizations involved in the
development of QuatRx&#146;s pre-clinical and clinical stage
products and indemnities to QuatRx&#146;s directors and officers
to the maximum extent permitted under the laws of the State of
Delaware. The duration of these indemnities, commitments and
guarantees varies, and in certain cases is indefinite. The
majority of these indemnities, commitments and guarantees do not
provide for any limitation of the maximum potential future
payments the Company could be obligated to make. QuatRx has not
recorded any liability for these indemnities, commitments and
guarantees in the accompanying balance sheets. However, QuatRx
accrues for losses for any known contingent liability, including
those that may arise from indemnification provisions, when
future payment is probable. No such losses have been recorded to
date.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-20

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Redeemable Convertible Preferred Stock</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The authorized, issued and outstanding shares of redeemable
convertible preferred stock (preferred stock) by Series are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Issued and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Authorized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Liquidation Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>December&nbsp;31, 2000</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>December&nbsp;31, 2001</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,716,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,100,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,975,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,816,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,858,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,389,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,375,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,247,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,994,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,276,068</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,885,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,885,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,374,237</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,660,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,660,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,644,730</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,120,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,780,068</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,596,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,596,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,315,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,071,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,964,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,481,211</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,442,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,335,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>56,697,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>September&nbsp;30, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,214,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;B</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,969,069</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;C</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,596,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,596,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,066,541</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,428,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,821,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,067,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Series&nbsp;D-1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,260,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,408,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,906,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,060,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,600,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,224,113</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The par value for all shares of Preferred Stock is $0.01.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2000, QuatRx issued 1,575,000&nbsp;shares of
Series&nbsp;A Preferred Stock at $1.00&nbsp;per share for
proceeds of $1,546,259, net of issuance costs of $28,741.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2001, QuatRx issued 1,400,000&nbsp;shares of
Series&nbsp;B Preferred Stock at $1.50&nbsp;per share for
proceeds of $2,070,661, net of issuance costs of $29,339.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2002, QuatRx issued 1,400,000&nbsp;shares of
Series&nbsp;B Preferred Stock at $1.50&nbsp;per share for
proceeds of $2,078,671&nbsp;net of issuance costs of $21,329.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-21

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2003, QuatRx issued 1,400,000&nbsp;shares of
Series&nbsp;B Preferred Stock at $1.50&nbsp;per share for
proceeds of $2,084,977, net of issuance costs of $15,023. Also
during 2003, QuatRx issued 12,885,963&nbsp;shares of
Series&nbsp;C Preferred Stock at $1.14&nbsp;per share for
proceeds of $14,485,395, net of $204,603 of issuance costs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, QuatRx issued 12,710,528&nbsp;shares of
Series&nbsp;C Preferred Stock at $1.14&nbsp;per share for
proceeds of $14,448,873, net of issuance costs of $41,129. Also
during 2004, QuatRx issued 10,964,285&nbsp;shares of
Series&nbsp;D Preferred Stock at $1.40&nbsp;per share for
proceeds of $15,183,204, net of issuance costs of $166,796.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the nine months ended September&nbsp;30, 2005, QuatRx
issued 1,000,000&nbsp;shares of Series&nbsp;D Preferred Stock at
$1.40&nbsp;per share for proceeds of $1,400,000. In addition, in
connection with the acquisition of Hormos, QuatRx issued
857,145&nbsp;shares of Series&nbsp;D and 3,408,025&nbsp;shares
of Series&nbsp;D-1 Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of Preferred Stock have the following rights and
preferences:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Voting Rights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of shares of all series of preferred stock are
entitled to one vote for each share of common stock into which
each share of preferred stock could be converted. The holders of
preferred stock, voting equally with shares of common stock, are
entitled to vote upon any matters submitted to stockholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Election of Directors</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of Series&nbsp;A Preferred Stock, as a class, the
holders of Series&nbsp;B Preferred Stock, as a class, and the
holders of Series&nbsp;D-1 Preferred Stock, as a class, each are
entitled to elect one director to QuatRx&#146;s Board of
Directors. The holders of Series&nbsp;C Preferred Stock, as a
class, and the holders of Series&nbsp;D Preferred Stock, as a
class, each are entitled to elect two directors to QuatRx&#146;s
Board of Directors. The holders of Series&nbsp;A Preferred
Stock, Series&nbsp;B Preferred Stock, Series&nbsp;C Preferred
Stock, Series&nbsp;D Preferred Stock, and Series&nbsp;D-1
Preferred Stock, voting together as a single class, are entitled
to elect one director to QuatRx&#146;s Board of Directors. The
holders of the QuatRx common stock, voting as a single class,
are entitled to elect one member to QuatRx&#146;s Board of
Directors.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Dividends</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of Series&nbsp;D Preferred Stock and Series&nbsp;D-1
Preferred Stock are entitled to receive dividends, prior and in
preference to any declaration or payment of any dividend on
Series&nbsp;A, Series&nbsp;B or Series&nbsp;C Preferred Stock,
or common stock of QuatRx, at the rate of 8%&nbsp;per annum on
the original issue price of $1.40.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of Series&nbsp;C Preferred Stock are entitled to
receive dividends, prior and in preference to any declaration or
payment of any dividend on Series&nbsp;A or Series&nbsp;B
Preferred Stock, or common stock of QuatRx, at the rate of
8%&nbsp;per annum on the original issue price of $1.14.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of Series&nbsp;A and Series&nbsp;B Preferred Stock
are entitled to receive dividends, prior and in preference to
any declaration or payment of any dividend on common stock of
QuatRx, at the rate of 9%&nbsp;per annum for the period prior to
the issuance of the Series&nbsp;C shares and 8%&nbsp;per annum
subsequent to the issuance of the Series&nbsp;C shares on the
original issue price of $1.00 and $1.50, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dividends are payable only when, as and if declared by the Board
of Directors. As of September&nbsp;30, 2005, no dividends have
been declared.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-22

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Liquidation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of any liquidation, dissolution or winding up of
QuatRx, after payment of the full liquidation preference, any
remaining assets shall be distributed ratably to the holders of
all preferred stock, on an as-converted to common stock basis,
and common stock until the holders of all preferred stock have
received an aggregate amount per share equal to three times the
applicable original issue price; thereafter, the holders of
common stock shall receive all of the remaining assets in
proportion to their applicable share.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The liquidation preference is $1.00, $1.50, $1.14, $1.40 and
$1.40&nbsp;per share for Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C, Series&nbsp;D and Series&nbsp;D-1 Preferred
Stock, respectively, plus 9%&nbsp;per annum for Series&nbsp;A
and Series&nbsp;B shares prior to the issuance of Series&nbsp;C
Preferred Stock and 8%&nbsp;per annum thereafter, plus
8%&nbsp;per annum from the date of issuance for Series&nbsp;C,
Series&nbsp;D and Series&nbsp;D-1 Preferred Stock, shares less
any dividends declared and paid to the respective shareholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Redemption</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The redemption provisions of the preferred stock stipulate that
at any time on or after December&nbsp;31, 2008, upon request of
at least 65% of the then outstanding shares of Series&nbsp;D
Preferred Stock and 75% of the then outstanding shares of
Series&nbsp;C Preferred Stock, QuatRx is required to redeem the
Series&nbsp;A, Series&nbsp;B, Series&nbsp;C, Series&nbsp;D and
Series&nbsp;D-1 Preferred Stock. The redemption price is equal
to the liquidation preference. During the years ended
December&nbsp;31, 2002, 2003 and 2004, the nine months ended
September&nbsp;30, 2004 and 2005, and the period from inception
(November&nbsp;30, 2000) to September&nbsp;30, 2005 accretion of
$390,147, $1,503,791, $2,319,484, $1,428,885, $3,457,130 and
$7,817,463, respectively, was recorded to adjust the carrying
amounts of the preferred stock to their redemption value.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Conversion</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All series of preferred stock are convertible, at the option of
the holder, at any time after the date of issuance, into fully
paid non-assessable shares of common stock as determined by the
then applicable conversion rate, which is generally
<FONT style="white-space: nowrap">one-to</FONT>-one. The
conversion rate is subject to adjustment from time to time for
certain subdivisions, dividends, combinations, consolidations,
dilutive issuances and certain other factors. As of
September&nbsp;30, 2005, 70,867,976&nbsp;shares of common stock
are reserved for the conversion of the preferred shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Automatic conversion occurs immediately upon the closing of a
firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933 meeting
certain requirements set forth in the Company&#146;s certificate
of incorporation, or with respect to Series&nbsp;D-1 Preferred
Stock, conversion occurs upon the written election of the
holders of a majority of the outstanding shares of the
Series&nbsp;D-1 Preferred Stock, voting as a single class, or
with respect to Series&nbsp;D Preferred Stock, conversion occurs
upon written election of the holders of 65% of the outstanding
Series&nbsp;D Preferred Stock, voting as a single class, or with
respect to shares of Series&nbsp;C Preferred Stock, conversion
occurs upon the written election of the holders of 75% of the
outstanding shares of Series&nbsp;C Preferred Stock, voting as a
single class, or with respect to shares of Series&nbsp;A
Preferred Stock and Series&nbsp;B Preferred Stock, conversion
occurs upon the written election of 75% of the outstanding
shares of the Series&nbsp;A and Series&nbsp;B Preferred Stock
voting together as a single class.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Common Stock</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain issued and outstanding shares of QuatRx&#146;s common
stock are subject to vesting and the right of repurchase by
QuatRx. Vesting is generally over four years. Unvested shares
are subject to repurchase at a price equal to the original
purchase price of the stock. As of December&nbsp;31, 2003 and
2004 and
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-23

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
September&nbsp;30, 2005 there were 1,969,333, 1,125,333 and
492,333 unvested shares, respectively, subject to repurchase at
prices ranging from $0.05 to $0.15&nbsp;per share.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Stock Option Plans and Employee Benefits</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2000 Equity Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2000, the Board of Directors approved QuatRx&#146;s
2000 Equity Incentive Plan (&#147;2000&nbsp;Plan&#148;), under
which QuatRx may grant options and restricted stock awards to
officers, employees, consultants and directors. Options granted
may be exercised for a period of not more than 10&nbsp;years
from the date of grant or any shorter period as determined by
the Board of Directors. Options vest as determined by the Board
of Directors, generally over a four-year period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the 2000 Plan, QuatRx granted 20,000&nbsp;options to
purchase shares of common stock to a non-employee consultant
during 2004 at an exercise price of $0.20&nbsp;per share. These
options vest immediately based upon the occurrence of a
qualifying transaction. As of September&nbsp;30, 2005, none of
these options are exercisable.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2005 Stock Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, the Board of Directors approved QuatRx&#146;s
2005 Stock Incentive Plan (&#147;2005 Plan&#148;). Under the
2005 Plan, QuatRx may grant options and restricted stock awards
to employees, directors and consultants of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options granted may be exercised for a period of not more than
10&nbsp;years from the date of grant or any shorter period as
determined by the administrator of the plan. Options vest as
determined by the administrator of the plan, generally over a
four-year period. The option price of any incentive stock option
shall equal or exceed the fair value per share on the date of
grant as determined by the administrator of the plan, or 110% of
the fair value per share in the case of a 10% or greater
stockholder.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At September&nbsp;30, 2005, QuatRx had reserved an aggregate of
7,275,259&nbsp;shares of common stock for issuance under the
plans and 806,769&nbsp;shares were available for grant.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-24

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock option activity under the plans is summarized in the
following table:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Incentive and Nonqualifying Stock Options</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Outstanding at December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,727,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Outstanding at December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,727,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>580,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Outstanding at December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,303,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>730,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,165,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exercised (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(30,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expired (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited (unaudited)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Outstanding at September&nbsp;30, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,438,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,282,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx did not grant any options prior to 2003. The total
options outstanding and exercisable under the plans as of
December&nbsp;31, 2004 and September&nbsp;30, 2005 are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Options Outstanding</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Options Exercisable</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Remaining</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contractual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise</B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B>Exercise Prices</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Outstanding</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Life (Years)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $0.20</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,303,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>730,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>September&nbsp;30, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $0.20</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,303,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>730,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $0.20</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,293,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,143,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $0.34</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,193,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,138,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    $0.35</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>952,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,438,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,282,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.27</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-25

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Employee Savings and Retirement Plans</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2002, QuatRx adopted a safe-harbor profit sharing plan which
provided contributions to employee savings and retirement plans.
Contributions under the plan were $159,984 in 2002. No
contributions were made under the plan in 2003, 2004 or for the
nine months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2003, QuatRx adopted a safe-harbor 401(k) employee savings
and retirement plan which is qualified under
Sections&nbsp;401(a) and 401(k) of the Internal Revenue Code of
1986, as amended. Eligible employees may elect to defer current
compensation up to the statutorily prescribed annual limits and
have the amount of such reduction contributed to the
401(k)&nbsp;Plan. As a safe-harbor plan, QuatRx contributes an
amount equal to 3% of certain eligible employee&#146;s
compensation annually as a nonelective contribution to the Plan.
Expense related to the plan totaled $29,006, $12,000, $3,000,
$18,592 and $59,598 in 2003 and 2004, the nine months ended
September&nbsp;30, 2004 and 2005, and the period from inception
(November&nbsp;20, 2000) to September&nbsp;30, 2005,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
QuatRx&#146;s Finnish employees are covered by a defined
contribution pension plan as required by the TEL Employees
Pension Act. The pension plan payment levels are set annually by
the Finnish Ministry of Social Affairs and Health. In 2005,
QuatRx is required to contribute 17.3% of certain eligible
employees&#146; compensation to the plan. Since the acquisition
of Hormos in May 2005, QuatRx has contributed $97,395 to the
plan through September&nbsp;30, 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets for financial
reporting and the amount reported for income tax purposes.
Significant components of QuatRx&#146;s deferred tax assets are
shown below. A valuation allowance has been established, as
realization of such assets is uncertain due to the
Company&#146;s history of generating net operating losses.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>At December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>At September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Deferred tax assets (liabilities)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,231,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,422,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,299,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Start-up costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    License</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>746,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,262,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,332,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total net deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,260,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,186,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,581,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,329,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,260,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,186,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,581,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,329,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004 and September&nbsp;30, 2005, QuatRx
had U.S.&nbsp;federal tax net operating loss carryforwards of
approximately $18,527,000 and $26,772,000, respectively, which
can be used to offset future U.S.&nbsp;taxable income. The
U.S.&nbsp;federal tax loss carryforwards will begin to expire in
2021, unless previously utilized. QuatRx had Finnish tax net
operating loss carryforwards of $50,000,000 at
September&nbsp;30, 2005, which can be used to offset future
Finnish taxable income. The Finnish tax loss carryforwards will
begin to expire in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to Internal Revenue Code Section&nbsp;382, use of
QuatRx&#146;s net operating loss carryforwards may be limited if
a cumulative change in ownership of more than 50% occurs within
a three-year period. The issuance of common or preferred stock
or the grant of stock options may result in such a change in
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-26

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
ownership. If certain substantial changes in the Company&#146;s
ownership occur, there would be an annual limitation on the
amount of carryforwards which can be utilized and this may
result in the expiration of net operating loss carryforwards
before utilization.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s effective tax rate differs from the
U.S.&nbsp;federal statutory rate of 34% due to the Company
providing a valuation allowance against deferred tax assets,
which primarily consists of net operating loss carryforwards.
The Company&#146;s income tax provision (benefit) consisted of
the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>At December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>At September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,117,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,926,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,395,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,339,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in valuation allowance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,926,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,395,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,339,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income tax provision</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additional deferred tax assets totalling $12,409,000 and a
related full valuation allowance resulted due to the net
operating losses acquired in the Hormos transaction.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Segment Information</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SFAS&nbsp;No.&nbsp;131, <I>Disclosures about
Segments of an Enterprise and Related Information</I>, the
Company has determined that it is principally engaged in one
operating segment: the research and development of therapeutic
compounds primarily for treatment of endocrine, metabolic and
cardiovascular diseases. Management uses consolidated financial
information in determining how to allocate resources to its
company-wide research and product development efforts and assess
financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company operates in two geographic locations: the United
States and Finland. The following table summarizes selected
financial information of the Company&#146;s operations by
geographic location:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>At December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>At September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-lived tangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>141,778</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Finland</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>625,620</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-lived tangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,846</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>767,398</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2005, the Company issued 12,821,428&nbsp;shares of
Series&nbsp;D Preferred Stock at $1.40&nbsp;per share for
proceeds of $17,916,851, net of issuance costs of $33,148.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2005, Tekes notified Hormos that repayment would not
be required for certain loans totaling $2,558,214, including
principal and accrued interest, associated with a research
project which did not reach commercial feasibility. Also in
December 2005, Sitra notified Hormos that a loan totaling
$123,353, including principal and accrued interest, would not be
required to be repaid.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2006, the Company entered into an $18,000,000 debt
agreement with a lending company. At closing, QuatRx drew
$6,000,000 under the agreement with $12,000,000 available for
future draws through the end of 2006. Each loan drawn under the
agreement bears interest at prime plus 3% with interest-only
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-27

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>QuatRx Pharmaceuticals Company</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(A development stage company)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Consolidated Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
payments due during the first 12&nbsp;months of each loan.
Principal is repaid over 36&nbsp;months after the interest-only
period, with a balloon payment due at the end of the repayment
period. Loans under the agreement are collateralized by
substantially all of our assets other than our intellectual
property rights. In addition, the debt agreement contains
covenants restricting our ability to incur further indebtedness,
pay dividends or make investments, subject to exceptions
specified in the agreement. In connection with the debt
agreement, QuatRx issued a warrant to the lender to purchase
shares of QuatRx preferred stock. The number of shares and
exercise price in the warrant will be determined by a formula
based on the timing and price of the next round of equity
invested in the Company. The warrant is exercisable for seven
years from the date of issue, or three years after an initial
public offering of the Company&#146;s common stock.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-28
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Report of Independent Auditors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
To the Shareholders of Hormos Medical Oy:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the accompanying balance sheets and the related
income statements and cash flow statements present fairly, in
all material respects, the financial position of Hormos Medical
Oy at December&nbsp;31, 2004 and December&nbsp;31, 2003, and the
results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally
accepted in Finland. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounting standards generally accepted in Finland vary in
certain significant respects from accounting principles
generally accepted in the United States of America. Information
relating to the nature and effect of such differences is
presented in Note&nbsp;31 to the financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Turku, Finland
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
February 1, 2006
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
/s/ PricewaterhouseCoopers
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
PricewaterhouseCoopers Oy
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Authorized Public Accountants
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-29

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Income Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net Sales</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,033,402.80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,762,159.00</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,656,828.62</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,719,355.66</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Business development expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(298,700.38</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(643,111.97</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Administrative expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(977,530.56</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(922,543.21</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>360,643.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>677,095.19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Operating Loss</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(2,539,013.20</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(7,845,756.65</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial income and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73,715.35</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,183.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net Loss</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(2,612,728.55</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(7,827,572.68</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these financial
statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-30

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Balance Sheets</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As at December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <BR>
    <B>ASSETS</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Non-current Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,147,135.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,192,215.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,042.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,754.18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Current Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14, 15,16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>260,020.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148,506.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363,848.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,327.62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,829,047.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,058,803.78</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; Equity and Liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,031.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,031.33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share premium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589,243.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589,243.37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,952,267.11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,124,694.43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss for the financial year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,612,728.55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,827,572.68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,462,266.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,280,305.83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; Equity in Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(1,307,454.13</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>123,313.42</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="13" align="left" valign="top">
    <B>Liabilities</B></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566,256.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>346,110.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,22,23,24,29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,570,245.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,589,380.36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Shareholders&#146; Equity and Liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,829,047.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,058,803.78</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these financial
statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-31

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Cash Flow Statements</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flows from operating activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,539,013.20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,845,756.65</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238,310.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,550,264.78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,161.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(652,753.14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,618.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,175.82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,903.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,359.79</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash flow from operating activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(2,342,256.73</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(3,930,061.04</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flows from investing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of tangible and intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(163,519.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(166,475.08</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash flow from investing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(163,519.19</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(166,475.08</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flows from financing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in loan advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>476,868.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in capital loan advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>837,190.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>717,142.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from long-term liabilities (R&#38;D loans)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>220,146.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>346,110.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from long-term liabilities (capital loans)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,181,961.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,543,098.43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of convertible bond</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash flow from financing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,239,297.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>3,083,218.43</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net change in cash and cash equivalents</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>733,521.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,013,317.69</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents in the beginning of the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,327.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,643,645.31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash and cash equivalents at the end of the financial year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363,848.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,327.62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Change in working capital:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in current receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(111,513.19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190,679.83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,674.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(843,432.97</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net change in working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,161.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(652,753.14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The accompanying notes are an integral part of these financial
statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-32

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Accounting Policies and Notes to Financial Statements</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Background and Description of Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos Medical Oy is a pharmaceutical discovery and development
company established in 1997 in Turku, Finland. Its core
competence involves research in tissue-specific regulation
mechanisms of hormones and development of patented
pharmaceuticals, based on the core competence, for the
international market.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has a license and research collaboration agreement
with the Belgian Solvay Pharmaceuticals. The agreement will
exploit Hormos Medical&#146;s core competence in development of
a new medicine for the treatment of endometriosis. Net sales for
the financial year amounted to 2.03&nbsp;million euros of which
1.94&nbsp;million euros consist of research services delivered
to Solvay Pharmaceuticals.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the reporting period the Company has continued its
development projects that all are involved in hormone dependent
treatment of diseases of the elderly. The company has research
and development activities in Turku and Oulu. In the end of the
financial period the number of personnel was 38, of whom in
Turku 30 employees and in Oulu 8 employees.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At the Annual General Meeting on March&nbsp;15, 2004 it was
noted that the equity was less than half of the share capital.
The meeting decided to increase the share capital with not more
than 130.719&nbsp;shares by issuing a convertible bond of
1&nbsp;million euros. The loan was subscribed as a whole during
the financial year.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to 2003, the Hormos Medical <I>&#147;Group&#148;</I>
consisted of a parent company, Hormos Medical Oyj, and its
wholly owned subsidiary, Hormos Nutraceutical Oy. During
December 2003, Hormos Nutraceutical Oy was dissolved and merged
into Hormos Medical Oyj. As a result, the Company charged a
merger loss in 2003 to research and development expenses in the
amount of
<FONT face="times new roman,times">&#128;</FONT>3,528,747,
relating to the accumulated losses of Hormos Nutraceutical Oy.
Hormos Medical Oyj changed its name to Hormos Medical Oy in 2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Preparation of the Financial Statements</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s financial statements have been prepared in
accordance with Finnish generally accepted accounting principles
(&#147;Finnish GAAP&#148;). The accounting methods have not
changed from previous year and thus the financial statements are
comparable. The Company&#146;s financial statements are stated
in Euros
(&#147;<FONT face="times new roman,times">&#128;</FONT>&#147;).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Fixed Assets</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Assets are recorded at historical cost less accumulated
depreciation. Grants received are recorded against the
acquisition cost of the related acquired assets.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation is calculated as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Intangible assets (patents and in-licensing agreements) are
    amortized on a straight-line method over 10&nbsp;years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Office equipment and furniture are depreciated using the 25%
    residue value method.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The acquisition cost of machinery and equipment acquired for
    research and development purposes is expensed as incurred.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Computer software is depreciated on a straight-line method over
    4&nbsp;years.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the useful life for an asset is shorter than three years, the
acquisition costs are expensed as incurred.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Foreign Currency Translation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign currency denominated items are included only in trade
payables and all such foreign currency denominated payables have
been settled prior to the date of the signing of the financial
statements. As a result, all foreign currency denominated items
are valued by using the payment date rate.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-33

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Net Sales</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Domestic research services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,655.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,000.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exported research services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,939,747.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,709,159.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,033,402.80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,762,159.00</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Other Operating Income</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes grants for R&#38;D projects</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>291,979.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>621,752.84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,663.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,342.35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>360,643.56</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>677,095.19</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Average Number of Personnel</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Average number of personnel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Number of personnel at December&nbsp;31</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    in Administration and Business development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    in Research and Development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Personnel Expenses</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and compensations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,222,268.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,673,810.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,389.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>278,018.29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other indirect personnel expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64,379.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,952.83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,501,038.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,034,781.27</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Taxation value of fringe benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>52,943.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,050.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,553,981.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>2,090,831.27</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Personnel expenses are included in research and development
expenses, business development expenses and general and
administrative expenses.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Executive Compensation</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year Ended</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>December&nbsp;31,</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries and other compensations for the CEO and for the members
    of the Board of Directors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    111,942.82</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    126,869.17</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-34

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Depreciation and Amortization</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and Equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,844.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,439.51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    R&#38;D machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,337.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,738.88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangible assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,128.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,709.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>238,310.23</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>256,887.55</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Financial Income and Expenses</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,903.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,359.79</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,618.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,175.82</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(73,715.35</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>(18,183.97</B></TD>
    <TD align="left" valign="bottom" nowrap><B>)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Intangible Assets</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Intangible</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Assets&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition cost on January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,674,565.39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,462.85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grants received</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>271.14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition cost on December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,806,757.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation on January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>482,350.38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation for the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,271.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation on December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>659,621.41</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Book value on December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,147,135.69</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book value on December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,192,215.01</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-35

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Tangible Assets</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>R&#38;D</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Machinery and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Computer</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Machinery and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equipment&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>software&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Equipment&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition cost on January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>192,891.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,926.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795,253.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,077,070.68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,337.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,337.48</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decreases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,010.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,010.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition cost on December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190,881.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,926.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,590.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,108,398.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation on January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>115,495.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>78,567.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>795,253.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>989,316.51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation for the period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,844.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,857.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,337.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,039.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated depreciation on December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,340.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,424.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,590.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,050,355.71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Book value on December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>56,541.16</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>1,501.29</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>0.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>58,042.45</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Book value on December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,395.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,358.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,754.18</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Short-term Receivables&nbsp;&#151; Trade Receivables</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year Ended</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>December&nbsp;31,</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade receivables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    126,945.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    30,599.79</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>15.</B></TD>
    <TD>
    <B>Short-term Receivables&nbsp;&#151; Other Receivables</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year Ended</B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>December&nbsp;31,</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    VAT receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    60,734.87</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    34,432.35</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>16.</B></TD>
    <TD>
    <B>Short-term Receivables&nbsp;&#151; Prepaid Expenses and
    Accrued Income</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,919.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,105.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,420.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,369.73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>72,340.11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><B>83,474.83</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-36

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>17.</B></TD>
    <TD>
    <B>Shareholders&#146; Equity</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004 <FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003 <FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share capital at the beginning of the financial year
    January&nbsp;1,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,031.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,031.33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share capital at the end of the financial year December&nbsp;31,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,031.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>206,031.33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share premium reserve, beginning of the financial year
    January&nbsp;1,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589,243.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589,243.37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share premium reserve, end of the financial year
    December&nbsp;31,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589,243.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,589,243.37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,952,267.11</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,124,694.43</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss for the financial year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,612,728.55</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,827,572.68</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; equity before capital loans</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,769,720.96</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,156,992.41</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sitra 1391</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,275.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,275.17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 729/97</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>287,584.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>287,584.54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 557/97</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,748.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,748.83</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 129/99</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>504,563.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>504,563.78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 312/99</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,469.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,469.82</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 313/99</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,469.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,469.82</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 670/99</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>354,564.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>354,564.54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 677/00</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,469.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>420,469.82</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 719/00</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,345,503.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,345,503.41</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 720/00</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,194,134.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,194,134.28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 970/00</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>840,939.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>840,939.63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 225/01</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,295,047.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,295,047.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 379/01</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218,644.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>218,644.30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 539/01</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,382.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,382.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 701/01</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>336,375.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>336,375.85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 291/02</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,382.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,798.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 457/02</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>468,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>468,000.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 835/02</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>227,010.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>128,747.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 359/03</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>637,879.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>371,588.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes 439/04</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>768,823.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Capital loans in total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,462,266.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,280,305.82</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; equity in total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,307,454.14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,313.41</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>18.</B></TD>
    <TD>
    <B>Capital Loans</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Booked as</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid to Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Lender</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Medical <FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loan&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loan Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sitra nro 1391</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,275.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,275.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3/24/1997-8/31/2001</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &#151;&nbsp;Interest rate of the capital loan is
    12&nbsp;months&#146; euribor rate + 3%</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes, loans with capital loan term</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,016,598.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,462,266.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="bottom">6-8&nbsp;years including 3-5&nbsp; years without paybacks</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition Tekes, the National Technology Agency has granted to
Hormos Medical capital loans worth 1,993,468.00&nbsp;euros,
which have not been withdrawn by the Company as at
December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-37

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The terms for the Tekes loans</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The interest rate is one percent below the Bank of
    Finland&#146;s reference interest rate, however the minimum is
    three percent.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The interest has been accounted in total as interest of a
    subordinated capital loan and it has not been booked as
    financial expense.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Tekes loans are not convertible into the company&#146;s shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    The terms of the subordinated capital loans are recognized
    according to the chapter&nbsp;5 in the Finnish Companies Act.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In addition the rules of Tekes are applied.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The capital loans can be repaid to the lenders only if the terms
in the Finnish Companies Act chapter&nbsp;5 are fulfilled,
i.e.&nbsp;if the company has adequate equity capital after the
repayment of the loan.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>19.</B></TD>
    <TD>
    <B>Accrued Interest for Capital Loans</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,062,055.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>734,349.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sitra</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,818.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,245.23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,095,873.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>764,594.45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>20.</B></TD>
    <TD>
    <B>Long-term Liabilities</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tekes loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566,256.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>346,110.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566,256.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>346,110.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term liabilities consist of loans granted by Tekes, the
National Technology Agency. In addition, Tekes has granted to
Hormos Medical R&#38;D loans amounting to 546,436.00 euros,
which had not been withdrawn by the Company as at
December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>21.</B></TD>
    <TD>
    <B>Short-term Liabilities&nbsp;&#151; Advances Received</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advances Received from Tekes (Capital loans and R&#38;D loan)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2,031,200.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    1,194,010.00</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>22.</B></TD>
    <TD>
    <B>Short-term Liabilities&nbsp;&#151; Trade Payables</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Trade payables</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    243,710.71</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    129,101.15</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-38

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>23.</B></TD>
    <TD>
    <B>Short-term Liabilities&nbsp;&#151; Accrued Expenses</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Salaries&nbsp;&#38; wages</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,581.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued holiday pay</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,028.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>259,223.42</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,265.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,272.25</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>258,875.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,495.67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>24.</B></TD>
    <TD>
    <B>Other Short-term Liabilities</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payroll tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,038.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Social security</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,420.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>176.75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other short-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330.86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,458.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>773.54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>25.</B></TD>
    <TD>
    <B>Leases</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities from lease agreements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,691.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>354,216.96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Of which due in following year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,725.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>242,165.67</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has rented from PharmaCity&#146;s building a total
of
2,966&nbsp;m<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>
office and laboratory facilities under a
<FONT style="white-space: nowrap">10-year</FONT> lease, which
ends in 2011. There is seven years left of the agreement. Of
these office and laboratory facilities, the Company has sublet
1,137&nbsp;m<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>.
The rents due for the financial year 2005 of the
1,829&nbsp;m<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>
are approximately
<FONT face="times new roman,times">&#128;</FONT>&nbsp;390,000.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>26.</B></TD>
    <TD>
    <B>Other Liabilities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The company has not booked the social security liability arising
from its share option plan.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>27.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred tax assets from tax loss carry forwards as at
December&nbsp;31, 2004 amounted to
<FONT face="times new roman,times">&#128;</FONT>&nbsp;10,352,893.30.
The company has not recorded the deferred tax asset in its
financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-39

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>28.</B></TD>
    <TD>
    <B>Option Rights</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Decision of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Decision of the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>General</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total Face</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subscription</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subscription</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Board of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Annulled</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Meeting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of the Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Directors</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Issues</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2/16/1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2002-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2/16/1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2002-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11/19/1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/20/2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4/15/1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,836.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2000-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.3468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5/31/1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3/28/2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,190.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2002-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.7006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9/12/2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3/28/2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,060.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2004-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27.7006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9/12/2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10/25/2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6/27/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>425.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2004-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9/5/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6/27/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,125.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2005-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9/5/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>6/27/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,700.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1/1/2006-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9/5/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6/30/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,136.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The rights to 21,700&nbsp;options have been returned to the
Company and expired due to the fact that the option right
holders have left the company before the subscription period has
started.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has deviated from the subscription right because the
options have been directed to the personnel. The option rights
accepted in the General Meeting on April&nbsp;15, 1999 have been
given to the Company&#146;s advisers in year&nbsp;1999 as
incentives for the execution of the round. These options expire
on June&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The subscription prices have been defined on basis of the
previous share issue&#146;s share price.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other conditions attached to the subscription right: the company
has to be listed or all shareholders have been offered otherwise
a chance to discharge of 50&nbsp;percent of the shares owned by
them, the employee has to be employed by the company
continuously until the beginning of the subscription period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terms and conditions for subscribing shares based on the
employee stock option plans did not fulfill and new shares
cannot be subscribed based on any of Hormos Medical&#146;s
employee stock option plans.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>29.</B></TD>
    <TD>
    <B>Convertible Bond</B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>Decision of the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Face</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subscription</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Subscription</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B>General Meeting</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of the Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>of Shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3/15/2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>22,222.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right" valign="top">10/15/2004- 3/15/2005</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>7.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>130,719.00</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The nominal value for the convertible debt of
<FONT face="times new roman,times">&#128;</FONT>&nbsp;1,000,000
is included in short-term liabilities.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-40

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>30.</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Loss for the financial year and adequacy of
shareholders&#146; equity</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board proposes that the loss for the financial period
amounting to 2,612,728.55&nbsp;euros shall be transferred to the
retained deficit account. There will be no dividends distributed.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Extraordinary General Meeting approved the balance sheet
prepared under the Finnish Companies Act, which requires the
Board of Directors to follow shareholders&#146; equity
continuously. According to Chapter&nbsp;13 of the Companies Act,
if the Board of Directors, when preparing the annual accounts
notices or if it otherwise has a reason to assume that the
shareholders&#146; equity of the Company is less than half of
its share capital, the Board of Directors must, as soon as
possible, prepare a balance sheet to ascertain the financial
situation of the company. If the shareholders&#146; equity of
the company, according to the balance sheet, is less than half
of the share capital, the Board of Directors must, without a
delay, submit the balance sheet to be audited by the auditors
and to convene the General Meeting of the Shareholders to decide
on actions required by the ratio of shareholders&#146; equity
and share capital.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the Ordinary Shareholders&#146; Meeting held on
March&nbsp;15, 2004, the balance sheet indicated that the level
of shareholder&#146;s equity was less than half of the share
capital and, thus, the Board of Directors were given
12&nbsp;months period to fix the ratio. Consequently, the Board
of Directors convened an Extraordinary Shareholders Meeting in
January&nbsp;7, 2005 and presented an audited control balance
sheet demonstrating that on November&nbsp;30, 2004 the
shareholders&#146; equity was more than half of the share
capital.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Hormos Medical merger with QuatRx Pharmaceuticals in May
2005</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos Medical announced the merger with QuatRx Pharmaceuticals,
a biopharmaceutical company based in Ann Arbor, Michigan, USA on
May&nbsp;16, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In late 2004 Hormos Medical initiated negotiations on project
out-licensing with QuatRx Pharmaceuticals. The negotiations lead
to QuatRx&#146;s offer to acquire all of Hormos Medical
Oy&#146;s capital stock in the spring 2005. All shareholders of
Hormos Medical accepted the offer and the transaction was closed
on May&nbsp;25, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transaction had a positive effect on Hormos Medical as it
created access to the US&nbsp;capital markets and improved
business development and commercialization capabilities in the
US&nbsp;market. Supported by QuatRx Pharmaceuticals&#146; strong
financial standing the company has a possibility to advance the
expensive clinical development projects, ospemifene and
fispemifene in particular. Development of the earlier stage
discovery projects was also made possible through the secured
financing position.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>31.</B></TD>
    <TD>
    <B>Summary of Significant Differences Between Generally Accepted
    Accounting Principles in Finland and Generally Accepted
    Accounting Principles in the United States</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is in the development stage. The Company&#146;s
financial statements have been prepared in accordance with
Finnish GAAP. The tables that follow are a reconciliation of the
significant differences relating to the profit and loss
statement and total shareholders&#146; equity for the last two
years as permitted by
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-41

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
the U.S.&nbsp;Securities and Exchange Commission. Cash flow
statements according to U.S.&nbsp;GAAP are included for the
years ended December&nbsp;31, 2004 and 2003.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Reconciliation of net loss</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net loss in accordance with Finnish GAAP</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,612,729</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,827,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;GAAP Adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangibles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(A</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(B</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(57,132</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(185,621</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(C</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,115</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,782</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ospemifene milestone payment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(D</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(F</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(331,279</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(285,162</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grant income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(G</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104,724</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hormos Nutraceutical</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(H</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,528,747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net loss in accordance with U.S.&nbsp;GAAP</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,130,990</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,449,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B>Reconciliation of total shareholders&#146; equity</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Finnish GAAP&nbsp;&#151; Shareholders&#146; equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,307,454</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>123,313</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;GAAP Adjustments:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intangibles</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(A</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,147,136</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,192,215</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(B</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(C</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>220,663</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ospemifene milestone payment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(D</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(E</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,462,267</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,280,306</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(F</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,095,873</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(764,594</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Grant income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(G</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(34,919</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,105</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>U.S.&nbsp;GAAP&nbsp;&#151; Shareholders&#146; equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,010,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,879,306</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Share Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Series&nbsp;A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Series&nbsp;B</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>During</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="left" nowrap><B>Statements of Shareholders&#146; Equity (Deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Development</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shareholders&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="center" nowrap><B>According to U.S.&nbsp;GAAP</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premium&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stage&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deficit&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at January&nbsp;1, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>892,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,437,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,073,193</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,429,332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,449,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,449,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>892,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,437,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,523,167</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,879,306</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,130,990</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,130,990</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>892,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,437,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,654,157</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,010,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-42

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Cash Flow Statements According to U.S.&nbsp;GAAP</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003&nbsp;<FONT face="times new roman,times">&#128;</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash Flows from Operating Activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,130,990</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,449,974</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustment to reconcile net loss to net cash used in operating
    activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>298,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>445,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off of in-process R&#38;D</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>617,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss on disposal of assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,503</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest expense on long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>285,162</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in cash resulting from changes in assets and
    liabilities, net of acquisitions&nbsp;&#151;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(89,595</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(55,104</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80,618</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(737,524</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued payroll&nbsp;&#38; benefits</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(52,095</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(115,003</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,418</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,301,869</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,857,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash Flows from Investing Activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of property and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31,327</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,226</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition of Tess-Finland</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,492</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash acquired in Tess-Finland transaction</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,310</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31,327</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,408</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash Flows from Financing Activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from capital loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,181,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,543,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from convertible debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from loan advances</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>837,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,194,010</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from industrial loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>220,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Principle payments on capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(172,580</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(297,897</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,066,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,714,511</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net Increase (Decrease) in cash and Cash Equivalents</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>733,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,149,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash&nbsp;&#151; Beginning of Period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,780,106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash&nbsp;&#151; End of Period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,363,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Disclosure of Cash Flow Activity:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash paid for interest</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Supplemental Disclosure of Non-Cash Flow Activity:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment purchased under capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt assumed in connection with acquisition of Tess-Finland</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="times new roman,times">&#128;</FONT>&nbsp;714,799</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-43
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to U.S.&nbsp;GAAP Adjustments</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(A)</B></TD>
    <TD>
    <B>Intangible Assets</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, patent costs have been capitalized as a
long-term asset and amortized. Under U.S.&nbsp;GAAP, patent
costs have been expensed in the period they were incurred.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(B)</B></TD>
    <TD>
    <B>Depreciation Expense</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, research equipment has been fully
depreciated in the year of acquisition and other furniture and
office equipment has been depreciated using methods other than
straight-line. Under U.S.&nbsp;GAAP, depreciation expense has
been adjusted and recognized on the straight-line basis over the
underlying asset&#146;s depreciable lives consistent with QuatRx.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(C)</B></TD>
    <TD>
    <B>Capital Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, classification of leases into finance or
operating leases is optional. The Company has treated all leases
as operating leases. Under U.S.&nbsp;GAAP, Statement of
Financial Accounting Standards No.&nbsp;13, <I>Accounting for
Leases</I>, leases are classified as either operating or capital
leases. A lease meeting certain criteria must be treated as a
capital lease under U.S.&nbsp;GAAP. The lessee records a capital
lease as an asset and an obligation at an amount equal to the
lesser of the present value of the minimum lease payments at the
beginning of the lease term or the fair value of the leased
property. Under U.S.&nbsp;GAAP those leasing agreements which
qualify as capital leases have been adjusted in the
U.S.&nbsp;GAAP reconciliation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(D)</B></TD>
    <TD>
    <B>Ospemifene Milestone Payment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP a 200,000&nbsp;Euro milestone payment due in
December&nbsp;2004 was expensed in March&nbsp;2005, when it was
invoiced to Hormos and payment was made. Under U.S.&nbsp;GAAP,
the milestone payment has been accrued as of December&nbsp;31,
2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(E)</B></TD>
    <TD>
    <B>Long-Term Debt</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, subordinated loans with Tekes and Sitra have
been classified as equity. Under U.S.&nbsp;GAAP, the loans have
been reclassified as long-term debt.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(F)</B></TD>
    <TD>
    <B>Interest Expense</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, interest expense on subordinated loans is
not recorded until the Company has distributable retained
profits and has paid the interest. To date, no interest expense
has been recognized or paid on these subordinated loans. Under
U.S.&nbsp;GAAP, interest expense on the subordinated loans has
been accrued at each balance sheet date.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(G)</B></TD>
    <TD>
    <B>Grant Income</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, grant income has been recognized and a grant
receivable recorded at the balance sheet date when a grant
application is expected to be filed shortly thereafter. Under
U.S.&nbsp;GAAP, grant income has been adjusted to recognize
grant income at the time grant proceeds were received.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(H)</B></TD>
    <TD>
    <B>Hormos Nutraceutical</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, with the merger of Hormos Nutraceutical and
Hormos Medical in 2003, a cumulative
<FONT style="white-space: nowrap">loss-to</FONT>-date for Hormos
Nutraceutical as of December&nbsp;2002 was recorded by Hormos
Medical as a current period research and development expense in
2003. Under U.S.&nbsp;GAAP, the December&nbsp;2002 cumulative
<FONT style="white-space: nowrap">loss-to</FONT>-date for Hormos
Nutraceutical has been reflected as a prior period adjustment in
Hormos Medical Oy&#146;s 2003 financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-44

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hormos Medical Oy</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(I)</B></TD>
    <TD>
    <B>Net Sales</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under U.S.&nbsp;GAAP, the amounts recorded as Net Sales by
Hormos, have been classified as Other Income by QuatRx. The
amounts represent contract research income.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(J)</B></TD>
    <TD>
    <B>Accounts Payable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Finnish GAAP, accounts payable denominated in foreign
currencies are valued at the exchange rate in effect at the time
of payment. Under U.S.&nbsp;GAAP, foreign currency denominated
payables are valued at the exchange rate in effect as of each
balance sheet date. As the differences were determined to be
insignificant, no adjustment was recorded.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Additional Disclosures under U.S.&nbsp;GAAP:</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Comprehensive income</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under U.S.&nbsp;GAAP, comprehensive income includes net income
and &#147;other&#148; comprehensive income. &#147;Other&#148;
comprehensive income (OCI) includes charges or credits to equity
that are not the result of transactions with owners, including
examples such as adjustments to minimum pension liabilities,
unrealized gains and losses on available-for-sale debt or equity
securities, and gains or losses on certain derivative
instruments qualifying for hedge accounting. During the periods
presented, the Company has not had any transactions that have
resulted in OCI, and accordingly, net income of the Company
represents total comprehensive income of the Company.
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;25, 2005, the QuatRx Pharmaceuticals Company
(&#147;QuatRx&#148; or the &#147;Company&#148;) completed the
acquisition of Hormos Medical Oy (&#147;Hormos&#148;), a Finnish
development-stage pharmaceuticals company. Hormos is in the
development stage and is presumed not to be a business according
to the Emerging Issues Task Force (&#147;EITF&#148;) 98-3,
<I>Determining Whether a Nonmonetary Transaction Involves
Receipt of Productive Assets or of a Business.</I> The
transaction was therefore accounted for as a purchase of assets
and assumption of liabilities. In connection with the
acquisition, the Company acquired all of the outstanding capital
stock of Hormos in exchange for 857,145&nbsp;shares of
Series&nbsp;D and 3,408,025&nbsp;shares of Series&nbsp;D-1
Preferred Stock and 9,520,154&nbsp;shares of common stock and
assumed current liabilities and notes payable totaling
$20,289,423. The Company also incurred $1,000,000 in
acquisition-related costs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjustments were made to record the acquired net assets of
Hormos at fair value, including allocating a portion of the
total purchase price to in-process research and development.
Based on management&#146;s review of the analysis of the
tangible and intangible assets and liabilities of Hormos, the
purchase price has been allocated as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total acquisition costs:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of Series&nbsp;D Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,200,003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of Series&nbsp;D-1 Preferred Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,771,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,856,047</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition-related costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed liabilities and notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,289,423</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,116,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Allocated to assets and liabilities as follows:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,170,596</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property and equipment acquired</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>776,995</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    In-process research and development, expensed</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,800,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work force</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>480,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Favorable loans</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,101,923</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,380,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued contingent consideration</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,593,025</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,116,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Contingent consideration associated with the acquisition
includes an additional 321,415&nbsp;shares and
1,277,995&nbsp;shares of Series&nbsp;D and Series&nbsp;D-1
Preferred Stock, respectively, and 3,570,046&nbsp;shares of
common stock with an aggregate value of $3,310,188, held in
escrow and payable upon the occurrence of certain future events.
One-third of the contingent shares secure indemnification
obligations of the Hormos selling shareholders and will be
released to the Company in satisfaction of an indemnification
claim or to the Hormos shareholders one year after the closing
date of the acquisition. The remaining contingent shares will
generally be released to Hormos selling shareholders upon the
first to occur of: the closing of a qualified public offering of
QuatRx&#146;s common stock or the dosing of the first patient in
a second phase&nbsp;III clinical trial of ospemifene. Additional
purchase consideration will be recorded as the contingent
consideration is released. The additional purchase consideration
will be allocated to the assets acquired based upon their
relative fair value and will result in additional expense for
in-process research and development of $585,000, and accrued
contingent consideration totaling $1,593,025 will be
reclassified to equity.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following sets forth pro forma condensed combined financial
statements (i)&nbsp;derived from the audited financial
statements of QuatRx for the year ended December&nbsp;31, 2004
and the unaudited condensed financial statements of QuatRx for
the nine month period ended September&nbsp;30, 2005 and
(ii)&nbsp;derived from the audited
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
financial statements of Hormos for the fiscal year ended
December&nbsp;31, 2004 and the unaudited financial statements of
Hormos for the period from January&nbsp;1, 2005 to May&nbsp;25,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma condensed combined financial statements
and notes are presented to give effect to the acquisition of
Hormos by QuatRx and represent the combined company&#146;s
unaudited pro forma statements of operations for the year ended
December&nbsp;31, 2004 and the nine months ended
September&nbsp;30, 2005. The statement of operations for the
year ended December&nbsp;31, 2004 was derived by combining the
results for the year ended December&nbsp;31, 2004 of QuatRx with
the results for the year ended December&nbsp;31, 2004 of Hormos
and the statement of operations for the nine months ended
September&nbsp;30, 2005 was derived by combining the results for
the nine months ended September&nbsp;30, 2005 of QuatRx with the
results for the period from January&nbsp;1, 2005 to May&nbsp;25,
2005 of Hormos.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma condensed combined statements
of operations give effect to the acquisition transaction between
QuatRx and Hormos as if it occurred on January&nbsp;1, 2004, the
first day of QuatRx&#146;s fiscal year ended December&nbsp;31,
2004. The unaudited pro forma condensed combined financial
statements include adjustments directly attributable to the
acquisition transaction. The pro forma adjustments are described
in the accompanying notes. The pro forma adjustments are based
upon available information and assumptions that are factually
supportable including the completion of the acquisition
transaction. These unaudited pro forma condensed combined
financial statements are not necessarily indicative of the
results of operations that would have been achieved had the
transaction actually taken place at the date indicated and do
not purport to be indicative of future operating results.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos&#146;s historical condensed financial statements are
presented in Euros and were prepared in accordance with Finnish
GAAP, which differs in certain respects from U.S.&nbsp;GAAP.
QuatRx&#146;s condensed financial statements were prepared in
accordance with U.S.&nbsp;GAAP and are presented in
U.S.&nbsp;dollars. As described in Note&nbsp;1 to these
unaudited pro forma condensed combined financial statements,
Hormos&#146;s historical condensed financial statements were
reconciled to U.S.&nbsp;GAAP and were translated from Euros to
U.S.&nbsp;dollars. As presented in Note&nbsp;1, pro forma
adjustments have been made to the financial statements of Hormos
to conform to QuatRx&#146;s presentation under U.S.&nbsp;GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma condensed combined financial statements
and related notes should be read in conjunction with the
historical consolidated financial statements and related notes
and other financial information pertaining to QuatRx and Hormos,
including &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations,&#148; and
&#147;Risk Factors&#148; which appear elsewhere in this
prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-47

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Nine Months Ended September&nbsp;30, 2005</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>QuatRx</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combined</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(See Note&nbsp;2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,156,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,591,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,686</TD>
    <TD align="left" valign="bottom" nowrap>(A)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,790,990</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,199,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>717,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,783</TD>
    <TD align="left" valign="bottom" nowrap>(B)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,923,788</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,356,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,309,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,714,778</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,356,189</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,309,120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(49,469</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,714,778</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>826,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>996,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,822,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(285,678</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(160,324</TD>
    <TD align="left" valign="bottom" nowrap>)(C)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(352,703</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>919,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>710,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(160,324</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,469,751</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10,436,587</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,598,647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(209,793</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,245,027</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457,130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,457,130</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(13,893,717</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,598,647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(209,793</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(15,702,157</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Loss Per Share, Basic and Diluted:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.24</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,680,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,021,619</TD>
    <TD align="left" valign="bottom" nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,701,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to unaudited pro forma condensed combined
financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-48

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Year Ended December&nbsp;31, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Pro Forma</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>QuatRx</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Combined</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(See Note&nbsp;2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,724,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,283,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>293,585</TD>
    <TD align="left" valign="bottom" nowrap>(A)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,301,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,723,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,619,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97,603</TD>
    <TD align="left" valign="bottom" nowrap>(B)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,441,062</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,448,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,903,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>391,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,742,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,448,067</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,903,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(391,188</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(15,742,556</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529,147</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense), net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(520,171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(402,384</TD>
    <TD align="left" valign="bottom" nowrap>)(C)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(778,564</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,008,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(402,384</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,750,583</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,304,076</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,894,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(793,572</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,991,973</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accretion of redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,319,484</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,623,560</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,894,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(793,572</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,311,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Loss Per Share, Basic and Diluted:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss per share available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4.79</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1.37</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,520,154</TD>
    <TD align="left" valign="bottom" nowrap>(D)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,945,746</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying notes to unaudited pro forma condensed combined
financial statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-49

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>U.S.&nbsp;GAAP and Reclassification Adjustments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Reconciliation for Nine Months Ended September&nbsp;30,
2005</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Hormos&#146;s financial statements were prepared in accordance
with Finnish GAAP, which differs in certain material respects
from U.S.&nbsp;GAAP. Hormos also classified certain costs
differently than QuatRx in their statement of operations. The
following schedule summarizes the necessary material adjustments
to conform the Hormos statement of operations for the period
from January&nbsp;1, 2005 to May&nbsp;25, 2005 to U.S.&nbsp;GAAP
and to reclassify certain amounts to QuatRx&#146;s basis of
presentation.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Finnish</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>U.S.&nbsp;GAAP</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>GAAP</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Euro)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Euro)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Euro)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(U.S.&nbsp;$)</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(a)</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>1,279,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(1,279,699</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(b</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,279,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,279,699</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,236,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,875</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(c</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,224,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,591,707</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>553,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,060</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(d</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>552,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>717,413</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,950</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(e</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,756,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,777,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,309,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(476,352</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,300,714</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,777,066</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,309,120</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>766,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(f</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>766,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>996,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,131</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(183,723</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(g</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(219,854</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(285,678</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(36,131</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>582,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>546,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>710,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(512,483</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(717,813</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(1,230,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,598,647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(a)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>U.S.&nbsp;Dollar Exchange Rate</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Hormos amounts have been translated into U.S.&nbsp;dollars at a
    rate of <FONT face="times new roman,times">&#128;</FONT>1.00 =
    US$1.2994, the average daily exchange rate for the period from
    January&nbsp;1, 2005 to May&nbsp;25, 2005.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(b)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <BR>
    <B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of Hormos contract research income to other
    income (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(1,279,699</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(c)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <BR>
    <B>Research and Development</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    To expense patent costs as incurred to conform to QuatRx&#146;s
    statement of operations presentation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>162,510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for depreciation expense</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for capital leases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,440</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment to recognize license fee expense in
    period incurred rather than in the period the license fee was
    paid</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(200,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of grant income from operations to other income
    (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,068</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for grant income</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(11,875</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-50

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(d)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>General and administrative</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for depreciation expense</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for capital leases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,570</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(1,060</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(e)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Other operating income</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of grant income from operations to other income
    (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>33,950</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(f)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Contract research income</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of Hormos contract research income to other
    income (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>1,279,699</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for deferred revenue</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(513,075</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>766,624</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(g)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Other expense</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S. GAAP adjustment for capital leases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(2,517</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for interest expense on long-term debt</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182,088</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of other income from operations to other income
    (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>882</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(183,723</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-51

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Reconciliation for Year Ended December&nbsp;31,
2004</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following schedule summarizes the necessary material
adjustments to conform the Hormos statement of operations for
the year ended December&nbsp;31, 2004 to U.S.&nbsp;GAAP and to
reclassify certain amounts to QuatRx&#146;s basis of
presentation.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Finnish</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>U.S.&nbsp;GAAP</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hormos</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>GAAP</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustments</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Notes</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Euro)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Euro)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Euro)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(U.S.&nbsp;$)</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap>(a)</TD><TD></TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>2,033,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(2,033,403</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(b</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of revenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,033,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,033,403</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Research and development</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,656,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(213,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(c</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,443,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,283,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General and administrative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,276,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(d</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,302,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,619,954</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other operating income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(360,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>360,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(e</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,572,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,746,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,903,301</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,539,014</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,207,168</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,746,182</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,903,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other income (expense):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Contract research income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,033,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(f</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,033,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,529,147</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other expense, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73,715</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(344,496</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(g</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(418,211</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(520,171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total other income (expense)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(73,715</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,688,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,615,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,008,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss available to common stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(2,612,729</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(518,261</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(3,130,990</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,894,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(a)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>U.S.&nbsp;Dollar Exchange Rate</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Hormos amounts have been translated into U.S.&nbsp;dollars at a
    rate of
    <FONT face="times new roman,times">&#128;</FONT>&nbsp;1.00 =
    US$1.2438, the average daily exchange rate for the year ended
    December&nbsp;31, 2004.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(b)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of Hormos contract research income to other
    income (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(2,033,403</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(c)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Research and development</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    To expense patent costs as incurred to conform to QuatRx&#146;s
    statement of operations presentation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(45,079</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for depreciation expense</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,692</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for capital leases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31,518</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment to recognize license fee expense in
    period incurred rather than in the period
    the<BR>&nbsp;&nbsp;license fee was paid</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of grant income from operations to other income
    (expense)&nbsp;to conform to
    QuatRx&#146;s<BR>&nbsp;&nbsp;statement of operations
    classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(359,980</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for grant income</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(33,186</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(213,071</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-52

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(d)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>General and administrative</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for depreciation expense</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>440</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for capital leases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,752</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>26,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(e)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Other operating income</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of grant income from operations to other income
    (expense)&nbsp;to conform to
    QuatRx&#146;s<BR>&nbsp;&nbsp;statement of operations
    classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>360,644</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(f)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Contract research income</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of Hormos contract research income to other
    income (expense)&nbsp;to conform to QuatRx&#146;s statement of
    operations classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>2,033,403</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>(g)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B>Other expense</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for capital leases</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(13,881</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    U.S.&nbsp;GAAP adjustment for interest expense on long-term debt</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(331,279</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Reclassification of other income from operations to other income
    (expense)&nbsp;to conform to
    QuatRx&#146;s<BR>&nbsp;&nbsp;statement of operations
    classification</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="times new roman,times">&#128;</FONT></TD>
    <TD align="right" valign="bottom" nowrap>(344,496</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Pro Forma Adjustments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>(A)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Reflects an increase in
depreciation and amortization expense from the step-up of
Hormos&#146;s tangible and intangible assets to their estimated
fair values as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in depreciation expense resulting from the
    step-up of Hormos furniture and equipment to their estimated
    fair values</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>206,453</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in amortization expense resulting from the intangible
    asset associated with the Hormos work force</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>293,585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>(B)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Reflects an increase in
depreciation and amortization expense from the
<FONT style="white-space: nowrap">step-up</FONT> of
Hormos&#146;s tangible and intangible assets to their estimated
fair values as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in depreciation expense resulting from the
    step-up of Hormos furniture and equipment to their estimated
    fair values</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,087</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in amortization expense resulting from the intangible
    asset associated with the Hormos work force</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,088</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>97,603</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>(C)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Reflects an increase in
interest expense resulting from the amortization of discount
associated with the Hormos favorable loans of $402,384 and
$160,324 for December&nbsp;31, 2004 and September&nbsp;30, 2005,
respectively.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-53

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>(D)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The increase in weighted
average common shares outstanding for the basic and diluted
earnings per share calculations reflects the issuance of
9,520,154&nbsp;shares of QuatRx common stock issued in the
acquisition.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Other Transaction Related Costs</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The objective of the unaudited pro forma condensed combined
financial statements and notes provided herein is to provide
information about the continuing impact of the acquisition by
showing how it might have affected historical operating results
if the acquisition had been consummated at the beginning of the
most recent full fiscal year. As such, charges directly
resulting from the transaction are necessarily excluded from the
unaudited pro forma condensed combined statement of operations.
The write off of in-process research and development of
$25,800,000 has been excluded from the above pro forma condensed
combined statements of operations.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-54

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<DIV align="left" style="font-size: 0pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 15pt;color: #000000; background: #ffffff; margin-top: 80pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="v16003v1600300.gif" alt="(QUATRX LOGO)">
</DIV>

<DIV align="center" style="font-size: 15pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT face="helvetica,arial">Common Stock</FONT></B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Prospectus
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT face="helvetica,arial">Banc of America Securities
LLC</FONT></B>
</DIV>

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">SG Cowen&nbsp;&#38;
Co.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Lazard Capital Markets</FONT></B>
</DIV>

<DIV align="center" style="font-size: 16pt;color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Pacific Growth Equities,
LLC</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006, all dealers that buy, sell or trade the common stock may
be required to deliver a prospectus, regardless of whether they
are participating in this offering. This is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
</DIV>

<DIV align="left" style="font-size: 1pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth an itemization of the various
costs and expenses, all of which we will pay, in connection with
the issuance and distribution of the securities being
registered. All of the amounts shown are estimated except the
SEC Registration Fee, the Nasdaq National Market Listing Fee and
the NASD Filing Fee.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SEC Registration Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,229</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nasdaq National Market Listing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing and Engraving Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD Legal Fees and Blue Sky Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer Agent and Registrar Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><TR><TD><TR><TD><TR><TD>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

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

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>*</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our restated certificate of incorporation and bylaws provide
that each person who was or is made a party or is threatened to
be made a party to or is otherwise involved (including, without
limitation, as a witness) in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director or an
officer of QuatRx or is or was serving at our request as a
director, officer, or trustee of another corporation, or of a
partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan, whether the
basis of such proceeding is alleged action in an official
capacity as a director, officer or trustee or in any other
capacity while serving as a director, officer or trustee, shall
be indemnified and held harmless by us to the fullest extent
authorized by the Delaware General Corporation Law against all
expense, liability and loss (including attorneys&#146; fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the Delaware General Corporation Law permits
a corporation to indemnify any director or officer of the
corporation against expenses (including attorneys&#146; fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or
was a director or officer of the corporation, if such person
acted in good faith and in a manner that he reasonably believed
to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or
proceeding, if he or she had no reasonable cause to believe his
or her conduct was unlawful. In a derivative action, (i.e., one
brought by or on behalf of the corporation), indemnification may
be provided only for expenses actually and reasonably incurred
by any director or officer in connection with the defense or
settlement of such an action or suit if such person acted in
good faith and in a manner that he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be provided if such person
shall have been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action or
suit was brought shall determine that the defendant is fairly
and reasonably entitled to indemnity for such expenses despite
such adjudication of liability.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-1

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to Section&nbsp;102(b)(7) of the Delaware General
Corporation Law,
Article&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our restated certificate of incorporation eliminates the
liability of a director to us or our stockholders for monetary
damages for such a breach of fiduciary duty as a director,
except for liabilities arising:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    from any breach of the director&#146;s duty of loyalty to us or
    our stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    from acts or omissions not in good faith or which involve
    intentional misconduct or a knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    under Section&nbsp;174 of the Delaware General Corporation
    Law;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    from any transaction from which the director derived an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We carry insurance policies insuring our directors and officers
against certain liabilities that they may incur in their
capacity as directors and officers. In addition, we expect to
enter into indemnification agreements with each of our directors
and executive officers prior to completion of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, reference is made to the Purchase Agreement filed
as Exhibit&nbsp;1.1 hereto, which provides for indemnification
by the underwriters of QuatRx, our directors and officers who
sign the registration statement and persons who control QuatRx,
under certain circumstances.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three years preceding the filing of this registration
statement, we have sold the following securities that were not
registered under the Securities Act of 1933. No underwriters
were employed by us in connection with any of these transactions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Issuances of Capital Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The sale and issuance of the securities set forth below were
deemed to be exempt from registration under the Securities Act
by virtue of Section&nbsp;4(2) of Regulation&nbsp;D and
Regulation&nbsp;S promulgated thereunder.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;6, 2003, we issued
    and sold 1,400,000&nbsp;shares of our Series&nbsp;B Preferred
    Stock at a price per share of $1.50 for an aggregate purchase
    price of $2,100,000.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between May&nbsp;20, 2003 and
    October&nbsp;5, 2004, we issued and sold 25,596,491&nbsp;shares
    of our Series&nbsp;C Preferred Stock at a purchase price per
    share of $1.14 for an aggregate purchase price of $29,179,999.74.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between November&nbsp;22, 2004
    and October&nbsp;31, 2005, we issued and sold
    24,785,713.43&nbsp;shares of our Series&nbsp;D Preferred Stock
    at a purchase price per share of $1.40 for an aggregate purchase
    price of $34,699,998.80.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;25, 2005, we issued
    1,071,422&nbsp;shares of our Series&nbsp;D Preferred Stock,
    4,260,022&nbsp;shares of our Series&nbsp;D-1 Preferred Stock and
    11,900,185&nbsp;shares of our common stock to the shareholders
    of Hormos Medical Oy in exchange for shares and promissory notes
    of Hormos representing 100% of all the outstanding capital stock
    of Hormos and all securities or other instruments convertible
    into or exercisable for capital stock of Hormos.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Certain Grants and Exercises of Stock Options</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The sale and issuance of the securities described below were
deemed to be exempt from registration under the Securities Act
in reliance on Rule&nbsp;701 promulgated under Section&nbsp;3(b)
of the Securities Act, as transactions by an issuer not
involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to
compensation as provided under Rule&nbsp;701.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-2

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

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to our stock plans, we have issued options to purchase
an aggregate of 6,655,990&nbsp;shares of common stock. Of these
options:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    options to purchase&nbsp;85,000&nbsp;shares of common stock have
    been canceled or lapsed without being exercised;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    options to purchase&nbsp;994,319&nbsp;shares of common stock
    have been exercised;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    options to purchase a total of 5,576,671&nbsp;shares of common
    stock are currently outstanding, at a weighted average exercise
    price of $0.31&nbsp;per share.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exchange Agreement, dated May&nbsp;20, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy and the shareholders
    of Hormos signatories thereto</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Escrow Agreement, dated May&nbsp;25, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy, U.S.&nbsp;Bank
    National Association and the shareholders of Hormos signatories
    thereto</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Eighth Amended and Restated Certificate of Incorporation, as
    currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Amendment to Certificate of Incorporation, as
    currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Certificate of Amendment of Certificate of Incorporation,
    as currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws, as currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.5*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended Restated Certificate of Incorporation (to be
    filed in connection with the closing of this offering and
    effective upon the closing of this offering)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.6*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bylaws (to be effective upon the
    closing of this offering)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amended and Restated Investor Rights Agreement, entered
    into as of November&nbsp;22, 2004, by and among QuatRx
    Pharmaceuticals Company. and certain investors named therein</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Fourth Amended and Restated Investor Rights
    Agreement, entered into as of May&nbsp;25, 2005, by and among
    QuatRx Pharmaceuticals Company and certain investors named
    therein</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen Common Stock Certificate</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Warrant to Purchase Shares of the Series&nbsp;D Preferred Stock
    of QuatRx Pharmaceuticals Company, dated as of January&nbsp;26,
    2006, granted to Hercules Technology Growth Capital, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Heller Ehrman LLP</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stock Option Agreement for Employee under Amended and
    Restated 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2000 Equity Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stock Option Agreement for Employee under 2000 Equity
    Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Office Lease between Transwestern Great Lakes, L.P. and QuatRx
    Pharmaceuticals Company, dated November&nbsp;11, 2004</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Lease, dated June&nbsp;30, 2005, by and
    between Transwestern Great Lakes REIT, L.P. and QuatRx
    Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exclusive License Agreement, dated November&nbsp;7, 2001, by and
    between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment, dated November&nbsp;8, 2004, to the Exclusive License
    Agreement between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company dated November&nbsp;7, 2001</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-3

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement, dated November&nbsp;9, 2001, by and between Wisconsin
    Alumni Research Foundation and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exclusive License Agreement dated February&nbsp;14, 2005, by and
    between EndoChem, Inc. and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter, dated February&nbsp;14, 2005, from The Regents of the
    University of California to QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exclusive License Agreement, dated May&nbsp;19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1, dated September&nbsp;30, 2004, to
    Exclusive License Agreement, dated May&nbsp;19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent License Agreement, dated March&nbsp;25, 2004, by and
    between Hormos Medical Oy and Orion Corporation</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent License Agreement, dated October&nbsp;10, 2005, by and
    between Hormos Medical Oy and Orion Corporation</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restated Transfer Agreement, dated May&nbsp;26, 2005, by and
    between Hormos Medical Oy and Tess Diagnostics and
    Pharmaceuticals Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent Assignment Agreement, dated June&nbsp;4, 2004, by and
    between Hormos Medical Oy and the University of Turku</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement on Manufacturing, Sales and Distribution License for
    HMRlignan, dated April&nbsp;8, 2005, by and between Linnea S.A.
    and Hormos Medical Oy</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated September&nbsp;29, 2003 between
    QuatRx Pharmaceuticals Company and Gary Onn</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan and Security Agreement, dated January&nbsp;26, 2006,
    between QuatRx Pharmaceuticals Company and Hercules Technology
    Growth Capital, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreements between Tekes and Hormos Medical Oy</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated November&nbsp;29, 2001, between BioTie
    Therapies Oyj and Hormos Medical Oy (unofficial translation)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated November&nbsp;15, 2001, between Turun
    Biolaakso Oy; and Hormos Medical Oy (unofficial translation)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of subsidiaries</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers Oy</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Heller Ehrman LLP (included in Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on signature page)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; *</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>**</TD>
    <TD align="left">
    Indicates a management contract or compensatory plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; &#134;</TD>
    <TD align="left">
    Application has been made to the Securities and Exchange
    Commission to seek confidential treatment of certain provisions
    of this exhibit under Rule&nbsp;406 of the Securities Act of
    1933. Omitted material for which confidential treatment has been
    requested has been filed separately with the Securities and
    Exchange Commission.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Statement Schedules.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    Financial Statement schedules are omitted because the
    information is included in our financial statements or notes to
    those financial statements.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-4
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of determining any
    liability under the Securities Act of 1933, the information
    omitted from the form of prospectus filed as part of this
    registration statement in reliance upon Rule&nbsp;430A and
    contained in a form of prospectus filed by the registrant
    pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the
    Securities Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purpose of determining
    any liability under the Securities Act of 1933, each
    post-effective amendment that contains a form of prospectus
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-5

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

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Signatures</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on
February&nbsp;3, 2006.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    QUATRX PHARMACEUTICALS COMPANY</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ Robert Zerbe, M.D.</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid black; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Robert Zerbe,&nbsp;M.D.</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    President and Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, the undersigned directors and/or officers of QuatRx
Pharmaceuticals Company. (the &#147;Registrant&#148;), hereby
severally constitute and appoint Robert Zerbe,&nbsp;M.D.,
President and Chief Executive Officer, and Gary Onn, Chief
Financial Officer, and each of them individually, with full
powers of substitution and resubstitution, our true and lawful
attorneys, with full powers to them and each of them to sign for
us, in our names and in the capacities indicated below, any and
all amendments (including post-effective amendments) to the
Registration Statement on
Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT> filed
with the Securities and Exchange Commission, and any
registration statement filed pursuant to Rule&nbsp;462(b) under
the Securities Act of 1933 in connection with the registration
under the Securities Act of 1933 of the Registrant&#146;s equity
securities, and to file or cause to be filed the same, with all
exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of
them, or their substitute or substitutes, shall do or cause to
be done by virtue of this Power of Attorney.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Robert Zerbe,&nbsp;M.D.<BR>
    <HR size="1" noshade>Robert Zerbe,&nbsp;M.D.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    President, Chief Executive Officer and Director (Principal
    Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Gary Onn<BR>
    <HR size="1" noshade>Gary Onn</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Chief Financial Officer (Principal Financial and Accounting
    Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Caley Castelein,&nbsp;M.D.<BR>
    <HR size="1" noshade>Caley Castelein,&nbsp;M.D.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Chris Ehrlich<BR>
    <HR size="1" noshade>Chris Ehrlich</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Richard P. Fox<BR>
    <HR size="1" noshade>Richard P. Fox</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-6

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ William Greene,&nbsp;M.D.<BR>
    <HR size="1" noshade>William Greene,&nbsp;M.D.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Patrick Heron<BR>
    <HR size="1" noshade>Patrick Heron</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Christopher Moller,&nbsp;Ph.D.<BR>
    <HR size="1" noshade>Christopher Moller,&nbsp;Ph.D.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Nicholas Simon&nbsp;III<BR>
    <HR size="1" noshade>Nicholas Simon&nbsp;III</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ August Watanabe,&nbsp;M.D.<BR>
    <HR size="1" noshade>August Watanabe,&nbsp;M.D.</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Anders Wiklund<BR>
    <HR size="1" noshade>Anders Wiklund</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;3, 2006</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-7

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Exhibit Index</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exchange Agreement, dated May&nbsp;20, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy and the shareholders
    of Hormos signatories thereto</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Escrow Agreement, dated May&nbsp;25, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy, U.S.&nbsp;Bank
    National Association and the shareholders of Hormos signatories
    thereto</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Eighth Amended and Restated Certificate of Incorporation, as
    currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Amendment to Certificate of Incorporation, as
    currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Second Certificate of Amendment of Certificate of Incorporation,
    as currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws, as currently in effect</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.5*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended Restated Certificate of Incorporation (to be
    filed in connection with the closing of this offering and
    effective upon the closing of this offering)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.6*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bylaws (to be effective upon the
    closing of this offering)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fourth Amended and Restated Investor Rights Agreement, entered
    into as of November&nbsp;22, 2004, by and among QuatRx
    Pharmaceuticals Company. and certain investors named therein</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment to Fourth Amended and Restated Investor Rights
    Agreement, entered into as of May&nbsp;25, 2005, by and among
    QuatRx Pharmaceuticals Company and certain investors named
    therein</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen Common Stock Certificate</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Warrant to Purchase Shares of the Series&nbsp;D Preferred Stock
    of QuatRx Pharmaceuticals Company, dated as of January&nbsp;26,
    2006, granted to Hercules Technology Growth Capital, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Heller Ehrman LLP</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stock Option Agreement for Employee under Amended and
    Restated 2005 Stock Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2000 Equity Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Stock Option Agreement for Employee under 2000 Equity
    Incentive Plan</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Office Lease between Transwestern Great Lakes, L.P. and QuatRx
    Pharmaceuticals Company, dated November&nbsp;11, 2004</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    First Amendment to Lease, dated June&nbsp;30, 2005, by and
    between Transwestern Great Lakes REIT, L.P. and QuatRx
    Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exclusive License Agreement, dated November&nbsp;7, 2001, by and
    between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment, dated November&nbsp;8, 2004, to the Exclusive License
    Agreement between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company dated November&nbsp;7, 2001</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement, dated November&nbsp;9, 2001, by and between Wisconsin
    Alumni Research Foundation and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exclusive License Agreement dated February&nbsp;14, 2005, by and
    between EndoChem, Inc. and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter, dated February&nbsp;14, 2005, from The Regents of the
    University of California to QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12<B>&#134;</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exclusive License Agreement, dated May&nbsp;19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amendment No.&nbsp;1, dated September&nbsp;30, 2004, to
    Exclusive License Agreement, dated May&nbsp;19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent License Agreement, dated March&nbsp;25, 2004, by and
    between Hormos Medical Oy and Orion Corporation</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent License Agreement, dated October&nbsp;10, 2005, by and
    between Hormos Medical Oy and Orion Corporation</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Restated Transfer Agreement, dated May&nbsp;26, 2005, by and
    between Hormos Medical Oy and Tess Diagnostics and
    Pharmaceuticals Inc.</TD>
</TR>

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B>Exhibit No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Patent Assignment Agreement, dated June&nbsp;4, 2004, by and
    between Hormos Medical Oy and the University of Turku</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18&#134;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Agreement on Manufacturing, Sales and Distribution License for
    HMRlignan, dated April&nbsp;8, 2005, by and between Linnea S.A.
    and Hormos Medical Oy</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19**</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated September&nbsp;29, 2003 between
    QuatRx Pharmaceuticals Company and Gary Onn</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan and Security Agreement, dated January&nbsp;26, 2006,
    between QuatRx Pharmaceuticals Company and Hercules Technology
    Growth Capital, Inc.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreements between Tekes and Hormos Medical Oy</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated November&nbsp;29, 2001, between BioTie
    Therapies Oyj and Hormos Medical Oy (unofficial translation)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated November&nbsp;15, 2001, between Turun
    Biolaakso Oyj and Hormos Medical Oy (unofficial translation)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    List of subsidiaries</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers LLP</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers Oy</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Heller Ehrman LLP (included in Exhibit&nbsp;5.1)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included on signature page)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; *</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>**</TD>
    <TD align="left">
    Indicates a management contract or compensatory plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; &#134;</TD>
    <TD align="left">
    Application has been made to the Securities and Exchange
    Commission to seek confidential treatment of certain provisions
    of this exhibit under Rule&nbsp;406 of the Securities Act of
    1933. Omitted material for which confidential treatment has been
    requested has been filed separately with the Securities and
    Exchange Commission.</TD>
</TR>

</TABLE>
</BODY>
</HTML>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on
February 3, 2006
Registration
No.
333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
QUATRX PHARMACEUTICALS COMPANY
(Exact name of Registrant as specified in its charter)
Delaware
2834
38-3566182
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
777 East Eisenhower Parkway, Suite 100
Ann Arbor, Michigan 48108
(734) 913-9900
(Address, including zip code and telephone number, including
area code,
of Registrant's principal executive offices)
Robert L. Zerbe, M.D.
Chief Executive Officer
QuatRx Pharmaceuticals Company
777 East Eisenhower Parkway, Suite 100
Ann Arbor, Michigan 48108
(734) 913-9900
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Copies to:
Stephen M. Davis, Esq.
Peter DiIorio, Esq.
Heller Ehrman LLP
Times Square Tower, 7 Times Square
New York, New York 10036
Phone: (212) 832-8300
Fax: (212) 763-7600
Jeffery M. Brinza, Esq.
QuatRx Pharmaceuticals Company
777 East Eisenhower Parkway, Suite 100
Ann Arbor, Michigan 48108
Phone: (734) 913-9900
Fax: (734) 913-0743
Danielle Carbone, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Phone: (212) 848-4000
Fax: (212) 848-7179
Approximate date of commencement of proposed sale to
public:
As soon as practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box:
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering:
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering:
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering:
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class of
Aggregate
Amount of
Securities to be Registered
Offering Price(1)
Registration Fee
Common Stock, $0.01 par value per share
$86,250,000
$9,229
(1)
Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule 457(o) of the Securities Act of 1933,
    as amended.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Table of Contents
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED
FEBRUARY 3, 2006
Prospectus
Shares
Common Stock
QuatRx Pharmaceuticals Company is
offering                      shares
of common stock. This is our initial public offering, and no
public market currently exists for our shares. We anticipate
that the initial public offering price will be between
$          and
$           per
share. After the offering, the market price for our shares may
be outside this range.
We have applied to list our common stock on the Nasdaq National
Market under the symbol "QTRX".
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 8.
Per Share
Total
Offering price
$
$
Discounts and commissions to underwriters
$
$
Offering proceeds to QuatRx Pharmaceuticals Company, before
    expenses
$
$
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal
offense.
We have granted the underwriters the right to purchase up
to                     additional
shares of common stock to cover any over-allotments. The
underwriters can exercise this right at any time within
30 days after the offering. The underwriters expect to
deliver the shares on or
about                     ,
2006.
Banc of America Securities LLC
SG Cowen & Co.
Lazard Capital Markets
Pacific Growth Equities, LLC
,
2006
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. We
are not making offers to sell or seeking offers to buy these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained in
this prospectus is accurate as of the date in the front of this
prospectus only. Our business, financial condition, results of
operations and prospectus may have changed since that date.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
8
Forward-Looking Statements
29
Use of Proceeds
30
Dividend Policy
30
Capitalization
31
Dilution
33
Selected Consolidated Financial Data
35
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
37
Business
50
Management
72
Certain Relationships and Related Party
    Transactions
84
Principal Stockholders
86
Description of Capital Stock
89
United States Federal Income Tax
    Consequences to Non-United States Holders
93
Shares Eligible for Future Sale
96
Underwriting
99
Legal Matters
103
Experts
103
Where You Can Find More Information
104
Index To Financial Statements
F-1
Table of Contents
PROSPECTUS SUMMARY
Although this summary highlights information about us and our
business that we believe is important for you to read and
consider, you should read this entire prospectus carefully,
including "Risk Factors" beginning on page 8 and
our consolidated financial statements and the notes to those
financial statements beginning on page F-1, before you decide to
buy our common stock. In this prospectus, all references to
"QuatRx," "the company," "we,"
"us" and "our" refer to QuatRx
Pharmaceuticals Company and its subsidiary, and all references
to "Hormos" refer to Hormos Medical Oy, our wholly
owned subsidiary, unless the context requires otherwise.
Our Business
Overview
We are a pharmaceutical company focused on discovering,
licensing, developing and commercializing compounds in the
endocrine, metabolic and cardiovascular therapeutic areas. We
currently have four product candidates in clinical development
and one compound that we expect to enter clinical development in
the first half of 2006. Our two lead product candidates treat
hormone deficiencies that result from aging in men and women.
Ospemifene, our treatment for vaginal atrophy, a common problem
associated with estrogen deficiency in post-menopausal women,
has entered phase III clinical testing. Fispemifene, our
treatment for the symptoms of andropause in aging males, is
about to enter phase II clinical testing. We also have two
product candidates for the treatment of elevated cholesterol
levels, QRX-401 and QRX-431, in phase I clinical trials and
advanced preclinical development, respectively. Becocalcidiol,
our topical product candidate for the treatment of mild to
moderate psoriasis, has completed a phase IIb clinical
trial that we believe demonstrates clinical proof of efficacy.
Our management team has extensive experience in pharmaceutical
development, particularly in endocrine and cardiovascular
therapies, having participated in over 60 clinical development
programs in their careers. This team has contributed to over
30 programs involving approved drugs, ten of which reached
annual sales in excess of $1 billion and include the
world's best selling pharmaceutical product, Lipitor.
Ospemifene is our product candidate for the treatment of
post-menopausal vaginal atrophy. Vaginal atrophy is a chronic
condition resulting from a decline in estrogen levels. The
symptoms of vaginal atrophy include vaginal dryness, burning,
irritation, itching, pain during intercourse and vaginal
discharge. It is estimated that there are 145 million
post-menopausal women in North America, Europe and Japan, and
that between 10% and 40% of them suffer from vaginal atrophy.
Vaginal atrophy is typically treated with hormone replacement
therapies, including estrogen-based therapies. U.S. sales
of hormone replacement therapies for menopausal symptoms were
$1.7 billion in 2004, but have been declining due to
concerns that the long-term use of these therapies increases the
risk of breast and uterine cancer. Ospemifene is a selective
estrogen receptor modulator, or SERM, an orally available small
molecule that binds to estrogen receptors and selectively
stimulates or blocks estrogen's activity in different
tissue types. We have completed two phase II clinical
trials of ospemifene in which it has demonstrated beneficial
effects on vaginal cell maturation, indicating improvement in
the symptoms of vaginal atrophy. Based on our completed clinical
and preclinical studies, we believe that, in addition to its
beneficial effect on the symptoms of vaginal atrophy, ospemifene
has a positive effect on bone density, does not increase the
risk of breast and uterine cancer, and does not appear to induce
hot flashes, a common side effect of SERMs. In January 2006, we
initiated our first phase III clinical trial of ospemifene
for the treatment of vaginal atrophy. The trial is expected to
take place in approximately 65 sites in the U.S. and will enroll
approximately 800 patients.
Fispemifene is our product candidate for the treatment of the
symptoms of andropause. Andropause is a condition in men caused
by a gradual decline in testosterone levels that occurs
naturally as men age. The symptoms of andropause include muscle
wasting, enlarged breasts, urinary tract problems and sexual
dysfunction. Patients receiving treatment for andropause
typically utilize testosterone replacement therapy.
U.S. sales of testosterone replacement products reached
$538 million in 2004, a growth rate of 40% versus the prior
year. Unlike testosterone replacement therapies that are
typically topical or injection therapies,
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fispemifene is an oral treatment and is not a formulation of
testosterone. Rather, fispemifene is a novel SERM that utilizes
the body's normal feedback mechanism to increase
testosterone levels. In a multiple dose phase I trial,
subjects treated with fispemifene demonstrated an increase in
testosterone levels. In the first half of 2006, we plan to
initiate a phase II trial with fispemifene in older men
with low testosterone levels.
QRX-401 and QRX-431 are our two product candidates for the oral
treatment of elevated levels of low-density lipoprotein
cholesterol, or LDL cholesterol, the so-called "bad
cholesterol." Elevated LDL cholesterol levels have been
shown to increase a person's risk of heart disease. In
2004, treatments for lowering cholesterol had worldwide sales of
approximately $26 billion. In preclinical studies with
monkeys, QRX-401 demonstrated the ability to lower LDL
cholesterol as well as lipoprotein(a), also referred to as
Lp(a), high levels of which are associated with an increased
risk of stroke and coronary artery disease. We are currently
conducting a phase I clinical program of QRX-401. In our
phase I studies to date, QRX-401 has been well-tolerated
and no safety issues were observed, although we have not
observed consistent LDL cholesterol lowering in normal
volunteers. Our second product candidate for the treatment of
elevated cholesterol levels, QRX-431, has demonstrated the
ability to reduce LDL cholesterol and Lp(a) levels and cause
weight loss in monkeys. We expect to file an IND for QRX-431 in
the first half of 2006.
Becocalcidiol is our topical product candidate for the treatment
of mild to moderate psoriasis. Psoriasis is a chronic disease of
the skin characterized by red patches covered with white scales
that can occur on any part of the body. Ten million people in
the United States, Japan, France, Germany, Italy, Spain and the
United Kingdom have been diagnosed with psoriasis and
approximately 81% of them are receiving treatment with a variety
of prescription and
over-the
-counter
topical therapies, according to 2004 estimates. Global sales of
topical psoriasis therapies were estimated at $532 million
for the twelve months ended October 2005. We have successfully
completed a phase IIb trial of becocalcidiol in which it
demonstrated a statistically significant improvement in both the
Physicians' Global Assessment of psoriasis and the
Psoriasis Symptom Score, two standard methods for assessing
efficacy of topical treatments for psoriasis in clinical trials.
Because becocalcidiol is outside our core therapeutic areas, we
are evaluating alternatives for continued development of this
product candidate, including seeking a partner for further
development and commercialization.
Our Strategy
Our goal is to build a successful pharmaceutical company that
develops and commercializes products in the endocrine, metabolic
and cardiovascular therapeutic areas. Our strategy is to
leverage our extensive management expertise in order to:
•
Build and maintain a portfolio of product candidates;
•
Utilize focused criteria to select product candidates that we
    believe have a high likelihood of clinical success;
•
Focus on product candidates that have a large commercial
    opportunity; and
•
Develop product opportunities in therapeutically aligned areas.
Risk Factors
We are subject to a number of risks of which you should be aware
before you decide to buy our common stock. These risks are more
fully described under the heading "Risk Factors." All
of our product candidates are in the development stage. Neither
we nor our collaborative partners have received regulatory
approval for, or generated commercial revenues from, any of our
product candidates. If we do not successfully obtain regulatory
approval for, or commercialize any of our product candidates, we
will be unable to achieve our business objectives. Since
inception, we have incurred net losses. As of September 30,
2005, we had an accumulated deficit of $64.0 million. We
expect to continue to incur increasing losses over the next
several years, and we may never become profitable.
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Corporate Information
We were incorporated in Delaware on November 20, 2000. In
May 2005, we acquired Hormos Medical Oy, a privately held
Finnish company. Our principal executive offices are located at
777 East Eisenhower Parkway, Suite 100, Ann Arbor, Michigan
48108, and our telephone number is (734) 913-9900. Our
website address is www.quatrx.com. Information contained in our
website is not a part of this prospectus. We have included our
website address as a factual reference and do not intend it to
be an active link to our website.
"QUATRX" is our registered United States trademark.
Other service marks, trademarks and trade names referred to in
this prospectus are the property of their respective owners.
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Table of Contents
THE OFFERING
Common stock offered by QuatRx
shares
    (           shares
    if the underwriters' over-allotment option is fully
    exercised)
Common stock to be outstanding after this offering
shares
    (           shares
    if the underwriters' over-allotment option is fully
    exercised)
Use of proceeds
We intend to use the net proceeds from this offering for the
    development of our product candidates, research and development
    of our preclinical programs and the remainder, if any, for
    working capital and other general corporate purposes, which may
    include in-licensing or acquiring additional product candidates.
    See "Use of Proceeds."
Proposed Nasdaq National Market symbol
QTRX
Risk factors
See "Risk Factors" and the other information in this
    prospectus for information you should consider before deciding
    whether to invest in shares of our common stock.
The number of shares of common stock to be outstanding after
this offering is based on 13,526,154 shares of common stock
outstanding as of September 30, 2005, and except as
otherwise indicated:
•
gives effect to a
    1-for-                     reverse
    stock split to be effected prior to the closing of this offering;
•
gives effect to our amended and restated certificate of
    incorporation, which we will file immediately prior to the
    closing of this offering;
•
gives effect to the automatic conversion of all outstanding
    shares of our preferred stock into 48,408,823 shares of
    common stock upon the closing of this offering;
•
gives effect to the required release upon the closing of this
    offering of 3,446,305 shares of common stock held in escrow
    in connection with the Hormos acquisition which are not
    reflected in our outstanding shares, including
    1,066,274 shares of common stock issued upon the conversion
    of 1,066,274 shares of preferred stock held in such
    escrow; and
•
assumes no exercise by the underwriters of their option to
    purchase            shares
    of our common stock in this offering to cover over-allotments.
Except as otherwise indicated, all information in this
prospectus excludes:
•
6,438,490 shares of common stock issuable upon the exercise
    of options outstanding as of September 30, 2005, with
    exercise prices ranging from $0.20 to $0.35 per share and a
    weighted average exercise price of $0.29 per share;
•
806,769 additional shares of common stock reserved for future
    grants under our Amended and Restated 2005 Stock Incentive Plan
    as of September 30, 2005; and
•
shares issuable upon the exercise of a warrant issued by us in
    connection with a credit facility we entered into in January
    2006, with respect to which the number of underlying shares and
    exercise price will be established at the closing of this
    offering pursuant to a formula agreed upon with the lender.
    Under this formula, at an assumed initial public offering price
    of
    $                    per
    share and assuming a closing date
    of                     ,
    2006, this warrant would be exercisable
    for                      shares
    of common stock at an exercise price of
    $              per
    share.
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Table of Contents
SUMMARY CONSOLIDATED FINANCIAL DATA
You should read the summary consolidated financial data
presented below in conjunction with our consolidated financial
statements and the related notes, "Selected Consolidated
Financial Data," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The summary consolidated
financial data presented below for the years ended
December 31, 2002, 2003 and 2004 and for the period from
inception (November 20, 2000) to December 31, 2004 and
as of December 31, 2003 and 2004 have been derived from our
audited consolidated financial statements included elsewhere in
this prospectus. The summary consolidated financial data for the
nine months ended September 30, 2004 and 2005 and for the
period from inception (November 20, 2000) to
September 30, 2005 and as of September 30, 2005 are
unaudited, and have been derived from our audited and unaudited
consolidated financial statements that are included elsewhere in
this prospectus and have been prepared on the same basis as our
consolidated financial statements. In the opinion of management,
the unaudited summary consolidated financial data presented
below reflect all adjustments, which include only normal and
recurring adjustments, necessary to state fairly our results of
operations for and as of the periods presented. Historical
results are not necessarily indicative of the results of
operations to be expected for future periods.
The pro forma consolidated statement of operations data for the
year ended December 31, 2004 and the nine months ended
September 30, 2005 give effect to the acquisition of Hormos
as if the acquisition occurred on January 1, 2004, and
should be read in conjunction with our Unaudited Pro Forma
Condensed Combined Financial Statements included elsewhere in
this prospectus.
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Table of Contents
Year Ended December 31,
Nine Months Ended September 30,
Cumulative
Cumulative
Period From
Period From
2002
2003
2004
Inception
2004
2005
Inception
(November 20,
(November 20,
Pro Forma
2000) to
Pro Forma
2000) to
for
December 31,
for
September 30,
Actual
Acquisition
2004
Actual
Acquisition
2005
(in thousands, except share and per share data)
Consolidated Statement of Operations Data:
Operating Expenses:
Research and development
$
2,713
$
8,372
$
7,725
$
12,302
$
19,230
$
5,873
$
9,157
$
10,791
$
28,387
General and administrative
717
886
1,723
3,441
3,598
1,121
2,199
2,924
5,797
Purchased in- process research and development
—
—
—
—
—
—
25,800
—
25,800
Total operating expenses
3,430
9,258
9,448
15,743
22,828
6,994
37,156
13,715
59,984
Loss from operations
(3,430
)
(9,258
)
(9,448
)
(15,743
)
(22,828
)
(6,994
)
(37,156
)
(13,715
)
(59,984
)
Other Income (Expense):
Contract research income
—
—
—
2,529
—
—
826
1,823
826
Consulting income
1
221
—
—
247
—
—
—
247
Other income (expense), net
39
73
144
(778
)
328
52
93
(353
)
422
Total other income (expense)
40
294
144
1,751
575
52
919
1,470
1,495
Net loss
(3,390
)
(8,964
)
(9,304
)
(13,992
)
(22,253
)
(6,942
)
(36,237
)
(12,245
)
(58,489
)
Accretion of redeemable convertible preferred stock
(390
)
(1,504
)
(2,320
)
(2,319
)
(4,360
)
(1,428
)
(3,457
)
(3,457
)
(7,818
)
Net loss available to common stockholders
$
(3,780
)
$
(10,468
)
$
(11,624
)
$
(16,311
)
$
(26,613
)
$
(8,370
)
$
(39,694
)
$
(15,702
)
$
(66,307
)
Net Loss Per Share, Basic and Diluted:
Loss per share available to common stockholders
$
(6.30
)
$
(7.57
)
$
(4.79
)
$
(3.61
)
$
(5.17
)
Shares used to compute basic and diluted net loss per share
600,000
1,382,723
2,425,592
2,319,573
7,680,211
Pro forma for conversion basic and diluted net loss per share
    available to common stockholders(1)
$
(0.45
)
$
(0.75
)
Shares used to compute pro forma basic and diluted net loss per
    share
25,841,981
53,212,900
(1)
Pro forma for conversion basic and diluted net loss per common
    shares is calculated to give effect to the conversion of all
    outstanding shares of our preferred stock into
    48,408,823 shares of common stock upon the completion of
    this offering, excluding 1,066,274 shares of preferred
    stock held in escrow in connection with the Hormos acquisition
    that will convert into common stock upon the completion of this
    offering.
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Table of Contents
The following table presents a summary of our balance sheet as
of September 30, 2005:
•
on an actual basis;
•
on a pro forma basis to give effect to the automatic conversion
    of all of our outstanding preferred stock into
    48,408,823 shares of our common stock upon the completion
    of this offering; and
•
on a pro forma as adjusted basis to give further effect to
    (1) the required release upon the closing of this offering
    of 3,446,305 shares of common stock held in escrow in
    connection with the Hormos acquisition, including
    1,066,274 shares of common stock issued upon the conversion
    of 1,066,274 shares of preferred stock held in such escrow,
    (2) $6.0 million of indebtedness incurred by us in
    connection with a debt facility we entered into in January 2006
    and (3) the sale of shares of common stock by us in this
    offering at an assumed initial public offering price of
    $          per
    share, after deducting underwriting discounts and commissions
    and estimated offering costs to be paid by us.
As of September 30, 2005
(unaudited)
Pro Forma
Actual
Pro Forma
as Adjusted
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
22,868
$
22,868
$
Working capital(1)
18,785
18,785
Total assets
24,932
24,932
Long-term debt, less current portion
13,608
13,608
Convertible preferred stock
66,736
—
Deficit accumulated during the development stage
(64,014
)
(64,014
)
Total stockholders' equity (deficit)
(62,377
)
4,358
(1)
Represents current assets less current liabilities.
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Table of Contents
RISK FACTORS
Before you invest in our common stock, you should understand
the high degree of risk involved. You should consider carefully
the following risks and other information in this prospectus,
including our historical financial statements and related notes,
before you decide to purchase shares of our common stock. If any
of the following risks actually occur, our business, financial
condition and operating results could be adversely affected. As
a result, the trading price of our common stock could decline
and you could lose part or all of your investment.
Risks Related to Our Company
Risks Related to Drug Discovery, Development and
Commercialization
Clinical trials may fail to adequately demonstrate the
    safety or efficacy of our existing product candidates or any
    future product candidates we may seek to develop, preventing or
    significantly delaying their regulatory approval and
    commercialization.
We will not be able to commercialize any of our product
candidates until we obtain applicable regulatory approvals. To
satisfy FDA or foreign regulatory approval standards for the
commercial sale of our product candidates, we must demonstrate
in adequate and controlled clinical trials that our product
candidates are safe and effective.
Clinical trial programs are expensive, time-consuming and
typically take years to complete. We do not expect to receive
approval for marketing of any of our product candidates for
several years, if at all. In connection with clinical trials, we
face the risks that:
•
the product candidate may not prove to be efficacious;
•
the results may not confirm positive results in earlier clinical
    or preclinical trials;
•
the product candidate may not be well-tolerated, may cause
    harmful side effects or may be subject to adverse or undesirable
    interaction when used with other drugs;
•
patients may die or suffer other adverse medical events for
    reasons that may or may not be related to the product candidate
    being tested;
•
clinical research organizations or other suppliers we contract
    with may not perform as we expect;
•
the results may not meet the level of statistical significance
    required by the FDA or other regulatory agencies; and
•
the FDA or other regulatory agencies may place a clinical hold
    on studies of our product candidates.
In 2006, we initiated a randomized, double-blind,
placebo-controlled, parallel group pivotal study of ospemifene
in the treatment of vaginal atrophy. The primary efficacy
endpoints will be assessed at week 12 and are a change in the
vaginal cell maturation index, change in vaginal pH and
improvement of the most bothersome symptom. Ospemifene is a
selective estrogen receptor modulator, or SERM. No SERM so far
has been approved by the FDA to treat vaginal atrophy. In
addition, some SERMs have been shown to increase the risk of
abnormal thickening of the endometrium, which is the lining of
the uterus, and of deep veinous thrombosis, which are blood
clots in a deep vein of an extremity. Some SERMs have also been
shown to cause increased incidence of hot flashes. We cannot
assure you that these side effects will not be demonstrated with
ospemifene. Lasofoxifene (Oporia), a SERM under development by
Pfizer for the treatment of osteoporosis and vaginal atrophy,
received a non-approvable letter from the FDA for the
osteoporosis indication. The reasons for the FDA's decision
are not publicly known. The FDA has not yet publicly issued a
decision regarding the approval of Oporia for the treatment of
vaginal atrophy.
In the case of fispemifene, initial phase I trials have
demonstrated that fispemifene raises testosterone levels in
older men, but these trials were not specific to the target
population for this product candidate, men with low
testosterone. Testosterone replacement therapy increases
prostate size and may raise prostate specific
8
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antigen, or PSA, levels, a marker for prostate cancer. We cannot
assure you that prostate enlargement and elevated PSA levels
will not be shown in any trials we may conduct with fispemifene.
There is no long-term safety data regarding administration of
SERMs in men, nor has the FDA ever approved a SERM for use in
men. In addition, fispemifene uses the body's normal
feedback mechanism to increase testosterone levels. To date, our
clinical trials have only studied fispemifene in patients with
normal testosterone levels, and we have not yet confirmed that
fispemifene is effective in patients with low testosterone
levels. We cannot assure you that further clinical trials of
fispemifene will not raise safety or efficacy concerns.
QRX-401
is in
phase I clinical trials to assess safety and preliminary
indications of efficacy. To date, we have not observed
consistent LDL cholesterol lowering in normal volunteers
following administration of
QRX-401
in our trials.
These trials are not yet complete and there can be no assurance
that the results of these trials will demonstrate that the use
of
QRX-401
is safe or
effective.
QRX-431
is
in preclinical studies and has not yet been tested in human
clinical trials. The FDA may not allow us to test
QRX-431
in humans,
which would prevent us from further developing this product
candidate. As a result, we cannot yet assess the potential
safety or efficacy of
QRX-431
in humans.
Success in preclinical testing and early clinical trials does
not ensure that later clinical trials will be successful. In
addition, our preclinical product candidates may not demonstrate
sufficient efficacy or safety to allow us to progress to
clinical testing. A number of companies in the pharmaceutical
industry have suffered significant setbacks in advanced clinical
trials, even after obtaining promising results in earlier
clinical trials. Future clinical trials may indicate previously
undetected side effects or fail to demonstrate efficacy in a
statistically significant manner. If we fail to achieve the
primary endpoints in our clinical trials or the results are
ambiguous, we will have to determine whether to redesign our
trials and protocols and continue with additional testing, or
cease development of the product candidate. Redesigning programs
could be extremely costly and time-consuming. Even if we are
able to achieve the primary endpoints of our trials, we may need
positive results from additional clinical trials to support the
filing of a new drug application, or NDA, with the FDA or a
similar application with regulatory authorities in other
countries seeking marketing approval for a product candidate. We
cannot predict how long any additional trial that might be
required by the FDA or regulatory authorities in other countries
will take or what the cost will be. If our clinical trials for
our product candidates are not completed, are significantly
delayed or fail to demonstrate that the product candidates are
safe and effective, our business prospects would be harmed and
our stock price would likely decline.
Delays in clinical trials could result in increased costs
    to us and delay our ability to obtain regulatory approval and
    commercialize our product candidates.
Significant delays in clinical trials could materially affect
our product development costs and delay regulatory approval of
our product candidates. We do not know whether planned clinical
trials will begin on time, will need to be redesigned or will be
completed on schedule, if at all. Clinical trials can be delayed
for a variety of reasons, including:
•
delays or failures in obtaining regulatory approval to commence
    a trial;
•
delays or failures in obtaining clinical materials and
    manufacturing sufficient quantities of the product candidate for
    use in trials;
•
an inability to find a sufficient number of clinical
    investigators capable of running our clinical trials, or
    clinical research organizations and other suppliers of materials
    or services capable of providing support for our clinical trials;
•
delays or failures in reaching agreement on acceptable clinical
    trial agreement terms with prospective sites;
•
delays or failures in obtaining approval of our clinical trial
    protocol from an institutional review board to conduct a study
    at a prospective site;
•
delays in recruiting patients to participate in a study;
•
failure of our clinical investigation sites and related
    facilities to be in compliance with the applicable protocol or
    applicable legal and regulatory requirements, including the
    FDA's Good Clinical Practices;
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Table of Contents
•
unforeseen safety issues;
•
inability to monitor patients adequately during or after
    treatment;
•
difficulty monitoring multiple clinical sites; and
•
failure of our third-party clinical trial managers and other
    suppliers of material or services to satisfy their contractual
    duties, comply with regulations or meet expected deadlines.
Completion of clinical trials depends, among other things, on
our ability to enroll a sufficient number of patients who remain
in a study until its conclusion, which depends on many factors,
including:
•
the patient eligibility criteria defined in the applicable
    protocol;
•
the size of the patient population required for analysis of the
    trial's therapeutic endpoints;
•
the proximity of patients to clinical sites;
•
the adherence of patients to the applicable protocol;
•
the design of the applicable protocol;
•
our ability to recruit clinical trial investigators with the
    appropriate competencies and experience;
•
our ability to obtain and maintain patient consents; and
•
competition for patients by clinical trial programs for other
    treatments.
Difficulties in enrolling patients in our clinical trials could
increase the costs or affect the timing or outcome of clinical
trials.
If we fail to obtain regulatory approvals in the United
    States for our product candidates, we will not be able to
    generate revenue in the United States market from the
    commercialization of our product candidates.
We must receive FDA approval for our product candidates for an
indication at a particular dose before we can commercialize or
sell these product candidates in the United States for that
indication. The FDA can limit, delay or deny its approval for
many reasons, including:
•
a product candidate may be found to be unsafe or ineffective;
•
regulators may interpret data from preclinical testing and
    clinical trials differently and less favorably than we do;
•
regulators may not approve the manufacturing processes or
    facilities that we use; and
•
regulators may change or initiate new requirements for approval
    at any time, many of which are unwritten.
We may incur additional costs from any significant delay in
obtaining FDA approval and delays may diminish any competitive
advantages that we have. Even if we obtain FDA approval, our
product candidates may not be approved for all indications that
we request, which could limit the uses of our products and
adversely impact our potential royalties and product sales. If
FDA approval of a product is granted, such approval will be
limited to the indicated uses for which the product may be
marketed and may require costly post-marketing
follow-up
studies, and
the FDA approved labeling may carry warnings or restrictions
that detract from the market acceptance of the product.
If we fail to obtain regulatory approvals in countries
    outside of the United States for our product candidates, we will
    not be able to generate revenue in such countries from the
    commercialization of product candidates.
In order to market our products outside of the United States, we
must comply with numerous and varying regulatory requirements of
other countries. Approval procedures vary among countries and
can involve additional product testing and additional
administrative review periods. Additional separate pricing
10
Table of Contents
approval procedures may be required prior to commercialization
in such countries. The time required to obtain approval in other
countries might differ from that required to obtain FDA approval
in the United States. The regulatory approval process in other
countries may include all of the risks detailed above regarding
FDA approval as well as additional risks. Regulatory approval in
one country does not ensure regulatory approval in another, but
a failure or delay in obtaining regulatory approval in one
country may negatively impact the regulatory process in others.
Failure to obtain regulatory approval in other countries or any
delay or setback in obtaining such approval could have the same
adverse effects detailed above regarding FDA approval in the
United States.
Even if we obtain regulatory approval, our marketed
    products will be subject to ongoing regulatory review. If we
    fail to comply with continuing United States and foreign
    regulations, we could lose approvals to market our products and
    our business would be seriously harmed.
Following initial regulatory approval of any products we may
develop, we and our suppliers will be subject to continuing
regulatory review, including review of adverse drug experiences
and clinical results that are reported after our products become
commercially available. These post-approval clinical results
would include results from any post-marketing tests or vigilance
required as a condition of approval. The subsequent discovery of
previously unknown problems with the product, such as an adverse
side effect, may result in restrictions on the product or
withdrawal of the product from the market. The labeling,
packaging, storage, disposal, advertising, promotion and record
keeping related to the product will also continue to be subject
to extensive regulation. In addition, the manufacturer and
manufacturing facilities we use to make any of our product
candidates will be subject to periodic review and inspection by
the FDA and foreign regulatory agencies. If a previously unknown
problem or problems with a product or a manufacturing or
laboratory facility used by us is discovered, the FDA and any
foreign regulatory agency may impose restrictions on that
product or on the manufacturing facility, including requiring us
to withdraw the product from the market. Any changes to an
approved product, including the way it is manufactured or
promoted, often require regulatory approval before the product,
as modified, can be marketed. If we, our contract manufacturers
or any of our other suppliers fail to comply with applicable
regulatory requirements, a regulatory agency may:
•
issue warning letters;
•
impose civil or criminal penalties;
•
suspend or withdraw our regulatory approval;
•
seize or detain products or require a product recall;
•
suspend any of our ongoing clinical trials;
•
impose restrictions on our operations;
•
refuse to approve pending applications or supplements to
    approved applications filed by us; or
•
close the facilities of our contract manufacturers.
Even if we receive regulatory approval to market our
    product candidates, the market may not be receptive to our
    products, which would negatively affect our ability to achieve
    profitability.
If approved for marketing, the commercial success of our product
candidates will depend upon their acceptance by physicians and
the medical community, patients, and private, government and
third-party payors as clinically useful, safe and cost-effective
therapeutics. The degree of market acceptance of any of our
approved products will depend upon a number of factors,
including:
•
the indication for which the product is approved, as well as its
    approved labeling;
•
the establishment and demonstration in the medical community of
    the safety and efficacy of our products;
•
the prevalence and severity of adverse side effects;
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•
the potential advantages of such products over existing and
    future treatment methods;
•
the relative convenience, tolerability and ease of
    administration of our products;
•
the strength of sales, marketing and distribution support;
•
the price and cost-effectiveness of the product;
•
the willingness of third parties to include the product on their
    drug formularies; and
•
sufficient third-party reimbursement.
We are aware that a significant number of product candidates are
currently under development and may become available in the
future for the treatment of endocrine diseases of aging,
elevated cholesterol levels and psoriasis, and may be approved
prior to any of our products coming to market. Even if our
products achieve market acceptance, we may not be able to
maintain that market acceptance over time if new therapeutics
are introduced that are safer or more effective than our
products or are more favorably received than our products. In
addition, market acceptance can be impacted if previously
unknown problems with our products are subsequently discovered.
If our products do not achieve and maintain market acceptance,
we will not be able to generate sufficient revenue from product
sales to attain profitability.
We have no experience selling, marketing or distributing
    products and have minimal capabilities to do so.
If we receive regulatory approval to commence commercial sales
of any of our product candidates, we will need to establish a
sales and marketing organization with appropriate technical
expertise and distribution capability or identify collaborators
who have sales and marketing organizations. At present, we have
a Chief Business Officer who has marketing experience, but we
have no other sales or marketing employees. Factors that may
impede our efforts to commercialize our products through our own
sales and marketing organization include:
•
significant costs associated with building a sales, marketing
    and distribution organization;
•
difficulty recruiting and retaining adequate numbers of
    effective sales and marketing personnel;
•
the inability of sales personnel to obtain access to, or
    persuade adequate numbers of, physicians to prescribe our
    products; and
•
the lack of complementary products to be offered by sales
    personnel, which may put us at a competitive disadvantage to
    companies with broader product lines.
Even if we are able to develop our own sales and marketing
organization, we may not be able to compete effectively against
our competitors, many of which will include pharmaceutical
companies with substantially greater resources and larger sales
and marketing staffs than we are likely to have.
As an alternative to establishing our own sales and marketing
organization, we may attempt to engage pharmaceutical or other
health care companies with existing distribution systems and
direct sales and marketing organizations to assist us. If we
were to seek marketing partners or collaborators, we may not be
able to negotiate favorable distribution or partnering
arrangements, if at all. To the extent we enter co-promotion,
co-marketing or other licensing arrangements, the amount of
revenues we receive from the sale of our products will depend on
the efforts of third parties and will not be under our control.
Risks Related to Our Financial Performance and Operations
We have a history of losses, and we may never achieve
    profitability.
Since our inception, we have incurred significant net losses,
including net losses of $36.2 million and $9.3 million
for the nine months ended September 30, 2005 and the year
ended December 31, 2004, respectively. As of
September 30, 2005, our cumulative net loss was
$58.5 million. We have not yet completed the development,
including obtaining regulatory approvals, of any of our product
candidates and, consequently, have not generated revenues from
the sale of products. Even if we succeed in developing and
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commercializing one or more of our product candidates, we expect
to incur substantial losses for the foreseeable future. We also
anticipate that our expenses will increase substantially in the
foreseeable future as we:
•
continue the development of our product candidates and
    preclinical programs;
•
begin clinical development of our preclinical programs;
•
prepare for commercialization of our product candidates;
•
expand our portfolio of product candidates;
•
increase our administrative functions; and
•
hire additional personnel.
We also expect to experience negative cash flow from operations
for the foreseeable future as we fund our operating losses. We
will need to generate significant revenues to achieve
profitability. We may not be able to generate significant
revenues, and we may never achieve profitability. Our failure to
fund our continuing losses or achieve profitability would
negatively impact the market price of our common stock. Even if
we do become profitable, we may not be able to sustain or
increase profitability on a quarterly or annual basis.
If we cannot raise additional capital on acceptable terms,
    we may be unable to complete planned clinical and preclinical
    trials, obtain regulatory approvals or commercialize our product
    candidates.
We believe that our existing cash reserves, together with
available borrowings under our credit facility and proceeds from
this offering, will fund our planned activities for at least the
next 18 months. We will require substantial future capital
in order to continue to conduct the research and development,
preclinical and clinical programs and regulatory activities
necessary to bring our product candidates to market. During the
nine months ended September 30, 2005, our net cash used in
operating activities was $10.4 million. We expect our rate
of cash used in operating activities will increase as we
undertake large and costly phase III trials for ospemifene
and continue to advance other product candidates. Our future
capital requirements depend on many factors, including:
•
the progress of preclinical development and clinical trials;
•
the number of product candidates we pursue or the expansion of
    existing product candidates to new indications;
•
the discovery, in-licensing or acquisition of additional product
    candidates or technologies that require financial commitments;
•
the time and costs involved in obtaining regulatory approvals,
    and the number of different regulatory agencies we seek approval
    from;
•
delays that may be caused by evolving requirements of regulatory
    agencies;
•
our plans to establish sales, marketing and distribution
    capabilities;
•
the cost and timing of securing manufacturing capabilities for
    our product candidates and commercial products, if any;
•
the terms and timing of any collaborative, licensing and other
    arrangements we may establish;
•
the costs involved in filing, maintaining and prosecuting patent
    applications and enforcing or defending patent claims;
•
our revenues, if any, from successful development and
    commercialization of our products;
•
the costs of being a public company; and
•
the number of additional employees we hire.
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We may seek additional funding through private or public sales
of our equity securities, debt financing or corporate
collaborations or licensing arrangements. To the extent that we
raise additional funds by issuing equity securities, our
existing stockholders may experience dilution. Debt financing
may subject us to restrictive covenants that could limit our
flexibility in conducting future business activities. To the
extent that we raise additional funds through collaboration or
licensing agreements, it will be necessary to relinquish some
commercial rights to our clinical product candidates. Our
ability to raise additional funds will depend on financial,
economic and market conditions in the pharmaceutical industry,
general market conditions and other factors, many of which are
beyond our control. We may not be able to obtain additional
funding on favorable terms, or at all. If we cannot obtain
adequate funds, we may:
•
delay, reduce the scope or eliminate some of our preclinical
    development or clinical trials for one or more of our product
    candidates;
•
delay establishment of, or decide not to establish,
    manufacturing, sales, marketing and distribution capabilities;
•
curtail significant product development programs that are
    designed to identify new product candidates;
•
be unable to acquire technologies or pursue other business
    opportunities that require financial commitments; and/or
•
sublicense certain patents and patent applications, cease the
    prosecution and maintenance of certain patents and applications
    on a country-by-country basis, or otherwise relinquish some or
    all rights to our product candidates.
Our research and development program is funded in part by
    Finnish government agencies, and in order to maintain this
    funding and obtain additional funding from these agencies, we
    are required to comply with their requirements. If we fail to
    comply, we may lose government funding for our research and
    development programs in Finland.
Tekes, the National Technology Agency of Finland, is one of the
main public financers of technology research and development
programs in Finland. Tekes provides financial aid and loans on
favorable terms to qualifying companies in Finland. These loans
are granted on a project-by-project basis, generally carry
interest at below market rates and generally are not required to
be repaid for several years. Under Finnish law, interest and
principal on these loans are not repayable unless we have
adequate equity capital. As of September 30, 2005, we had
approximately $15.5 million in principal and accrued
interest outstanding with respect to these loans and
$2.4 million in outstanding advances from Tekes that relate
to several separate projects. The terms, conditions and
reporting requirements of the loans are set forth in loan
documents entered into with respect to each separate project
loan, and in the general terms and conditions published by
Tekes. Some of the loan terms may be subject to interpretation
by Tekes and us and may not provide definitive guidance as to
whether we are in compliance with them. Under the terms of the
loans, Tekes has the right to accelerate the loans in whole or
in part under a number of circumstances, including if:
•
significant changes in the funded programs occur;
•
changes in the conditions required by the research work occur
    such that continuing the research work is not expedient;
•
we use the funding for purposes other than those for which they
    were granted; or
•
we otherwise fail to comply with the loan terms.
We believe we are in compliance in all material respects with
all these requirements. However, if Tekes were to find that we
are not in compliance with the terms of the loans or the other
requirements, Tekes may have the right to stop funding loans and
to require repayment of outstanding loans. If Tekes were to
require us to repay all of the outstanding loans, it could have
a material adverse effect on us. If Tekes were to refuse to
provide additional funding, we would be required to seek
alternative funding for our research and development programs in
Finland and if such funding were not available, to reduce the
scope or eliminate
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some of our research and development programs. Such alternative
funding may not be available to us on acceptable terms, or at
all.
Our secured loan agreement contains various covenants that
    may restrict our business and financing activities.
On January 26, 2006, we entered into an $18.0 million
secured loan agreement with a third party lender. Loans under
the agreement are secured by substantially all of our assets
other than our intellectual property rights, and additionally,
the agreement contains covenants that, among other things,
restrict our ability to:
•
borrow money;
•
pay cash dividends on our capital stock, including on the shares
    of our common stock sold in this offering;
•
repurchase or redeem our capital stock;
•
make certain types of investments;
•
create liens;
•
use assets as security in other transactions;
•
sell certain assets; and
•
enter into certain transactions with our employees, officers or
    directors.
These restrictions may limit our operational flexibility. Any
failure to comply with the restrictions of the secured loan
agreement may result in an event of default. Such default may
allow the lender to accelerate maturity of our obligations under
the agreement. If our debt were to be accelerated, we cannot
assure you that we would be able to repay it. In addition, our
default could give our lenders the right to terminate any
commitments they had made to provide us with additional funds.
We may have difficulty managing the integration of Hormos
    and we may be exposed to liabilities from its prior
    operations.
In May 2005, we completed the acquisition of Hormos, a privately
held Finnish company focused on discovering and developing novel
hormonal therapies for age-related endocrine deficiencies in men
and women. The Hormos acquisition provided us with over 30
employees based in Finland, as well as multiple office locations
in Finland. The process of integrating Hormos has required and
continues to require a significant amount of resources and
management attention which detracts from attention to our
day-to
-day business.
Our ability to manage the continued integration of Hormos will
require us to continue to improve our operational, financial and
management information systems and controls. If we fail to
manage the integration of Hormos effectively it could have a
material adverse effect on our results of operations.
In addition, as a result of the Hormos acquisition, we may be
subject to contingent liabilities resulting from Hormos's
operations before we acquired it, including liabilities
resulting from the operation of Finnish law. Although we may
have some recourse to the sellers of the business under our
acquisition agreements, we may not be fully covered for
contingent liabilities.
If we are unable to retain any of our key executives or if
    we are unable to recruit and retain other qualified personnel as
    we grow our business, it may be more difficult for us to execute
    our business strategy.
We believe that one of our strengths lies in the drug
development and commercialization skills and experience of our
senior management. Accordingly, we are highly dependent on our
four founders: Chief Executive Officer, Robert Zerbe, M.D.,
Chief Scientific and Regulatory Officer, Stuart
Dombey, M.B., Chief Medical Officer, Randall
Whitcomb, M.D. and Chief Business Officer, Christopher
Nicholas. We have key-man insurance on these members of our
management team, but we do not have employment agreements with
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them. The loss of any of our key employees and our inability to
fill these positions with equally qualified employees could
impede the achievement of our development objectives. As we grow
our business, our success will also depend on our ability to
hire additional qualified personnel. We may be unable to attract
and retain personnel on acceptable terms given the competition
for experienced scientists among biotechnology, pharmaceutical
and health care companies, universities and non-profit research
institutions. If we are unsuccessful in our recruitment efforts,
we may be unable to execute our strategy.
We will need to increase the size of our organization, and
    we may encounter difficulties managing our growth.
As of December 31, 2005, we had 19 employees in Ann Arbor
and 39 employees in Finland. We plan to hire several
additional employees as required each year to add depth and
specialized expertise to our scientific and management team. We
expect that any substantial growth would place a strain on our
administrative and operational infrastructure. If the product
candidates that we are developing continue to advance in
clinical trials, we will need to expand our development,
regulatory, manufacturing, quality, sales, marketing and
distribution capabilities or contract with third parties to
provide these capabilities for us. As our operations expand, we
expect that we will need to develop additional relationships
with various collaborators, contract research organizations,
suppliers, manufacturers and other organizations. We may not be
able to establish such relationships or may incur significant
costs to do so. Our ability to manage our growth will also
require us to continue to improve our operational, financial and
management controls, reporting systems and procedures, which
will further increase our operating costs.
In addition to our operations in Ann Arbor, Michigan, we
    operate two facilities in Finland. If we are unable to manage
    the challenges associated with our international operations, the
    growth of our business could be limited.
In May 2005, we acquired our wholly owned subsidiary Hormos, a
Finnish company. Prior to acquiring Hormos, we had never
conducted operations outside of the United States. We are
subject to a number of risks and challenges that specifically
relate to these international operations. Our international
operations may not be successful if we are unable to meet and
overcome these challenges, which could limit the growth of our
business and may have an adverse effect on our business and
operating results. These risks include:
•
difficulty managing operations in multiple locations;
•
local regulations that may make it more difficult to conduct our
    research and development activities;
•
foreign protectionist laws and business practices that favor
    local competition;
•
failure of local laws to provide the same degree of protection
    against infringement of our intellectual property; and
•
understanding legal requirements that differ from those of the
    United States and keeping abreast of changes in those
    requirements.
Hormos conducts business in Euros. However, we fund a portion of
the operations of Hormos through intercompany financing
denominated in United States dollars. We are exposed to
fluctuations in exchange rates, which could result in losses and
have an adverse impact on our results of operations. We have no
control over the factors that generally affect these risks, such
as economic, financial and political events and the supply and
demand for the applicable currencies. Because we have foreign
operations, fluctuations in foreign exchange rates could have a
material effect on our operating results.
Because we have operated as a private company, we have no
    experience complying with public company obligations, including
    the Sarbanes-Oxley Act. Complying with these requirements will
    increase our costs and require additional management
    resources.
We are a small company with limited resources. We have operated
as a private company, not subject to the requirements applicable
to public companies. We will need to expand our staff when we
become a public
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company, and we may encounter difficulty attracting qualified
staff with requisite experience due to the high level of
competition for experienced personnel.
As directed by Section 404 of the Sarbanes-Oxley Act, the
SEC adopted rules requiring public companies to include a report
of management on the company's internal controls over
financial reporting in their annual reports on
Form
10-K.
In
addition, the public accounting firm auditing the company's
financial statements must attest to and report on
management's assessment of the effectiveness of the
company's internal controls over financial reporting. This
requirement will first apply to our annual report on
Form
10-K
for our
fiscal year ending December 31, 2007. We may be unable to
comply with applicable deadlines. In addition, if we are unable
to conclude that we have effective internal controls over
financial reporting or, if our independent auditors are unable
to provide us with an unqualified report as to the effectiveness
of our internal controls over financial reporting as required by
Section 404 of the Sarbanes-Oxley Act, investors could lose
confidence in the reliability of our financial statements.
Risks Related to Our Dependence on Third Parties
We rely on independent clinical investigators and contract
    research organizations to conduct clinical trials, and they may
    not be diligent, careful or timely, which may delay development
    and commercialization of our product candidates.
We rely almost exclusively on independent clinical investigators
and contract research organizations (CROs) to conduct our
clinical trials and to perform data collection and analysis.
These investigators are not our employees, and we cannot control
the amount of time or resources that they devote to our product
development programs. These investigators may fail to devote
sufficient time and resources to our programs, fail to enroll
patients as rapidly as expected, or otherwise fail to perform in
a satisfactory manner, potentially delaying regulatory approval
of our product candidates. Failure of the CROs to meet their
obligations under our agreements could adversely affect clinical
development of our product candidates. These independent
investigators and CROs may also have relationships with other
commercial entities, some of which may compete with us.
We rely on third party manufacturers to manufacture our
    product candidates. If these third party manufacturers fail to
    manufacture product candidates of satisfactory quality, in a
    timely manner, in sufficient quantities or at acceptable costs,
    development and commercialization of our product candidates
    could be delayed.
We have no manufacturing facilities, and we have no experience
in the commercial manufacturing of drugs or in designing drug
manufacturing processes. We have contracted with third party
manufacturers to produce our product candidates for clinical
trials. We have limited supplies of our product candidates for
clinical trials. If our supplies are damaged or destroyed,
either during storage or shipping or otherwise, our clinical
trials may be delayed, which could have a material adverse
effect on our business. We intend to rely on third party
contract manufacturers to manufacture, supply, store and
distribute commercial quantities of our product candidates. We
will also rely on our third party manufacturing partners to work
with us to complete the Chemistry, Manufacturing and Control, or
CMC, section of any NDAs or other marketing approval
applications we may file.
Contract manufacturers are obliged to operate in accordance with
government mandated obligations, including FDA-mandated current
good manufacturing practices, or cGMPs. A failure of any of our
contract manufacturers to establish and follow cGMPs or to
document their adherence to such practices may lead to
significant delays in the availability of material for clinical
trials and may delay or prevent filing or approval of marketing
applications for our products.
Changing contract manufacturers may be difficult, and the number
of potential manufacturers is limited. Changing manufacturers
requires re-validation of the manufacturing processes and
procedures in accordance with government mandated obligations,
including FDA-mandated cGMPs. Such re-validation may be costly
and time-consuming. It may be difficult or impossible for us to
find replacement manufacturers on acceptable terms quickly, if
at all. Either of these factors could delay or prevent the
completion of our clinical trials, the
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approval of our product candidates by the FDA or other
regulatory agencies, or the commercialization of our products,
result in higher costs, or cause a decline in potential product
revenues.
Drug manufacturers are subject to on-going, periodic unannounced
inspections by the FDA and corresponding state and foreign
agencies to ensure strict compliance with cGMPs, other
government regulations and corresponding foreign standards.
While we are obligated to audit the performance of third party
contractors, we do not have control over our third party
manufacturers' compliance with these regulations and
standards. Failure by our third party manufacturers or us to
comply with applicable regulations could result in sanctions
being imposed on us, including fines, injunctions, civil
penalties, failure of the government to grant market approval of
drugs, delays, suspension of clinical trials, withdrawal of
approvals, seizures, detentions or recalls of product, operating
restrictions and criminal prosecution.
To date, our product candidates have been manufactured in small
quantities by third party manufacturers for preclinical and
clinical trials. In order to obtain marketing approval for any
of these product candidates, we will need to enter into
long-term supply agreements with our existing or new third party
manufacturers and demonstrate that we can manufacture sufficient
quantities for commercial sale. Our third party manufacturers
may not be able to successfully increase their manufacturing
capacity or apply at commercial scale the current manufacturing
process for any of our product candidates in a timely or
economic manner, or at all. This may require seeking out
additional manufacturing partners who may have different
equipment requiring additional validation studies, which the
relevant government regulator must review and approve. If we are
unable to successfully increase the manufacturing capacity for a
product candidate, the regulatory approval or commercial launch
of that product candidate may be delayed or there may be a
shortage in the supply of the product candidate. Our product
candidates require precise, high-quality manufacturing. The
failure of our third party manufacturers to achieve and maintain
these high manufacturing standards, including the incidence of
manufacturing errors, could result in patient injury or death,
product recalls or withdrawals, delays or failures in product
testing or delivery, cost overruns or other problems that could
seriously harm our business.
We may not succeed in entering into collaborations with
    partners at the later stages of developing our product
    candidates.
Our business strategy, in part, includes entering into
collaborations, licenses or marketing and distribution
arrangements with corporate partners, primarily pharmaceutical
companies, for later stage development, commercialization,
marketing and distribution of certain of our product candidates.
To date, we have not entered into any collaboration agreements.
We intend to seek collaborators in cases where a product
candidate is not within the endocrine, metabolic or
cardiovascular therapeutic areas or where we think the product
candidate would benefit from the resources of a larger
pharmaceutical company. For instance, because becocalcidiol is
outside our core therapeutic areas, we are evaluating
alternatives for further developing this product candidate,
including seeking a partner for further development and
commercialization. We have been in discussions with potential
partners for becocalcidiol, but have not yet reached an
agreement. We cannot assure you that we will be able to reach an
agreement on commercially reasonable terms, if at all. If we
fail to reach agreement with collaborators, we will have to
incur substantial additional costs to complete development of
our product candidates and begin commercialization. If we
determine that we do not have access to sufficient cash or
funding to meet these costs, we may be forced to stop developing
these product candidates, either temporarily or permanently,
which would adversely affect our business.
If we are successful in entering into collaborations, we will
face the following risks:
•
collaborators may under-fund or not commit sufficient resources
    to the testing, marketing, distribution or development of our
    product candidates;
•
collaborators may fail to perform their obligations with respect
    to the testing, marketing, distribution or development of our
    product candidates;
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•
collaborators may not properly maintain or defend our
    intellectual property rights, or they may utilize our
    proprietary information in such a way as to invite litigation
    that could jeopardize or potentially invalidate our proprietary
    information or expose us to potential liability;
•
collaborators may encounter conflicts of interest, changes in
    business strategy or other business issues, which could
    adversely affect their willingness or ability to fulfill their
    obligations to us; and
•
disputes may arise between us and our collaborators delaying or
    terminating the research, development or commercialization of
    our product candidates, resulting in significant litigation or
    arbitration that could be time-consuming and expensive, or
    causing collaborators to act in their own self-interest and not
    in our interest.
If we fail to enter into additional in-licensing or
    acquisition agreements or if these arrangements are
    unsuccessful, our business and operations might be adversely
    affected, and if we engage in any acquisition or in-licensing,
    we will incur a variety of costs, and we may never realize the
    anticipated benefits of the transaction.
Since our inception, we have in-licensed or acquired all of our
product candidates. One of our strategies for expanding our
business is the in-licensing and acquisition of products and
additional product candidates. The success of this strategy
depends upon our ability to identify, select and acquire the
right pharmaceutical product candidates and products. We may be
unable to enter into any additional in-licensing or acquisition
agreements because suitable products or product candidates that
are within our expertise may not be available to us on terms
that are acceptable to us or because competitors with greater
resources seek to in-license the same products or product
candidates. Product candidates that we would like to develop may
not be available to us because they are controlled by
competitors who are unwilling to license the rights to the
product or product candidate to us. If we are unable to enter
into additional agreements to license products or product
candidates, or if these arrangements are unsuccessful, our
ability to execute our business strategy could be adversely
affected.
Although we currently have no commitments or agreements with
respect to any acquisitions, if we undertake an acquisition, the
process of integrating the acquired business, technology,
services, product or programs may result in unforeseen operating
difficulties and expenditures and may divert significant
management attention from our on-going business operations.
Moreover, we may fail to realize the anticipated benefits of any
acquisition for a variety of reasons, such as an acquired
product candidate proving to not be safe or effective in later
clinical trials. We may fund any future acquisition by issuing
equity or equity-linked securities, which could dilute the
ownership percentage of our equity holders. We may also incur
debt to pay for an acquisition. The holders of the debt would
have priority over equity holders in the event of a subsequent
liquidation or bankruptcy, which would impair value for our
equity holders. Acquisition efforts can require substantial
expenditures, which could detract from our other programs. In
addition, we may devote resources to potential acquisitions that
are never completed.
Risks Related to Our Intellectual Property
If we are unable to protect our intellectual property
    rights, our competitors may develop and market products with
    similar features and our ability to commercialize our potential
    products could suffer.
The following factors are important to our success:
•
receiving patent protection for our product candidates;
•
maintaining patent protection for products or product candidates
    we have licensed and enforcing our license agreements;
•
preventing others from infringing our intellectual property
    rights; and
•
maintaining our patent and trademark rights and trade secrets.
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We will be able to protect our intellectual property rights from
unauthorized use by third parties only to the extent that such
intellectual property rights are covered by valid and
enforceable patents and trademarks or are effectively maintained
as trade secrets.
We try to protect our proprietary position by filing U.S. and
foreign patent applications related to our important proprietary
technology, inventions and improvements. Because the patent
position of pharmaceutical companies involves complex legal,
administrative and factual questions, the issuance, scope,
validity and enforceability of patents cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated,
circumvented or rendered unenforceable. U.S. patents and
patent applications may also be subject to interference
proceedings, U.S. patents may be subject to reexamination
or reissue proceedings in the U.S. Patent and Trademark
Office, or PTO, and foreign patents may be subject to opposition
or comparable proceedings in corresponding foreign patent
offices. These proceedings could result in either loss of the
patent or denial of the patent application or loss or reduction
in the scope of one or more of the claims of the patent or
patent application. In addition, such interference,
reexamination, reissue and opposition proceedings may be costly.
Thus, any patents that we own or license from others may not
provide any protection against competitors. Furthermore, an
adverse decision in an interference proceeding can result in a
third party receiving the patent rights sought by us, which in
turn could affect our ability to market a potential product to
which that patent filing was directed.
Our pending patent applications, those we may file in the
future, or those we may license from third parties, may not
result in patents being issued. The issuance of a patent is not
conclusive as to its validity or its enforceability and may not
provide us with proprietary protection or competitive advantages
against competitors with similar compounds. Furthermore, others
may independently develop more effective compounds, designs or
methods. We also rely on third party payment services for the
payment of patent annuities and other fees. Non-payment or delay
in payment of such fees, whether intentional or unintentional,
may result in loss of patents or patent rights important to our
business.
In addition, our ability to enforce our patent rights depends on
our ability to detect infringement. It is difficult to detect
infringers who do not advertise the compounds that are used in
their products. Moreover, it may be difficult or impossible to
detect infringement in a competitor's or potential
competitor's product. Any litigation to enforce or defend
our patent rights, even if we were to prevail, could be costly
and time-consuming and would divert the attention of our
management and key personnel from our business operations.
We also rely on our licensors to protect our intellectual
    property rights, and if our licensors fail to adequately protect
    this intellectual property or if we do not have exclusivity for
    the marketing of our products, our ability to commercialize
    products could suffer.
We are a party to a number of licenses that give us rights to
third party intellectual property that is necessary for our
business. In some of these cases, our licensors have retained
the right to prosecute and defend the intellectual property
rights licensed to us. We depend in part on the ability of our
licensors to obtain, maintain and enforce patent protection for
our licensed intellectual property. Our licensors may not
successfully prosecute the patent applications that we have
licensed. Even if patents issue in respect of these patent
applications, our licensors may fail to maintain these patents,
may determine not to pursue litigation against other companies
that are infringing these patents, or may pursue such litigation
less aggressively than we would. Without protection for the
intellectual property we license, other companies might be able
to offer substantially identical products for sale, which could
adversely affect our competitive business position and harm our
business prospects.
We are dependent on patents and proprietary technology
    licensed from others. If we lose our licenses for any of our
    product candidates, we may not be able to continue developing
    such product candidates.
We have obtained many of our product candidates pursuant to
licenses that give us rights to third party intellectual
property that is necessary or useful to our business. The
license agreements covering our product candidates impose
various diligence, commercialization, royalty and other
obligations on us. One or more of our licensors may allege that
we have breached our license agreement with them, and
accordingly seek to
20
Table of Contents
terminate our license. If we materially breach the obligations
in our license agreements, the licensor typically has the right
to terminate the license and we may not be able to market
products that were covered by the license, which could adversely
affect our competitive business position and harm our business
prospects. In addition, any claims brought against us by our
licensors could be costly and time-consuming and would divert
the attention of our management and key personnel from our
business operations.
Claims that we infringe a third party's intellectual
    property may give rise to burdensome litigation, result in
    potential liability for damages or stop our development and
    commercialization efforts.
Third parties may assert patent or other intellectual property
infringement claims against us with respect to technologies used
in our potential products. While we have conducted patent
searches to determine whether our product candidates infringe
patents held by third parties, due to the inherent uncertainty
in conducting patent searches, we cannot assure you that all
relevant patents were identified. In addition, we expect that
numerous patent applications are currently pending and may be
filed in the future for products generally related to our
product candidates, including many patent applications that
remain confidential after filing. Due to these factors, we
cannot assure you that our product candidates do not infringe
the patent rights of third parties.
A third party holds an issued United States patent related to
the use of an anti-estrogen for use in the treatment of androgen
deficiency and related disorders. Zonagen, Inc., a
pharmaceutical company also developing a treatment for
testosterone deficiency in men using a compound that is named in
the patent, requested a reexamination of this patent from the
PTO on the grounds that the claims of the third party's
patent were invalid because they were disclosed in printed
publications before the date of the invention. In June 2005, the
PTO determined that the claims, as amended during this
reexamination, were patentable in view of the publications under
consideration. Zonagen has subsequently stated in its public
filings that it intends to seek further reexamination of this
third party patent based on additional prior art publications
not previously considered by the PTO. If, as a result of this
further reexamination, the patentability of the claims is
confirmed by the PTO, the patent's scope could cover our
intended use of fispemifene. If Zonagen is not successful in its
attempt to invalidate all of the claims of the patent, our
intended use may be covered by any surviving claims. The patent
holder could bring a claim against us alleging that our
fispemifene product candidate infringes the patent. We believe
we would have valid defenses to any such claim; however,
notwithstanding any defenses we may assert, if such an
infringement claim were successful, we would need to obtain a
license from the patent holder in order to commercialize
fispemifene in the United States. If such a license were
necessary but not available to us on acceptable terms or at all,
we may not be able to commercialize fispemifene at all in the
United States.
The owners or licensees of this or other patents may file one or
more infringement actions against us. Patent litigation can
involve complex factual and legal questions, and its outcome is
uncertain. Any claim relating to infringement of patents that is
successfully asserted against us may require us to pay
substantial damages for past use of the asserted intellectual
property and a royalty going forward if we are forced to take a
license. Even if we were to prevail, any litigation could be
costly and time-consuming and would divert the attention of our
management and key personnel from our business operations. As a
result of a patent infringement suit brought against us, we may
be forced to stop or delay developing, manufacturing or selling
potential products that are claimed to infringe a third
party's intellectual property unless that party grants us
rights to use its intellectual property and we may be subject to
damages. In such cases, we may be required to obtain licenses to
patents or proprietary rights of others in order to continue to
commercialize our products. However, we may not be able to
obtain any required licenses on acceptable terms, or at all.
Even if we were able to obtain rights to the third party's
intellectual property, these rights may be non-exclusive,
thereby giving our competitors access to the same intellectual
property, and any license may be royalty bearing. As a result of
third party claims, we may be forced to redesign or rename our
products to avoid infringing the intellectual property rights of
third parties, which may not be possible and could be costly and
time-consuming if it is possible to do. Ultimately, we may be
unable to commercialize some of our product candidates or may
have to discontinue development of product candidates or cease
some of our business
21
Table of Contents
operations as a result of patent infringement claims or due to
our failure to license essential technology, which could
severely diminish our commercial prospects and harm our
financial condition.
We are subject to the patent laws of countries other than
    the United States, which may not offer the same level of patent
    protection and may require us to pay royalties to employee
    inventors that are not yet determinable.
Many countries, including certain countries in Europe, have
compulsory licensing laws under which a patent owner may be
compelled to grant licenses to third parties (for example, the
patent owner has failed to "work" the invention in
that country, or the third party has patented improvements). In
addition, many countries limit the enforceability of patents
against government agencies or government contractors. In these
countries, the patent owner may have limited remedies, which
could materially diminish the value of the patent. Moreover, the
legal systems of certain countries, particularly certain
developing countries, do not favor the aggressive enforcement of
patent and other intellectual property protection which makes it
difficult to stop infringement.
Under Finnish law, current and former employees of Hormos are
entitled to "fair and reasonable compensation" upon
commercialization of intellectual property developed by them and
transferred to Hormos. Hormos has a policy in place for the
calculation of the royalties due to employees that we believe
conforms to the statutory requirements. The potential royalty
payments depend on the type of assignment and the stage of
development of the invention, among other things. We believe
that all current employees of Hormos are bound by the policy of
Hormos which determines the amount of royalties due. However,
under Finnish law, an employee cannot be bound to accept a
certain level of compensation before the invention is made,
therefore Hormos may be required to negotiate "fair and
reasonable compensation" with its former employees if the
inventions of these former employees are ever commercialized. An
employee has a ten-year period, calculated from the date when
Hormos acquired the rights from the employee, to make claims
based on the employee's inventions. Current and former
employees may seek royalties that are not acceptable to us, or
may refuse to accept our offer or may challenge the formula
itself. In case of an impasse in the negotiations, the parties
have the right under Finnish law to bring a claim in front of a
special "employee invention board" with
representations of both employer and employee organizations. We
have no experience in these types of proceedings, and any
determination adverse to us, such as the imposition of a royalty
payment that we believe is excessive, could increase our
expenses.
We rely on trade secrets and other forms of non-patent
    intellectual property protection. If we are unable to protect
    our trade secrets, other companies may be able to compete more
    effectively against us.
We also rely on trade secrets, know-how and technology, which
are not protected by patents, to maintain our competitive
position. We try to protect this information by entering into
confidentiality agreements with parties that have access to it,
such as our strategic partners, collaborators, employees and
consultants. Any of these parties may breach these agreements
and we may not have adequate remedies for any specific breach.
In addition, our trade secrets may otherwise become known or be
independently discovered by competitors. To the extent that our
commercial partners, collaborators, employees and consultants
use intellectual property owned by others in their work for us,
disputes may arise as to the rights in related or resulting
know-how and inventions. If any of our trade secrets, know-how
or other technologies not protected by a patent were to be
disclosed to or independently developed by a competitor, our
business, financial condition and results of operations could be
materially adversely affected.
We may be subject to damages resulting from claims that we
    or our employees have wrongfully used or disclosed alleged trade
    secrets of their former employers.
Many of our employees were previously employed at other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although no claims against
us are currently pending, we may be subject to claims that these
employees or we have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend
against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial
costs and be a distraction to management. If we fail in
defending such claims, in addition to
22
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paying money claims, we may lose valuable intellectual property
rights or personnel. A loss of key personnel or their work
product could hamper or prevent our ability to commercialize
certain product candidates, which would adversely affect our
commercial development efforts.
Risks Related to Our Industry
Competition in the biotechnology and pharmaceutical
    industries is intense, and even if our product candidates are
    approved and commercialized, competitive products may impede
    market acceptance of our products.
Our business is characterized by extensive research and
development efforts, rapid developments and intense competition.
Our competitors may have or may develop superior technologies or
approaches to treat the diseases or conditions targeted by our
product candidates, which may provide them with competitive
advantages. Our product candidates may not compete successfully.
The success of our product candidates will depend upon factors
such as product efficacy, safety, reliability, availability,
timing, scope of regulatory approval, acceptance and price,
among other things. If our competitors enter the marketplace
before we do with less expensive or favorably differentiated
drugs, our product candidates, if approved for
commercialization, may not be profitable to sell or continue to
develop.
Pharmaceutical technologies have undergone rapid and significant
change, and we expect that they will continue to do so. Any
compounds, products or processes that we develop may become
obsolete or uneconomical before we recover any expenses incurred
in connection with their development.
If ospemifene and fispemifene are approved and commercialized,
they will have significant competition. Vaginal atrophy is
generally treated with estrogen-based therapies, either oral or
topical, such as Premarin, Prempro and Premarin Vaginal Cream,
marketed by Wyeth, and Vagifem, marketed by Novo Nordisk. Other
products in development for this condition include bazedoxifene,
being developed by Wyeth, and Oporia, being developed by Pfizer,
which are both SERMs. Testosterone deficiency is most frequently
treated with topical gels or patches, such as Solvay
Pharmaceuticals' Androgel and Watson Pharma's
Androderm. Products in development include Acapodene and
Ostarine, both being developed by GTx and Androxal, being
developed by Zonagen.
If
QRX-401
and
QRX-431
are approved
and commercialized, they will also have significant competition.
In the treatment of lipid disorders, statins are the most
frequently prescribed products, examples of which include
Lipitor, marketed by Pfizer, Zocor and Mevacor, both marketed by
Merck & Co., Crestor, marketed by AstraZeneca and
Pravachol, marketed by Bristol-Myers Squibb. Other competitors
include non-statin products, such as Zetia, marketed by
Merck/Schering-Plough, Tricor, marketed by Abbott, and Niaspan,
marketed by Kos; combinations of statins with other agents, for
example Vytorin, marketed by Merck/Schering-Plough and Advicor,
marketed by Kos; and new products in development, such as
KaroBio's KB2115.
Becocalcidiol, if approved and commercialized, will face
competition from several marketed topical psoriasis products or
products under development, specifically topical calcitriol
analogues. These include Dovonex, marketed by Warner Chilcott,
Talconex, to be marketed by Warner Chilcott,
tisocalcitate, in development by Schering AG, and CTA018, in
development by Cytochroma.
Most of our competitors, including many of those listed above,
have substantially greater capital resources, research and
development staffs, facilities and experience in conducting
clinical trials and obtaining regulatory approvals, as well as
in manufacturing and marketing pharmaceutical products. As a
result, they may achieve earlier product commercialization or
patent protection. In addition to the branded competitive
products listed above, if our product candidates receive
regulatory approval they may face competition from generic
drugs, and the availability of generic drugs may adversely
affect the market for our products.
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Any drugs we develop may become subject to unfavorable
    third party reimbursement practice, pricing regulations or
    health care reform initiatives, thereby harming our
    business.
The commercial success of our product candidates is
substantially dependent on whether third party reimbursement is
available for our product candidates. Medicare, Medicaid, health
maintenance organizations and other third party payors may not
cover or provide adequate payment for our potential products.
They may not view our product candidates as cost-effective and
reimbursement may not be available to consumers or may not be
sufficient to allow our potential products to be marketed on a
competitive basis. Changes in reimbursement policies or health
care cost containment initiatives that limit or restrict
reimbursement for our products may cause our revenue to decline.
Legislative or regulatory efforts to control or reduce health
care costs or reform government health care programs could
result in lower prices or rejection of product candidates that
we may commercialize. Federal legislation enacted in December
2003 added an outpatient prescription drug benefit to Medicare,
effective January 2006. In the interim, Congress has established
a discount drug card program for Medicare beneficiaries. Both
benefits will be provided primarily through private entities,
which will attempt to negotiate price concessions from
pharmaceutical manufacturers. These negotiations may increase
pressure to lower prescription drug prices. While the new law
specifically prohibits the U.S. government from interfering
in price negotiations between manufacturers and Medicare drug
plan sponsors, some members of Congress are pursuing legislation
that would permit the U.S. government to use its enormous
purchasing power to demand discounts from pharmaceutical
companies, thereby creating de facto price controls on
prescription drugs. In addition, the new law contains triggers
for Congressional consideration of cost containment measures for
Medicare in the event Medicare cost increases exceed a certain
level. These cost containment measures could include limitations
on prescription drug prices. This Medicare prescription drug
coverage legislation, as well as additional healthcare
legislation that may be enacted at a future date, could reduce
our sales and adversely affect our results of operations.
Another development that may affect the pricing of drugs is
Congressional action regarding drug reimportation into the
United States. The Medicare Prescription Drug Plan legislation,
which became law in December 2003, requires the Secretary of
Health and Human Services to promulgate regulations for drug
reimportation from Canada into the United States under some
circumstances, including when the drugs are sold at a lower
price than in the United States. The Secretary retains the
discretion not to implement a drug reimportation plan if he
finds that the benefits do not outweigh the cost. Proponents of
drug reimportation may attempt to pass legislation that would
directly allow reimportation under certain circumstances. If
legislation or regulations were passed allowing the
reimportation of drugs, they could decrease the price we receive
for any products that we may develop, negatively affecting our
anticipated revenues and prospects for profitability.
State pharmaceutical marketing compliance and reporting
    requirements may expose us to regulatory and legal action by
    state governments or other government authorities.
In recent years, several states, including California, Maine,
Minnesota, New Mexico, Vermont and West Virginia, have enacted
legislation requiring pharmaceutical companies to establish
marketing compliance programs and file periodic reports with the
state on sales, marketing, pricing and other activities. For
example, California has enacted a statute requiring
pharmaceutical companies to adopt a comprehensive compliance
program that is in accordance with the Office of Inspector
General of the Department of Health and Human Services
Compliance Program Guidance for Pharmaceutical Manufacturers.
This compliance program must include policies for compliance
with the Pharmaceutical Research and Manufacturers of America
Code on Interactions with Healthcare Professionals, as well as a
specific annual dollar limit on gifts or other items given to
individual healthcare professionals in California. The law
requires posting policies on a company's public web site
along with an annual declaration of compliance.
Maine, Minnesota, New Mexico, Vermont and West Virginia have
also enacted statutes of varying scope that impose reporting and
disclosure requirements upon pharmaceutical companies pertaining
to drug pricing and payments and costs associated with
pharmaceutical marketing, advertising and promotional
activities, as
24
Table of Contents
well as restrictions upon the types of gifts that may be
provided to healthcare practitioners. Similar legislation is
being considered in other states. Many of these requirements are
new and uncertain and the penalties for failure to comply with
these requirements are unclear.
We face potential product liability exposure far in excess
    of our limited insurance coverage.
The use of any of our product candidates in clinical trials, and
the sale of any approved products, may expose us to product
liability claims. These claims might be made directly by
consumers, health care providers, pharmaceutical companies or
others selling our products. We have obtained limited product
liability insurance coverage for our clinical trials. However,
our insurance may not reimburse us or may not be sufficient to
reimburse us for expenses or losses we may suffer. Moreover,
insurance coverage is becoming increasingly expensive, and we
may not be able to maintain insurance coverage at a reasonable
cost or in sufficient amounts to protect us against losses due
to liability. If we obtain marketing approval for any of our
product candidates, we intend to expand our insurance coverage
to include the sale of commercial products, but we may be unable
to obtain commercially reasonable product liability insurance
for any products approved for marketing. On occasion, juries
have awarded large judgments in class action lawsuits based on
drugs that had unanticipated side effects. In addition, the
pharmaceutical and biotechnology industries, in general, have
been subject to significant product liability litigation. A
product liability claim or series of claims brought against us
would decrease our cash reserves and could cause our stock price
to fall, and, if a claim against us is successful, it could have
a material adverse effect on our financial condition.
If we do not comply with laws regulating the protection of
    the environment and health and human safety, our business could
    be adversely affected.
Our research and development involves the use of hazardous
materials and chemical compounds. We maintain quantities of
various toxic chemicals in our facilities in Finland that are
required for our research and development activities. We believe
our procedures for storing, handling and disposing of these
materials in our Finnish facility comply with the standards
mandated by applicable Finnish laws and guidelines. Although we
believe that our safety procedures for handling and disposing of
these materials comply with the standards mandated by applicable
regulations, the risk of accidental contamination or injury from
these materials cannot be eliminated. If an accident occurs, we
could be held liable for resulting damages, which could be
substantial. We are also subject to numerous environmental,
health and workplace safety laws and regulations, including
those governing laboratory procedures, exposure to blood-borne
pathogens and the handling of biohazardous materials.
We may not be able to conduct, or contract with others to
    conduct, animal testing in the future, which could harm our
    research and development activities.
Certain laws and regulations relating to drug development
require us to test our product candidates on animals before
initiating clinical trials involving humans. Animal testing
activities have been the subject of controversy and adverse
publicity. Animal rights groups and other organizations and
individuals have attempted to stop animal testing activities by
pressing for legislation and regulation in these areas and by
disrupting these activities through protests and other means. To
the extent the activities of these groups are successful and we
or our contract research organizations are unable to conduct
animal testing, our research and development activities may be
interrupted or delayed.
Risks Related to Our Common Stock
We expect that our stock price will fluctuate
    significantly.
Prior to this offering, you could not buy or sell our common
stock publicly. An active public market for our common stock may
not develop or be sustained after this offering. We will
negotiate and determine the initial public offering price with
the underwriters based on several factors. This price may vary
from the market price of our common stock after this offering.
You may be unable to sell your shares of common stock at or
above the initial offering price. The market price of
pharmaceutical and biotechnology stocks is
25
Table of Contents
subject to significant volatility. The volatility of
pharmaceutical and biotechnology stocks often does not relate to
the operating performance of the companies represented by the
stock. Factors that could cause volatility in the market price
of our common stock include:
•
the timing and the results from our clinical trial programs;
•
the timing and results from our preclinical studies;
•
the discovery, in-licensing or acquisition of additional product
    candidates;
•
FDA or international regulatory actions;
•
failure of any of our product candidates, if approved, to
    achieve commercial success;
•
announcements of new products by our competitors;
•
market conditions in the pharmaceutical and biotechnology
    sectors;
•
developments concerning intellectual property rights;
•
any litigation against us;
•
any public concern about the safety of our potential products;
•
comments by securities analysts;
•
actual and anticipated fluctuations in our quarterly operating
    results;
•
deviations in our operating results from the estimates of
    securities analysts;
•
rumors relating to us or our competitors;
•
additions or departures of key personnel;
•
third party reimbursement policies; and
•
developments concerning current or future strategic alliances.
These and other factors may cause the market price and demand
for our common stock to fluctuate substantially, which may limit
or prevent investors from readily selling their shares of common
stock and may otherwise negatively affect the liquidity of our
common stock. In addition, in the past, when the market price of
a stock has been volatile, holders of that stock have instituted
securities class action litigation against the company that
issued the stock. If any of our stockholders brought a lawsuit
against us, we could incur substantial costs defending the
lawsuit. Such a lawsuit could also divert the time and attention
of our management.
Upon the issuance of additional securities or the exercise
    of outstanding options, the ownership interests of our existing
    stockholders will be diluted. In addition, future sales of
    common stock by us or our stockholders may cause our stock price
    to fall.
We may issue additional securities to raise capital or make
acquisitions. We also have made and expect to continue to make
grants of stock options to retain and motivate employees,
officers and directors. Upon the issuance of additional
securities and options and the exercise of outstanding options,
your percentage ownership may be diluted both in terms of book
value and voting percentage. In addition, the market price of
our common stock could decline as a result of issuances by us,
or sales by our existing stockholders, of shares of common stock
in the market following the completion of this offering, or the
perception that these sales could occur. The
lock-up
agreements with
Banc of America Securities LLC executed by us, our executive
officers and directors and substantially all of our stockholders
and optionholders, provide that Banc of America Securities LLC
may release those parties, at any time or from time to time and
without notice, from their obligation not to dispose of shares
of common stock for a period of 180 days after the date of
this prospectus (which period could be extended for up to an
additional 34 days under certain circumstances). Banc of
America Securities LLC has no pre-established conditions to
waiving the terms of the
lock-up
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Table of Contents
agreements. Any decision by it to waive those conditions would
depend on a number of factors, which may include market
conditions, the performance of our common stock in the market
and our financial condition at that time. Based on shares
outstanding at September 30, 2005, we will
have                      shares
of common stock outstanding upon the completion of this
offering. This includes
the                      shares
of common stock that we are selling in this offering, which may
be resold in the public market immediately. The
remaining                      shares,
or           %
of our outstanding common stock upon completion of this
offering, will be restricted as a result of securities laws or
lock-up
agreements.
Based on shares outstanding as of September 30, 2005,
taking into account the
lock-up
agreements, and
assuming Banc of America Securities LLC does not release
stockholders from these agreements prior to the expiration of
the
180-day
lock-up
period, the
following shares will be eligible for sale in the public market
at the following times:
•
shares
    that are not subject to the
lock-up
agreements
    discussed above may be sold immediately after completion of this
    offering;
•
additional
    shares that are not subject to the
180-day
lock-up
period
    described above may be sold beginning 90 days after the
    effective date of the offering; and
•
additional
    shares may be sold upon expiration of the
180-day
lock-up
period
    described above.
Following the expiration of the
lock-up
period, holders
of
approximately                      shares
of our common stock will have the right to require us to
register these shares under the Securities Act pursuant to a
registration rights agreement. See "Description of Capital
Stock — Registration Rights."
Our directors and management will exercise significant
    control over our company.
After this offering, our directors and executive officers and
their affiliates will collectively control
approximately           %
of our outstanding common stock, assuming that the
underwriters' over-allotment is not exercised. These
stockholders, if they act together, will be able to influence
our management and affairs and all matters requiring stockholder
approval, including the election of directors and approval of
significant corporate transactions. This concentration of
ownership may have the effect of delaying or preventing a change
in control of our company and might affect the market price of
our common stock.
We will have broad discretion in how we use the proceeds
    of this offering, and we may not use these proceeds effectively,
    which could affect our results of operations and cause our stock
    price to decline.
We will have considerable discretion in the application of the
net proceeds of this offering. We currently intend to use the
net proceeds of this offering for general corporate purposes,
including clinical trials, research and development expenses,
general and administrative expenses, and potential acquisitions
of companies, products and technologies that complement our
business. We have not yet finalized the amount of net proceeds
that we will use specifically for each of these purposes. We may
use the net proceeds for corporate purposes that do not yield a
significant return or any return at all for our stockholders.
Provisions of Delaware law or our charter documents could
    delay or prevent an acquisition of our company, even if the
    acquisition would be beneficial to our stockholders, and could
    make it more difficult for you to change management.
Provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a merger, acquisition or other
change in control that stockholders may consider favorable,
including transactions in which stockholders might otherwise
receive a premium for their shares. This is because these
provisions may prevent or frustrate attempts by stockholders to
replace or remove our current management or members of our board
of directors.
These provisions include:
•
a classified board of directors;
•
a prohibition on stockholder action through written consent;
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Table of Contents
•
a requirement that special meetings of stockholders be called
    only by the Chairman of the board of directors, the Chief
    Executive Officer, or the board of directors pursuant to a
    resolution adopted by a majority of the total number of
    authorized directors;
•
advance notice requirements for stockholder proposals and
    nominations;
•
a requirement that
    66
2
/
3
%
    of stockholders approve certain amendments to our certificate of
    incorporation and amendments to our bylaws; and
•
the authority of the board of directors to issue preferred stock
    with such terms as the board of directors may determine.
As a result, these provisions and others available under
Delaware law could limit the price that investors are willing to
pay in the future for shares of our common stock.
We have never paid dividends on our capital stock, and we
    do not anticipate paying any dividends in the foreseeable
    future.
We have paid no dividends on any of our classes of capital stock
to date and we currently intend to retain our future earnings,
if any, to fund the development and growth of our businesses. In
addition, our secured loan agreement prohibits us from paying
cash dividends. As a result, capital appreciation, if any, of
our common stock will be your sole source of gain for the
foreseeable future.
Investors in this offering will pay a much higher price
    than the book value of our common stock.
If you purchase common stock in this offering, you will pay more
for your shares than the amounts paid by existing stockholders
for their shares. You will incur immediate and substantial
dilution of
$          per
share, representing the difference between our pro forma as
adjusted net tangible book value per share after giving effect
to this offering and an assumed initial public offering price of
$          per
share. In the past, we issued options and warrants to acquire
common stock at prices significantly below the assumed initial
public offering price. To the extent these outstanding options
or warrants are ultimately exercised, you will sustain further
dilution.
28
Table of Contents
FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled
"Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and
"Business," contains forward-looking statements.
Forward-looking statements include, but are not limited to,
statements about:
•
the progress, timing and completion of our research, development
    and clinical trials for product candidates;
•
our ability to successfully complete preclinical studies;
•
our receipt of regulatory approvals;
•
our ability to market, commercialize and achieve market
    acceptance for product candidates;
•
our ability to contract for and maintain third party
    manufacturing services;
•
whether any product candidates we commercialize are safer or
    more effective than other marketed products, treatments or
    therapies;
•
our ability to enter into collaborative or strategic
    relationships to assist in the clinical development or
    commercialization of our product candidates;
•
our ability to maintain the licenses relating to our product
    candidates or in-license or acquire new product candidates;
•
our ability to protect our intellectual property and operate our
    business without infringing upon the intellectual property
    rights of others;
•
our ability to build an internal sales and marketing
    infrastructure;
•
implementation of our business strategy;
•
our use of the proceeds from this offering;
•
our estimates for future operating and financial
    performance; and
•
our estimates regarding anticipated operating losses, future
    revenues, capital requirements and our needs for additional
    financing.
These statements relate to future events or our future financial
performance, and involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different
from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements. These risks and other factors include those listed
under "Risk Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by
terminology such as "may," "will,"
"should," "expects," "intends,"
"plans," "anticipates,"
"believes," "estimates,"
"predicts," "potential,"
"continue" or the negative of these terms or other
comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We undertake no duty to
update any of the forward-looking statements after the date of
this prospectus or to conform these statements to actual
results. Neither the Private Securities Litigation Reform Act of
1995 nor Section 27A of the Securities Act of 1933 provides
any protection for statements made in this prospectus.
29
Table of Contents
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of
shares of our common stock in this offering of approximately
$           million
($           million
if the underwriters exercise their over-allotment option in
full), based upon an assumed initial public offering price of
$          per
share and after deducting underwriting discounts and commissions
and estimated offering expenses payable by us. We expect to use
the net proceeds as follows:
•
approximately
    $           million
    for the development of ospemifene, fispemifene, QRX-401, QRX-431
    and becocalcidiol, and research and development of preclinical
    programs; and
•
the remainder, if any, for working capital and for other general
    corporate purposes, which may include in-licensing or acquiring
    product candidates.
We have no current agreements or commitments with respect to any
future acquisitions or in-licensing.
As of the date of this prospectus, we cannot specify with
certainty all of the particular uses for the net proceeds to be
received upon the completion of this offering. Accordingly, our
management will have broad discretion in the application of the
net proceeds, and investors will be relying on the judgment of
our management regarding the application of the proceeds of this
offering. Pending these uses, we plan to invest the net proceeds
in short-term, interest-bearing obligations, investment-grade
instruments, certificates of deposit or direct or guaranteed
obligations of the United States. The goal with respect to the
investment of these net proceeds is capital preservation and
liquidity so that funds are readily available to fund our
research and development operations.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital
stock. We do not anticipate paying any cash dividends on our
capital stock in the foreseeable future. We currently intend to
retain all available funds and any future earnings to fund the
development and growth of our business.
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Table of Contents
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 2005:
•
on an actual basis;
•
on a pro forma basis, reflecting the conversion of all of our
    preferred stock into an aggregate of 48,408,823 shares of
    common stock immediately prior to the closing of this
    offering; and
•
on a pro forma as adjusted basis, reflecting the pro forma
    adjustment noted above and reflecting (1) the required
    release upon the closing of this offering of
    3,446,305 shares of common stock held in escrow in
    connection with the Hormos acquisition, including
    1,066,274 shares of common stock issued upon the conversion
    of 1,066,274 shares of preferred stock held in such escrow,
    (2) $6.0 million of indebtedness incurred by us in
    connection with a debt facility we entered into in January 2006
    and (3) the sale
    of                      shares
    of common stock in this offering at an assumed initial public
    offering price of
    $          per
    share, after deducting underwriting discounts and commissions
    and estimated offering expenses payable by us.
You should read this table in conjunction with the sections of
this prospectus entitled "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with
our financial statements and related notes.
As of September 30, 2005
Actual
Pro Forma
Pro Forma as Adjusted
(in thousands, except share data)
(unaudited)
Cash and cash equivalents
$
22,868
$
22,868
$
Current portion of long-term debt
36
36
Loan advances
2,446
2,446
Long-term debt, less current portion
13,608
13,608
Total debt
16,090
16,090
Convertible preferred stock, $0.01 par value; actual,
    70,060,092 shares authorized, 47,600,946 shares issued
    and outstanding; pro forma and pro forma as adjusted, no shares
    authorized, no shares issued and outstanding
66,736
—
Stockholders' equity (net capital deficiency):
Common stock, $0.01 par value; actual, 94,919,416 shares
    authorized and 13,526,154 shares issued and outstanding; pro
    forma, 94,919,416 shares authorized and 61,934,977 shares issued
    and outstanding; pro forma as
    adjusted,      shares authorized
    and      shares issued and outstanding
135
619
Additional paid-in capital
1,031
67,283
Deficit accumulated during the development stage
(64,014
)
(64,014
)
Accumulated other comprehensive income
471
471
Total stockholders' equity (net capital deficiency)
(62,377
)
4,359
Total capitalization
$
20,449
$
20,449
$
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The actual number of shares of common stock shown as issued and
outstanding in the table above excludes:
•
6,438,490 shares of common stock issuable upon the exercise
    of options outstanding as of September 30, 2005, with
    exercise prices ranging from $0.20 to $0.35 per share and a
    weighted average exercise price of $0.29 per share;
•
806,769 additional shares of common stock reserved for future
    grants under our Amended and Restated 2005 Stock Incentive Plan
    as of September 30, 2005; and
•
shares issuable upon the exercise of a warrant issued by us in
    connection with a credit facility we entered into in January
    2006, with respect to which the number of underlying shares and
    exercise price will be established at the closing of this
    offering pursuant to a formula agreed upon with the lender.
    Under this formula, at an assumed initial public offering price
    of
    $          per
    share and assuming a closing date
    of                     ,
    2006, this warrant would be exercisable
    for            shares
    of common stock at an exercise price of
    $                        per
    share.
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Table of Contents
DILUTION
Our historical net tangible book value as of September 30,
2005 was approximately
$(                    ) million,
or
$          per
share, based
on                      shares
of common stock outstanding as of September 30, 2005.
Historical net tangible book value per share is determined by
dividing our total tangible assets less total liabilities and
convertible preferred stock by the actual number of outstanding
shares of our common stock. Our pro forma net tangible book
value as of September 30, 2005 was approximately
$           million,
or approximately
$          per
share, based
on                      shares
of common stock outstanding after giving effect to the
conversion of all outstanding shares of our convertible
preferred stock into common stock upon the closing of this
offering.
After giving effect to our sale
of                      shares
of common stock in this offering based on an assumed initial
public offering price of
$          per
share, less underwriting discounts and commissions and offering
expenses payable by us, the conversion of the outstanding shares
of convertible preferred stock into common stock and the release
of shares held in escrow in connection with our Hormos
acquisition, our pro forma as adjusted net tangible book value
as of September 30, 2005 would have been
$          per
share. This represents an immediate increase in net tangible
book value per share of
$          to
existing stockholders and immediate dilution in net tangible
book value of
$          per
share to new investors purchasing our common stock in the
offering at the initial public offering price. Dilution per
share to new investors is determined by subtracting pro forma as
adjusted net tangible book value per share after this offering
from the assumed initial public offering price per share paid by
a new investor. The following table illustrates the per share
dilution without giving effect to the over-allotment option
granted to the underwriters:
Assumed initial public offering price per share
$
Historical net tangible book value per share as of
    September 30, 2005
$
(     )
Increase per share due to the conversion of all shares of
    preferred stock
Pro forma net tangible book value per share as of
    September 30, 2005
$
Increase per share attributable to new investors
$
Pro forma as adjusted net tangible book value per share after
    the offering
Dilution per share to new investors
$
The following table summarizes on a pro forma basis, as of
September 30, 2005, the number of shares of our common
stock purchased from us, the total cash consideration paid to us
and the average price per share paid to us by existing
stockholders and to be paid by new investors purchasing shares
of our common stock in this offering, before deducting
underwriting discounts and commissions and estimated offering
expenses payable by us:
Total
Shares Purchased
Consideration
Average Price
Number
%
Amount
%
Per Share
Existing stockholders
$
%
$
%
$
New investors
Total
$
%
$
%
$
If the underwriters exercise their over-allotment option in
full, our existing shareholders will
own           %
and our new investors will
own           %
of our shares of common stock outstanding after this offering.
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Table of Contents
The above discussion and tables are based on
13,526,154 shares of common stock issued and outstanding as
of September 30, 2005 and excludes:
•
6,438,490 shares of common stock issuable upon the exercise
    of options outstanding as of September 30, 2005, with
    exercise prices ranging from $0.20 to $0.35 per share and a
    weighted average exercise price of $0.29 per share;
•
806,769 additional shares of common stock reserved for future
    grants under our Amended and Restated 2005 Stock Incentive Plan,
    as of September 30, 2005; and
•
shares issuable upon the exercise of a warrant issued by us in
    connection with a credit facility we entered into in January
    2006, with respect to which the number of underlying shares and
    exercise price will be established at the closing of this
    offering pursuant to a formula agreed upon with the lender.
    Under this formula, at an assumed initial public offering price
    of
    $          per
    share and assuming a closing date
    of                     ,
    2006, this warrant would be exercisable
    for                      shares
    of common stock at an exercise price of
    $          per
    share.
To the extent the outstanding options are, or the warrant is,
exercised, you will experience further dilution. In addition, we
may choose to raise additional capital due to market conditions
or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To
the extent that additional capital is raised through the sale of
equity or convertible debt securities, the issuance of these
securities could result in further dilution to our stockholders.
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Table of Contents
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the selected consolidated financial data
presented below in conjunction with our consolidated financial
statements and the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The
selected consolidated financial data presented below for the
years ended December 31, 2002, 2003 and 2004 and for the
period from inception (November 20, 2000) to
December 31, 2004 and as of December 31, 2003 and
2004, have been derived from our audited consolidated financial
statements included elsewhere in this prospectus. The selected
consolidated financial data as of December 31, 2001 and
2002, have been derived from our audited consolidated financial
statements not included in this prospectus. The selected
consolidated financial data for the nine-months ended
September 30, 2004 and 2005 and for the period from
inception (November 20, 2000) to September 30, 2005
and as of September 30, 2005 are unaudited, and have been
derived from unaudited and audited consolidated financial
statements that are included elsewhere in this prospectus and
have been prepared on the same basis as our consolidated
financial statements. The selected consolidated financial data
for the period from inception (November 20, 2000) to
December 31, 2000 and as of December 31, 2000 are
unaudited, and have been derived from unaudited consolidated
financial statements not included elsewhere in this prospectus
and have been prepared on the same basis as our consolidated
financial statements. In the opinion of management, the
unaudited selected consolidated financial data presented below
reflect all adjustments, which include only normal and recurring
adjustments, necessary to state fairly our results of operations
for and as of the periods presented. Historical results are not
necessarily indicative of the results of operations to be
expected for future periods.
The pro forma consolidated statement of operations data for the
year ended December 31, 2004 and the nine months ended
September 30, 2005 give effect to the acquisition of Hormos
as if the acquisition occurred on January 1, 2004 and
should be read in conjunction with our Unaudited Pro Forma
Combined Financial Statements included elsewhere in this
prospectus.
35
Table of Contents
Cumulative
Cumulative
Cumulative
Period From
Period From
Period From
Inception
Inception
Inception
(November 20,
(November 20,
(November 20,
2000) to
2000) to
2000) to
December 31,
December 31,
September 30,
2000
Year ended December 31,
2004
Nine Months Ended September 30,
2005
2001
2002
2003
2004
2004
2005
Pro Forma
for
Pro Forma for
Actual
Acquisition
Actual
Acquisition
(in thousands, except share and per share data)
Consolidated Statements of Operations Data:
Operating Expenses:
Research and development
—
$
420
$
2,713
$
8,372
$
7,725
$
12,302
$
19,230
$
5,873
$
9,157
$
10,791
$
28,387
General and administrative
—
272
717
886
1,723
3,441
3,598
1,121
2,199
2,924
5,797
Purchased in- process research and development
—
—
—
—
—
—
—
—
25,800
—
25,800
Total operating expenses
—
692
3,430
9,258
9,448
15,743
22,828
6,994
37,156
13,715
59,984
Loss from operations
—
(692
)
(3,430
)
(9,258
)
(9,448
)
(15,743
)
(22,828
)
(6,994
)
(37,156
)
(13,715
)
(59,984
)
Other Income (Expense):
Contract research income
—
—
—
—
—
2,529
—
—
826
1,823
826
Consulting income
—
25
1
221
—
—
247
—
—
—
247
Other income (expense), net
—
73
39
73
144
(778
)
328
52
93
(353
)
422
Total other income (expense)
—
98
40
294
144
1,751
575
52
919
1,470
1,495
Net loss
—
(594
)
(3,390
)
(8,964
)
(9,304
)
(13,992
)
(22,253
)
(6,942
)
(36,237
)
(12,245
)
(58,489
)
Accretion of redeemable convertible preferred stock
—
(147
)
(390
)
(1,504
)
(2,320
)
(2,319
)
(4,360
)
(1,428
)
(3,457
)
(3,457
)
(7,818
)
Net loss available to common stockholders
—
$
(741
)
$
(3,780
)
$
(10,468
)
$
(11,624
)
$
(16,311
)
$
(26,613
)
$
(8,370
)
$
(39,694
)
$
(15,702
)
$
(66,307
)
Net Loss Per Share, Basic and Diluted:
Loss per share available to common stockholders
—
$
(1.25
)
$
(6.30
)
$
(7.57
)
$
(4.79
)
$
(3.61
)
$
(5.17
)
Shares used to compute basic and diluted net loss per share
219,438
595,068
600,000
1,382,723
2,425,592
2,319,573
7,680,211
Pro forma basic and diluted net loss per share available to
    common stockholders(1)
$
(0.45
)
$
(0.75
)
Shares used to compute pro forma basic and diluted net loss per
    share
25,841,981
53,212,900
(1)
Pro forma basic and diluted net loss per common shares is
    calculated to give effect to the conversion of all outstanding
    shares of our preferred stock into 48,408,823 shares of
    common stock upon the completion of this offering, excluding
    1,066,274 shares of preferred stock held in escrow in
    connection with the Hormos acquisition that will convert into
    common stock upon the completion of this offering.
As of December 31,
As of
September 30,
2000
2001
2002
2003
2004
2005
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
1,745
$
2,568
$
1,363
$
10,546
$
31,128
$
22,868
Working capital
1,717
3,161
1,911
9,522
29,831
18,785
Total assets
1,745
3,393
2,195
10,685
31,495
24,932
Long-term debt, less current portion
—
—
—
—
—
13,608
Convertible preferred stock
1,546
3,413
5,882
23,956
55,907
66,736
Deficit accumulated during the development stage
—
(594
)
(3,984
)
(14,432
)
(26,056
)
(64,014
)
Total stockholders' equity (deficit)
1,717
(204
)
(3,924
)
(14,393
)
(26,016
)
(62,377
)
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial
condition and results of operations in conjunction with the
financial statements and the notes to those statements included
elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties.
As a result of many factors, such as those set forth under the
section entitled "Risk Factors" and elsewhere in this
prospectus, our actual results may differ materially from those
anticipated in these forward-looking statements.
Overview
We are a pharmaceutical company focused on discovering,
licensing, developing and commercializing compounds in the
endocrine, metabolic and cardiovascular therapeutic areas. We
currently have four product candidates in clinical development
and one compound that we expect to enter clinical development in
the first half of 2006. Our two lead product candidates treat
hormone deficiencies that result from aging in men and women. We
also have two product candidates for the treatment of elevated
cholesterol levels, one in phase I and one in advanced
preclinical development. Becocalcidiol, our topical product
candidate for the treatment of mild to moderate psoriasis, has
completed a phase IIb clinical trial that we believe
demonstrates clinical proof of efficacy. In addition to our drug
development programs, we have two research programs for targeted
endocrine therapies.
Our strategy is to build and maintain a portfolio of product
candidates; utilize focused criteria to select product
candidates that we believe have a high likelihood of clinical
success; focus on product candidates that have a large
commercial opportunity; and develop product candidates in
therapeutically aligned areas. In certain cases, we expect that
we will build our own sales and marketing infrastructure to
market some of our products. In other cases, we expect that we
will enter into collaborations to develop and commercialize
product candidates that are either not in our core therapeutic
areas or for which the sales and marketing infrastructure
required to maximize the value of the product is larger than is
practical for a company of our size.
In May 2005, we completed the acquisition of Hormos Medical Oy,
a privately held Finnish company focused on discovering and
developing novel pharmaceutical compounds involving the tissue
specific regulation of estrogen effects for the treatment of
certain age-related diseases. In connection with the acquisition
of Hormos, which was accounted for as a purchase of assets and
assumption of liabilities, we assumed $20.3 million in
liabilities and debt and issued 857,145 shares of our
Series D Preferred Stock, 3,408,025 shares of our
Series D-1 Preferred Stock, and 9,520,154 shares of
our common stock, collectively valued at $8.8 million.
Contingent consideration associated with the acquisition
includes an additional 321,415 shares and
1,277,995 shares of Series D and
Series
D-1
Preferred Stock, respectively, and 3,570,046 shares of
common stock with an aggregate value of $3.3 million, held
in escrow and payable upon the occurrence of certain future
events. One-third of the contingent shares secure
indemnification obligations of the Hormos selling shareholders
and will be released to the Company in satisfaction of an
indemnification claim or to the Hormos shareholders one year
after the closing date of the acquisition. The remaining
contingent shares will generally be released to Hormos selling
shareholders upon the first to occur of the closing of a
qualified public offering of our common stock, including this
offering, or the dosing of the first patient in a second
phase III clinical trial of ospemifene. Additional purchase
consideration, with an aggregate value of $2.2 million,
will be recorded as the contingent consideration is released.
The additional purchase consideration will be allocated to the
assets acquired based upon their relative fair value and will
result in additional expense for in-process research and
development of $0.6 million and accrued contingent
consideration totaling $1.6 million will be reclassified to
stockholders' equity. The operating results of Hormos are
included in our results of operations as of the May 2005 date of
acquisition.
Most of our expenditures to date have been to license and
develop our product candidate portfolio. Research and
development expenditures through September 30, 2005
primarily were related to the licensing and development of
QRX-401
and
QRX-431,
our product
candidates for treating elevated cholesterol levels,
37
Table of Contents
and becocalcidiol, our psoriasis product candidate. We outsource
a substantial portion of our preclinical study efforts and our
clinical trial and manufacturing development activities to third
parties to maximize efficiency and minimize our internal
overhead.
Since our inception in November 2000, we have generated
significant losses while we in-licensed, acquired and advanced
our product candidates and research programs. To date, we have
not generated significant product revenues and have funded our
operations primarily through proceeds of $53.3 million from
private placements of preferred stock. As of September 30,
2005, we had an accumulated deficit of $64.0 million.
Historically, Hormos has used Finnish government sponsored loans
which bear below-market interest rates to help fund its
operations. We assumed these loans as part of our acquisition of
Hormos and we intend to continue to apply for additional loans
in the future.
We expect to incur substantial and increasing losses for the
next several years as we expand our research and development
activities and move our product candidates into later stages of
development and potential commercialization. These efforts
include:
•
our ongoing phase III clinical trials for ospemifene, our
    product candidate for the treatment of vaginal atrophy, a
    common, chronic condition of post-menopausal women;
•
phase II clinical trials starting in 2006 for fispemifene,
    our product candidate for the treatment of the symptoms of
    andropause;
•
continued clinical development of
QRX-401,
a non-statin
    compound for lowering LDL cholesterol and lipoprotein(a);
•
IND filing for and clinical development of
QRX-431,
also a
    non-statin compound for lowering LDL cholesterol and
    lipoprotein(a), with phase I clinical trials expected to
    begin in 2006;
•
additional development of becocalcidiol, a topical treatment for
    mild to moderate psoriasis;
•
advancement of our preclinical research programs for targeted
    endocrine therapies;
•
acquisition or in-licensing of additional technology or products
    which complement our portfolio; and
•
preparations for commercialization.
International Operations
As of February 1, 2006, we had 58 employees located in
the United States and Finland. We coordinate program management,
drug development, clinical and regulatory activities from our
corporate offices in Ann Arbor, Michigan and our drug discovery
effort primarily is conducted in Turku and Oulu, Finland.
Research and Development
Since our inception, we have been focused primarily on drug
development programs. Our research and development expenses
include:
•
employee expenses, including salaries and benefits;
•
formulation and synthesis costs of our product candidates;
•
third-party manufacturing costs;
•
licensing payments;
•
preclinical study costs including toxicology study costs;
•
clinical trial costs;
•
costs related to the regulatory approvals process; and
•
research laboratory costs.
38
Table of Contents
Most of our product development programs are at an early stage;
therefore, the successful development of our product candidates
is highly uncertain and may not result in approved products.
Completion dates and completion costs can vary significantly for
each product candidate and are difficult to predict. Product
candidates that may appear promising at early stages of
development may not reach the market for a number of reasons.
Product candidates may be found ineffective or cause harmful
side effects during clinical trials, may take longer to progress
through clinical trials than anticipated, may fail to receive
necessary regulatory approvals or may prove impractical to
manufacture in commercial quantities at reasonable cost and with
acceptable quality. We rely on third parties to conduct our
clinical trials. If these third parties do not perform as
contractually required or expected, we may not be able to obtain
regulatory approval for or commercialize our product candidates.
The lengthy process of seeking regulatory approvals requires the
expenditure of substantial resources. Any failure by us to
obtain, or any delay in obtaining, regulatory approvals could
materially adversely affect our product development efforts. Our
strategy includes entering into collaborations with third
parties to participate in the development and commercialization
of at least some of our product candidates. We cannot forecast
with certainty which of our product candidates, if any, will be
subject to future collaborations, when any such collaborations
may occur, or how such arrangements would affect our development
plans or capital requirements. As a result of these
uncertainties, we are unable to determine the timing, duration
and completion costs of our research and development projects or
when and to what extent we will generate revenues from the
commercialization and sale of any of our product candidates.
Research and Development Cost Allocations
We have many research and development projects ongoing at any
one time and we have the ability to utilize our financial and
human resources across several research and development
projects. Our internal resources, employees and infrastructure
are not directly tied to any individual research or development
project and are typically deployed across multiple projects. We
generally do not record or maintain information regarding the
costs incurred for our research and development programs on a
program specific basis.
Critical Accounting Policies
The preparation of our consolidated financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of our financial
statements as well as the reported revenues and expenses. We
base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
While our significant accounting policies are described in
Note 1 to our financial statements appearing at the end of
this prospectus, we believe the following critical accounting
policies are important to understanding and evaluating our
reported financial results.
Accrued Expenses.
As part of the process of preparing
financial statements, we are required to estimate accrued
expenses. This process involves communicating with appropriate
personnel to identify services that have been performed on our
behalf and estimating the scope of service performed and the
associated cost incurred when we have not yet been invoiced or
otherwise notified of the actual cost. The majority of our
service providers invoice us monthly in arrears for services
performed. We make estimates of our accrued expenses as of each
balance sheet date in our financial statements based on facts
and circumstances known to us. Examples of our estimated accrued
expenses include:
•
fees paid to contract research organizations for preclinical and
    toxicology studies and clinical trials;
•
fees paid to investigative sites in connection with clinical
    trials;
•
fees paid to contract manufacturers in connection with the
    production of clinical trial materials; and
•
professional service fees.
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We base our expenses related to clinical trials on our estimates
of the services received and efforts expended pursuant to
contracts with multiple research institutions and clinical
research organizations that conduct and manage clinical trials
on our behalf. The financial terms of these agreements are
subject to negotiation, vary from contract to contract, and may
result in uneven payment flows. Payments under some of these
contracts depend on factors such as the successful enrollment of
patients and the completion of clinical trial milestones. In
accruing service fees, we estimate the time period over which
services will be performed and the level of effort to be
expended in each period. If the actual timing of the performance
of services or the level of effort varies from our estimate, we
will adjust the accrual accordingly. If we do not identify costs
that we have begun to incur or if we underestimate or
overestimate the level of services, our actual expenses could
differ from our estimates.
Valuation of Intangibles and Other Long-lived Assets.
We
are required to periodically assess the impairment of
intangibles and other long-lived assets which requires us to
make assumptions and judgments regarding the carrying value of
these assets. The assets are considered to be impaired if we
determine that the carrying value may not be recoverable based
upon our assessment of the following events or changes in
circumstances:
•
a determination that the carrying value of such assets can not
    be recovered through undiscounted cash flows;
•
loss of legal ownership or title to the assets;
•
significant changes in our strategic business objectives and
    utilization of the assets; or
•
the impact of significant negative industry or economic trends.
If the assets are considered to be impaired, the impairment we
recognize is the amount by which the carrying value of the
assets exceeds the fair value of the assets. In addition, we
base the useful lives and related amortization or depreciation
expense on our estimate of the useful life of the assets. If a
change were to occur in any of the factors or estimates above,
the likelihood of a material change in our reported results
would increase.
Stock-based Compensation.
We account for employee stock
options using the intrinsic-value method in accordance with
Accounting Principles Board, or APB, Opinion No. 25,
Accounting for Stock Issued to Employees, and Financial
Accounting Standards Board Interpretation, or FIN, No. 44,
Accounting for Certain Transactions Involving Stock
Compensation, an Interpretation of APB No. 25, and have
adopted the disclosure-only provisions of Statement of Financial
Accounting Standards, or SFAS No. 123, Accounting for
Stock-Based Compensation.
The information regarding net loss as required by
SFAS No. 123, presented in Note 1 to our
financial statements, has been determined as if we had accounted
for our employee stock options under the fair value method of
SFAS No. 123. The resulting effect on net loss to date
pursuant to SFAS No. 123 is not likely to be
representative of the effects on net loss pursuant to
SFAS No. 123(R), which will be effective for years
beginning January 1, 2006, since future years are likely to
include additional grants and the irregular impact of future
years' vesting and because of the differing requirements of
SFAS No. 123(R).
Stock-based compensation for options granted to employees is
measured as the excess, if any, of the estimated fair value of
our common stock on the date the options were granted above the
exercise price of the option. Given the absence of an active
market for our common stock, the fair value of our common stock
has periodically been estimated using several criteria,
including progress and milestones achieved in our business
development and performance, the price per share of our
convertible redeemable preferred stock offerings, estimates of
the sale value of our company to a buyer, estimates of a
potential price per share in an initial public offering of our
common stock and, beginning in November 2004, periodic
contemporaneous independent valuations.
For stock options granted to non-employees, the fair value of
the stock options is estimated using the Black-Scholes valuation
model. This model utilizes the estimated fair value of common
stock and requires that, at the date of grant, we make
assumptions with respect to the expected life of the option, the
volatility
40
Table of Contents
of the fair value of our common stock, risk-free interest rates
and expected dividend yields of our common stock. We have to
date assumed that non-employee stock options have an expected
life of four years, representing about half of their contractual
life, and assumed common stock volatility of 70%. Higher
estimates of volatility and expected life of the option increase
the value of an option and the resulting expense.
Purchased In-process Research and Development.
In our
acquisition of Hormos, we acquired technology that we expect to
utilize in our research and development activities. We account
for the costs associated with acquired technology in accordance
with FASB Statement No. 2, Accounting for Research and
Development Costs. Under this standard, we are required to
determine whether the technology relating to a particular
research and development project we acquire has an alternative
use. If we determine that the technology has no alternative
uses, the amount is expensed as incurred. Otherwise, the costs
are capitalized and amortized over their estimated useful life.
In conjunction with our acquisition of Hormos, we determined
that in-process research and development with respect to
ospemifene and fispemifene had no alternative use and we
recorded an expense of $25.8 million in the second quarter
of 2005 to write-off the fair value of this purchased in-process
research and development. The fair value of each of the
in-process research and development projects was determined on
an income-based approach which attempts to estimate the
income-producing capability of the asset.
Results of Operations
The comparisons which follow compare actual results for the
applicable periods and do not reflect any pro forma adjustments
for our acquisition of Hormos in May 2005. The results of Hormos
are included in our financial results from the date of
acquisition.
Nine Months Ended September 30, 2005 Compared to Nine
    Months Ended September 30, 2004
Research and Development Expenses.
We group our research
and development activities into three major categories:
"outsourced research and development," "research
and development operations," and "license fees."
Outsourced research and development costs include the cost of
clinical research organizations and third party manufacturing
costs. The costs from research and development operations
consist primarily of salaries and employee benefits for our
research and development staff and related travel and support
costs. License fees consist of fees and milestone payments due
to licensors of our product candidates. Of the total research
and development expenses for the nine months ended
September 30, 2005 and 2004, the costs associated with
outsourced research and development, research and development
operations and license fees were:
Nine Months
Ended
September 30,
2004
2005
Change
(in thousands)
Outsourced research and development
$
3,303
$
6,673
$
3,370
Research and development operations
1,070
2,034
964
License fees
1,500
450
(1,050
)
Total research and development expenses
$
5,873
$
9,157
$
3,284
Outsourced research and development expenses increased
$3.4 million for the nine months ended September 30,
2005 compared to the same period in 2004. This increase is due
primarily to higher costs as
QRX-401
advanced in
phase I clinical trials,
QRX-431
entered
toxicology and other preclinical studies, and work began on
ospemifene and fispemifene in preparation for phase III and
phase II studies, respectively. We acquired ospemifene and
fispemifene as a result of the Hormos acquisition in May 2005.
Expenses in 2004 primarily consisted of clinical trials for
becocalcidiol and preclinical and clinical development of
QRX-401.
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Expenses from our research and development operations increased
$1.0 million for the nine months ended September 30,
2005 compared to the same period in 2004. The increase in
expenses in 2005 is largely related to increased employee
expenses, particularly salaries and benefits, as we added
research and development operations personnel to work on and
manage the increased number and size of research projects and
development programs in 2005.
License fees paid by us decreased by $1.0 million for the
nine months ended September 30, 2005 compared to the same
period in 2004. License fees and milestone payments for product
candidates we have in-licensed vary widely from compound to
compound. Milestone payments usually are dependent on the
successful advancement of the licensed compound to
pre-determined milestones. License fees in 2005 relate to fees
for initial licensing of
QRX-431,
while license
fees in 2004 are comprised of a milestone payment for
QRX-401.
General and Administrative Expenses.
General and
administrative expenses consist primarily of salaries and
benefits for administrative, finance, business development and
legal personnel. In addition, general and administrative
expenses include insurance costs, professional services and
facilities costs. General and administrative expenses increased
$1.1 million to $2.2 million for the nine months ended
September 30, 2005 compared to $1.1 million for the
same period in 2004. The increase in 2005 primarily resulted
from additional personnel and the related increase in salaries,
benefits and facilities expenses as the scope of our operations
expanded in 2005.
Purchased In-process Research and Development.
In
connection with the acquisition of Hormos and in accordance with
the related valuation and purchase price allocation of Hormos,
we determined that $25.8 million of the purchase price
related to in-process research and development that had not
reached technological feasibility and had no alternative future
use. The principal technology we acquired related to ospemifene
and fispemifene. Accordingly, we recorded an expense of
$25.8 million in the second quarter of 2005 to write-off
the fair value of this acquired in-process research and
development. The fair value of each of the in-process research
and development projects was determined on an income-based
approach which attempts to estimate the income-producing
capability of the asset.
Contract Research Income.
Contract research income of
$0.8 million for the nine months ended September 30,
2005 primarily consists of contract research performed for a
pharmaceutical company by Hormos. There were no corresponding
amounts for the same period in 2004.
Interest Income.
Interest income increased by
$0.4 million to $0.5 million for the nine months ended
September 30, 2005 compared to $52,000 for the same period
in 2004. The increase was due to higher average cash balances
and higher prevailing interest rates in 2005.
Interest Expense.
Interest expense consists of interest
incurred on debt held by Hormos. Hormos holds loans from
agencies of the Finnish government that bear interest at
below-market rates. In connection with the acquisition of Hormos
and in accordance with the related purchase price allocation,
the loans were recorded at their estimated fair value which
resulted in a discount of $2.1 million. The discount is
being amortized over the lives of the underlying loans.
Amortization expense related to this discount totaled
$0.2 million for the nine months ended September 30,
2005 and is recorded as interest expense. There were no
corresponding amounts for the same period in 2004.
Year Ended December 31, 2004 Compared to Year Ended
    December 31, 2003
Research and Development Expenses.
Research and
development expenses decreased $0.6 million to
$7.7 million in 2004 from $8.4 million in 2003. The
decrease largely resulted from the $2.5 million initial
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Table of Contents
licensing fee paid for
QRX-401
and related
compounds in 2003. The following table summarizes the changes in
the components of research and development expense between 2003
and 2004.
Year Ended
December 31,
2003
2004
Change
(in thousands)
Outsourced research and development
$
4,651
$
4,672
$
21
Research and development operations
1,221
1,553
332
License fees
2,500
1,500
(1,000
)
Total research and development expenses
$
8,372
$
7,725
$
(647
)
Outsourced research and development expenses increased $21,000
in 2004. The increase reflects continuing clinical development
of becocalcidiol and preclinical and clinical work on
QRX-401
and related
compounds. Phase I clinical studies for
QRX-401
began in the
second quarter of 2004 with single-dose studies using a small
number of volunteers. Phase II clinical trials for
becocalcidiol began in 2003 and continued in 2004.
Expenses from our research and development operations increased
$0.3 million in 2004 compared to 2003. The increase in
expenses in 2004 was largely related to increased employee
related expenses, particularly salaries and benefits, as we
added research and development operations personnel to work on
and manage the increased number and size of research projects
and development programs in 2004.
License fees decreased by $1.0 million in 2004. License
fees in 2004 related to a milestone payment for
QRX-401,
while license
fees in 2003 were comprised of initial in-licensing fees for
QRX-401
and related
compounds.
General and Administrative Expenses.
General and
administrative expenses increased $0.8 million to
$1.7 million in 2004 compared to $0.9 million in 2003.
The increase in 2004 primarily resulted from additional
personnel and the related increase in salaries and benefits
expenses as the scope of our operations expanded in 2004.
Consulting Income.
No consulting activity was undertaken
by us in 2004. Consulting income of $0.2 million in 2003
consisted of fees received for study design consultation we
performed for an unrelated company.
Interest Income.
Interest income increased by $71,000 to
$144,000 in 2004 from $73,000 in 2003. The increase was due
largely to higher average cash balances.
Year Ended December 31, 2003 Compared to Year Ended
    December 31, 2002
Research and Development Expenses.
Research and
development expenses increased $5.7 million to
$8.4 million in 2003 from $2.7 million in 2002. The
increase largely resulted from the $2.5 million licensing
fee paid for QRX-401 and related compounds in 2003 and increased
outsourced research and development activity as a result of the
addition of preclinical work for QRX-401 and related compounds
in 2003 and
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continuing phase II clinical trials for becocalcidiol. The
following table summarizes the changes in the components of
research and development expenses between 2003 and 2002.
Year Ended
December 31,
2002
2003
Change
(in thousands)
Outsourced research and development
$
1,917
$
4,651
$
2,734
Research and development operations
796
1,221
425
License fees
—
2,500
2,500
Total research and development expenses
$
2,713
$
8,372
$
5,659
Outsourced research and development expenses increased
$2.7 million in 2003. The increase was largely due to our
expanding portfolio of research and development projects with
the in-licensing of
QRX-401
and related
compounds in the second quarter of 2003 and expenses of
phase II clinical trials for becocalcidiol which began in
2003. In 2002, we conducted preclinical work for becocalcidiol.
Expenses from research and development operations increased
$0.4 million in 2003 compared to 2002. The increase in
expenses in 2003 is largely related to increased employee
related expenses, particularly salaries and benefits, as we
added research and development operations personnel to manage
the increased number and size of research projects and
development programs in 2003.
License fees increased by $2.5 million in 2003. License
fees in 2003 consisted of initial in-licensing fees for
QRX-401
and related
compounds. No license fees were paid by us in 2002.
General and Administrative Expenses.
General and
administrative expenses increased $0.2 million to
$0.9 million in 2003 compared to $0.7 million in 2002.
The increase in 2003 primarily resulted from additional
personnel and the related increase in salaries and benefits
expenses as the scope of our operations expanded in 2003.
Consulting Income.
Consulting income was
$0.2 million in 2003 and $1,000 in 2002 and consisted of
fees received for study design consultation we performed for an
unrelated company.
Interest Income.
Interest income increased by $34,000 to
$73,000 in 2003 from $39,000 in 2002. The increase was due
largely to higher average cash balances.
Liquidity and Capital Resources
Sources of Liquidity
Due to our significant research and development expenditures and
the lack of approved products to generate revenue, we have not
been profitable and have generated operating losses since we
were incorporated in November 2000. We have funded our
operations primarily through sales of our convertible preferred
stock. As of September 30, 2005, we had received aggregate
net proceeds of $53.3 million from sales of preferred
stock. As of September 30, 2005, we had unrestricted cash
and cash equivalents of $22.9 million compared to
$31.1 million as of December 31, 2004. In addition, as
of September 30, 2005 we had $0.1 million of cash
deposits with a financial institution collateralizing a letter
of credit in favor of our landlord in the event of a breach of
our Ann Arbor, Michigan facility lease which expires in 2011.
Hormos historically has financed a portion of its research and
development activities with loans and grants from Finnish
governmental agencies, Tekes and Sitra, as well as contract
research, fees from a product license arrangement and interest
earned on investments. The Finnish government loans are granted
on a project-by-project basis and generally carry interest at
below-market rates. If a project fails or does not reach
commercial success, under certain circumstances repayment of the
loan can be forgiven. At the date of acquisition, Hormos had
$15.1 million in loans from Finnish governmental agencies
and $2.4 million in advances related to future loans, which
we assumed. The loans carry interest at 1% to 3% below the
Finnish
44
Table of Contents
base rate as set by the Bank of Finland at the date the loan was
issued with a minimum interest rate of 1% to 3%. The loans are
unsecured and generally are subordinated with a loan period of
seven to ten years. Generally, the first several years of the
loan are free of repayment. Under applicable Finnish law,
interest or principal related to the notes can only be repaid
when the company has adequate equity capital. Because Hormos
lacks the requisite equity capital, no amounts outstanding under
these loans are currently repayable. We intend to continue to
pursue this source of funding in the future though we cannot
assure you that the funding will continue to be available.
In December 2005, Tekes notified Hormos that repayment would not
be required for certain loans totaling $2.6 million,
including principal and accrued interest, associated with a
research project which did not reach commercial feasibility.
Also in December 2005, Sitra notified Hormos that a loan
totaling $0.1 million, including principal and accrued
interest, would not be required to be repaid.
In January 2006, we entered into an $18.0 million debt
agreement with a third-party lender. At closing, we borrowed
$6.0 million under the agreement with $12.0 million
available for future borrowings through the end of 2006. Loans
under the agreement bear interest at prime plus 3% with
interest-only payments due during the first 12 months of
each loan. Principal is repaid over 36 months after the
interest-only period, with a balloon payment due at the end of
the repayment period. Loans under the agreement are secured by
substantially all of our assets other than our intellectual
property rights. In addition, the debt agreement contains
covenants restricting our ability to incur further indebtedness,
pay dividends or make investments, subject to exceptions
specified in the agreement. In connection with the debt
agreement, we issued a warrant to the lender to purchase shares
of our preferred stock, which will convert to a warrant for
common stock upon the completion of this offering. The number of
shares and exercise price in the warrant will be determined by a
formula based on the timing and price of the next round of
equity invested in our company, which we expect to be this
offering. The warrant is exercisable for seven years from the
date of issue, or three years after an initial public offering
of our common stock.
Our policy is to invest in cash equivalents,
U.S. government obligations, high-grade municipal and
corporate notes and commercial paper. Our investment objectives
are, primarily, to assure liquidity and preservation of capital
and, secondarily, to obtain investment income. Wherever
possible, we seek to minimize the potential effects of
concentration and degrees of risk. All of our investments in
debt securities are recorded as available-for-sale and are
recorded at cost plus accrued interest which approximates fair
value due to their short duration.
Cash Flows for Nine Months Ended September 30, 2005
Compared to September 30, 2004
The following table summarizes our cash flow information for the
nine months ended September 30, 2005 and 2004.
Nine Months Ended
September 30,
2004
2005
Change
(in thousands)
Net cash flows from:
Net cash used in operating activities
$
(7,116
)
$
(10,377
)
$
(3,261
)
Net cash used in investing activities
(28
)
—
28
Net cash provided by financing activities
—
2,084
2,084
Effect of exchange rate changes on cash and cash equivalents
—
33
33
Net increase (decrease) in cash and cash equivalents
(7,144
)
(8,260
)
(1,116
)
Cash and cash equivalents at January 1
10,546
31,128
20,582
Cash and cash equivalents at September 30
$
3,402
$
22,868
$
19,466
Net cash used in operating activities increased
$3.3 million to $10.4 million for the nine months
ended September 30, 2005 compared to $7.1 million in
the same period in 2004. The increase in cash used in
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operations in 2005 is due to a higher net loss from increased
operating costs as QRX-401 advanced in phase I clinical
trials, QRX-431 was licensed and entered toxicology and other
preclinical trials and as work began on ospemifene and
fispemifene, in preparation for phase III and phase II
studies, respectively.
Net cash used in investing activities decreased $28,000 to near
zero for the nine months ended September 30, 2005 compared
to the same period in 2004. Underlying the decrease in use of
cash for investing activities in 2005 were $0.9 million
used for acquisition costs, $1.0 million acquired in the
acquisition of Hormos and $0.1 million used in the purchase
of property and equipment. Cash used in investing activities for
the same period in 2004 consisted of $28,000 for purchases of
property and equipment.
Net cash provided by financing activities increased by
$2.1 million for the nine months ended September 30,
2005 compared to the same period in 2004. The increase resulted
primarily from the sale of $1.4 million of preferred stock
and a $0.7 million increase in long-term borrowings.
Annual Cash Flows
The following table summarizes our cash flow information for the
years ended December 31, 2004, 2003 and 2002.
Change
Year Ended December 31,
2003
2004
2002
2003
2004
vs. 2002
vs. 2003
(in thousands)
Net cash flows from:
Net cash used in operating activities
$
(3,308
)
$
(8,152
)
$
(9,011
)
$
(4,844
)
$
(859
)
Net cash provided by (used in) investing activities
(30
)
764
(39
)
794
(803
)
Net cash provided by financing activities
2,134
16,570
29,632
14,436
13,062
Effect of exchange rate changes on cash and cash equivalents
—
—
—
—
—
Net increase (decrease) in cash and cash equivalents
(1,204
)
9,183
20,582
10,387
11,399
Cash and cash equivalents at January 1
2,567
1,363
10,546
(1,204
)
9,183
Cash and cash equivalents at December 31
$
1,363
$
10,546
$
31,128
$
9,183
$
20,582
Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003
Net cash used in operating activities increased
$0.9 million to $9.0 million in 2004 compared to
$8.2 million in 2003. The increase in cash used in
operations is due primarily to drug development and clinical
trial expenses associated with QRX-401 and becocalcidiol.
Net cash used in investing activities increased
$0.8 million to $39,000 in 2004 compared to net cash
provided by investing activities of $0.8 million in 2003.
This increase resulted primarily from reduced maturities of our
short-term investments in 2004 compared to 2003.
Net cash provided by financing activities increased
$13.1 million in 2004 compared to 2003. The increase in
2004 is due to proceeds of approximately $29.6 million from
the sale of shares of our Series C and D Preferred Stock in
2004 compared with proceeds of approximately $16.6 million
from the sale of shares of our Series B and C Preferred
Stock in 2003.
Year Ended December 31, 2003 Compared to Year Ended
December 31, 2002
Net cash used in operating activities increased
$4.8 million to $8.2 million in 2003 from
$3.3 million in 2002. The increase in cash used in
operations is due primarily to licensing and drug development
expenses associated with QRX-401 and drug development and
clinical trial expenses associated with becocalcidiol.
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Net cash provided by investing activities increased
$0.8 million in 2003 compared to 2002. The increase
resulted from an increase in maturities of our short-term
investments in 2003 compared to 2002.
Net cash provided by financing activities increased
$14.4 million in 2003 compared to 2002. The increase in
2003 resulted from proceeds of approximately $16.6 million
from the sale of shares of our Series B and C Preferred
Stock in 2003 compared to proceeds of approximately
$2.1 million from the sale of shares of our Series B
Preferred Stock in 2002.
Contractual Obligations and Commitments
Our future contractual obligations at December 31, 2004
were as follows:
Payments Due by Period
Total
2005
2006-2007
2008-2009
After 2009
(in thousands)
Operating lease obligations
$
827
$
98
$
269
$
281
$
179
Our commitments under operating leases consist of payments
relating to our real estate lease in Ann Arbor, Michigan which
expires in 2011.
We have entered into a number of license agreements for our
product candidates. Generally these license agreements include
initial licensing payments, milestone payments, royalties on
future sales and patent maintenance costs. Future milestone
payments are generally due on the achievement of certain
development and regulatory milestones. Future milestone
obligations under licensing agreements total $59.2 million,
including a date-specific milestone payment of $0.1 million
due in 2006. The achievement and timing of reaching prescribed
milestones under these agreements and determination of royalties
on future sales is uncertain.
At the time of our acquisition of Hormos in May 2005, it had
$15.1 million in loans from Finnish governmental agencies,
Tekes and Sitra, and $2.4 million in advances related to
future Tekes loans, which we assumed. The loans are unsecured
and generally are subordinated with a loan period of seven to
ten years. Generally, the first several years of the loan are
free of repayment. Under applicable Finnish law, interest or
principal related to the notes can only be repaid when the
company has adequate equity capital. Because Hormos lacks the
requisite equity capital, no amounts outstanding under these
loans are currently repayable. In December 2005, Tekes notified
Hormos that repayment would not be required for certain loans
totaling $2.6 million, including principal and accrued
interest, associated with a research project which did not reach
commercial feasibility. Also in December 2005, Sitra notified
Hormos that a loan totaling $0.1 million, including
principal and accrued interest, would not be required to be
repaid.
Hormos is a party to five separate real estate leases of office
and laboratory space in Turku, Finland and Oulu, Finland. Two of
these leases are long-term leases through 2011 which require
monthly payments totaling approximately $0.8 million
annually. The remaining facility leases require 15 months
or less to terminate and have monthly payments totaling
approximately $28,000 annually.
Funding Requirements
We expect to devote substantial resources to continue our
research, development and commercialization efforts. Our funding
requirements will depend on a number of forward-looking factors.
These factors include, but are not limited to, the following:
•
the progress of preclinical development and clinical trials;
•
the number of product candidates we pursue or the expansion of
    existing product candidates to new indications;
•
the discovery, in-licensing or acquisition of additional
    technologies or product candidates that require financial
    commitments;
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•
the time and costs involved in obtaining regulatory approvals,
    and the number of different regulatory agencies we seek approval
    from;
•
delays that may be caused by evolving requirements of regulatory
    agencies;
•
our plans to establish sales, marketing and distribution
    capabilities;
•
the cost and timing of securing manufacturing capabilities for
    our product candidates and commercial products, if any;
•
the terms and timing of any collaborative, licensing and other
    arrangements we may establish;
•
the costs involved in filing, maintaining and prosecuting patent
    applications and enforcing or defending patent claims;
•
our revenues, if any, from successful development and
    commercialization of our products;
•
the costs of being a public company; and
•
the number of additional employees we hire.
Following completion of this offering we anticipate incurring
increased general and administrative expenses for directors and
officers insurance, investor relations and professional fees
associated with operating as a publicly traded company.
Increases in general and administrative expenses will also
likely include the hiring of additional personnel.
We believe that our existing capital resources, including
available borrowings of up to $12.0 million under our
existing debt facility, and the net proceeds from this offering,
together with interest thereon, will be sufficient to meet our
projected operating requirements for at least the next
18 months. We have based this estimate on assumptions that
may prove to be wrong, and we could utilize our available
capital resources sooner than we currently expect. Our
projection of financial requirements involves risks and
uncertainties and actual results could vary as a result of a
number of factors.
If we need to raise funds in the future, we may be required to
raise those funds through public or private financings,
strategic relationships or other arrangements. We also intend to
continue to pursue loans from Finnish government agencies. We
cannot assure you that these funding sources, if needed, will be
available on terms attractive to us, or at all. Furthermore, any
additional equity financing may be dilutive to stockholders and
debt financing, if available, may involve restrictive covenants.
To the extent that we raise additional capital through licensing
arrangements or arrangements with collaborative partners, we may
be required to relinquish, on terms that are not favorable to
us, rights to some of our technologies or product candidates
that we would otherwise seek to develop or commercialize
ourselves. Our failure to raise capital as and when needed could
have a negative impact on our financial condition and our
ability to pursue our business strategy.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board
issued SFAS No. 123(R),
Share-based Payment
,
which amends SFAS No. 123. The standard set forth in
SFAS No. 123(R) requires that all share-based payments
to employees, including grants of employee stock options, be
recognized in the consolidated financial statements of
operations based on their fair values. The pro forma disclosure
previously permitted under SFAS No. 123 will not be an
acceptable alternative to recognition of expenses in the
financial statements. The standard is effective for public
companies for annual periods beginning after June 15, 2005.
The adoption of SFAS No. 123(R) may have a material
impact on our results of operations and net loss per share. We
are currently in the process of evaluating the extent of such
impact.
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet
activities, including the use of structured finance, special
purpose entities, or variable interest entities.
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Quantitative and Qualitative Disclosure About Market Risk
The primary objective of our investment activities is to
preserve principal. We also seek to maximize income from our
investments without incurring significant risk. Some of the
securities we invest in may have market risk. This means that a
change in prevailing interest rates may cause the principal
amount of the marketable securities to fluctuate. To minimize
this risk, we maintain our portfolio of cash, cash equivalents,
and short-term investments in a variety of interest-bearing
instruments, including United States government and agency
securities, high-grade corporate bonds, commercial paper, and
money market funds. We have not used derivative financial
instruments for speculation or trading purposes. Due to the
short duration of our investment portfolio, we believe an
immediate 10% change in interest rates would not be material to
our financial condition or results of operations.
Approximately 30% of the costs and expenses of our Finnish
subsidiary are denominated in Euros. If exchange rates
change 10%, the impact on our net loss and cash used in
operations would be $0.7 million. We do not hedge our
foreign currency exposures.
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BUSINESS
Overview
We are a pharmaceutical company focused on discovering,
licensing, developing and commercializing compounds in the
endocrine, metabolic and cardiovascular therapeutic areas. We
currently have four product candidates in clinical development
and one compound that we expect to enter clinical development in
the first half of 2006. Our two lead product candidates treat
hormone deficiencies that result from aging in men and women.
Ospemifene, our treatment for vaginal atrophy, a common problem
associated with estrogen deficiency in post-menopausal women,
has entered phase III clinical testing. Fispemifene, our
treatment for the symptoms of andropause in aging males, is
about to enter phase II clinical testing. We also have two
product candidates for the treatment of elevated cholesterol
levels,
QRX-401
and
QRX-431,
in
phase I clinical trials and advanced preclinical
development, respectively. Becocalcidiol, our topical product
candidate for the treatment of mild to moderate psoriasis, has
completed a phase IIb clinical trial that we believe
demonstrates clinical proof of efficacy. Our management team has
extensive experience in pharmaceutical development, particularly
in endocrine and cardiovascular therapies, having participated
in over 60 clinical development programs in their careers. This
team has contributed to over 30 programs involving approved
drugs, ten of which reached annual sales in excess of
$1 billion and include the world's best selling
pharmaceutical product, Lipitor.
Ospemifene is our product candidate for the treatment of
post-menopausal vaginal atrophy. Vaginal atrophy is a chronic
condition resulting from a decline in estrogen levels. The
symptoms of vaginal atrophy include vaginal dryness, burning,
irritation, itching, pain during intercourse and vaginal
discharge. It is estimated that there are 145 million
post-menopausal women in North America, Europe and Japan, and
that between 10% and 40% of them suffer from vaginal atrophy.
Vaginal atrophy is typically treated with hormone replacement
therapies, including estrogen-based therapies. U.S. sales
of hormone replacement therapies for menopausal symptoms were
$1.7 billion in 2004, but have been declining due to
concerns that the long-term use of these therapies increases the
risk of breast and uterine cancer. Ospemifene is a selective
estrogen receptor modulator, or SERM, an orally available small
molecule that binds to estrogen receptors and selectively
stimulates or blocks estrogen's activity in different
tissue types. We have completed two phase II clinical
trials of ospemifene in which it has demonstrated beneficial
effects on vaginal cell maturation, indicating improvement in
the symptoms of vaginal atrophy. Based on our completed clinical
and preclinical studies, we believe that, in addition to its
beneficial effect on the symptoms of vaginal atrophy, ospemifene
has a positive effect on bone density, does not increase the
risk of breast and uterine cancer, and does not appear to induce
hot flashes, a common side effect of SERMs. In January 2006, we
initiated our first phase III clinical trial of ospemifene
for the treatment of vaginal atrophy. The trial is expected to
take place in approximately 65 sites in the U.S. and will
enroll approximately 800 patients.
Fispemifene is our product candidate for the treatment of the
symptoms of andropause. Andropause is a condition in men caused
by a gradual decline in testosterone levels that occurs
naturally as men age. The symptoms of andropause include muscle
wasting, enlarged breasts, urinary tract problems and sexual
dysfunction. Patients receiving treatment for andropause
typically utilize testosterone replacement therapy.
U.S. sales of testosterone replacement products reached
$538 million in 2004, a growth rate of 40% versus the prior
year. Unlike testosterone replacement therapies that are
typically topical or injection therapies, fispemifene is an oral
treatment and is not a formulation of testosterone. Rather,
fispemifene is a novel SERM that utilizes the body's normal
feedback mechanism to increase testosterone levels. In a
multiple dose phase I trial, subjects treated with
fispemifene demonstrated an increase in testosterone levels. In
the first half of 2006, we plan to initiate a phase II
trial with fispemifene in older men with low testosterone levels.
QRX-401
and
QRX-431
are our two
product candidates for the oral treatment of elevated levels of
low-density lipoprotein cholesterol, or LDL cholesterol, the
so-called
"bad
cholesterol." Elevated LDL cholesterol levels have been
shown to increase a person's risk of heart disease. In
2004, treatments for lowering cholesterol had worldwide sales of
over $26 billion. In preclinical studies with monkeys,
QRX-401 demonstrated the ability to lower LDL cholesterol as
well as lipoprotein(a), also referred to as Lp(a), high levels
of which are associated with an increased risk of stroke and
coronary artery disease. We are currently
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conducting a phase I clinical program of
QRX-401.
In our
phase I studies to date,
QRX-401
has been
well-tolerated and no safety issues were observed, although we
have not observed consistent LDL cholesterol lowering in normal
volunteers. Our second product candidate for the treatment of
elevated cholesterol levels,
QRX-431,
has
demonstrated the ability to reduce LDL cholesterol and Lp(a)
levels and cause weight loss in monkeys. We expect to file an
IND for
QRX-431
in the
first half of 2006.
Becocalcidiol is our topical product candidate for the treatment
of mild to moderate psoriasis. Psoriasis is a chronic disease of
the skin characterized by red patches covered with white scales
that can occur on any part of the body. Ten million people in
the United States, Japan, France, Germany, Italy, Spain and the
United Kingdom have been diagnosed with psoriasis and
approximately 81% of them are receiving treatment with a variety
of prescription and
over-the
-counter
topical therapies, according to 2004 estimates. Global sales of
topical psoriasis therapies were estimated at $532 million
for the twelve months ended October 2005. We have successfully
completed a phase IIb trial of becocalcidiol in which it
demonstrated a statistically significant improvement in both the
Physicians' Global Assessment of psoriasis and the
Psoriasis Symptom Score, two standard methods for assessing
efficacy of topical treatments for psoriasis in clinical trials.
Because becocalcidiol is outside our core therapeutic areas, we
are evaluating alternatives for continued development of this
product candidate, including seeking a partner for further
development and commercialization.
Our Strategy
Our goal is to build a successful pharmaceutical company that
develops and commercializes products in the endocrine, metabolic
and cardiovascular therapeutic areas. Our strategy is to
leverage our extensive management expertise in order to:
•
Build and maintain a portfolio of product candidates.
We
    believe that taking a portfolio approach to drug development
    balances risk by reducing our dependence on any one product
    candidate's clinical or commercial success. Our objective
    is to have between three and five product candidates in clinical
    development at any time. We also seek to maintain a portfolio of
    product candidates at different stages of development in order
    to ensure that our clinical pipeline continues to have multiple
    product candidates.
•
Utilize focused criteria to select product candidates that we
    believe have a high likelihood of clinical success.
Our
    management team has experience in all aspects of developing and
    commercializing drugs, including preclinical development,
    regulatory strategy, clinical trial management and
    commercialization. Part of our strategy is to utilize these
    skills to identify and in-license or acquire product candidates
    that we believe will have a high likelihood of success. We seek
    product candidates that:
•
have measurable, objective
    clinical endpoints that provide the ability to demonstrate proof
    of concept in human subjects early in the development process;
•
have established precedents for
    regulatory approval; and
•
fall within the areas of expertise
    of the management team.
•
Focus on product candidates that have a large commercial
    opportunity.
We seek product candidates that will provide a
    substantial return on our investment. To achieve these returns
    we seek to identify and develop product candidates that meet the
    following criteria:
•
serve large markets with unmet
    medical needs;
•
are favorably differentiated from
    existing therapies; and
•
have a sufficiently long period of
    exclusivity to justify development.
•
Develop product opportunities in therapeutically aligned
    areas.
We focus on developing treatments for endocrine,
    metabolic and cardiovascular therapeutic diseases. We believe
    that by having product candidates in therapeutically aligned
    areas we will be best positioned to leverage our clinical
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development expertise and regulatory knowledge. In addition,
    concentration in therapeutically aligned areas gives us the
    opportunity in the future to build sales and marketing
    infrastructure that can be utilized to sell multiple products.
Using this strategy, we have built our current portfolio of four
clinical stage product candidates and an advanced preclinical
program. As we continue to build our company, we intend to
extend our strategy by:
•
Developing our current portfolio of product candidates;
•
Leveraging our management expertise to expand our product
    pipeline;
•
Utilizing out-licensing and partnering opportunities, when
    appropriate;
•
Continuing to build our management capacity and capabilities as
    our needs expand; and
•
Developing sales and marketing capabilities, either on our own
    or in partnership with others, in order to commercialize our
    product candidates and maximize their value.
Our Product Pipeline
The following table summarizes our product pipeline:
Product Candidate
Initial Indication
Development Stage
Marketing Rights
Ospemifene
Vaginal Atrophy
Phase III
Worldwide*
Fispemifene
Symptoms of Andropause
Phase II
Worldwide*
QRX-401
Elevated LDL
Phase I
Worldwide
QRX-431
Elevated LDL
Preclinical
Worldwide
Becocalcidiol
Mild to Moderate Psoriasis
Phase II
Worldwide
*
Subject to our licensor's right to negotiate exclusive
    marketing rights in Denmark, Estonia, Finland, Iceland, Latvia,
    Lithuania, Norway, Russia and Sweden.
Ospemifene — A Treatment for Vaginal
Atrophy
Description of Condition
In North America, Europe and Japan, it is estimated that there
are 145 million post-menopausal women, a number that is
projected to increase as the median age of the population
increases. Post-menopausal women suffer from a number of
conditions as a result of a decline in estrogen levels. These
conditions include decreased bone density, known as
osteoporosis, hot flashes and vaginal atrophy. It is estimated
that between 10% and 40% of post-menopausal women suffer from
vaginal atrophy.
Vaginal atrophy is a common, chronic condition of
post-menopausal women and is characterized by vaginal dryness,
burning, irritation, itching, vaginal discharge and feeling of
pressure. Dryness and irritation accompanying decreases in
vaginal secretions and lubrication can often cause pain and/or
bleeding during sexual intercourse. Associated urinary symptoms
can include urinary frequency, pain on urination, urinary tract
infections and incontinence. In contrast to hot flashes, which
eventually disappear, vaginal atrophy persists as women age.
Vaginal atrophy results from a decline in estrogen levels that
causes thinning of the vaginal cell lining. This condition leads
to a fragile vaginal mucous membrane characterized by decreased
elasticity, paleness and disappearance of the small folds found
in the vaginal wall. Vaginal secretions and blood flow to the
vagina decrease, resulting in decreased lubrication. The decline
in estrogen levels also leads to an increase in vaginal pH,
creating an environment more susceptible to infection.
Product Candidate Characteristics
Ospemifene is our product candidate for the treatment of vaginal
atrophy. We have completed two phase II clinical trials of
ospemifene in which it has demonstrated beneficial effects on
vaginal cell
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maturation, indicating improvement in vaginal atrophy symptoms
in post-menopausal women. Based on our completed clinical and
preclinical studies, we believe that, in addition to its
beneficial effect on vaginal atrophy, ospemifene improves bone
density, does not increase the risk of breast and uterine
cancer, and does not appear to induce hot flashes. In January
2006, we initiated our first phase III clinical trial of
ospemifene for vaginal atrophy. The trial is expected to take
place in approximately 65 sites in the U.S. and will enroll
approximately 800 patients.
Ospemifene is differentiated from hormone replacement therapies
such as estrogen. Ospemifene is a next generation selective
estrogen receptor modulator, or SERM, which is a small molecule
that selectively binds to estrogen receptors and either
stimulates or blocks estrogen's activity in different
tissue types. SERMs block the actions of estrogen in certain
tissues by occupying the estrogen receptors that transmit
signals for cells to grow and divide. SERMs in development have
been shown to mimic estrogen's beneficial action in bone
tissue but do not stimulate estrogen's harmful effects in
the breast and uterus which increases the risk of cancer.
Market Opportunity
Hormone replacement therapy has long been the standard treatment
for menopause related conditions, including vaginal atrophy.
Hormone replacement therapy consists of treatment using
medications containing one or more female hormones, most
commonly estrogen and progestin.
Hormone replacement therapy is effective in alleviating symptoms
of vaginal atrophy but, after long-term use, increases the risk
of breast and uterine cancer. In 1991, the National Heart, Lung
and Blood Institute of the National Institutes of Health
(NIH) launched the Women's Health Initiative, a
15-year
U.S. national health study involving over 161,000 women
aged 50 to 79. The Women's Health Initiative focused on
strategies for preventing heart disease, breast cancer,
colorectal cancer and osteoporosis in healthy post-menopausal
women and included two clinical trials designed to test the
effects of oral estrogen plus progestin and of oral estrogen
alone on heart disease, osteoporotic fractures and breast and
colorectal cancer risk. These studies were stopped early in July
2002 and February 2004, respectively, as the accumulated
evidence suggested the overall health risks of long-term hormone
replacement therapy outweighed the benefits from the therapy.
In 2004, U.S. hormone replacement therapies sales for
menopausal conditions were approximately $1.7 billion. This
represents a 30% decline from the level of sales prior to
publication of the findings of the clinical studies from the
Women's Health Initiative. Sales of hormone replacement
products containing estrogen alone dropped from
$1.5 billion in 2002 to $1.1 billion in 2004 in the
United States, although still accounting for approximately 75%
of total 2004 oral hormone replacement prescriptions. Estrogen
therapy is often combined with other hormones, typically
progestin, which is used to decrease the estrogen-related risk
of uterine cancer. These combination therapies constituted
approximately 25% of all U.S. oral hormone replacement
prescriptions and had U.S. sales of $391 million in
2004, down from sales of $783 million in 2002.
Women and their physicians seeking alternatives to systemic
hormone replacement therapies to treat vaginal atrophy typically
turn to topical prescription-based hormone treatments. These
products include vaginal delivery of estrogen in the form of
creams, medicated vaginal suppositories and a hormone-releasing
ring. Sales in the U.S. of prescription topical treatments
for vaginal atrophy have increased by 35% to $232 million
from 2002 to 2004. Vaginal delivery of estrogen diminishes, but
does not eliminate, the risks of systemic exposure to estrogen.
Over-the
-counter
topical vaginal lubricants and moisturizers are also commonly
used, but these therapies are messy to apply. Further, over the
counter topical treatments do not fundamentally change the
mucous membrane of the vagina, and as a result offer only
temporary relief of vaginal atrophy, little relief of associated
local urinary symptoms, and can actually increase vaginal
dryness after the lubricant dries.
SERMs may offer another alternative to hormone replacement
therapies because they have not been shown to increase the risk
of breast or uterine cancer. The therapeutic effects of SERMs
depend on the tissue specificity of each compound. Raloxifene,
marketed as Evista by Eli Lilly, is the first and only approved
SERM for non-oncological treatment. Raloxifene is effective in
treatment of osteoporosis because it is selective to bone
tissue, but it has no effect on vaginal tissue and therefore
does not treat vaginal atrophy.
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Further, according to its product label, raloxifene may increase
the incidence of hot flashes. Lasofoxifene (Oporia), currently
in clinical development by Pfizer for the treatment of vaginal
atrophy, appears, based on published clinical data, to
effectively treat osteoporosis and vaginal atrophy, but it also
induces hot flashes. There are no published data on the
treatment of vaginal atrophy using bazedoxifene, a SERM being
developed by Wyeth.
Our product candidate, ospemifene, has been shown in
phase II studies to have beneficial effects on bone density
and vaginal atrophy and did not appear to induce hot flashes
when compared to placebo. As a result of the limitations of
current therapies, we believe that an oral therapeutic that
effectively treats the symptoms of post-menopausal vaginal
atrophy without increasing the risk of breast and uterine cancer
and which does not induce hot flashes would be an important
addition to the therapeutic choices of patients and their
physicians.
Completed Clinical Trials
Phase II Clinical Trial — Comparison with
    Placebo
In February 2001, we completed a randomized, double-blind,
parallel group study of ospemifene versus placebo in
159 post-menopausal women at two study sites in Finland. In
this trial, three dose levels of ospemifene (30, 60 or
90 mg once daily) were compared to placebo when
administered for 12 weeks. This study was designed
primarily to examine the effect of ospemifene on bone markers in
blood and urine. We also measured other parameters including
change in the vaginal maturation index, thickness of the uterine
lining and blood hormone levels.
This trial demonstrated that ospemifene had an estrogen-like
effect on vaginal cells. Statistically significant changes were
observed in the decrease in parabasal and increase in
superficial cells as reflected in the vaginal maturation index
compared to placebo for all doses except that no statistically
significant changes were observed for superficial cells with the
30 mg dose. Further evidence of the positive effect of
ospemifene was the improvement in vaginal dryness, particularly
in patients receiving the 60 mg dose. In addition,
ospemifene was found to be superior to placebo in reducing bone
turnover. Bone turnover is the rate at which the bone builds up
and breaks down. After menopause, women generally experience an
increase in bone turnover, as bone is resorbed faster than it is
replaced resulting in an increased rate of bone loss and
increased risk of fractures. In this study, ospemifene was
well-tolerated, no safety issues were observed and the reported
adverse events represented an expected range of common symptoms
and ailments not significantly different than placebo.
Ospemifene did not increase the frequency of hot flashes or
sweating when compared to placebo.
Phase II Clinical Trial — Comparison with
    Raloxifene
In January 2000, we completed a randomized, double-blind study
of ospemifene versus raloxifene in 118 post-menopausal women at
seven study sites in Finland. In this trial, three dose levels
of ospemifene (30, 60 or 90 mg once daily) were compared to
raloxifene 60 mg once daily when administered for
12 weeks. This trial demonstrated that all ospemifene dose
levels had an estrogen-like effect on vaginal cells. Ospemifene
caused statistically significant relative decreases in parabasal
cells and increases in superficial cells, as reflected in the
vaginal maturation index, as compared to raloxifene for all dose
levels except that no statistically significant changes were
observed for parabasal cells with 60 mg of ospemifene.
Raloxifene did not induce changes in the vaginal maturation
index. Ospemifene had similar effects on bone turnover to
raloxifene. In this study, ospemifene was well-tolerated and no
safety issues were observed.
Phase I Clinical Trials
Ospemifene has been the subject of five completed phase I
clinical trials with a total of 121 volunteers. These
trials included single and multi-dose escalating studies and
food effect studies. In these studies, ospemifene was well
tolerated and no safety issues were observed.
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Ongoing Phase III Clinical Trials
In October 2005, we had an End of Phase II Meeting with the
Division of Reproductive and Urologic Drug Products of the FDA
to discuss the future development of ospemifene. Based on this
meeting, we are conducting a phase III program to seek FDA
approval of ospemifene for the treatment of vaginal atrophy. Our
phase III program will consist of at least two
phase III trials, the first of which was initiated in
January 2006. The phase III clinical trial program may also
include additional supportive trials examining bone markers and
the potential for treatment of hot flashes. In addition, in
order to file an NDA, we will be required to complete two
two-year carcinogenicity studies that we expect to initiate in
2006 and will run in parallel with our phase III trials.
Our first phase III clinical trial is a randomized,
double-blind, placebo-controlled, parallel group pivotal study
of ospemifene in the treatment of vaginal atrophy. We expect to
enroll approximately 800 post-menopausal women in this study at
approximately 65 study sites in the United States. Patients will
receive 30 or 60 mg of ospemifene or placebo for
12 weeks. Following the treatment phase of the study,
patients will be eligible to participate in a one-year extension
study.
In designing our phase III clinical program for ospemifene,
we have followed FDA published guidance for clinical evaluation
of estrogen/progestin drug products used for hormone replacement
therapy. This guidance is intended to provide recommendations
for studies of estrogen/progestin drug products for the
treatment of moderate to severe vaginal atrophy symptoms
associated with menopause. The guidance recommends that three
primary efficacy analyses demonstrate a statistically
significant improvement versus placebo from baseline to week 12
in all three of the following parameters:
(1) vaginal maturation index, with an improvement reflected
    by a decrease of parabasal vaginal cells and increase in
    superficial vaginal cells;
(2) vaginal pH, with an improvement reflected by a lowering
    of vaginal pH; and
(3) the moderate to severe symptom identified by the
    patient as being most bothersome to her.
In our meeting with the FDA, the FDA confirmed to us that these
endpoints would also apply to clinical trials involving SERMs,
and specifically to ospemifene. In our phase II studies, we
have shown a statistically significant improvement in the
vaginal maturation index. In our phase III studies, our
goal is to confirm improvement in the vaginal maturation index
and achieve the vaginal pH and most bothersome symptoms
endpoints.
Fispemifene — A Treatment for the Symptoms of
Andropause
Description of Condition
Andropause is a result of a gradual decline in testosterone
levels that occurs naturally as men age, a phenomenon similar to
menopause in women. Testosterone, an androgen, is the
predominant male sex hormone. According to a recent World Health
Organization report, testosterone progressively declines as men
age, with 20% of men aged 60 to 80 and 33% of men over 80 having
lower than normal levels of testosterone. Andropause is linked
to a range of conditions including fatigue, reduced interest in
sexual activity, erectile dysfunction, reductions in muscle
mass, strength and agility, mood changes, hair loss, and breast
enlargement. Other longer term medical issues have also been
associated with low testosterone including reduced sperm
production and infertility, osteoporosis, depression and heart
disease. The severity and type of andropause symptoms and the
age at which symptoms first occur can differ greatly among men.
The production of testosterone in men is controlled by the
hypothalamus and pituitary gland. Under normal circumstances,
the release of two hormones, luteinizing hormone (LH) and
follicle stimulating hormone (FSH), stimulates production of
testosterone and estrogen from the testes. Testosterone and
estrogen in turn feedback to the hypothalamus and pituitary
gland. When adequate amounts of testosterone and estrogen have
been produced, the hypothalamus and pituitary recognize this and
decrease the release of LH and FSH. When either estrogen or
testosterone feedback is blocked, an increase in LH and FSH
occurs, stimulating the testes to produce more testosterone.
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Product Candidate Characteristics
Fispemifene is our product candidate for the treatment of the
symptoms of andropause. Unlike testosterone replacement
therapies, fispemifene utilizes the body's normal feedback
mechanism to increase testosterone levels into, but not beyond,
the normal range. Under normal circumstances, testosterone and
estrogen secretion from the testes are regulated by the
pituitary hormones, LH and FSH. Testosterone and estrogen in
turn feed back to the hypothalamus and pituitary to prevent
excessive secretion. By blocking estrogen feedback to the
pituitary with a drug like fispemifene, the pituitary increases
LH and FSH secretion which increases testosterone secretion. As
these rising testosterone levels feed back to the pituitary, LH
and FSH secretion return toward normal and testosterone reaches
a new, albeit higher, steady state level. Based on this
mechanism of action, fispemifene is being studied for the
treatment of androgen deficiency and associated symptoms in
aging men. We believe that increased production of testosterone
may treat many of the symptoms of andropause. In a multiple-dose
phase I study we conducted in healthy men, fispemifene
increased total testosterone levels after 28 days of
treatment.
Fispemifene's direct effect on tissues other than the
hypothalamus and pituitary gland may provide additional benefits
in patients with andropause. Because fispemifene has selective
tissue effects, it has estrogen-blocking effects in some tissue,
while having estrogen-like effects in other tissue. For example,
fispemifene's direct estrogen blocking effects on breast
may be useful in treatment of breast enlargement, while its
direct estrogen-like effect on bone may increase bone mass. In
addition, we have demonstrated preclinically the estrogen
blocking effects of fispemifene on the prostate, which may help
reduce certain risks associated with estrogen, including
prostate cancer and increase in prostate size.
Market Opportunity
Recent advances in the sensitivity of testing for bioavailable
testosterone have significantly enhanced the ability of
physicians to diagnose and treat andropause. In addition, the
growth of the aging population is driving a significant increase
in the number of older male patients that may benefit from
treatments for the symptoms of andropause. The symptoms of
andropause are most commonly treated with testosterone
replacement therapy. The current market for testosterone
replacement consists primarily of topical or injectable
products. Testosterone replacement products are designed to
provide exogenous testosterone to supplement the low levels of
testosterone seen in aging men but do not address the mechanism
which causes andropause.
Currently, gel and patch formulations of testosterone are the
most commonly prescribed replacement therapies. In the United
States alone, sales for this topical category reached
$538 million in 2004, a growth of 40% compared to 2003, and
almost doubling since 2002. In the same two-year period,
U.S. prescriptions grew 25%, from 1.9 million in 2002
to nearly 2.4 million in 2004. Androgel, marketed by
Solvay, is the U.S. market leader with a nearly 60% market
share of prescriptions and sales of almost $400 million in
2004. Approximately half of patients prescribed topical
testosterone products are between 46 and 65 years old.
Topical products have certain cosmetic and practical
limitations, such as messiness. Intramuscular injections of
testosterone are effective but are painful and inconvenient.
Oral testosterone therapy is rarely used because of the
potential risk of life-threatening liver toxicity.
The therapeutic goal of testosterone replacement therapy is to
normalize the blood serum testosterone concentration in men to
mid to low young adult serum levels and to avoid elevated
testosterone levels. In spite of this goal, elevated
testosterone levels do occur with replacement therapy and can
lead to problems including prostate enlargement and clinically
meaningful elevations in blood hemoglobin levels that can
increase the risk of vascular problems, including stroke. We
believe that an oral therapeutic option that could elevate
testosterone levels into the normal physiologic range without
increasing the risk of prostate enlargement and elevated blood
hemoglobin levels would be an important therapeutic option for
the treatment of the symptoms of andropause.
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Completed Clinical Trials
Phase I Clinical Trial — Multiple Dose
    Tolerance Study
In September 2002, we completed a randomized, double-blind,
placebo-controlled, ascending multiple-dose study of fispemifene
in 31 healthy older male subjects at a single site in Finland.
This study demonstrated that fispemifene was well tolerated at
doses of 10, 30, 100 and 300 mg administered once
daily for 28 days. As secondary objectives, the
pharmacokinetics and pharmacodynamics (serum hormone levels) of
fispemifene were also studied. The increase of the mean total
testosterone over baseline on days 15, 22 and 28 was
approximately 75% with 300 mg of fispemifene, which
constituted a statistically significant change (see Figure A
below). The increase of the mean total testosterone level with
doses of fispemifene lower than 300 mg was not
statistically significant and has been omitted from the graph.
Figure A. Testosterone Values Observed in Phase I
Clinical Trial
Multiple Dose Tolerance Study
*    Measurements at days 15, 22 and 28 were
statistically significant (p < 0.05).
Phase I Clinical Trial — Single Dose Tolerance
    Study
In November 2001, we completed a randomized, double-blind,
placebo-controlled, ascending single dose alternating group
study of fispemifene in 20 healthy male volunteers at a single
site in the United Kingdom. The primary objective was to study
the safety and tolerability of the drug. As secondary
objectives, the pharmacokinetics and pharmacodynamics of
fispemifene were studied. Six dose levels were included in the
study: 10 mg, 30 mg, 100 mg, 300 mg,
600 mg, and 1200 mg. Fispemifene was well tolerated at
all dose levels and there was no evidence of dose or
treatment-related trends in the number or severity of adverse
events.
Planned Phase II Clinical Trial — Study of
    Patients with Low Testosterone
To date, all clinical studies of fispemifene have occurred
outside of the United States. In November 2005, we submitted an
initial IND filing to the FDA for fispemifene in the treatment
of low testosterone in aging men. In the first quarter of 2006,
we will initiate a randomized, double-blind, placebo-controlled,
parallel group phase II study of fispemifene in the
treatment of low testosterone in older men. This study will seek
to enroll approximately 100 older men with low testosterone
levels at approximately 20 study sites in the
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United States. Patients will receive either 100, 200, or
300 mg fispemifene or placebo for 28 days. The primary
efficacy parameter will be testosterone increases relative to
baseline. Safety parameters will include assessment of prostate
volume in addition to routine safety monitoring. Our
phase II program for fispemifene will include multiple
phase II trials.
QRX-401
and
QRX-431
—
Treatments of Elevated LDL Cholesterol and Lp(a) Levels
Description of Condition
Approximately 70 million people in the United States have
one or more forms of cardiovascular disease, including coronary
heart disease. Coronary heart disease is the leading cause of
death in the United States, responsible for over 479,000 deaths
in 2003. Coronary heart disease is caused by deposition of
cholesterol, a type of lipid, in the coronary arteries leading
to coronary arteriosclerosis, a condition that may lead to chest
pain, heart attack or debilitating and potentially fatal heart
disease. At least 13.2 million Americans alive today have
suffered from such conditions. In addition, arteriosclerosis can
occur in other blood vessels, particularly those supplying blood
to the brain, leading to stroke and other cerebrovascular
conditions. High levels of LDL cholesterol, the so-called
"bad cholesterol," which can result from various
factors including a genetic predisposition, a diet high in
saturated fats, lack of exercise or diabetes, have been
conclusively shown to be a major cause of coronary heart disease.
A series of recent landmark clinical trials using drugs that
inhibit cholesterol production in the liver, called statins,
confirmed that decreasing high LDL cholesterol reduces the risk
of coronary artery disease and stroke. In 1985, the United
States National Heart, Lung, and Blood Institute of the NIH
launched the National Cholesterol Education Program
(NCEP) with the goal of reducing coronary heart disease by
reducing the percentage of Americans with high cholesterol.
Treatment guidelines issued by the NCEP have advocated
increasingly lower LDL cholesterol treatment targets as new
scientific data has emerged. Despite this awareness, in the
major pharmaceuticals markets, over 300 million people have
cholesterol disorders and of these, almost 180 million
remain undiagnosed, and less than 32% are receiving any form of
lipid drug treatment, according to 2003 estimates. It is
expected that the number of patients needing
cholesterol-lowering therapy will continue to grow because of an
aging population and the increasing number of people with
diabetes.
In addition to lowering LDL cholesterol levels, therapies are
being developed to lower triglycerides, a different form of fat,
to increase HDL cholesterol, the so-called "good
cholesterol," and to lower other lipoproteins that may
contribute to coronary heart disease and strokes. Lipoproteins
are proteins which transport fatty substances in the blood
stream to and from the liver. One of these lipoproteins is
Lp(a), which has a shape similar to blood clotting proteins and
may encourage blood to clot when Lp(a) levels are high. Lp(a)
has been shown to be an important independent variable for
prediction of risk of cardiovascular disease after LDL
cholesterol and HDL cholesterol, as demonstrated in patients
with coronary heart disease, stroke and premature peripheral
vascular disease and in the aging. Epidemiological studies
indicate that high levels of Lp(a) are associated with an
increased frequency of stroke and coronary heart disease. Large
studies confirming the effect of lowering Lp(a) have not yet
been conducted. To date, there are no drugs approved for the
treatment of elevated Lp(a) levels. Nevertheless, it is
generally believed that lowering Lp(a) could be beneficial and
contribute to a further reduction of the incidence of stroke and
coronary heart disease.
Product Candidate Characteristics
QRX-401
We are developing
QRX-401
as a potential
new therapy for the treatment of patients with elevated LDL
cholesterol levels.
QRX-401
appears to be
unique in its mechanism for lowering LDL cholesterol and Lp(a).
The liver synthesizes cholesterol, converting it into either
bile acids or particles such as LDL cholesterol. The farnesyl X
receptor, or FXR, indirectly regulates this conversion of
cholesterol into bile acids by the liver.
QRX-401
has been shown
in preclinical studies to be an FXR antagonist, which means that
it blocks the stimulation of the FXR. Blocking the stimulation
of the FXR causes an increase in bile acid formation and a
consequent decrease in the amount of cholesterol available for
LDL cholesterol formation by the liver. Other
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mechanisms may also contribute to the observed effects of
QRX-401
on LDL
cholesterol and Lp(a) in animal models. We have not yet
demonstrated that this mechanism for LDL cholesterol lowering is
effective in normal, healthy volunteers.
QRX-431
We are also developing
QRX-431
for the
treatment of elevated levels of LDL cholesterol and Lp(a).
QRX-431
activates the
thyroid beta receptor, which is a known mechanism for lowering
LDL cholesterol and Lp(a). The naturally occurring thyroid
hormone, T3, has been shown to lower LDL cholesterol and Lp(a)
through its effects on the thyroid beta receptor, but T3 also
stimulates the thyroid alpha receptor which produces potentially
harmful increases in heart rate. This lack of tissue specificity
renders T3 unacceptable as a therapy to lower cholesterol
because of the elevation in heart rate.
QRX-431
is selective to
the thyroid beta receptor and, as a result, has been shown in
our preclinical studies to lower LDL cholesterol and Lp(a) and
not affect heart rate. Further, in preclinical monkey studies,
QRX-431
was observed to
be selectively taken up by the liver relative to the heart,
which provides added protection to the heart. We believe that
QRX-431
may also have
the potential to act as a weight loss therapy. In the monkey
studies,
QRX-431
caused
an average weight loss of 3% to 4% after seven days of treatment.
Preclinical studies with
QRX-431
have also
demonstrated that this product candidate stimulates reverse
cholesterol transport, or RCT. RCT is an important protective
mechanism involving the transport of cholesterol from the
arteries, including plaques which may cause strokes, back to the
liver.
QRX-431
stimulates several steps in RCT including stimulation of the HDL
receptor
SR-B1
and
increasing bile acid synthesis and removal. This suggests that
QRX-431
might be a
candidate for treatment and prevention of cardiovascular disease
in humans independent of its effects on LDL cholesterol and
Lp(a).
Market Opportunity
In 2004, the market for prescription lipid disorder treatments
reached approximately $26 billion worldwide, making it the
single largest pharmaceutical category. Much of this growth was
driven by statins, which accounted for approximately 87% of
sales. Non-statin therapies, including fibrates, niacin and
cholesterol absorption inhibitors, have also seen an increase in
use, in particular in combination with low dose statins, a
recent example being Vytorin, a cholesterol absorption inhibitor
marketed by Merck/Schering-Plough.
The lowering of LDL cholesterol continues to be the primary
focus of current therapeutic strategies aimed at reducing the
risk of cardiovascular events in patients with elevated
cholesterol. A significant gap remains, however, between the
number of patients who would benefit from therapy and those who
are actually achieving treatment goals. For example, a recent
survey in the United States reported that 37% of patients at
high risk of developing coronary heart disease and only 18% of
patients with established coronary heart disease actually
achieved the LDL cholesterol values recommended by the NCEP
guidelines.
Among currently available cholesterol lowering therapies,
statins are the most widely used because they are considered to
be the most effective. Troublesome or serious side effects may
limit the utility of statins in some patients. Muscle pain
resulting from statin therapy, while not considered a serious
complication, may affect quality of life and lead to lack of
compliance, treatment at less than optimal doses or withdrawal
from therapy. Rare serious side effects such as muscle damage, a
breakdown of skeletal muscle cells and liver toxicity preclude
the use of statins in older individuals or in patients with
kidney or liver disease.
Statins are sometimes combined with other therapies to limit the
statin dose in patients who cannot tolerate higher doses and to
achieve LDL cholesterol target levels in patients for whom use
of statins alone is not sufficient. Combining statin therapy
with some other types of cholesterol lowering drugs may cause
adverse side effects resulting from the interaction of statins
with the other drugs. In addition, certain of the drugs that are
used in combination with statins have adverse side effects
themselves, including adverse liver and gastrointestinal effects
and facial flushing. Because of these side effects, new
treatments to use in combination with statins are being sought.
While statin therapy has proven to be safe and effective in the
majority of patients for lowering LDL cholesterol, it does not
address all cardiovascular risk factors. Statins have only small
beneficial effects on
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elevated triglycerides and HDL cholesterol and no effect on
Lp(a). We believe a drug that reduces LDL cholesterol and Lp(a)
and that can be used either alone or in combination with statins
would produce additional benefits over existing therapies.
Development Program —
QRX-401
Phase I Clinical Trials — Single and Multiple
    Dose Tolerance Studies
In June 2004 we began our initial single dose tolerance
phase I study with
QRX-401.
Since that
time, we have conducted a total of four single and multiple dose
tolerance studies with a total of 144 normal volunteers with
doses of up to 250 mg/day for 14 days. In all of these
studies,
QRX-401
has
been well-tolerated and no safety issues were observed. Although
we are still analyzing data from these studies, which were not
designed primarily to demonstrate efficacy, to date we have not
observed consistent LDL cholesterol lowering in normal
volunteers following administration of
QRX-401.
Phase I Clinical Trial — Food Effect Study
In June 2005, we completed a single-center, randomized,
balanced, single-dose, crossover study of the pharmacokinetics
of 150 mg
QRX-401
in fed and fasted healthy male subjects. This trial demonstrated
that
QRX-401
was
rapidly absorbed and metabolized. In addition, the trial showed
that safety and tolerability parameters were similar between the
fasted and fed states.
Ongoing Phase I Clinical Trial — Statin
    Interaction Study
We are currently conducting a multiple-dose pharmacokinetic drug
interaction between
QRX-401
and
simvastatin, a commonly used statin marketed as Zocor by
Merck & Co., in healthy male volunteers to evaluate the
potential for a pharmacokinetic drug interaction of
QRX-401
on simvastatin
as well as to assess the safety, tolerance and pharmacodynamic
effects of the co-administration of
QRX-401
and simvastatin
when administered once daily for two weeks. A secondary
objective is to evaluate the potential for a pharmacokinetic
drug interaction of simvastatin on
QRX-401
as compared to
historical single dose 250 mg
QRX-401
pharmacokinetic
data. The results from this study are expected in the second
quarter of 2006.
Development Program —
QRX-431
Preclinical Studies
A preclinical study of
QRX-431
in cynomolgus
monkeys was published in 2004. The monkeys were treated either
with the natural T3 hormone or
QRX-431
once daily for
seven days. The group treated with
QRX-431
demonstrated no
statistically significant increase in heart rate. Reductions in
LDL cholesterol and Lp(a) levels and a 3% to 4% weight reduction
in this group were observed. The differences between the
QRX-431
group and the
T3 group were statistically significant for each of the markers.
The results of the study are shown in Figure B below
comparing T3 to
QRX-431
(referred to as
GC-1
in
the graph).
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Figure B.     7 Day Treatment in
Cynomolgus Monkeys
* Measurements were statistically significant
(p<0.05)
G. J. Grover, D.M. Egan, P.G. Sleph,
B.C. Beehler, G. Chiellini, N. Nguyen,
J.D. Baxter and T.S. Scanlan, "Effects of the
Thyroid Hormone Receptor Agonist
GC-1
on Metabolic Rate
and Cholesterol in Rats and Primates: Selective Actions Relative
to 3,5,39- Triiodo-L-Thyronine," Endocrinology, April
2004 (4), 145, 1656 -1661. Copyright 2004 by The Endocrine
Society.
Planned Clinical Trial
We plan to submit an initial IND filing for
QRX-431
in the
treatment of lipid disorders in the first half of 2006 and
initiate a phase I trial shortly thereafter. Supportive
toxicology and safety pharmacology studies have been conducted
and are currently being summarized. The phase I clinical
program will consist of single and multiple rising dose
tolerance studies, a food effect study, and a drug interaction
study with a statin product.
Becocalcidiol — A Topical Treatment for
Psoriasis
Description of Condition
Psoriasis is a chronic disease of the skin characterized by red
patches covered with white scales, or plaques, that can occur on
any part of the body. Psoriasis usually develops in individuals
between 15 and 35 years of age, but can develop at any
time. In addition to its cosmetic aspect, psoriasis can have a
profound effect on quality of life depending on location on the
body and how much of the body is affected. Psoriasis is a very
common condition. According to 2004 sources, it is estimated
that 1% to 3% of the adult population have the disease with
various forms of severity and that over 18 million people
in the United States, Japan, France, Germany, Italy, Spain and
the United Kingdom suffer from the disease. In these markets, it
is estimated that approximately 10 million patients are
currently diagnosed with psoriasis and that approximately 81% of
these patients receive treatment with topical therapies. In the
United States, it is estimated that approximately
4.5 million patients are currently diagnosed with psoriasis
and that approximately 87% of these patients receive topical
therapy treatments.
Product Candidate Characteristics
Becocalcidiol is our product candidate for the treatment of mild
to moderate psoriasis. Becocalcidiol is a novel topical
calcitriol analog. Topical calcitriol and its analogs have been
shown for many years to be effective in the treatment of
psoriasis. Based on our completed phase IIb study,
becocalcidiol was statistically superior to vehicle in reducing
plaque and did not result in excessive blood calcium levels, a
side effect of existing calcitriol topical treatments for
psoriasis. This allows the potential for use of becocalcidiol at
higher doses and/or on larger body surface areas than can be
achieved with existing calcitriol topical products. We believe
that the ability to treat patients with higher doses may in turn
offer the potential for enhanced
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efficacy. In our clinical and preclinical studies, becocalcidiol
has been well tolerated with a low incidence of skin irritation.
Becocalcidiol has been formulated into an ointment, and has
undergone preliminary formulation work for cream, mousse and
lotion forms that all appear feasible and which could provide a
range of presentation options to address different patient
needs. Becocalcidiol has also successfully undergone
pre-formulation feasibility work for combination with a topical
steroid and a topical retinoid, two existing treatments for
psoriasis.
Market Opportunity
Global sales of topical products for the treatment of psoriasis
were $532 million for the twelve month period ended October
2005, with almost 70% of these sales coming from existing
topical vitamin D-based products. Other available topical agents
include corticosteroids, keratolytics, anthralin, coal tar and
retinoids. While each of these existing topical treatments has
been shown to produce some clinical benefit, each has also been
associated with undesirable side effects, including skin
irritation, odor and staining of the skin. Physicians often
switch or rotate therapies to try to avoid such problems or
improve efficacy. Topical products are mainly used for mild to
moderate psoriasis; recently, new systemic products have been
approved for the treatment of moderate to severe psoriasis. As
use of these much more expensive therapies increases, the
overall value of the total market for psoriasis products is
projected to grow significantly.
Corticosteroids and calcitriol analogs, either alone or in
combination, are the most popular of topical treatments.
Steroids can quickly clear lesions, but they typically do not
produce long remissions and repeated use can be associated with
a thinning of the outer layers of the skin and other undesired
skin changes. All currently marketed calcitriol based products
have reported cases of excessive blood levels of calcium, which
can result in kidney and other potentially serious problems.
These existing products are also reported to exhibit frequent
skin irritation that may reduce patient compliance and encourage
switching of therapies. Calcipotriol, a topical calcitriol
analog marketed by Warner Chilcott as Dovonex, and
calcipotriene/betamethason dipropionate, a calcipotrol with a
topical steroid to be marketed by Warner Chilcott as Taclonex,
are the only topical calcitriol products available in the United
States. In Europe, other topical calcitriol agents are also
available, as is a combination of calcipotriol with a topical
steroid.
Completed Clinical Trials
Phase IIb Clinical Trial — Whole Body Proof of
    Concept Study
In March 2005, we completed a randomized, double-blind, parallel
group, vehicle-controlled study of becocalcidiol in
185 patients with mild to moderate chronic psoriasis at 12
centers in the United States. In this trial, two dose regimens
of becocalcidiol ointment, 75 mg/g ointment applied once daily
(low dose) and 75 mg/g ointment applied twice daily (high dose),
were compared to a vehicle ointment not containing any drug. The
primary study endpoints were a Physician's Global
Assessment (PGA) reflecting the percentage of patients with
all plaques on body cleared or almost cleared, and a Psoriasis
Symptom Score (PSS) based on two to four target plaques
selected at baseline. Efficacy was assessed following eight
weeks of therapy.
This trial demonstrated that treatment with high dose and low
dose becocalcidiol resulted in a statistically significant
improvement in PGA score compared to vehicle. In addition, all
plaques were cleared or almost cleared in 31% and 20% of
patients treated in this trial with high and low dose
becocalcidiol, respectively, compared to 6% patients treated
with vehicle. Patients in the high dose becocalcidiol group
achieved a statistically significant improvement in PSS score
from baseline as compared to patients in the vehicle group.
Becocalcidiol was generally well-tolerated in this study with a
low incidence of skin irritation and no change in blood calcium
levels.
Phase IIa Clinical Trials
In October 2003, we completed two phase IIa clinical
trials. These two trials enrolled a total of 152 patients.
Patients were treated for two weeks in one study and
12 weeks in the other study. These studies
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were conducted at low doses compared to our phase IIb trial
described above. We observed initial indications of efficacy
that demonstrated the need to proceed to the higher doses. We
have now studied higher doses in our phase IIb trial.
Becocalcidiol was generally well-tolerated in both of these
phase IIa studies. No clinically significant changes in
blood or urine calcium levels were observed.
Planned Development
Because becocalcidiol is outside our core therapeutic areas, we
are evaluating alternatives for continued development of this
product candidate, including seeking a partner for further
development and commercialization. We are also currently working
on improved synthetic manufacturing methods for becocalcidiol.
Our Preclinical and Discovery Programs
Our preclinical and discovery programs are primarily conducted
by Hormos, our wholly owned Finnish subsidiary which we acquired
in May 2005. Over the last seven years, Hormos has built a drug
discovery capability that is focused on discovering and
developing novel pharmaceutical compounds involving the tissue
specific regulation of estrogen effects for the treatment of
certain age-related diseases. Hormos's discovery efforts
are aided by the potential for Finnish government research loans
and grants offered for drug discovery in Finland.
We are focusing our research on SERMs and
17b hydroxysteroid dehydrogenases, or HSDs. We are
enhancing and following the work already completed with
ospemifene and fispemifene in the SERM area, and particularly
focusing on the treatment of hot flashes in women. We have built
up a SERM library in which several molecules show no
estrogen-like effect in breast or uterine tissue, but
estrogen-like effect in the central nervous system, which should
have a positive effect in treating hot flashes in menopausal
women. HSDs are selective inhibitors to prevent the conversion
of estrone to estradiol and therefore cause relative estrogen
deficiency in selected tissues. We believe HSDs could be useful
for endometriosis and uterine fibroids in women and may have
applications for shrinking prostate size in men.
We have nine scientists and eight technicians working in our
chemistry and pharmacology laboratories at our research division
in Finland. Senior members of our research division have
extensive experience in drug discovery and development at
companies such as Farmos, Orion and Schering and with a wide
variety of products, including hormonal products. Prior to
joining Hormos, certain members of this research team discovered
the SERM compound toremifene, marketed as Fareston by GTx, and
participated in its worldwide development for the treatment of
breast cancer. Our resources in Finland enable us to focus on
the most critical elements of drug discovery, namely developing
and running key high throughput screening of compound libraries
and optimizing lead compounds. We also have access to a state of
the art animal facility allowing key small scale in vivo
experiments to be done in a timely manner.
Hormos also supports our clinical development activities by
providing expertise and resources in pharmacokinetics,
pharmaceutical product development and project management. The
development staff consists of ten members, eight of whom are
scientists. Bioanalytics is done in our
GLP-approved
laboratory. Our GMP approved
in-house
resource
allows tablet development and stability studies and release of
products for clinical studies. The team leader for our GMP work
has extensive experience in product development, outsourcing of
manufacturing and NDA filings relating to hormonal products.
Sales and Marketing
We do not have sales or marketing personnel. In order to
commercialize any products that are approved for commercial
sale, we must either build a sales and marketing infrastructure
or collaborate with third parties with sales and marketing
experience. We expect that we may build our own sales and
marketing infrastructure to market some of our product
candidates. We expect that we will
out-license
or enter
into collaboration agreements for the commercialization of other
product candidates, particularly in the case of product
candidates, such as our product candidates for treating elevated
cholesterol levels, where the sales and marketing infrastructure
required to maximize their value is larger than is practical for
a company of our size.
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Intellectual Property
Our policy is to protect the technology that we consider
important to our business. We will be able to protect our
technology from unauthorized use by third parties only to the
extent it is effectively maintained as a trade secret or is
covered by valid and enforceable patents and trademarks.
Individual patents extend for varying periods depending on the
date of filing of the patent application or the date of patent
issuance and the legal term of patents in the countries in which
they are obtained. Generally, patents issued in the United
States are effective for: (a) 20 years from the
earliest effective filing date, if the patent application was
filed on or after June 8, 1995, or (b) 17 years
from the issue date or 20 years from the earliest effective
filing date, whichever is later, if the patent application was
filed prior to June 8, 1995. The length of these effective
terms assume all maintenance fees are paid.
In addition, in certain instances, a patent term can be extended
to recapture a portion of the term effectively lost as a result
of the FDA regulatory review period. The duration of foreign
patents varies in accordance with provisions of applicable local
law.
The actual protection afforded by a patent varies on a product
by product basis, from country to country and depends upon many
factors, including the type of patent, the scope of its
coverage, the availability of regulatory related extensions, the
availability of legal remedies in a particular country and the
validity and enforceability of the patents.
We actively seek to obtain patent protection on the technology
that we consider important to our business, including chemical
species, compositions and forms, their methods of use and
processes for their manufacture. In addition to seeking patent
protection in the United States, we generally file patent
applications in Australia, Canada, Western European countries,
Japan, Mexico and additional foreign countries on a selective
basis in order to further protect the inventions that we
consider potentially important to the development of our
business.
For ospemifene, we have obtained an issued patent covering the
use of ospemifene for the treatment of climacteric disorders in
women during or after menopause. The patent will expire,
assuming all maintenance fees or annuities are paid, in the
United States in 2020, in Australia in 2021, in New Zealand in
2021 and in South Africa in 2021. A patent on the subject matter
has also been approved for issue in Europe.
We also have a license from Orion under its patents covering the
use of ospemifene in a dosage formulation suitable for use in a
variety of indications. The patent will expire, assuming all
maintenance fees or annuities are paid, in the United States in
2015, in Europe in 2015, in Australia in 2015, in Israel in
2015, in Norway in 2015, in New Zealand in 2015 and in South
Africa in 2015. The license from Orion also grants us rights
under Orion's patent claiming the use of ospemifene as a
serum cholesterol lowering agent. This patent expires, assuming
all maintenance fees or annuities are paid, in the United States
in 2017, in Australia in 2017, in Europe in 2017 and in New
Zealand in 2017. Our license rights from Orion are exclusive
worldwide, subject to a right of first refusal retained by Orion
for Denmark, Estonia, Finland, Iceland, Latvia, Lithuania,
Norway, Russia and Sweden.
For fispemifene, we have obtained an issued patent covering
triphenylalkene derivatives (including fispemifene) and their
use as selective estrogen receptor modulators. Orion owns an
undivided interest in this patent and we have entered into a
license agreement with Orion under this patent. Our license
rights from Orion are exclusive worldwide, subject to a right of
first refusal retained by Orion for Denmark, Estonia, Finland,
Iceland, Latvia, Lithuania, Norway, Russia and Sweden. This
patent will expire, assuming all maintenance fees or annuities
are paid, in the United States on November 15, 2020. This
patent will also expire in Indonesia in 2020, in New Zealand in
2020, in Singapore in 2020, in Taiwan in 2020 and in South
Africa in 2020.
A third party holds an issued United States patent related to
the use of an anti-estrogen for use in the treatment of androgen
deficiency and related disorders. Zonagen, Inc., a
pharmaceutical company also developing a treatment for
testosterone deficiency in men using a compound that is named in
the patent, requested a reexamination of this patent from the
PTO on the grounds that the claims of the third party's
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patent were invalid because they were disclosed in printed
publications before the date of the invention. In June 2005, the
PTO determined that the claims, as amended during this
reexamination, were patentable in view of the publications under
consideration. Zonagen has subsequently stated in its public
filings that it intends to seek further reexamination of this
third party patent based on additional prior art publications
not previously considered by the PTO. If, as a result of this
further reexamination, the patentability of the claims is
confirmed by the PTO, the patent's scope could cover our
intended use of fispemifene. Even if Zonagen is not successful
in its attempt to invalidate all of the claims of the patent,
our intended use may be covered by any surviving claims. The
patent holder could bring a claim against us alleging that our
fispemifene product candidate infringes the patent. We believe
we would have valid defenses to any such claim; however,
notwithstanding any defenses we may assert, if such an
infringement claim were successful, we would need to obtain a
license from the patent-holder in order to commercialize
fispemifene in the United States. If such a license were
necessary but not available to us on acceptable terms or at all,
we may not be able to commercialize fispemifene at all in the
United States.
For
QRX-401,
we have a
license from Genzyme Corporation (formerly Ilex Products, Inc.)
under its patent claiming the composition of matter of
QRX-401
and its use as
a cholesterol lowering agent. This patent expires in the United
States in 2021. Our rights under this patent are worldwide and
exclusive in the field of lipid disorders, atherosclerosis and
all other cardiovascular related diseases.
For
QRX-431,
we have a
license from EndoChem, Inc. under patents it licensed from the
University of California claiming the composition of
QRX-431
and its use in
the treatment of hyperlipidemia, obesity and diabetes. This
patent expires in 2017. Our rights under this patent are
exclusive and worldwide for all therapeutic applications.
For becocalcidiol, we have a license from Deltanoid
Pharmaceuticals, Inc. under its patent rights obtained from the
Wisconsin Alumni Research Foundation claiming the composition of
becocalcidiol and its use in the treatment of psoriasis. Our
rights under these patents are worldwide. These patents expire
in 2022. Our license rights under these patents are limited to
this compound and are for topical treatments of skin diseases.
In addition to the foregoing patents, we or our licensors, have
also filed various patent applications in certain countries to
obtain additional patent protection relating to ospemifene,
fispemifene,
QRX-401,
QRX-431
and
becocalcidiol.
In addition to patents, we rely upon unpatented trade secrets
and
know-how
to develop
and maintain our competitive position. We also have
confidentiality agreements or invention assignment agreements
with some of our commercial partners and consultants. These
agreements are designed to protect our proprietary information
and, in the case of the invention assignment agreements, to
grant us ownership of technologies that are developed through a
relationship with a third party.
Licenses and Collaborative Relationships
We have established and intend to continue to pursue licenses
from and collaborative relationships with pharmaceutical and
biotechnology companies and academic institutions.
Orion
We have two license agreements with Orion Corporation, one
relating to ospemifene and one relating to fispemifene.
Under a license agreement with Orion relating to ospemifene, we
received an exclusive, worldwide license to Orion's
undivided interest in patents with respect to osteoporosis,
vaginal atrophy and cholesterol lowering in women. We separately
own an undivided interest in such patents. This license to
Orion's interest in the patents is limited to
pharmaceutical products containing ospemifene as its sole active
ingredient. The agreement includes the right to grant
sublicenses to third parties. Orion retained a right of first
refusal to become the exclusive importer and market seller and
distributor of ospemifene in Denmark, Estonia, Finland, Iceland,
Latvia, Lithuania, Norway, Russia and Sweden. Under the terms of
the agreement, we paid Orion a
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license fee of 400,000 Euros and also agreed to pay Orion
development milestone payments of up to $750,000 for two
milestones, and of up to an additional 1,100,000 Euros for
the remaining milestones, plus a royalty based on net sales of
products resulting under the agreement. The term of our license
from Orion continues on a country-by-country basis until the
expiration or invalidation of the last to expire or be
invalidated of the licensed patents, or 15 years from the
date of the agreement, whichever is longer. In the case of a
payment default, Orion has the right to terminate the license
upon 15 days prior written notice and failure to cure
within such 15 day period. In all other cases, each party
has the right to terminate the license upon 30 days prior
written notice in the case of material breach and failure to
take action to cure such a breach within such 30 day
period. Orion also has the right to terminate the agreement
immediately in the event that we fail to launch ospemifene in
the United States, Germany, the United Kingdom and France before
December 31, 2015.
Under a license agreement with Orion relating to fispemifene, we
received an exclusive, worldwide license to Orion's
undivided interest in patents with respect to fispemifene. We
separately own an undivided interest in such patents. The
agreement includes the right to grant sublicenses to third
parties. Orion retained a right of first refusal to become the
exclusive importer and market seller and distributor of
fispemifene in Denmark, Estonia, Finland, Iceland, Latvia,
Lithuania, Norway, Russia and Sweden. Under the terms of the
agreement, we paid Orion an initial license fee of
50,000 Euros and also agreed to pay Orion combined
development milestone payments of up to 900,000 Euros and a
royalty based on net sales of products resulting under the
agreement. The term of the license from Orion continues on a
country-by-country basis until the expiration or invalidation of
the last to expire or be invalidated of the licensed patents.
Each party has the right to terminate the license upon
30 days prior written notice in the case of material breach
and failure to take action to cure such a breach within such
30 day period.
Tess Diagnostics and Pharmaceuticals
Our former development partner for ospemifene, Tess Diagnostics
and Pharmaceuticals, Inc. has assigned to us all of its license
rights under certain patents for the use of ospemifene. In
consideration for that assignment and Tess' earlier
contribution to the development of ospemifene, we made a payment
of $700,000 to Tess. We have also agreed to pay a royalty out of
ospemifene net sales of each product and a share of milestones
received from third parties depending on the implemented
commercialization model. Our requirement to pay royalties
continues on a country-by-country basis until the expiration of
the last to expire of an ospemifene patent covering such
product. If we have a change in control and we determine to
develop and commercialize ospemifene without giving an exclusive
license to a third party, then we must pay to Tess combined
milestone payments of up to $8.5 million. If we have a
change in control and we grant royalty bearing licenses to third
parties, we must pay to Tess a share of the payments received
from third parties. If we decide to permanently discontinue our
development and commercialization of ospemifene, we have the
right to terminate our license from Tess upon written notice to
Tess.
Genzyme Corporation
Under an exclusive license agreement with Genzyme Corporation
(formerly Ilex Products, Inc.), we have a license to develop and
market certain compounds for the treatment of lipid disorders,
atherosclerosis and all other cardiovascular related disorders
on a worldwide basis. These compounds include
QRX-401.
We have the
right to grant sublicenses to third parties. Under the terms of
the agreement, we paid Genzyme Corporation an initial license
fee of $2.5 million. With respect to
QRX-401,
we have agreed
to pay Genzyme Corporation combined development milestone
payments of up to $39 million, a share of sublicense
revenue and a royalty based on net sales of products resulting
under the agreement. Milestone payments made to date have
totaled $1.5 million. Our requirement to pay royalties
continues on a country-by-country basis until the expiration of
the last to expire of the licensed patents that claim the
products or for the period of non-patent marketing exclusivity
in that country. We may terminate the agreement for any reason
upon 90 days written notice. Genzyme Corporation may
terminate the agreement if we are in material breach and fail to
cure such a breach within 60 days of written notice of such
breach by Genzyme.
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EndoChem
Under an exclusive license agreement with EndoChem, Inc., we
have a license to develop and market
QRX-431
for all human
therapeutic applications on a worldwide basis. We have the right
to grant sublicenses to third parties, however this right may
only be granted to the extent reasonably necessary for the
development and commercialization of products and sublicensees
who have received a direct sublicense from us may grant further
sublicenses without further rights to sublicense. Under the
terms of the agreement, we owe EndoChem an initial license fee
of $800,000, of which $450,000 has been paid, $100,000 is due
within seven days of the one year anniversary of the date
of the agreement and $250,000 is due within seven days of
the filing of an Investigational New Drug application for
commencement of phase I clinical trials with the FDA. We
have also agreed to pay EndoChem combined development milestone
payments of up to $3.25 million, a royalty based on net
sales of products resulting under the agreement and a percentage
of sublicensing revenues other than net sales. This agreement
also requires us to make specified minimum annual royalty
payments of $100,000 beginning in the first year of sales, and
in any event, beginning in 2012, even if sales have not occurred
by then. Our requirement to pay royalties continues on a
country-by-country basis until the expiration of the last to
expire of the licensed patents that covers the sale of the
product in such country. We may terminate the agreement for any
reason upon 90 days written notice. EndoChem may terminate
the agreement upon written notice if we are in material breach
and fail to cure such a breach within 45 days of the notice
for monetary defaults and 75 days of the notice for any
other default. The rights licensed to us by EndoChem were
licensed by EndoChem from the Regents of the University of
California and our rights are therefore subject to the
continuation of the license between EndoChem and the University
of California. We have received an affirmation from the
University of California providing that notwithstanding the
termination or expiration of the license between EndoChem and
the University of California, the University shall permit us to
exercise all rights granted to EndoChem under its license with
EndoChem and sublicensed to us provided that we are not in
default in our license with EndoChem at the time of termination
or expiration, and that we agree in writing to the terms of the
University's license with EndoChem.
Deltanoid Pharmaceuticals
Under an exclusive license agreement with Deltanoid
Pharmaceuticals, Inc., we have a license to develop and market
becocalcidiol for topical treatments of skin diseases, including
psoriasis, on a worldwide basis. We have the right to grant
sublicenses to third parties. Under the terms of the agreement,
we have paid Deltanoid Pharmaceuticals an initial license fee
and have agreed to pay Deltanoid Pharmaceuticals development
milestone payments up to $3.5 million and a royalty based
on net sales of products resulting under the agreement. Our
requirement to pay royalties continues on a country-by-country
basis until the expiration of the last to expire of the licensed
patents that covers the sale of the products in that country. We
may terminate the agreement for any reason upon 90 days
written notice. Deltanoid Pharmaceuticals may terminate the
agreement if we are in breach and fail to cure such a breach
within 30 days of written notice of such breach. The rights
licensed to us by Deltanoid Pharmaceuticals were licensed by
Deltanoid Pharmaceuticals from the Wisconsin Alumni Research
Foundation and our rights are therefore subject to the
continuation of the license between Deltanoid and the Wisconsin
Alumni Research Foundation. As such, we have entered into an
agreement with the Foundation providing that if the license
between the Foundation and Deltanoid Pharmaceuticals is
terminated, and we are not in default in our license with
Deltanoid Pharmaceuticals, then we will be deemed to have
entered into a license directly with the Foundation on the same
terms and conditions as those set forth in our license with
Deltanoid.
University of Turku
Under a patent assignment agreement with the University of
Turku, we have rights to a patent relating to the method of use
of fispemifene for treatments for lower urinary tract symptoms
or pelvic pain. Under the terms of the agreement, we paid patent
application and patent approval fees to the inventors and a
signing fee to the University that totaled 11,400 Euros. We
have also agreed to pay a 10,000 Euros milestone payment
and to pay a royalty based on net income. Our requirement to pay
royalties continues on a country-by-country
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basis until the expiration of the licensed patent in that
country. We have further agreed to pay a percentage of any
purchase price we receive for the outright license or assignment
to a third party of the applicable patent. Each party has the
right to terminate the license on 30 days prior written
notice in the case of breach and failure to cure such a breach
within such 30 day period.
Linnea
We entered into a Manufacturing, Sales and Distribution License
Agreement with Linnea S.A. whereby Linnea received an exclusive,
worldwide license to our HMRlignan technology for nutraceutical
use. Under this agreement, Linnea has the right to develop,
manufacture and commercialize HMRlignan as an active ingredient
in dietary supplement products. Linnea has the right to grant
sublicenses to third parties. We retained a non-exclusive right
to market HMRlignan in finished forms in the United States. We
also retained the right to develop, manufacture, commercialize
and license to third parties HMRlignan for prescription
pharmaceutical applications. Under the terms of the agreement,
Linnea is required to pay a royalty on sales of HMR bulk
ingredient by Linnea to its customers after April 1, 2007
and on revenues for sublicenses granted by Linnea. Linnea must
maintain certain minimum sales volumes in order to maintain its
exclusive rights under the agreement. We granted Linnea an
option to the right to sell HMRlignan products approved under
(i) the Generally Recognized As Safe regulatory clearance
by the FDA and (ii) the criteria stated in the European
Union for sale of novel food items, upon payment of an option
fee of $500,000 for each such use. Linnea has paid an initial
signing fee of 400,000 Euros. Linnea has the right to
terminate the agreement at any time upon 4 months prior
written notice. Either party has the right to terminate the
agreement if the other party is in material breach and fails to
cure such breach within 30 days from the date the written
notice of breach is dispatched. The term of this agreement
expires on the expiration of US patent 6,451,849 which expires
in 2019.
Competition
Our major competitors are public and private pharmaceutical and
biotechnology companies, both in the United States and abroad,
which are engaged in the discovery and development of products
that would compete directly with our therapeutic compound
candidates in the fields of endocrine, metabolic and
cardiovascular diseases, as well as psoriasis. Many of these
companies have greater financial resources and expertise than we
have in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory
approvals and marketing. These entities also compete with us in
recruiting and retaining qualified scientific and management
personnel, as well as in acquiring technologies complementary
to, or necessary for, our programs.
Any compound candidates that we successfully develop and
commercialize will compete with existing therapies and new
therapies that are likely to become available in the future. It
is possible that competing companies will develop drug
candidates and market drugs that are less expensive and more
effective than any drugs we may successfully develop or that
will render any drugs we develop obsolete. It is also possible
that these companies will commercialize competing drugs before
we or any of our partners can launch any drugs developed from
our product candidates. In addition to branded competitive
products, if our product candidates receive regulatory approval
they may face competition from generic drugs and the
availability of generic drugs may adversely affect the market
for our products.
Vaginal atrophy is generally treated with estrogen-based
therapies either oral or topical, such as Premarin, Prempro and
Premarin Vaginal Cream, marketed by Wyeth, and Vagifem, marketed
by Novo Nordisk. Other products in development for this
condition include bazedoxifene, being developed by Wyeth, and
Oporia, being developed by Pfizer, which are both SERMs.
Testosterone deficiency is most frequently treated with topical
gels or patches, such as Solvay Pharmaceuticals' Androgel
and Watson Pharma's Androderm. Products in development
include Acapodene and Ostarine, both being developed by GTx, and
Androxal, being developed by Zonagen.
In the treatment of lipid disorders, statins are the most
frequently prescribed products, examples of which include
Lipitor, marketed by Pfizer, Zocor and Mevacor, both marketed by
Merck & Co., Crestor, marketed
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by AstraZeneca and Pravachol, marketed by Bristol-Myers Squibb.
Other competitors include non-statin products, such as Zetia,
marketed by Merck/ Schering-Plough, Tricor, marketed by Abbott,
and Niaspan, marketed by Kos; combinations of statins with other
agents, for example Merck/ Schering-Plough's Vytorin and
Kos' Advicor; and new products in development, such as
KaroBio's KB2115.
Competing marketed topical psoriasis products or products under
development, specifically topical calcitriol analogues, include
Dovonex marketed by Warner Chilcott, Taclonex to be marketed by
Warner Chilcott, tisocalcitate, in development by Schering AG,
and CTA018 in development by Cytochroma.
Regulatory
The FDA and comparable regulatory agencies in foreign countries,
as well as local and state or other regional governmental
agencies, impose substantial requirements upon the clinical
development, manufacture and marketing of pharmaceutical
products. These agencies and other federal, state and local
entities regulate research and development activities and the
testing, manufacture, quality control, safety, effectiveness,
labeling, storage, record keeping, approval, advertising and
promotion of our products.
The process required by the FDA before product candidates may be
marketed in the United States generally involves the following:
•
preclinical laboratory and animal tests;
•
submission of an investigational new drug application, or IND
    application, which must become effective before clinical trials
    may begin;
•
adequate and well-controlled human clinical trials to establish
    the safety and efficacy of the proposed drug for its intended
    use;
•
pre-approval inspection of manufacturing facilities, company
    regulatory files, and selected clinical investigators; and
•
FDA approval of a new drug application, or NDA, or FDA approval
    of an NDA supplement in the case of a new indication if the
    product is already approved for another indication.
The testing and approval process requires substantial time,
effort and financial resources, and we cannot be certain that
any new approvals for our product candidates will be granted on
a timely basis, if at all.
Prior to commencing the first human clinical trial, we must
submit an IND application to the FDA. The IND application
automatically becomes effective 30 days after receipt by
the FDA, unless the FDA, within the
30-day
time period,
raises concerns or questions about the preclinical drug testing
or nonclinical safety evaluation in animals, or the design or
conduct of the first proposed clinical trial, and places the
study on clinical hold. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical
trial may begin. Our submission of an IND application may result
in the FDA's denial of authorization to commence a clinical
trial. A separate submission to the existing IND application
must be made for each successive clinical trial conducted during
product development, and the FDA must not object to the
submission before each clinical trial may start and continue.
Further, an independent institutional review board for
investigation in human subjects within each medical center in
which the clinical trial will be conducted must review and
approve the preclinical drug testing and nonclinical safety
evaluation and efficacy in animals or prior human trials as well
as the design and goals of the proposed clinical trial before
the clinical trial commences at that center. Regulatory
authorities or an institutional review board or the sponsor may
suspend a clinical trial at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
For purposes of NDA approval, human clinical trials are
typically conducted in three sequential phases that may overlap.
Phase I:
Phase I clinical studies are initially
conducted in a limited population to evaluate the product
candidate for safety, dosage tolerance, absorption, metabolism,
distribution and excretion in healthy subjects.
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Phase II:
Phase II clinical studies are
conducted in a limited patient population to further identify
and measure possible adverse effects or other safety risks, to
determine the initial efficacy of the product for specific
targeted diseases and to determine dosage tolerance and optimal
dosage. Multiple phase II clinical trials may be conducted
by the sponsor to obtain information prior to beginning larger
and more expensive phase III clinical trials. The first,
limited phase II clinical trials may be termed
"phase IIa" trials to denote that only a few
patients are enrolled in order to obtain preliminary safety and
efficacy data. Later, larger phase II clinical trials may
be termed "phase IIb" trials to denote that
preliminary evidence of safety and efficacy has already been
obtained, and the current trial is intended to confirm the
finding of the earlier trial, as well as to enroll additional
patients in order to further refine the estimate of the optimal
dose and to detect less common side effects. In some instances,
a phase IIb trial may be declared acceptable by a
regulatory agency, such as the FDA, as one of the
"pivotal" trials necessary for purposes of obtaining
marketing authorization for a drug.
Phase III:
When phase II clinical evaluations
demonstrate that a dosage range of the product appears to be
effective and has an acceptable safety profile, phase III
clinical trials are undertaken in large patient populations to
further evaluate dosage, to confirm clinical efficacy and to
evaluate safety in yet larger and more diverse patient
populations at multiple clinical trial sites.
The FDA may require, or companies may pursue, additional
clinical trials after a product is approved. These so-called
phase IV clinical studies may be made a condition to be
satisfied after a drug receives approval. The results of
phase IV clinical studies may confirm the effectiveness of
a product and may provide important safety information to
augment the FDA's voluntary adverse drug reaction reporting
system.
The results of product development, preclinical studies and
clinical trials are submitted to the FDA as part of an NDA, or
as part of an NDA supplement. The FDA may deny approval of an
NDA or NDA supplement if the applicable regulatory criteria are
not satisfied, or it may require additional clinical data or an
additional pivotal phase III clinical trial. Even if such
data are submitted, the FDA may ultimately decide that the NDA
or NDA supplement does not satisfy the criteria for approval.
The FDA may move to withdraw product approval, once issued, if
ongoing regulatory standards are not met or if safety problems
occur after the product reaches the market. In addition, the FDA
may require testing and surveillance programs to monitor the
effect of approved products that have been commercialized, and
the FDA may move to prevent or limit further marketing of a
product based on the results of these post-marketing programs.
Satisfaction of FDA requirements or similar requirements of
state, local and foreign regulatory agencies typically takes
several years and the actual time required may vary
substantially based upon the type, complexity and novelty of the
product or disease. Typically, if a drug product is intended to
treat a chronic condition, as is the case with some of the
product candidates we are developing, safety and efficacy data
must be gathered over an extended period of time, which can
range from one to three years or more. Government regulation may
delay or prevent marketing of product candidates for new
indications for a considerable period of time and impose costly
procedures upon our activities. The FDA or any other regulatory
agency may not grant approvals for new indications for our
product candidates on a timely basis, if at all. Success in
preclinical testing and early clinical trials does not ensure
that later clinical trials will be successful. A number of
companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after
obtaining promising results in earlier clinical trials. Future
clinical trials may indicate previously undetected side effects
or fail to demonstrate efficacy in a statistically significant
manner. Data obtained from clinical activities is not always
conclusive and may be susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. Even if
a product candidate receives regulatory approval, the approval
may be significantly limited to specific disease states, patient
populations and dosages. Further, even after regulatory approval
is obtained, later discovery of previously unknown problems with
a product may result in restrictions on the product or even
complete withdrawal of the product from the market. Delays in
obtaining, or failures to obtain, additional regulatory
approvals for our products would harm our business. In addition,
we cannot predict what adverse governmental regulations may
arise from future U.S. or foreign governmental action.
Any products manufactured or distributed by us pursuant to FDA
approvals are subject to continuing regulation by the FDA,
including record-keeping requirements and reporting of adverse
experiences with the drug. Drug manufacturers and their
subcontractors are required to register their establishments
with the FDA
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and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies
for compliance with good manufacturing practices, which impose
certain procedural and documentation requirements upon us and
our third party manufacturers. We cannot be certain that we or
our present or future suppliers will be able to comply with the
good manufacturing practices regulations and other FDA
regulatory requirements. If our present or future suppliers are
not able to comply with these requirements, the FDA may halt our
clinical trials, require us to recall a drug from distribution,
or withdraw approval of the NDA for that drug.
The FDA closely regulates the marketing and promotion of drugs.
A company is permitted to make only those claims relating to
safety and efficacy that are approved by the FDA. Failure to
comply with these requirements can result in adverse publicity,
warning letters, corrective advertising and potential civil and
criminal penalties. Physicians may prescribe legally available
drugs for uses that are not described in the product's
labeling and that differ from those tested by us and approved by
the FDA. Such off-label uses are common across medical
specialties. Physicians may believe that such off-label uses are
the best treatment for many patients in varied circumstances.
The FDA does not regulate the behavior of physicians in their
choice of treatments. The FDA does, however, restrict
manufacturers' communications on the subject of off-label
use.
The FDA's policies may change, and additional government
regulations may be enacted which could prevent or delay
regulatory approval of our product candidates or approval of new
diseases for our product candidates. We cannot predict the
likelihood, nature or extent of adverse governmental regulation
that might arise from future legislative or administrative
action, either in the United States or abroad.
Manufacturing
We have no manufacturing facilities and we do not intend to
build manufacturing facilities of our own in the foreseeable
future. We have entered into arrangements with various third
parties for the formulation and manufacture of our clinical
supplies. These suppliers and their manufacturing facilities
must comply with regulations, current good laboratory practices,
or cGLPs, and current good manufacturing practices, or cGMPs,
enforced by the FDA. We currently have sufficient drug supplies
to complete our ongoing and planned clinical trials. We plan to
continue to outsource the formulation and manufacturing of our
clinical supplies. Although we have no long-term drug supply
contracts for our clinical trial supplies, we maintain good
relationships with the suppliers of our current drug supply and
we believe there are alternative manufacturers available to
produce clinical trial supplies if necessary. Prior to seeking
approval for any of our product candidates, we will need to
enter into a long-term supply agreement with a third-party
manufacturer who can formulate and manufacture supplies of our
product candidate on a commercial scale and who will work with
us to complete the Chemistry, Manufacturing and Controls, or
CMC, section of our NDA filing.
Legal Proceedings
We are not involved in any material legal proceedings.
Facilities
We currently lease and occupy approximately 9,742 square
feet of office space in Ann Arbor, Michigan under a lease
expiring in May, 2011. We also lease a total of approximately
3,111 square meters of office and laboratory space in
Turku, Finland and Oulu, Finland under five separate leases, two
of which expire in 2011 and the other three of which allow us to
terminate them upon prior notice of 15 months or less. We
believe our facilities are adequate for our present operations.
Employees
As of February 1, 2006, we had 19 employees in the
United States and 39 employees in Finland. Certain of our
employees in Finland are covered by a collective bargaining
agreement. We believe our relations with our employees are good.
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MANAGEMENT
Executive Officers, Directors and Key Employees
Our executive officers, directors and key employees, as of
February 1, 2006, are as follows:
Name
Age
Positions
Executive Officers:
Robert Zerbe, M.D.
55
Chief Executive Officer, President and Director
Stuart Dombey, M.B.
57
Chief Scientific and Regulatory Officer
Randall Whitcomb, M.D.
51
Chief Medical Officer
Christopher Nicholas
51
Chief Business Officer
Gary Onn
48
Chief Financial Officer
Key Employees:
Jeffery Brinza
44
General Counsel
Constance Keyserling
45
Head of Development Operations
Risto Lammintausta
55
Managing Director of Hormos Medical Oy
Non-Management Directors:
Caley Castelein, M.D.(1)
35
Director
Christopher B. Ehrlich
35
Director
Richard P. Fox(1)
58
Director
William Greene, M.D.
42
Director
Patrick Heron(1)(2)
35
Director
Christopher Moller, Ph.D.(2)
52
Director
Nicholas Simon III(2)
51
Director
August M. Watanabe, M.D.
64
Director
Anders P. Wiklund
65
Director
(1)
Member of the audit committee.
(2)
Member of the compensation committee.
Executive Officers
Robert Zerbe, M.D.
co-founded QuatRx in
November 2000 and has served as our Chief Executive Officer
and President and as a member of our board of directors since
inception. Dr. Zerbe has extensive experience in regulatory
affairs and global clinical development at Eli Lilly in the
United States and the United Kingdom, where he held a variety of
research and development positions, including Managing Director,
Lilly Research Center U.K., and Vice President of Clinical
Investigation and Regulatory Affairs, from 1982 to 1993. He
joined Parke-Davis in 1993, becoming Senior Vice President of
Worldwide Clinical Research and Development, during which time
he oversaw the successful development programs for Lipitor,
Neurontin and other key products. He serves on the boards of AP
Pharma, Corgentech and Aastrom Bioscience. Dr. Zerbe earned
his medical degree at Indiana University in 1975 and did post
graduate training in internal medicine, endocrinology and
neuroendocrinology at Indiana University and the National
Institutes of Mental Health.
Stuart Dombey, M.B.
co-founded QuatRx in
November 2000 and has served as our Chief Scientific and
Regulatory Officer since inception. Dr. Dombey is a
U.K.-trained
physician
with more than 25 years of experience in the pharmaceutical
industry and 13 years of international regulatory
experience. He initially worked for Hoechst as Medical Advisor
in the United Kingdom and then for Squibb, first as
U.K. Medical Director and then transferred to the United
States in 1987 as Vice President, Regulatory Liaison. He joined
Parke-Davis in the United States in 1990 as Vice President of
International Regulatory Affairs, where he had responsibility
for all regulatory activities on Parke-Davis products outside
the United States and the development and implementation of
innovative regulatory strategies for Parke-Davis compounds. Most
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recently, he was Vice President of R&D in Japan.
Dr. Dombey received his M.B. and Ch.B. degrees from the
University of Liverpool Medical School in 1971.
Randall Whitcomb, M.D.
joined QuatRx in
January 2001 as a co-founder and has served as our Chief
Medical Officer since that time. Dr. Whitcomb came to
QuatRx from Parke-Davis, where he was a Senior Director and
subsequently Vice President within Worldwide Clinical Research
and Drug Development from 1992 to 2000. His work involved the
development and approval of products for women's health
care and diabetes, and the oversight of earlier-stage compounds
for diabetic neuropathy, osteoporosis, inflammation and
gastrointestinal diseases. Dr. Whitcomb serves on the board
of Insmed. He was on the faculty of Massachusetts General
Hospital and Harvard Medical School prior to joining Parke-Davis
in 1992. Dr. Whitcomb received his medical degree at the
University of Kansas and research training at the National
Institutes of Health.
Christopher Nicholas
co-founded QuatRx in November 2000
and has served as our Chief Business Officer since inception.
Mr. Nicholas has more than 25 years of global
pharmaceutical marketing, business development and general
management experience at companies such as Bayer,
Hoechst/Roussel and Parke-Davis. He joined Parke-Davis in the
U.K. in 1980, and was ultimately responsible for the United
Kingdom marketing team before moving to the United States
headquarters in 1987. As Vice President of Global Marketing at
Parke-Davis, he was responsible for several major products,
notably the worldwide launch of Lipitor, and he chaired the
co-promotion/co-development partnership on Lipitor with Pfizer.
He also had responsibility for Parke-Davis business development.
He held Vice President and General Manager positions for
Parke-Davis in Benelux from April 1997 to April 1999
and Japan from April 1999 to September 2000.
Mr. Nicholas received B.Sc. honors degrees in chemistry and
business administration and a diploma in industrial studies in
chemistry and biology from Loughborough University in 1976.
Gary Onn
has served as our Chief Financial Officer since
November 2003. Mr. Onn is a Certified Public
Accountant in the state of Washington with over 20 years of
finance and management experience. From January 2003 to
November 2003, Mr. Onn served as a financial
consultant to early-stage businesses. From June 2001 to
January 2003, he served as the Chief Financial Officer and
interim Chief Executive Officer of Aculight Corporation, a laser
development company, and from July 2000 to June 2001,
he was the Chief Financial Officer of RevX.net, a software
developer. In 1994, Mr. Onn joined Heartstream, a publicly
listed developer of automatic external defibrillators, where he
served in the position of director of finance and later, Chief
Financial Officer. In 1990 he joined publicly listed software
developer Aldus Corporation as Financial Reporting Manager
responsible for external and internal financial reporting from
Aldus's domestic, European, and Asia-Pacific operations.
Prior to that, Mr. Onn spent nearly seven years as an
auditor with the public accounting firm of Ernst &
Young, including two years as an audit manager. Mr. Onn
received his B.A. in business administration from the University
of Washington in 1983.
Key Employees
Jeffery Brinza
has served as our General Counsel since
June 2005. Mr. Brinza has 19 years of experience
as a corporate and transactional attorney. In 1993, he joined
Warner-Lambert Company as associate counsel. From 1998 to 2000,
he served as vice president and assistant general counsel at
Warner-Lambert Company. From February 2001 to
September 2001, Mr. Brinza served as a Senior
Associate at the law firm of Butzel Long. From
September 2001 to June 2005, Mr. Brinza served as
a partner at Brinza & Associates, providing legal
representation for various pharmaceutical, life science and
technology companies. Mr. Brinza received his B.A. in
Economics and Computer Science from the University of Michigan
in 1983 and his J.D. from the University of Michigan in 1986.
Constance Keyserling
has served as our Head of
Development Operations since April 2002.
Ms. Keyserling has nearly 20 years of global clinical
development experience at Parke-Davis, Pfizer and Esperion
Therapeutics. As Director of Clinical Operations from December
2000 to October 2001 and Senior Director of Operations at
Esperion from October 2001 to April 2002, her responsibilities
included clinical program design and management, project
management, clinical outsourcing, regulatory operations and SOP
systems development, in addition to co-chairing one of three
product development teams. Her roles at Parke-
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Davis from October 1986 to November 2000 spanned biometrics and
anti-infective clinical development in the United States and
Europe, and she was the Director of Clinical Operations for
Pfizer Global Research and Development from December 1998 to
November 2000. Ms. Keyserling received her M.S. in
Biostatistics from Harvard University in 1984. Prior to joining
the pharmaceutical industry in 1986, she performed biomedical
research at the Dana-Farber Cancer Institute and the University
of Michigan.
Risto Lammintausta, M.D., Ph.D.
co-founded
Hormos Medical Oy in 1997 and has served as its Chief Executive
Officer since that time. Mr. Lammintausta joined us in
May 2005 in connection with our acquisition of Hormos.
Previously, he was Vice President for new drug development at
Orion Corporation from 1992 to 1997 and Research Director at
Farmos Group Ltd. from 1981 to 1991. In these positions he had
responsibility for new compound discovery and development.
Dr. Lammintausta served as a member of the Medical Research
Council of the Academy of Finland between 1995 and 2000 and is
Chairman of the Pharma Cluster Finland. He serves as a member of
the board of directors of Juvantia Pharma, Innomedica and the
Finnish Cancer Research Foundation. Dr. Lammintausta is a
medical doctor and holds a Ph.D. in Pharmacology from the
University of Turku.
Non-Management Directors
Caley Castelein, M.D.
has served as a member of our
board of directors since October 2004. Dr. Castelein became
a founding member of Thomas Weisel Healthcare Venture Partners
in March 2003. Since October 2000, Dr. Castelein has served
as a principal at ABS Ventures. Prior to that,
Dr. Castelein received a medical degree from the University
of California San Francisco in 1999, and was a resident in
the general surgery program from 1999 to 2000. He began his
career in corporate finance at Hambrecht & Quist, where
he served in the position of analyst from 1993 to 1994.
Dr. Castelein graduated Magna Cum Laude from Harvard
College in 1993.
Christopher B. Ehrlich
has served as a member of our
board of directors since October 2004. He is currently a partner
at InterWest Partners, a diversified venture capital firm, which
he joined in August 2000. Before InterWest, Mr. Ehrlich was
Director, Licensing & Business Development at Purdue
Pharma, a private pharmaceutical firm based in Stamford, CT.
Mr. Ehrlich worked in business development at Genentech,
Inc., in venture capital at The U.S. Russia Investment
Fund, and in biotechnology strategy development at LEK
Consulting. He also currently serves on the boards of BioMimetic
Pharmaceuticals, KAI Pharmaceuticals, Carbylan BioSurgery,
TransOral Pharmaceuticals and Xenon Pharmaceuticals. Mr. Ehrlich
earned his Bachelor's degree from Dartmouth College, cum
laude and an M.B.A. from the J.L. Kellogg Graduate School of
Management where he serves as an instructor and advisor to the
Biotech Program.
Richard P. Fox
has served as a member of our board of
directors since January 2006. Since October 2001, Mr. Fox
has served as a consultant and outside board member to
entrepreneurs and the financial services industry. From April
2000 to September 2001, he was an officer of CyberSafe, an IT
security company, serving as President and Chief Operating
Officer from January 2001 to September 2001. Mr. Fox spent
28 years with Ernst & Young, last serving as
Managing Partner of the Seattle office. He serves on the board
of directors of Premera, a Blue Cross managed care provider,
aQuantive, an online marketing company, Flow International, a
machine tool manufacturer, Isothermal Systems, and Shurgard
Storage Centers, Inc., a real estate investment trust. In
addition, he serves as Treasurer and is on the Board of Trustees
of the Seattle Foundation and is on the Board of Visitors of the
Fuqua School of Business, Duke University. Mr. Fox received
a B.B.A. degree from Ohio University and an M.B.A. from the
Fuqua School of Business, Duke University. He is a Certified
Public Accountant in Washington State.
William Greene, M.D.
has served on our board of
directors since May 2003. Dr. Greene joined MPM Capital in
January 2002, and is a General Partner. From June 1998
to January 2002, Dr. Greene was a senior Clinical
Scientist at Genentech, where he had responsibility for drug
development activities in several therapeutic areas. Previously,
from 1991 to 1998, he was in academic medicine at Yale Medical
School. He currently serves on the board of directors of Alsius
Corporation, Archus Orthopedics, EndoGastric Solutions and
Synergia Pharma. Dr. Greene received his medical degree at
the University of California San Francisco, where he is an
assistant professor of medicine and a B.A., with honors, from
Wesleyan University.
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Patrick Heron
helped found QuatRx and has served as a
member of our board of directors since our inception in November
2000. Through Frazier Healthcare Ventures, he was a founding
investor in QuatRx. Mr. Heron has held various positions
with Frazier Healthcare Ventures since September 1999, and is
currently a general partner. Fraizer Healthcare Ventures manages
venture capital funds that invest in early, mid and late stage
biopharma, medical device and healthcare service companies.
Prior to Frazier Healthcare Ventures, Mr. Heron was with
McKinsey & Co.'s biotechnology consulting practice
from 1992 to 1999, working on corporate strategy, M&A,
product launch, corporate partnering and research
prioritization. Mr. Heron obtained a B.A. from, and was a
Morehead Scholar at, the University of North Carolina at Chapel
Hill and holds an M.B.A. from Harvard Business School. In
addition to QuatRx, he also serves on the boards of Avera
Pharmaceuticals, Chimerix, Cerexa Pharmaceuticals, GenoSpectra,
Informed Medical Communications and Trubion Pharmaceuticals.
Christopher Moller, Ph.D.
has served as a member of
our board of directors since December 2000 and, through
TL Ventures, was a founding investor in QuatRx. In 1990,
Dr. Moller joined Radnor Venture Partners, a
TL Ventures predecessor fund, and has been leading the
biotechnology group since 1992, having responsibility for
selecting, evaluating and managing all the biotechnology
companies in TL Ventures' portfolio. Dr. Moller
currently serves as a director of Sopherion Therapeutics,
PharmaStem Therapeutics and CombinatoRx. Dr. Moller holds a
Ph.D. in immunology from the University of Pennsylvania.
Nicholas Simon III
has served as a member of our
board of directors since May 2003. Mr. Simon has been a
Managing Director of Clarus Ventures, a life sciences focused
venture capital firm, since February 2005. Mr. Simon has
also been a General Partner in MPM Bioventures III since October
2001. From 2000 to July 2001, Mr. Simon was the Chief
Executive Officer, founder and a director of Collabra Pharma, a
pharmaceutical development company. From 1989 to March 2000,
Mr. Simon served in various management positions with
Genentech including Vice President of Business and Corporate
Development. He currently serves on the board of directors of
several biopharmaceutical companies, including ARYx
Therapeutics, Barrier Therapeutics, Inc. and CoTherix, Inc., as
well as several private companies. He also serves on the
Advisory Board of Gladstone Foundation, a private
not-for
-profit research
institute affiliated with UCSF. Mr. Simon holds a B.S. in
microbiology from the University of Maryland and an M.B.A. from
Loyola College.
August M. Watanabe, M.D.
has served on our board of
directors since September 2003. From March 1990 to his
retirement in June 2003, Dr. Watanabe was with Eli Lilly
and Company, where he served as the Director and Executive Vice
President of Science and Technology at Eli Lilly and President
of Lilly Research Laboratories from 1994 to 2003. Prior to Eli
Lilly, from July 1971 to March 1990, Dr. Watanabe was a
full-time faculty member of the Department of Medicine of
Indiana University School of Medicine, and Professor and
Chairman of the Department of Internal Medicine at Indiana
University School of Medicine. He has co-authored more than 100
scientific publications. Dr. Watanabe has served as an
officer in several national academic organizations, including
the American College of Cardiology and the American Heart
Association, and as a consultant to the U.S. Food and Drug
Administration and the U.S. Public Health Service's
National Institutes of Health. Dr. Watanabe serves on the
boards of other biopharmaceutical companies, including Guidant
Corporation, Reliant, Endocyte, Kalypsys and Ambrx.
Dr. Watanabe received his medical degree from the Indiana
University School of Medicine.
Anders Wiklund
has served on our board of directors since
October 2005. Mr. Wiklund has been a principal of Wiklund
International Inc., a biotechnology advisory firm, since January
1997, and serves on the boards of several other
biopharmaceutical companies, including Medivir AB, EffRx, Gyros
AB and Insite Vision Inc. Mr. Wiklund was also on the board
and was a co-founder of Esperion Therapeutics. Previously, from
January 1996 to December 1996, Mr. Wiklund led corporate
business development at Pharmacia Inc. (later
Pharmacia & Upjohn). Prior to that, Mr. Wiklund
was chief executive officer and president of KabiVitrum Inc. and
Kabi Pharmacia Inc., as well as president of KabiVitrum
International in Stockholm, Sweden. Mr. Wiklund received
his Masters of Pharmacy from the Pharmaceutical Institute in
Stockholm, Sweden and studied business administration at the
University of Stockholm.
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Scientific Advisory Board
Our Scientific Advisory Board was initially formed in early
2004. The purpose of this Board is to provide input on our
compounds in development. As such, we ask them to review and
comment on data as requested. We have met with them as
individuals and as a group on several occasions since that time.
When the Board was originally formed, the focus of the portfolio
was lipids and therefore the Board is heavily weighted with
expertise in the lipid area. We are currently meeting with
additional experts and will be adding additional expertise in
the endocrine area consistent with our current portfolio of
product candidates.
The following individuals are members of our Scientific Advisory
Board:
Name
Current Positions
Christie M. Ballantyne, M.D.
Director, Center for Cardiovascular Disease Prevention,
    Methodist DeBakey Center; Professor, Section of Atherosclerosis,
    Department of Medicine, Baylor College of Medicine
Robert H. Knopp, M.D.
Director, the Northwest Lipid Research Clinic; Professor of
    Medicine, University of Washington School of Medicine
Daniel J. Rader, M.D.
Director, Preventive Cardiology and Lipid Clinic; Associate
    Professor of Medicine, University of Pennsylvania School of
    Medicine.
Alan R. Saltiel, Ph.D.
Director, Life Sciences Institute, Professor of Internal
    Medicine and Physiology, University of Michigan School of
    Medicine
August M. Watanabe, M.D.
Retired Executive Vice President of Science and Technology,
    Director of Eli Lilly and Company, and President of Lilly
    Research Laboratories
Composition of our Board of Directors
Immediately prior to this offering, our board of directors will
be divided into three staggered classes of directors of the same
or nearly the same number and each of our directors will be
assigned to one of the three classes. At each annual meeting of
stockholders, a class of directors will be elected for a
three-year term to succeed the directors of the same class whose
terms are then expiring. The terms of the directors will expire
upon election and qualification of successor directors at the
annual meeting of stockholders to be held during the years 2007
for the Class I directors, 2008 for the Class II
directors and 2009 for the Class III directors.
Our certificate of incorporation and bylaws provide that the
number of our directors shall be fixed from time to time by a
resolution of the majority of our board of directors. Any
additional directorships resulting from an increase in the
number of directors will be distributed among the three classes
so that, as nearly as possible, each class shall consist of one
third of the directors. There are no family relationships among
any of our directors or executive officers.
The division of our board of directors into three classes with
staggered three-year terms may delay or prevent stockholder
efforts to effect a change of our management or a change in
control.
Each of our directors currently serves on the board of directors
pursuant to a voting agreement. The voting agreement will
terminate upon the closing of this offering.
Committees of our Board of Directors
Our board of directors has established a compensation committee
and an audit committee and intends, in conjunction with this
offering, to establish a nominating and corporate governance
committee.
Compensation Committee.
Our compensation committee is a
standing committee of, and will operate under a written charter
to be adopted by, our board of directors. Our compensation
committee consists of Patrick Heron, Christopher Moller and
Nicholas Simon. The compensation committee makes decisions and
recommendations regarding cash and other compensation for our
directors and executive officers, and
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administers our incentive compensation and benefit plans,
including our Amended and Restated 2005 Stock Incentive Plan.
Audit Committee.
Our audit committee is a standing
committee of, and operates under a written charter adopted by,
our board of directors. Our audit committee consists of Patrick
Heron, Caley Castelein and Richard Fox. The audit committee
reviews and monitors our accounting practices and financial
statements; appoints, determines funding for, and oversees our
independent auditors; reviews the results and scope of audits;
approves the retention of the independent auditors to perform
any proposed permissible non-audit services; and reviews and
evaluates our audit and control functions. We believe that each
member of our audit committee satisfies the requirements for
members established by the Nasdaq National Market and the
Securities and Exchange Commission. Our board of directors has
determined that Mr. Fox is an audit committee financial
expert as currently defined under SEC rules.
Nominating and Corporate Governance Committee.
In
conjunction with this offering, we intend to establish a
nominating and corporate governance committee of our board of
directors and adopt a written charter for the committee. The
nominating and corporate governance committee will be authorized
to identify and approve individuals qualified to serve as
members of our board of directors, select director nominees for
our annual meetings of stockholders, evaluate our board's
performance and develop and recommend to our board corporate
governance guidelines and provide oversight with respect to
corporate governance and ethical conduct.
Other Committees.
Our board of directors may establish
other committees as it deems necessary or appropriate from time
to time.
Compensation Committee Interlocks and Insider
Participation
None of the members of our compensation committee has at any
time been one of our officers or employees. None of our
executive officers currently serves, or in the past fiscal year
has served, as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving on our board of directors or
compensation committee.
Director Compensation
We reimburse our directors who are not employees for their
reasonable expenses incurred in attending meetings of the board
of directors. Our directors are eligible to participate in our
Amended and Restated 2005 Stock Incentive Plan. Our outside
directors, Anders Wiklund, August Watanabe and Richard Fox,
receive payments of $1,500 for each meeting of our board of
directors attended in person, and $750 for each meeting of our
board attended telephonically.
Limitation of Liability and Indemnification of Officers and
Directors
Our certificate of incorporation limits the liability of
directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not
be personally liable for monetary damages for breach of their
fiduciary duties as directors, except liability for:
•
any breach of their duty of loyalty to the corporation or its
    stockholders;
•
acts or omissions not in good faith or which involve intentional
    misconduct or a knowing violation of law;
•
unlawful payments of dividends or unlawful stock repurchases or
    redemptions; or
•
any transaction from which the director derived an improper
    personal benefit.
Our bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by law, including if he
or she is serving as a director, officer, employee or agent of
another company at our request. We believe that indemnification
under our bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer,
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Table of Contents
director, employee or other agent for any liability arising out
of his or her actions in connection with their services to us,
regardless of whether our bylaws permit such indemnification.
In conjunction with this offering, we intend to enter into
separate indemnification agreements with our directors and
executive officers, in addition to the indemnification provided
for in our bylaws. These agreements, among other things, will
provide that we will indemnify our directors and executive
officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by a director
or executive officer in any action or proceeding arising out of
such person's services as one of our directors or executive
officers, or any of our subsidiaries or any other company or
enterprise to which the person provides services at our request.
We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive
officers.
There is no pending litigation or proceeding involving any of
our directors or executive officers as to which indemnification
is required or permitted, and we are not aware of any threatened
litigation or proceeding that may result in a claim for
indemnification.
Executive Compensation
The following table sets forth information regarding the
compensation that we paid to our Chief Executive Officer and
each of our other four most highly compensated executive
officers during the year ended December 31, 2005. We refer
to these officers in this prospectus as the "named
executive officers."
Summary Compensation Table
Long-Term
Compensation
Annual Compensation
Securities
Other Annual
Underlying
All Other
Name and Principal Position
Year
Salary
Bonus
Compensation(1)
Options
Compensation
Robert Zerbe, M.D.
2005
$
260,212
—
—
1,059,135
—
Chief Executive Officer
Stuart Dombey, M.B.
2005
224,729
—
—
515,659
—
Chief Scientific and
Regulatory Officer
Randall Whitcomb, M.D.
2005
224,729
—
—
559,839
—
Chief Medical Officer
Christopher Nicholas
2005
224,729
—
—
522,494
—
Chief Business Officer
Gary Onn
2005
187,250
—
—
333,893
—
Chief Financial Officer
(1)
In accordance with the rules of the SEC, the compensation
    described in this table does not include medical, group life
    insurance or other benefits which are available generally to all
    of our salaried employees and certain perquisites and other
    personal benefits received which do not exceed the lesser of
    $50,000 or 10% of any named executive officer's salary and
    bonus disclosed in this table.
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Table of Contents
Stock Option Grants in Last Fiscal Year
The following table sets forth information regarding grants of
stock options to each of our named executive officers during the
fiscal year ended December 31, 2005. The percentage of
options granted was based on aggregate grants of options to
purchase common stock totaling 4,187,710 shares granted to
employees during 2005. Potential realizable values are net of
exercise price before taxes, and are based on the assumption
that our common stock appreciates at the annual rate shown,
compounded annually, from the date of grant until expiration of
the ten-year term.
Individual Grants
Potential Realizable
Number of
Value at Assumed
Shares of
Percentage of
Annual Rates of
Common
Total
Stock Price
Stock
Options
Exercise
Appreciation for
Underlying
Granted to
Price
Option Terms
Option
Employees in
Per
Expiration
Name
Granted
FY 2005
Share(1)
Date
5%
10%
Robert Zerbe, M.D.
182,414
(2)
4.356%
$
0.34
April 17, 2015
114,027
(3)
2.723%
$
0.34
April 17, 2015
35,949
(4)
0.858%
$
0.34
April 17, 2015
726,745
(5)
17.355%
$
0.34
April 17, 2015
Stuart Dombey, M.B.
35,848
(2)
0.856%
$
0.34
April 17, 2015
26,835
(6)
0.641%
$
0.34
April 17, 2015
26,384
(7)
0.630%
$
0.34
April 17, 2015
426,592
(5)
10.187%
$
0.34
April 17, 2015
Randall Whitcomb, M.D.
114,521
(2)
2.735%
$
0.34
April 17, 2015
72,858
(8)
1.740%
$
0.34
April 17, 2015
26,384
(7)
0.630%
$
0.34
April 17, 2015
346,076
(5)
8.26%
$
0.34
April 17, 2015
Christopher Nicholas
35,848
(2)
0.856%
$
0.34
April 17, 2015
27,072
(9)
0.646%
$
0.34
April 17, 2015
33,851
(10)
0.808%
$
0.34
April 17, 2015
425,723
(5)
10.166%
$
0.34
April 17, 2015
Gary Onn
60,000
(11)
1.433%
$
0.34
April 17, 2015
27,864
(12)
0.665%
$
0.34
April 17, 2015
246,029
(5)
5.815%
$
0.34
April 17, 2015
(1)
There was no public trading market for our common stock during
    fiscal 2005. Accordingly, these exercise prices are based on our
    board of directors' determination of the fair market value
    of the underlying shares as of the dates of grant.
(2)
A total of 25% of these options vested on May 20, 2005 and
    the remaining options vest monthly in equal installments over
    the following 36 months.
(3)
41,517.5 of these options vested on the date of grant;
    6,156.50 options vested on July 20, 2005;
    513.04 options vest monthly on and after August 20,
    2005; and 1,710.13 options vest monthly on and after
    May 1, 2005.
(4)
4,229 of these options vested on the date of grant and the
    remaining 31,720 options vested on May 20, 2005.
(5)
A total of
5
/
36
of these options vested on the date of grant and the remaining
    options vest monthly in equal installments over the following
    31 months.
(6)
12,585.67 of these options vested on the date of grant;
    1,209.75 options vested on July 20, 2005;
    100.81 options vest monthly on and after August 20,
    2005; and 336.08 options vest monthly on and after
    May 1, 2005.
(7)
1,841 of these options vested on the date of grant and the
    remaining 24,543 options vested on May 20, 2005.
(8)
27,336.5 of these options vested on the date of grant;
    3,865 options vested on July 20, 2005;
    322.08 options vest monthly on and after August 20,
    2005; and 1,073.63 options vest monthly on and after
    May 1, 2005.
(9)
12,822.67 of these options vested on the date of grant;
    1,209.75 options vested on July 20, 2005;
    100.81 options vest monthly on and after August 20,
    2005; and 336.08 options vest monthly on and after
    May 1, 2005.
(10)
1,916 of these options vested on the date of grant and the
    remaining 31,935 options vested on May 20, 2005.
(11)
21,250 of these options vested on the date of grant and
1
/
48
of the total number of options vest monthly on and after
    May 1, 2005.
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(12)
10,449 of these options vested on the date of grant and the
    remaining 17,415 options vested on May 20, 2005.
The potential realizable value is calculated based on the
ten-year term of the stock option at the time of grant. The
assumed 5% and 10% rates of stock price appreciation are
provided in accordance with the rules of the SEC based on an
assumed initial public offering price of
$          per
share and do not represent our estimate or projection of our
future stock price. The potential realizable values at 5% and
10% appreciation are calculated by:
•
multiplying the number of shares of common stock subject to a
    given stock option by the assumed initial public offering price
    of
    $          per
    share;
•
assuming that the aggregate stock value derived from that
    calculation compounds at the annual 5% or 10% rate shown in the
    table until the expiration of the option; and
•
subtracting from that result the aggregate option exercise price.
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
The following table sets forth the number and value of
securities underlying options held as of December 31, 2005
by each of our named executive officers. Options shown as
exercisable in the table below are immediately exercisable.
Number of
Number of Shares
Value of Unexercised
Shares
Underlying Unexercised
In-the-Money Options at
Acquired
Options at Fiscal Year-End
Fiscal Year-End(1)
on
Value
Name
Exercise
Realized(1)
Exercisable
Unexercisable
Exercisable
Unexercisable
Robert Zerbe, M.D.
407,893
452,751
958,670
Stuart Dombey, M.B.
109,667
215,192
369,699
Randall Whitcomb, M.D.
264,554
249,537
531,471
Christopher Nicholas
111,247
222,582
369,144
Gary Onn
—
356,292
377,601
(1)
These values have been calculated based on an assumed initial
    public offering price of
    $        per share, less
    the applicable exercise price per share, multiplied by the
    underlying shares, without taking into account any taxes that
    may be payable in connection with the transaction.
Employment Agreements and Change of Control Arrangements
We have entered into an employment agreement dated as of
September 29, 2003 with Gary Onn, our Chief Financial
Officer. The agreement provides for an employment at-will
arrangement and can be terminated by Mr. Onn or us at any
time. Pursuant to his employment agreement, Mr. Onn is
entitled to a base salary of $175,000 per year. In 2004,
our board of directors authorized an increase in
Mr. Onn's annual salary to $187,250. Under the
agreement, we granted Mr. Onn an option to purchase up to
400,000 shares of our common stock at a price of
$0.20 per share. According to the vesting schedule in
Mr. Onn's employment agreement, 100,000 shares of
the option vested on November 1, 2004, and an additional
8,333.34 shares vested or will vest in each subsequent
month of Mr. Onn's employment. The vesting schedule
will accelerate if Mr. Onn's employment is terminated
without cause, or upon a dissolution or liquidation or change of
control involving us or sale of all or substantially all of our
assets. Under Mr. Onn's employment agreement, if we
terminate Mr. Onn's employment without cause, he is
entitled to his then annual salary for nine months.
Benefit Plans
Amended and Restated 2005 Stock Incentive Plan
We maintain a stock incentive plan which allows for the grant of
incentive stock options, nonqualified stock options, stock
bonuses, stock appreciation rights and rights to acquire
restricted stock to our employees, directors
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and consultants. The plan has a ten year term that commenced on
April 18, 2005 and terminates on April 17, 2015,
unless it is terminated earlier as approved by our stockholders.
The plan may be administered by our board of directors or any
committee of one or more members of the board appointed by the
board. We have reserved 5,851,979 shares of our common
stock, increased by up to 2,323,280 shares issued under our
2000 Equity Incentive Plan that are forfeited to us (i.e., in
connection with the termination of the holder's employment)
or that were subject to options granted by us pursuant to the
2000 Equity Incentive Plan which terminate or expire or become
unexercisable for any reason without having been exercised in
full after April 14, 2005, for issuance pursuant to awards
under this plan. As of December 31, 2005, options to
purchase a total of 5,576,671 shares of common stock, with
a weighted average price of $0.31 per share, were outstanding
under this plan.
Administration.
The administrative committee selects the
individuals to receive awards under the stock incentive plan and
sets the terms and conditions of each award. The administrative
committee has plenary authority to interpret the stock incentive
plan and to make all determinations relating to the plan. After
the date that awards under this plan are no longer exempt from
the provisions of Section 162(m) of the Internal Revenue
Code, the maximum number of shares of our common stock that may
be subject to awards of options or stock appreciation rights for
any single individual in any year cannot exceed 1.5 million
shares, except that awards covering up to an additional
1 million shares may be granted to an individual during
their first year of service as an employee, director or
consultant.
Term of Awards; Transferability.
The term of each award
is set by the administrative committee, provided that, in the
case of an option, no term can exceed ten years, or ten and
one-half years (or a shorter period) in the case of options
granted to employees in certain jurisdictions outside the United
States, from the date of grant. Awards may expire earlier upon
an optionee's termination of employment. Awards under the
plan are non-assignable and otherwise non-transferable except as
determined by the administrative committee or by will or the
laws of descent and distribution.
Stock Options.
Options granted under the stock incentive
plan may be "incentive stock options" as defined under
Section 422 of the Internal Revenue Code or nonqualified
stock options. Incentive stock options may only be granted to
employees. The exercise price and vesting schedule for options
will be set by the administrative committee at the time of
grant, provided that the per share exercise price for incentive
stock options and nonqualified stock options intended to be
exempt from the provisions of Section 162(m) of the
Internal Revenue Code cannot be less than the fair market value
of a share of our common stock on the date of grant. Fair market
value is defined in the stock incentive plan as the closing
price of our common stock on the Nasdaq Stock Market, or such
national securities exchange upon which our common stock is
listed, on the date of determination. If our common stock is not
publicly traded, the administrative committee determines the
fair market value in a manner it deems reasonable in good faith.
The exercise price of an option may be reduced, or options
cancelled and regranted in order to reduce the applicable
exercise price, without stockholder approval. Upon exercise, the
exercise price for an option may be paid in cash, by bank check
or wire transfer or, in the discretion of the administrative
committee, through delivery of shares of our common stock having
an aggregate value equal to the aggregate exercise price, or
through a brokered exercise procedure or other procedure not in
violation of any law.
Other Stock-based Awards.
The administrative committee
may grant other cash, stock or stock-related awards under the
stock incentive plan, including stock appreciation rights and
stock units. The terms and conditions of any such other
stock-based awards will be determined by the administrative
committee, in its sole discretion. Shares of restricted stock
granted under the stock incentive plan will be subject to
forfeiture upon the termination of employment. The holder of a
restricted stock award will generally have the rights and
privileges of a stockholder after the shares are issued,
including the right to vote such shares. Cash and stock
dividends on such shares, if any, may be distributed to the
holder of a restricted stock award or held for the account of
the holder, as determined by the administrative committee.
Adjustments.
All outstanding awards under the stock
incentive plan, the maximum number of shares available under the
stock incentive plan and the maximum number of shares of our
common stock available pursuant to the grant of options and
stock appreciation rights to any single person in any year, if
applicable,
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are subject to adjustment or substitution, as determined by the
administrative committee in the event of certain corporate
transactions.
Restrictions on Shares.
In an award agreement, we may
reserve a right of first refusal to purchase all shares that a
participant proposes to transfer to a third party. Our right of
first refusal terminates upon the initial public offering of our
common stock.
Amendment.
The stock incentive plan may be terminated or
amended at any time by the administrative committee, subject to
the approval of our stockholders as required by law, provided
that without stockholder approval no such amendment may:
•
materially increase the number of shares of our common stock for
    which awards may be granted under the stock incentive plan;
•
reduce the minimum exercise price at which options may be
    granted under the incentive stock plan; or
•
change the class of persons eligible to receive awards under the
    plan without stockholder approval.
Except for adjustments subject to certain corporate transactions
and amendments, suspensions or termination of the plan that do
not impair the rights of an award, alterations to outstanding
awards under the stock incentive plan may be made only with the
consent of the award recipient.
2000 Equity Incentive Plan
Our 2000 Equity Incentive Plan, or the 2000 Plan, was adopted by
our board of directors. The 2000 Plan has a ten-year term that
commenced on December 19, 2000 and terminates on
December 18, 2010 unless it is terminated earlier as
approved by our stockholders. We no longer expect to grant
options under this plan, but as of December 31, 2005,
non-qualified options to purchase a total of
1,328,961 shares of common stock, with a weighted average
exercise price of $0.20 per share, were outstanding under this
plan. The 2000 Plan allowed for the grant or sale of stock
options and restricted stock awards to employees, officers,
directors and consultants.
Administration.
The 2000 Plan is administered by the
committee appointed by our board of directors or administered by
our board of directors acting as the committee. The
administrative committee selected individuals to receive awards
under the 2000 Plan and sets the terms and conditions of each
award. The administrative committee also has the authority to
interpret the 2000 Plan, set rules and regulations relating to
it, and make all other determinations for the administration of
the 2000 Plan.
Payment for Share Purchase.
Payment for shares purchased
under the 2000 Plan may be made in cash by check, or, where
expressly approved for the participant by the administrative
committee and where permitted by law, by cancellation of any
debt owned by us, shares of our common stock (with some
restriction), full recourse promissory note having such terms as
approved by the administrative committee, waiver of compensation
or, if the shares are purchased on exercise of an option, the
2000 Plan also permits payment to be made by broker-assisted
same day sales or margin commitment, or by surrender of shares
then issuable upon exercise of the option. The administrative
committee may help the participant pay for shares purchased
under the 2000 Plan by authorizing a guarantee by us of a third
party loan to the participant.
Rights and Privileges; Transferability.
No participant
will have any rights of a shareholder until the shares are
issued to the participant. After the issuance, the participant
will be a shareholder and have all the rights of a shareholder
with respect to such shares, including the right to vote and
receive dividends or other distributions. If the shares issued
are restricted stock, then any new, additional or different
securities the participant receives by virtue of stock dividend,
stock split or any other changes in our corporate or capital
structure will be subject to the same restrictions as the
restricted stock. Awards granted under the 2000 Plan are not
transferable or assignable by participant, and may not be made
subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution.
However, the administrative committee may provide that the
awards granted under the 2000 Plan (other than an incentive
stock option) be transferable, without consideration, to a
participant's immediate family members.
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Restrictions on Shares.
In an award agreement, we may
reserve a right of first refusal to purchase all shares that a
participant proposes to transfer to a third party. Our right of
first refusal terminates upon the initial public offering of our
common stock. In an award agreement, we may also reserve a right
to repurchase the unvested shares held by a participant for cash
and/or cancellation of purchase money indebtedness, following
such participant's termination at any time within
90 days after his termination date and the date the
participant purchases shares, whichever is later.
Exchange and Buyout.
With the consent of participants,
the administrative committee may authorize us to issue new
awards in exchange for the surrender and cancellation of
outstanding awards. The administrative committee may buy from a
participant an award previously granted with payment in cash,
shares of our common stock (including restricted stock) or other
consideration, based on the terms and conditions agreed by the
administrative committee and the participant.
Amendment.
The 2000 Plan may be amended by the
administrative committee. However, without stockholder approval,
no such amendment may increase the number of shares reserved for
issuance under the 2000 Plan. Our board of directors may suspend
the 2000 Plan at any time; however, such suspension must not
adversely affect any outstanding benefit.
Vesting and Exercise Price of Stock Options.
The vesting
schedule and exercise price for options granted under the 2000
Plan were determined by the administrative committee and set
forth in a stock option agreement. In no event is an option
exercisable after 10 years from the grant date. The
exercise price of the non-qualified options was not less than
85% of the fair market value of the shares on the date of grant.
Since our common stock was not publicly traded at the time of
the grants under the 2000 Plan, the administrative committee
determined the fair market value in a manner it deemed
reasonable and in good faith.
Termination.
If a participant of the 2000 Plan is
terminated because of death or disability, then the
participant's option is exercisable only to the extent that
it is exercisable on the termination date, and the option must
be exercised by the participant no later than 12 months
after the termination date. If a participant is terminated for
cause, then the participant's option will expire on the
termination date, or at such later time determined by the
administrative committee. If a participant is terminated for any
reason except death, disability or for cause, then the
participant's option is exercisable only to the extent that
it is exercisable on the termination date, and the option must
be excised no later than 3 months after the termination
date. In any event, no option may be exercised after the
expiration date of the options.
Modification, Extension or Renewal.
The administrative
committee may modify, extend or renew outstanding options and
authorize the grant of new options in substitution for the
outstanding options, however, such action may not, without the
written consent of a participant, impair the participant's
rights under any option previously granted. The administrative
committee may reduce the exercise price of outstanding options
without the consent of participants affected by a written notice
to them; however, the exercise price may not be reduced below
the minimum exercise price that would be permitted under the
2000 Plan.
401(k) Plan
We have established a tax-qualified employee savings and
retirement plan for all employees who satisfy certain
eligibility requirements, including requirements relating to age
and length of service. Under our 401(k) plan, employees may
elect to reduce their current compensation by up to 15% or the
statutory limit, $13,000 in 2004, whichever is less, and have us
contribute the amount of this reduction to the 401(k) plan. In
addition, we contribute an amount equal to 3% of certain
eligible employees' compensation as a nonelective
contribution to our 401(k) plan. As of December 31, 2005 we
had 12 employees eligible for participation in our 401(k) plan.
We will make contributions of $26,000 for 2005 to the plan for
certain eligible employees.
We intend for the 401(k) plan to qualify under Section 401
of the Internal Revenue Code so that contributions by employees
or by us to the 401(k) plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from
the 401(k) plan. Our contributions, if any, will be deducted by
us when made.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of transactions since
January 1, 2003 to which we were or are a party in which
the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our capital stock
or any member of such person's immediate family had or will
have a direct or indirect material interest, other than
compensation agreements, which are described under the caption
"Management".
Purchases of Securities
Since January 1, 2003, the following executive officers,
directors, holders of more than 5% of our capital stock and
members of such person's immediate family purchased
securities in the amounts and as of the dates shown below.
Number of
Number of
Number of
Number of
Number of
Shares of
Shares of
Shares of
Shares of
Shares of
Series B
Series C
Series D
Series D-1
Common
Preferred
Preferred
Preferred
Preferred
Name of Purchaser
Stock
Stock
Stock
Stock
Stock
5% Stockholders affiliated with Directors:
Entities associated with Fraizer Healthcare Ventures(1)
—
700,000
3,070,176
1,428,571
—
Entities associated with InterWest Partners(2)
—
—
4,385,964
4,285,714
—
Entities associated with MPM BioVentures III(3)
—
—
13,456,140
7,857,142
—
Thomas Weisel Healthcare Venture Partners, L.P.(4)
—
—
—
5,000,000
—
Entities associated with TL Ventures(5)
—
700,000
3,508,772
2,500,000
—
Other 5% Stockholders:
Biomedical Venture III Ltd.(6)
1,920,827
—
—
1,271,432
795,217
Directors and Executive Officers:
Caley Castelein, M.D.(4)
—
—
—
—
—
Christopher B. Ehrlich(2)
—
—
—
—
—
William Greene, M.D.(3)
—
—
—
—
—
Patrick Heron(1)
—
—
—
—
—
Christopher Moller, Ph.D.(5)
—
—
—
—
—
August Watanabe, M.D.(7)
45,000
—
—
—
—
Robert Zerbe, M.D.(8)
407,893
—
—
—
—
Stuart Dombey, M.B.(9)
109,667
—
—
—
—
Randall Whitcomb, M.D.(10)
264,554
—
—
—
—
Christopher Nicholas(11)
111,247
—
—
—
—
(1)
Represents shares held by Frazier Healthcare, III L.P. and
    Frazier Affiliates, III, L.P. Patrick Heron, a member of
    our board of directors, is a venture capitalist with Frazier
    Healthcare Ventures where he holds the title of General Partner.
    Entities affiliated with Frazier Healthcare Ventures serve as
    the general partners of Frazier Healthcare III, LP and
    Frazier Affiliates III, LP. During 2003, entities
    associated with Frazier Healthcare Ventures purchased
    700,000 shares of our Series B Preferred Stock at
    $1.50 per share. During 2003 and 2004, entities associated
    with Frazier Healthcare Ventures purchased 3,070,176 shares
    of our Series C Preferred Stock at $1.14 per share,
    and in 2004 and 2005, entities associated with Frazier
    Healthcare Ventures purchased 1,428,571 shares of our
    Series D Preferred Stock at $1.40 per share.
(2)
Represents shares held by InterWest Investors VIII, L.P.,
    InterWest Investors Q VIII, L.P. and InterWest Partners VIII,
    L.P. Christopher Ehrlich, a member of our board of directors, is
    a Partner at InterWest Partners. During 2003 and 2004, entities
    associated with InterWest Partners purchased
    4,385,964 shares of our Series C Preferred Stock at
    $1.14 per share. During 2004 and 2005, entities associated
    with InterWest Partners purchased 4,285,714 shares of our
    Series D Preferred Stock at $1.40 per share.
(3)
Represents shares held by MPM Asset Management Investors 2003
    BVIII LLC, MPM Bioventures III GmbH & Co.
    Beteiligungs KG, MPM Bioventures III Parallel Fund, L.P.,
    MPM Bioventures III, L.P., MPM Bioventures III-QP, L.P.,
    MPM Bioventures Strategic Fund, L.P. William Greene, M.D.
    and Nicholas Simon III, members of our board of directors,
    are General Partners of
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MPM Bioventures III. During
    2003 and 2004, entities associated with MPM Bioventures III
    purchased 13,456,140 shares of our Series C Preferred
    Stock at $1.14 per share and 7,857,142 shares of our
    Series D Preferred Stock at $1.40 per share.
(4)
Caley Castelein, M.D., a
    member of our board of directors, is a Managing Partner of
    Thomas Weisel Healthcare Partners LLC, the General Partner of
    Thomas Weisel Healthcare Venture Partners, L.P. During 2004 and
    2005, Thomas Weisel Healthcare Venture Partners LLC purchased
    5,000,000 shares of our Series D Preferred Stock at
    $1.40 per share.
(5)
Represents shares held by TL
    Ventures V Interfund, L.P. and TL Ventures V L.P. Christopher
    Moller, Ph.D., a member of our board of directors, is a
    member and on the board of directors of TL Ventures V LLC,
    the General Partner of TL Ventures V Interfund L.P. and TL
    Ventures V Management L.P., the General Partner of TL
    Ventures V L.P. During 2003, entities associated with TL
    Ventures purchased 700,000 shares of our Series B
    Preferred Stock at $1.50 per share. During 2003 and 2004,
    entities associated with TL Ventures purchased
    3,508,772 shares of our Series C Preferred Stock at
    $1.14 per share, and in 2004 and 2005, entities associated
    with TL Ventures purchased 2,500,000 shares of our
    Series D Preferred Stock at $1.40 per share.
(6)
In May 2005, we issued
    200,003 shares of our Series D Preferred Stock,
    795,217 shares of our Series D-1 Preferred Stock and
    1,920,827 shares of our common stock to Biomedical
    Venture III Ltd. in exchange for shares of Hormos
    representing all the outstanding capital stock of Hormos and all
    securities or other instruments convertible into or exercisable
    for capital stock of Hormos held by Biomedical Venture III
    Ltd. Between June 2005 and October 2005, Biomedical
    Venture III Ltd. purchased 1,071,428.57 shares of our
    Series D Preferred Stock at $1.40 per share.
(7)
August Watanabe, M.D., a
    member of our board of directors, exercised stock options to
    purchase 30,000 shares of our common stock at an
    exercise price of $0.20 per share in 2005 and exercised
    options to purchase 15,000 shares of our common stock at an
    exercise price of $0.20 in 2006.
(8)
During 2005, Robert
    Zerbe, M.D., our Chief Executive Officer, exercised options
    to purchase 407,893 shares of our common stock at an
    exercise price of $0.20 per share.
(9)
During 2005, Stuart
    Dombey, M.B., our Chief Scientific and Regulatory Officer,
    exercised options to purchase 109,667 shares of our
    common stock at an exercise price of $0.20 per share.
(10)
During 2005, Randall Whitcomb, M.D., our Chief Medical
    Officer, exercised options to purchase 264,554 shares
    of our common stock at an exercise price of $0.20 per share.
(11)
During 2005, Christopher Nicholas, our Chief Business Officer,
    exercised options to purchase 111,247 shares of our
    common stock at an exercise price of $0.20 per share.
Indemnification Agreements
As permitted by the Delaware General Corporation Law, we have
adopted provisions in our certificate of incorporation and
bylaws that authorize and require us to indemnify our officers
and directors to the full extent permitted under Delaware law,
subject to limited exceptions. See "Management —
Limitation of Liability and Indemnification of Officers and
Directors." In addition, in conjunction with this offering,
we intend to enter into separate indemnification agreements with
our directors and executive officers, in addition to the
indemnification provided for in our bylaws.
Fourth Amended and Restated Investor Rights Agreement, as
amended
We and our preferred stockholders have entered into an investor
rights agreement under which our preferred stockholders have
registration rights with respect to their shares of common
stock, rights of first refusal on certain new issues of our
capital stock and rights to purchase shares in this offering.
These rights have been waived with respect to this offering and
the rights of first refusal shall terminate immediately prior to
the closing of this offering. Upon closing of this offering, all
our currently outstanding shares of preferred stock will be
converted into shares of our common stock. See "Description
of Capital Stock — Registration Rights" for a
further description of the terms of this agreement.
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PRINCIPAL STOCKHOLDERS
The following table presents information concerning the
beneficial ownership of the shares of our common stock as of
December 31, 2005, by:
•
each person we know to be the beneficial owner of 5% or more of
    our outstanding shares of our capital stock;
•
each of our named executive officers listed on the Summary
    Compensation Table;
•
each of our directors; and
•
all of our executive officers and directors as a group.
The information set forth in the table gives effect to the
conversion of all of our preferred stock.
Beneficial ownership is determined under the rules of the SEC
and generally includes voting or investment power over
securities. Except in cases where community property laws apply
or as indicated in the footnotes to this table, we believe that
each stockholder identified in the table possesses sole voting
and investment power over all shares of common stock shown as
beneficially owned by the stockholder. Percentage of beneficial
ownership is based on 77,403,623 shares of common stock
outstanding as of December 31, 2005 (as adjusted to reflect
as of that date the conversion of all shares of our preferred
stock outstanding into common stock),
and                      shares
of common stock outstanding after the completion of this
offering. Shares of common stock subject to options that are
currently exercisable or exercisable within 60 days of
December 31, 2005, are considered outstanding and
beneficially owned by the person holding the options for the
purpose of computing the percentage ownership of that person but
are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Unless indicated
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below, the address of each individual listed below is
c/o QuatRx Pharmaceuticals Company, 777 East Eisenhower
Parkway, Suite 100, Ann Arbor, Michigan 48108.
Percentage of Shares
Number of
Outstanding
Shares
Beneficially
Prior to the
After the
Name of Beneficial Owner
Owned(1)
Offering
Offering
Stockholders owning 5% or more:
Entities affiliated with MPM Bioventures III(2)
21,313,282
27.54
%
Entities affiliated with TL Ventures(3)
9,362,711
12.10
Entities affiliated with InterWest Partners(4)
8,671,678
11.20
Entities affiliated with Frazier Healthcare(5)
8,252,686
10.66
Entities affiliated with Thomas Weisel Healthcare Venture
    Partners, L.P.(6)
5,000,000
6.46
Biomedical Venture III Ltd.(7)
3,987,476
5.15
Directors and Executive Officers:
Caley Castelein, M.D.(6)
5,000,000
6.46
Christopher B. Ehrlich(4)
8,671,678
11.20
Richard P. Fox
—
*
William Greene, M.D.(2)
21,313,282
27.54
Patrick Heron(5)
8,252,686
10.66
Christopher Moller, Ph.D.(3)
9,362,711
12.10
Nicholas Simon III(2)
21,313,282
27.54
August Watanabe, M.D.(8)
45,000
*
Anders Wiklund
—
*
Robert Zerbe, M.D.(9)
1,950,820
2.52
Stuart Dombey, M.B.(10)
1,324,327
1.71
Christopher Nicholas(12)
1,333,249
1.72
Gary Onn(13)
385,042
*
Randall Whitcomb, M.D.(11)
967,722
1.25
All directors and executive officers as a group (13 persons)
58,606,516
92.06
%
*
Less than 1%.
(1)
Includes shares of common stock issuable pursuant to options
    exercisable within 60 days of December 31, 2005.
(2)
Includes 326,238 shares held by MPM Asset Management
    Investors 2003 BVIII LLC, 1,424,013 shares held by MPM
    Bioventures III GmbH & Co. Beteiligungs KG,
    508,879 shares held by MPM Bioventures III Parallel
    Fund, L.P., 1,132,937 shares held by MPM
    Bioventures III, L.P., 16,849,787 shares held by MPM
    Bioventures
III-QP,
L.P. and 1,071,428 shares held by MPM Bioventures Strategic
    Fund, L.P., collectively, the MPM Funds. William
    Greene, M.D. and Nicholas Simon III, members of our
    board of directors, are General Partners of
    MPM Bioventures III. Dr. Greene and
    Mr. Simon have shared voting and dispositive powers over
    the shares held by the MPM Funds. They disclaim beneficial
    ownership of the shares held by the MPM Funds, except to the
    extent of their pecuniary interest therein. The address for MPM
    BioVentures III LLC is 200 Clarendon St.,
    54th Floor, Boston, MA 02116.
(3)
Includes 159,185 shares held by TL Ventures V Interfund,
    L.P. and 9,203,526 shares held by TL Ventures V L.P.,
    collectively, the TL Ventures Funds. Christopher
    Moller, Ph.D., a member of our board of directors, is a
    member and on the board of directors of TL Ventures V LLC,
    the general partner of TL Ventures V Interfund L.P.
    and TL Ventures V Management L.P., the general partner of TL
    Ventures V L.P. Dr. Moller may be deemed to have
    shared voting and dispositive powers over the shares held by the
    TL Ventures Funds. He disclaims beneficial ownership of the
    shares held by the TL Ventures Funds, except to the extent of
    his pecuniary interest therein. The address for the TL Ventures
    Funds is 700 Building, 435 Devon Park Drive, Wayne, PA 19087.
(4)
Includes 66,772 shares held by InterWest Investors VIII,
    L.P., 239,338 shares held by InterWest Investors Q VIII,
    L.P. and 8,365,568 shares held by InterWest Partners VIII,
    L.P, collectively, the InterWest Funds. Christopher Ehrlich, a
    member of our board of directors, is a Venture Member of
    InterWest Management Partners VIII, LLC, the general partner of
    the InterWest Funds. Mr. Ehrlich has shared voting and
    dispositive powers over the shares held by the InterWest Funds.
    He disclaims beneficial ownership of the shares held by the
    InterWest Funds, except to the extent of his pecuniary interest
    therein. The address for InterWest Partners is 2710 Sand Hill
    Road, Menlo Park, CA 94025.
(5)
Includes 8,191,086 shares held by Frazier
    Healthcare III, L.P. and 61,600 shares held by Frazier
    Affiliates, III, L.P., collectively, the Frazier III
    Funds. Patrick Heron, a member of our board of directors, is a
    venture capitalist with Frazier Healthcare Ventures
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where he holds the title of General
    Partner. Entities affiliated with Frazier Healthcare Ventures
    serve as the general partners of the Frazier III Funds.
    Mr. Heron may be deemed to have shared voting and
    dispositive powers over the shares held by the Frazier III
    Funds. He disclaims beneficial ownership of the shares held by
    the Frazier III Funds, except to the extent of his
    pecuniary interest therein. The address for the Frazier III
    Funds and Frazier Healthcare Ventures is 601 Union Street,
    Suite 3200, Seattle, WA 98101.
(6)
Caley Castelein, M.D., a
    member of our board of directors, is a Managing Partner of
    Thomas Weisel Healthcare Partners LLC, the general partner of
    Thomas Weisel Healthcare Venture Partners, L.P.
    Mr. Castelein has shared voting and dispositive powers over
    the shares held by Thomas Weisel Healthcare Venture Partners,
    L.P. He disclaims beneficial ownership of the shares held by the
    Thomas Weisel Healthcare Venture Partners, L.P., except to the
    extent of his pecuniary interest therein. The address for Thomas
    Weisel Healthcare Venture Partners is One Montgomery Street,
    San Francisco, CA 94101.
(7)
The address for Biomedical
    Venture III Ltd. is Sundkrogsgade 7, DK-2100,
    Copenhagen, Denmark.
(8)
Includes 15,000 shares of
    common stock issuable upon the exercise of stock options
    exercisable within 60 days of December 31, 2005.
(9)
Includes 547,927 shares of
    common stock issuable upon the exercise of stock options
    exercisable within 60 days of December 31, 2005. Also
    includes an aggregate of 955,000 shares held by trusts
    established by Dr. Zerbe for the benefit of his children
    and of which he and his wife, Linda Zerbe, are the trustees.
(10)
Includes 249,660 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    December 31, 2005. Also includes an aggregate of
    925,000 shares held by trusts established by
    Dr. Dombey for the benefit of his children and of which he
    and his wife, Heather Jane Dombey, are the trustees and
    40,000 shares held by a trust established by
    Dr. Dombey as trustee of the Stuart Lionel Dombey Trust
    u/a/d.
(11)
Includes 303,168 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    December 31, 2005. Also includes an aggregate of
    400,000 shares held by trusts established by
    Dr. Whitcomb of which he and his wife, Rita K. Whitcomb,
    are the trustees.
(12)
Includes 257,002 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    December 31, 2005. Also includes 20,000 shares held by
    Christine L. Nicholas, Mr. Nicholas's wife and an
    aggregate of 450,000 shares held by trusts established by
    Mr. Nicholas for the benefit of his children.
(13)
Includes 385,042 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    December 31, 2005.
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DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital
stock will consist
of                      shares
of common stock, par value $0.01 per share,
and                      shares
of preferred stock, par value $0.01 per share, and there
will
be                      shares
of common stock outstanding and no shares of preferred stock
outstanding. As of September 30, 2005, we had
approximately           record
holders of our capital stock. All of our outstanding shares of
preferred stock will automatically convert into shares of our
common stock upon the completion of this offering. In addition,
upon completion of this offering, options to
purchase                      shares
of our common stock will be outstanding
and                      shares
of our common stock will be reserved for future grants under our
Amended and Restated 2005 Stock Incentive Plan.
The following description of our capital stock and provisions of
our certificate of incorporation and bylaws are summaries of
material terms and provisions and are qualified by reference to
our certificate of incorporation and bylaws, copies of which
have been filed with the SEC as exhibits to the registration
statement of which this prospectus is a part. The descriptions
of the common stock and preferred stock reflect amendments to
our certificate of incorporation and bylaws that will become
effective upon closing of this offering.
Common Stock
Upon the closing of this offering, we will be authorized to
issue one class of common stock. Stockholders will be entitled
to one vote for each share of our common stock held of record on
all matters on which stockholders are entitled or permitted to
vote. Our common stock will not have cumulative voting rights in
the election of directors. As a result, holders of a majority of
the shares of our common stock voting for the election of
directors can elect all the directors standing for election.
Holders of our common stock will be entitled to receive
dividends out of legally available funds when and if declared
from time to time by our board of directors. See "Dividend
Policy." In the event of our liquidation, dissolution or
winding up, the holders of our common stock will be entitled to
share ratably in all assets remaining after payment of
liabilities, subject to the rights of any then outstanding
preferred stock. The rights, preferences and privileges of
holders of our common stock will be subject to, and may be
adversely affected by, the rights of holders of shares of any
series of preferred stock that we may designate and issue in the
future. All outstanding shares of our common stock are fully
paid and nonassessable, and the shares of common stock offered
hereby will be fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, all outstanding shares of our
preferred stock, including shares of preferred stock held in the
escrow established in connection with our acquisition of Hormos,
will be converted into an aggregate of 49,475,097 shares of
common stock. Under our certificate of incorporation, upon the
closing of this offering, we will be authorized, subject to the
limits imposed by the Delaware General Corporation Law, to
issue                      shares
of preferred stock in one or more series, to establish from time
to time the number of shares to be included in each series, to
fix the rights, preferences and privileges of the shares of each
wholly unissued series and any of its qualifications,
limitations, restrictions. Our board of directors can also
increase or decrease the number of shares of any series of our
preferred stock, but not below the number of shares of that
series then outstanding, without any further vote or action by
our stockholders.
Our board of directors may authorize the issuance of preferred
stock with voting or conversion rights that could adversely
affect the voting power or other rights of our common
stockholders. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of delaying or
preventing our change in control and may cause the market price
of our common stock to decline or impair the voting and other
rights of the holders of our common stock. We have no current
plans to issue any shares of preferred stock.
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Registration Rights
Upon completion of this offering, the holders of
approximately                      shares
of common stock will be entitled to rights with respect to the
registration of these shares under the Securities Act as
described below.
Demand Registration Rights
At any time beginning 180 days after the closing of this
offering, the holders of at least fifty percent (50%) of the
shares having registration rights can demand that we file a
registration statement for those shares so long as the demand
covers at least fifty percent (50%) of the shares subject to the
registration rights. We will use our best efforts to effect the
registration as requested, unless the underwriters if any,
decide to limit the number of shares that may be included in the
registration due to marketing factors. We are only obligated to
satisfy two demand registrations (provided that at least eighty
percent (80%) of the shares requested to be registered must be
registered in order for such demand to qualify as a demand
registration), and we may defer a registration by up to
90 days under specified circumstances not more than once in
any
12-month
period. We
are not obligated to satisfy a demand registration if the
registrable shares may be immediately registered pursuant to a
registration statement on
Form
S-3,
as
described below.
Piggyback Registration Rights
If we register any securities for public sale, the holders of
the shares having registration rights may include their shares
in the registration statement. The underwriters have the right
to limit the number of shares having registration rights that
may be included in the registration statement, but not below 20%
of the total number of shares included in the registration
statement. These piggyback registration rights have been waived
with respect to this offering on behalf of the holders of these
rights.
Form
S-3
Registration Rights
If we are eligible to file a registration statement on
Form
S-3,
any
holders of the shares having registration rights can demand that
we file a registration statement on
Form
S-3
or any
similar short-form registration statement, so long as
(i) the aggregate amount of securities to be sold under the
registration statement on
Form
S-3
is at
least $1.0 million and (ii) we have not already
effected two registrations on
Form
S-3
in any
12-month
period.
Expenses of Registration
We will pay for all registration expenses, including the
reasonable legal expenses of a single counsel for the holders,
relating to any demand, piggyback or
Form
S-3
registration, other than the underwriting discount and selling
commissions applicable to the shares of common stock held by the
holders with registration rights.
Expiration of Registration Rights
If shares having registration rights are sold either to the
public, sold pursuant to Rule 144 or sold by a holder in a
transaction in which those rights are not assigned, then the
shares will no longer be considered registrable shares.
Antitakeover Effects of Delaware Law and Provisions of our
Certificate of Incorporation and Bylaws
Delaware Takeover Statute
We are subject to Section 203 of the Delaware General
Corporation Law. This statute regulating corporate takeovers
prohibits a Delaware corporation from engaging in any business
combination with any
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interested stockholder for three years following the date that
the stockholder became an interested stockholder, unless:
•
prior to the date of the transaction that resulted in the
    interested stockholder becoming an interested stockholder, the
    board of directors of the corporation approved either the
    business combination or the transaction which resulted in the
    stockholder becoming an interested stockholder;
•
upon completion of the transaction that resulted in the
    interested stockholder becoming an interested stockholder, the
    interested stockholder owned at least 85% of the voting stock of
    the corporation outstanding at the time the transaction
    commenced, excluding for purposes of determining the number of
    shares outstanding (a) shares owned by persons who are
    directors and also officers, and (b) shares owned by
    employee stock plans in which employee participants do not have
    the right to determine confidentially whether shares held
    subject to the plan will be tendered in a tender or exchange
    offer; or
•
on or subsequent to the date of the transaction that resulted in
    the interested stockholder becoming an interested stockholder,
    the business combination is approved by the board and authorized
    at an annual or special meeting of stockholders, and not by
    written consent, by the affirmative vote of at least
    66
2
/
3
%
    of the outstanding voting stock which is not owned by the
    interested stockholder.
Generally, a business combination includes a merger, asset or
stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. An interested stockholder
is a person who, together with affiliates and associates, owns
or, within three years prior to the determination of interested
stockholder status, did own 15% or more of a corporation's
outstanding voting securities. We expect the existence of this
provision to have an anti-takeover effect with respect to
transactions our board of directors does not approve in advance.
We also anticipate that Section 203 may discourage takeover
attempts that might result in a premium over the market price
for the shares of common stock held by stockholders.
Certificate of Incorporation and Bylaw Provisions
Provisions of our certificate of incorporation and bylaws, which
will become effective upon the closing of this offering, may
have the effect of making it more difficult for a third party to
acquire, or discourage a third party from attempting to acquire,
control of our company by means of a tender offer, a proxy
contest or otherwise. These provisions may also make the removal
of incumbent officers and directors more difficult. These
provisions are intended to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of QuatRx to first negotiate
with us. These provisions could also limit the price that
investors might be willing to pay in the future for shares of
our common stock. These provisions may make it more difficult
for stockholders to take specific corporate actions and could
have the effect of delaying or preventing a change in control.
In particular, our certificate of incorporation and bylaws will
provide for the following:
Staggered Board of Directors.
Our board of directors is
divided into three classes of the same or nearly the same number
of directors, each serving staggered three-year terms, which
means that only one class of directors may be elected at each
annual meeting or special meeting in lieu of such annual
meeting. These provisions may make the removal of incumbent
directors difficult and may discourage third parties from
attempting to circumvent the anti-takeover effects of our
certificate of incorporation and bylaws by removing our
incumbent directors.
No Written Consent of Stockholders.
Any action to be
taken by our stockholders must be effected at a duly called
annual or special meeting and may not be effected by written
consent.
Special Meetings of Stockholders.
Special meetings of our
stockholders may be called only by (i) the Chairman of the
board of directors, (ii) the Chief Executive Officer, or
(iii) the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized
directors.
Advance Notice Requirement.
Stockholder proposals to be
brought before an annual meeting of our stockholders must comply
with advance notice procedures. These advance notice procedures
require timely
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notice and apply in several situations, including stockholder
proposals relating to the nominations of persons for election to
the board of directors. Generally, to be timely, notice must be
received at our principal executive offices not less than
90 days nor more than 120 days prior to the first
anniversary date of the annual meeting for the preceding year.
Issuance of Undesignated Preferred Stock.
Our board of
directors is authorized to issue, without further action by the
stockholders, up
to                      shares
of undesignated preferred stock with rights and preferences,
including voting rights, designated from time to time by the
board of directors. The existence of authorized but unissued
shares of preferred stock enables our board of directors to
render more difficult or to discourage an attempt to obtain
control of us by means of a merger, tender offer, proxy contest
or otherwise.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is                     .
Listing
We have applied for our common stock to be quoted on the Nasdaq
National Market under the trading symbol "QTRX".
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States
federal income tax consequences of the ownership and disposition
of our common stock to a non-United States holder. For the
purpose of this discussion, a non-United States holder is any
beneficial holder of our common stock that for United States
federal income tax purposes is not a United States person. For
United States federal income tax purposes, person means:
•
an individual citizen or resident of the United States;
•
a corporation or other entity taxable as a corporation or a
    partnership or entity taxable as a partnership created or
    organized in the United States or under the laws of the United
    States or any state thereof;
•
an estate whose income is subject to United States federal
    income tax regardless of its source; or
•
a trust (i) whose administration is subject to the primary
    supervision of a United States court and which has one or more
    United States persons who have the authority to control all
    substantial decisions of the trust or (ii) which has made
    an election to be treated as a United States person.
If a partnership holds common stock, the tax treatment of a
partner will generally depend on the status of the partner and
upon the activities of the partnership. Accordingly, we urge
partnerships which hold our common stock and partners in such
partnerships to consult their tax advisors.
This discussion assumes that non-United States holders will hold
our common stock issued pursuant to the offering as a capital
asset (generally, property held for investment). This discussion
does not address all aspects of United States federal income
taxation that may be relevant in light of a non-United States
holder's special tax status or special tax situations.
United States expatriates, life insurance companies, tax-exempt
organizations, dealers in securities or currency, banks or other
financial institutions, holders whose functional currency is
other than the United States dollar, "controlled foreign
corporations," "passive foreign investment
companies," and investors that hold common stock as part of
a hedge, straddle or conversion transaction are among those
categories of potential investors that are subject to special
rules not covered in this discussion. This discussion does not
address any tax consequences arising under the laws of any
state, local or non-United States taxing jurisdiction.
Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), legislative history and Treasury Regulations
and administrative and judicial interpretations thereof, all as
in effect on the date hereof, and all of which are subject to
change, possibly with retroactive effect. Accordingly, we urge
each non-United States Holder to consult a tax advisor regarding
the United States federal, state, local and non-United States
income and other tax consequences of acquiring, holding and
disposing of shares of our common stock.
Prospective purchasers are urged to consult their own tax
advisors regarding United States federal income tax
consequences, as well as other United States federal, state, and
local income and estate tax consequences, and non-United States
tax consequences, to them of acquiring, owning, and disposing of
our common stock.
Dividends
We have not paid any distributions on our common stock and we do
not plan to pay any distributions for the foreseeable future.
However if we do make distributions on our common stock, those
payments will constitute dividends for United States tax
purposes to the extent paid from our current or accumulated
earnings and profits, as determined under United States federal
income tax principles. To the extent those distributions exceed
our current or accumulated earnings and profits, the
distributions will constitute a return of capital and will first
reduce a holder's basis, but not below zero, and then will
be treated as gain from the sale of stock.
Any dividend paid from our current or accumulated earnings and
profits paid to a non-United States holder of common stock
generally will be subject to United States withholding tax
either at a rate of 30% of the gross amount of the dividend or
such lower rate as may be specified by an applicable tax treaty.
In order
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to receive a reduced treaty rate, a non-United States holder
must provide us with an IRS
Form
W-8BEN
(or
successor form) certifying, under penalty of perjury, the
holder's status as a
non-U.S.
person as
defined under the Code and qualification for the reduced rate.
Dividends received by a non-United States holder that are
effectively connected with a United States trade or business
conducted by the non-United States holder are exempt from such
withholding tax. In order to obtain this exemption, a non-United
States holder must provide us with an IRS
Form
W-8ECI
(or
successor form) properly certifying such exemption. Such
effectively connected dividends, although not subject to
withholding tax, are taxed at the same graduated rates
applicable to United States persons, net of certain deductions
and credits. In addition to the graduated tax described above,
dividends received by a corporate non-United States holder that
are effectively connected with a United States trade or business
of the corporate non-United States holder may also be subject to
a branch profits tax at a rate of 30% or such lower rate as may
be specified by an applicable tax treaty.
A non-United States holder of common stock that is eligible for
a reduced rate of withholding tax pursuant to a tax treaty may
obtain a refund of any excess amounts currently withheld if an
appropriate claim for refund is filed with the Internal Revenue
Service, or IRS. If a non-United States holder holds common
stock through a foreign partnership or foreign intermediary, the
foreign partnership or foreign intermediary will also be
required to comply with additional certification requirements.
Gain on Disposition of Common Stock
A non-United States holder generally will not be subject to
United States federal income tax on any gain realized upon the
sale or other disposition of our common stock unless:
•
the gain is effectively connected with a United States trade or
    business of the non-United States holder (and if required by an
    applicable income tax treaty, is attributable to a United States
    permanent establishment of the non-United States holder);
•
the non-United States holder is an individual who holds his or
    her common stock as a capital asset (generally, an asset held
    for investment purposes) and who is present in the United States
    for a period or periods aggregating 183 days or more during
    the calendar year in which the sale or disposition occurs and
    certain other conditions are met; or
•
our common stock constitutes a United States real property
    interest by reason of our status as a "United States real
    property holding corporation" ("USRPHC") for
    United States federal income tax purposes at any time within the
    shorter of the five-year period preceding the disposition or the
    holder's holding period for our common stock.
We believe that we are not currently, and that we will not
become, a USRPHC for United States federal income tax purposes.
If we are determined to be a USRPHC, the United States federal
income and withholding taxes relating to interests in USRPHCs
nevertheless will not apply to gains derived from the sale or
other disposition of the common stock by a non-United States
holder whose shareholdings, actual and constructive, at all
times during the applicable period, amount to 5% or less of our
common stock, provided that our common stock is regularly traded
on an established securities market. However, no assurance can
be given that we will not be a USRPHC, or that our common stock
will be considered regularly traded, when a non-United States
holder sells its shares of our common stock.
Unless an applicable treaty provides otherwise, gain described
in the first bullet point above will be subject to the United
States federal income tax imposed on net income on the same
basis that applies to United States persons, as defined under
the Code, generally and, for corporate holders under certain
circumstances, the branch profits tax, but will generally not be
subject to withholding, provided any certification requirements
are met. Gain described in the second bullet point above will be
subject to a flat 30% United States federal income tax and may
be offset by United States source capital losses. Non-United
States holders should consult any applicable income tax treaties
that may alter the applicable rules.
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Backup Withholding and Information Reporting
Generally, we must report annually to the IRS the amount of
dividends paid, the name and address of the recipient, and the
amount, if any, of tax withheld. A similar report is sent to the
holder. Pursuant to tax treaties or other agreements, the IRS
may make its reports available to tax authorities in the
recipient's country of residence.
Payments of dividends or of proceeds on the disposition of stock
made to a non-United States holder may be subject to backup
withholding (currently at a rate of 28%) unless the non-United
States holder establishes an exemption, for example, by properly
certifying its non-United States status on a
Form
W-8BEN
or
another appropriate version of
Form
W-8.
Notwithstanding the foregoing, backup withholding may apply if
either we or our paying agent has actual knowledge, or reason to
know, that the holder is a United States person as defined under
the Code.
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale of our
common stock within the United States or conducted through
certain United States-related financial intermediaries, unless
the beneficial owner certifies under penalty of perjury that it
is a non-United States holder (and the payor does not have
actual knowledge or reason to know that the beneficial owner is
a United States person as defined under the Code), or such owner
otherwise establishes an exemption.
Backup withholding is not an additional tax. Rather, the United
States income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is timely
furnished to the IRS.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock, and there can be no assurance that a significant
public market for the common stock will develop or be sustained
after this offering. Future sales of substantial amounts of our
common stock, including shares issued upon exercise of
outstanding options, in the public market following this
offering could adversely affect market prices prevailing from
time to time and could impair our ability to raise capital
through the sale of our equity securities.
Upon completion of this offering and based on shares outstanding
at September 30, 2005 and the conversion of all shares of
preferred stock into shares of common stock, we will have
outstanding                      shares
of common stock. All the shares sold in this offering, plus any
shares issued upon exercise of the underwriters' option to
purchase additional shares from us, will be freely tradable
without restriction under the Securities Act, unless purchased
by our "affiliates" as that term is defined in
Rule 144 under the Securities Act.
The
remaining                      shares
of common stock outstanding are "restricted
securities" within the meaning of Rule 144 under the
Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule 701 or another exemption or
meet the safe harbor qualifications under Rule 144 under
the Securities Act as summarized below.
Our directors, officers and substantially all of our
stockholders, who combined hold
approximately           %
of our stock, have entered into
lock-up
agreements with
the underwriters of this offering generally providing that they
will not offer, sell, contract or grant any option to sell,
pledge, transfer, establish an open put equivalent position or
liquidate or decrease a call equivalent position or otherwise
dispose of or transfer any shares of common stock, options or
warrants to acquire shares of common stock, or securities
exchangeable or exercisable for or convertible into shares of
common stock owned by them prior to this offering for a period
of 180 days after the date of this prospectus without the
prior written consent of Banc of America Securities LLC, on
behalf of our underwriters. The
lock-up
agreements do
not prohibit transfers or dispositions by our officers,
directors and stockholders as a gift or by will or intestacy, to
immediate family members or affiliates, and to any trust for the
direct or indirect benefit of the holder or his or her
immediately family. As a result of these contractual
restrictions, notwithstanding possible earlier eligibility for
sale under the provisions of Rules 144, 144(k) and 701,
shares subject to
lock-up
agreements may
not be sold until such agreements expire or are waived by Banc
of America Securities LLC, on behalf of our underwriters. Banc
of America Securities LLC has advised us that it has no current
intention to shorten or release any of the shares subject to the
lock-up
agreements
prior to the expiration of the
lock-up
period. Based
on shares outstanding as of September 30, 2005, taking into
account the
lock-up
agreements, and assuming Banc of America Securities LLC does not
release stockholders from these agreements prior to the
expiration of the
180-day
lock-up
period, the
following shares will be eligible for sale in the public market
at the following times:
•
shares
    that are not subject to the
lock-up
agreements
    discussed above may be sold immediately after completion of this
    offering;
•
additional
    shares that are not subject to the
180-day
lock-up
period
    described above may be sold beginning 90 days after the
    effective date of the offering; and
•
additional
    shares may be sold upon expiration of the
180-day
lock-up
period
    described above.
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Rule 144
In general, under Rule 144 as currently in effect, a person
who has beneficially owned restricted shares for at least one
year, including the holding period of any prior owner except an
affiliate, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
•
1% of the number of shares of common stock then outstanding,
    which will equal
    approximately                      shares
    immediately after this offering; or
•
the average weekly trading volume of our common stock during the
    four calendar weeks preceding the date on which notice of the
    sale is filed.
Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability
of current public information about us. Under Rule 144(k),
a person who is not deemed to have been an affiliate of us at
any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least
two years, including the holding period of any prior owner
except an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701
Any of our employees, officers, directors or consultants who
purchased shares under a written compensatory plan or contract
may be entitled to rely on the resale provisions of
Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying
with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such
shares in reliance on Rule 144 without having to comply
with the holding period, public information, volume limitation
or notice provisions of Rule 144. All holders of
Rule 701 shares are required to wait until
90 days after the effective date of this offering before
selling such shares.
Registration Rights
Upon completion of this offering, the holders
of            shares
of our common stock, or their transferees, have rights to
require or participate in the registration of those shares under
the Securities Act pursuant to our amended and restated investor
rights agreement. For a detailed description of these
registration rights see "Description of Capital
Stock — Registration Rights."
Stock Options
We intend to file a registration statement under the Securities
Act covering up to 8,175,259 shares of common stock
reserved for issuance under our 2005 Equity Incentive Plan. That
registration statement is expected to become effective upon
filing with the SEC. Accordingly, common stock registered under
that registration statement will, subject to vesting provisions
and limitations as to the volume of shares that may be sold by
our affiliates under Rule 144 described above, be available
for sale in the open market unless the holder is subject to the
180-day
lock-up
period.
As of September 30, 2005, options to purchase
6,438,490 shares of common stock were issued and
outstanding at a weighted average exercise price of $0.29 per
share. Upon the expiration of the
lock-up
period
described above, at
least                      shares
of common stock will be subject to vested options.
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Table of Contents
Warrant
Upon completion of this offering, there will be outstanding a
warrant to purchase shares of common stock issued in connection
with a credit facility we entered into in January 2006. The
number of shares subject to the warrant and the exercise price
will be established at the closing of this offering pursuant to
a formula agreed upon with the lender. Under this formula, at an
assumed initial public offering price of
$          per
share and assuming a closing date
of           ,
2006, this warrant would be exercisable
for           shares
of common stock at an exercise price of the $ per share.
The shares issuable upon exercise of the warrant are subject to
a
lock-up
agreement
with Banc of America Securities LLC. Such shares are also
entitled to the registration rights discussed above. In
addition, any shares purchased pursuant to the warrant may be
sold pursuant to the requirements of Rule 144.
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Table of Contents
UNDERWRITING
We are offering the shares of common stock described in this
prospectus through a number of underwriters. Banc of America
Securities LLC, SG Cowen & Co., LLC, Lazard Capital
Markets LLC and Pacific Growth Equities, LLC are the
representatives of the underwriters. We have entered into a firm
commitment underwriting agreement with the representatives.
Subject to the terms and conditions of the underwriting
agreement, we have agreed to sell to the underwriters, and each
underwriter has agreed to purchase, the number of shares of
common stock listed next to its name in the following table:
Underwriter
Number of Shares
Banc of America Securities LLC
SG Cowen & Co., LLC
Lazard Capital Markets LLC
Pacific Growth Equities, LLC
Total
The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell
the shares to the public when and if the underwriters buy the
shares from us.
The underwriters initially will offer the shares to the public
at the price specified on the cover page of this prospectus. The
underwriters may allow a concession of not more than
$          per
share to selected dealers. The underwriters may also allow, and
those dealers may reallow, a concession of not more than
$          per
share to some other dealers. If all the shares are not sold at
the public offering price, the underwriters may change the
public offering price and the other selling terms. Our common
stock is offered subject to a number of conditions, including:
•
receipt and acceptance of the common stock by the
    underwriters; and
•
the underwriters' right to reject orders in whole or in
    part.
Over-Allotment Options.
We have granted the underwriters
an over-allotment option to buy up to additional shares of our
common stock at the same price per share as they are paying for
the shares shown in the table above. These additional shares
would cover sales of shares by the underwriters that exceed the
total number of shares shown in the table above. The
underwriters may exercise this option at any time within
30 days after the date of this prospectus. To the extent
that the underwriters exercise this option, each underwriter
will purchase additional shares from us in approximately the
same proportion as it purchased the shares shown in the table
above. If purchased, the additional shares will be sold by the
underwriters on the same terms as those on which the other
shares are sold.
Discount and Commissions.
The following table shows the
per share and total underwriting discounts and commissions to be
paid to the underwriters by us. These amounts are shown assuming
no exercise and full exercise of the underwriters' option
to purchase additional shares.
We estimate that the expenses of the offering to be paid by us,
not including the underwriting discounts and commissions, will
be approximately
$                    .
Paid by Us
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Listing.
We have applied to have our common stock
included for quotation on the Nasdaq National Market under the
symbol "QTRX".
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Table of Contents
Stabilization.
In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common stock, including:
•
stabilizing transactions;
•
short sales;
•
syndicate covering transactions;
•
imposition of penalty bids; and
•
purchases to cover positions created by short sales.
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
Stabilizing transactions may include making short sales of our
common stock, which involves the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering, and purchasing shares of common
stock from us or in the open market to cover positions created
by short sales. Short sales may be "covered" shorts,
which are short positions in an amount not greater than the
underwriters' over-allotment option referred to above, or
may be "naked" shorts, which are short positions in
excess of that amount. Syndicate covering transactions involve
purchases of our common stock in the open market after the
distribution has been completed in order to cover syndicate
short positions.
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares pursuant to the over-allotment option.
A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the common stock in the open market that could
adversely affect investors who purchased in this offering. To
the extent that the underwriters create a naked short position,
they will purchase shares in the open market to cover the
position.
The representatives also may impose a penalty bid on
underwriters and dealers participating in the offering. This
means that the representatives may reclaim from any syndicate
members or other dealers participating in the offering the
underwriting discounts on shares sold by them and purchased by
the representatives in stabilizing or short covering
transactions.
These activities may have the effect of raising or maintaining
the market price of our common stock or preventing or retarding
a decline in the market price of our common stock. As a result
of these activities, the price of our common stock may be higher
than the price that otherwise might exist in the open market. If
the underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the Nasdaq National Market, in the
over-the
-counter market
or otherwise.
Discretionary Accounts.
The underwriters have informed us
that they do not expect to make sales to accounts over which
they exercise discretionary authority in excess of 5% of the
shares of common stock being offered.
IPO Pricing.
Prior to this offering, there has been no
public market for our common stock. The initial public offering
price will be negotiated between us and the representatives of
the underwriters. Among the factors to be considered in these
negotiations are:
•
the history of, and prospects for, our company and the industry
    in which we compete;
•
our past and present financial performance;
•
an assessment of our management;
•
the present state of our development;
•
the prospects for our future earnings;
100
Table of Contents
•
the prevailing conditions of the applicable United States
    securities market at the time of this offering;
•
market valuations of publicly traded companies that we and the
    representatives of the underwriters believe to be comparable to
    us; and
•
other factors deemed relevant.
Lock-up
Agreement.
We, our executive officers and directors and
substantially all of our stockholders have entered into or will,
prior to the completion of this offering, enter into
lock-up
agreements with
the underwriters. Under these agreements, subject to exceptions,
we may not issue any new shares of common stock, and those
holders of stock and options may not, directly or indirectly,
sell, offer, contract or grant any option to sell, pledge,
transfer or otherwise dispose of or hedge any common stock or
securities convertible into or exchangeable for shares of common
stock, or publicly announce the intention to do any of the
foregoing, without the prior written consent of Banc of America
Securities LLC for a period of 180 days from the date of
this prospectus, subject to a potential extension of up to an
additional 34 days under certain circumstances. This
consent may be given at any time without public notice. In
addition, during this period, we have also agreed not to file
any registration statement for any shares of our common stock
without the prior written consent of Banc of America Securities
LLC. Pursuant to the
lock-up
agreements
holders of greater
than                     %
of the "registrable securities" under our registration
rights agreement have also agreed not to make any demand for, or
exercise any right to registration of any shares of common stock
or any securities convertible into or exercisable or
exchangeable for common stock, without the prior written consent
of Banc of America Securities LLC.
Indemnification.
We will indemnify the underwriters
against some liabilities, including liabilities under the
Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters
may be required to make in respect of those liabilities.
Conflicts/ Affiliates.
The underwriters and their
affiliates have provided, or may in the future provide, various
investment banking, commercial banking and other financial
services for us.
Compliance with
Non-U.S.
Laws and
Regulations
Each underwriter intends to comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers,
sells or delivers shares of our common stock or has in its
possession or distributes the prospectus.
European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), with effect from and including the date on which
the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) an offer of shares to
the public may not be made in that Relevant Member State prior
to the publication of a prospectus in relation to shares which
has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant
Member State and notified to the competent authority in that
Relevant Member State, all in accordance with the Prospectus
Directive, except that it may, with effect from and including
the Relevant Implementation Date, make an offer of shares to the
public in that Relevant Member State at any time:
•
to legal entities which are authorized or regulated to operate
    in the financial markets or, if not so authorized or regulated,
    whose corporate purpose is solely to invest in securities;
•
to any legal entity which has two or more of (1) an average
    of at least 250 employees during the last financial year;
    (2) a total balance sheet of more than
    43,000,000 Euros and (3) an annual net turnover of
    more than 50,000,000 Euros, as shown in its last annual or
    consolidated accounts; or
•
in any other circumstances which do not require the publication
    by the Issuer of a prospectus pursuant to Article 3 of the
    Prospectus Directive.
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Table of Contents
For the purposes of this provision, the expression an
"offer of shares to the public" in relation to any
shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the shares to be offered so as to enable an
investor to decide to purchase or subscribe the shares, as the
same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and
the expression Prospectus Directive means Directive 2003/71/ EC
and includes any relevant implementing measure in each Relevant
Member State.
France
No prospectus (including any amendment, supplement or
replacement thereto) has been prepared in connection with the
offering of the shares that has been approved by the
Autorité des marchés financiers
or by the
competent authority of another State that is a contracting party
to the Agreement on the European Economic Area and notified to
the
Autorité des marchés financiers
; no shares
have been offered or sold and will be offered or sold, directly
or indirectly, to the public in France except to permitted
investors ("Permitted Investors") consisting of
persons licensed to provide the investment service of portfolio
management for the account of third parties, qualified investors
(
investisseurs qualifiés
) acting for their own
account and/or corporate investors meeting one of the four
criteria provided in Article 1 of Decree N o
2004-1019
of
September 28, 2004 and belonging to a limited circle of
investors (
cercle restreint d'investisseurs
) acting
for their own account, with "qualified investors" and
"limited circle of investors" having the meaning
ascribed to them in Article L.
411-2
,
D.411-1,
D.411-2,
D.734-1,
D.744-1,
D754-1
and
D.764-1
of the French
Code Monétaire et Financier
and applicable
regulations thereunder; neither this prospectus, nor any other
materials related to the offering or information contained
therein relating to the shares has been released, issued or
distributed to the public in France except to Permitted
Investors; and the direct or indirect resale to the public in
France of any shares acquired by any Permitted Investors may be
made only as provided by
Articles
L.411-1,
L.411-2,
L.412-1
and
L.621-8
to
L.621-8-3
of the French
Code Monétaire et Financier
and applicable
regulations thereunder.
United Kingdom
Each underwriter acknowledges and agrees that:
•
it has not offered or sold and will not offer or sell any shares
    other than to persons whose ordinary activities involve them in
    acquiring, holding, managing or disposing of investments (as
    principal or as agent) for the purposes of their businesses or
    who it is reasonable to expect will acquire, hold, manage or
    dispose of investments (as principal or agent) for the purposes
    of their businesses where the issue of the shares would
    otherwise constitute a contravention of Section 19 of the
    Financial Services and Markets Act 2000 (the "FSMA")
    by the issuer;
•
it has only communicated or caused to be communicated and will
    only communicate or cause to be communicated an invitation or
    inducement to engage in investment activity (within the meaning
    of Section 21 of the FSMA) received by it in connection
    with the issue or sale of the shares in circumstances in which
    Section 21(1) of the FSMA does not apply to the
    Issuer; and
•
it has complied and will comply with all applicable provisions
    of the FSMA with respect to anything done by it in relation to
    the shares in, from or otherwise involving the United Kingdom.
This document is only being distributed to and is only directed
at (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the "Order") or
(iii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as "relevant persons"). The
shares are only available to, and any invitation, offer or
agreement to subscribe, purchase or otherwise acquire such
shares will be engaged in only with, relevant persons. Any
person who is not a relevant person should not act or rely on
this document or any of its contents.
102
Table of Contents
Italy
Each underwriter acknowledges and agrees that the offering of
the shares has not been cleared by the Italian Securities
Exchange Commission (Commissione Nazionale per le Società e
la Borsa, the "CONSOB") pursuant to Italian securities
legislation and, accordingly, acknowledges and agrees that the
shares may not and will not be offered, sold or delivered, nor
may or will copies of the prospectus or any other documents
relating to the shares or the prospectus be distributed in Italy
other than to professional investors (investitori
professionali), as defined in Article 31, paragraph 2
of CONSOB Regulation No. 11522 of July 1, 1998,
as amended ("Regulation No. 11522") or
pursuant to another exemption from the requirements of
Articles 94 and seq. of Legislative Decree No. 58 of
February 24, 1998 (the "Italian Finance Law") and
CONSOB Regulation No. 11971 of May 14, 1999
("Regulation No. 11971").
Each underwriter acknowledges and agrees that any offer, sale or
delivery of the shares or distribution of copies of the
prospectus or any other document relating to the shares or the
prospectus in Italy may and will be effected in accordance with
all Italian securities, tax, exchange control and other
applicable laws and regulations, and, in particular, will be:
•
made by an investment firm, bank or financial intermediary
    permitted to conduct such activities in Italy in accordance with
    the Legislative Decree No. 385 of September 1, 1993,
    as amended (the "Italian Banking Law"), Legislative
    Decree No. 58 of February 24, 1998, as amended, CONSOB
    Regulation No. 11522 of July 1, 1998, and any
    other applicable laws and regulations;
•
in compliance with Article 129 of the Italian Banking Law
    and the implementing guidelines of the Bank of Italy; and
•
in compliance with any other applicable notification requirement
    or limitation which may be imposed upon the offer of shares by
    CONSOB or the Bank of Italy.
Any investor purchasing the shares in this offering is solely
responsible for ensuring that any offer or resale of the shares
it purchased in this offering occurs in compliance with
applicable laws and regulations.
This prospectus and the information contained herein are
intended only for the use of its recipient and are not to be
distributed to any third party resident or located in Italy for
any reason. No person resident or located in Italy other than
the original recipients of this document may rely on it or its
content.
In addition to the above (which shall continue to apply to the
extent not inconsistent with the implementing measures of the
Prospectus Directive in Italy), after the implementation of the
Prospectus Directive in Italy, the restrictions, acknowledgments
and agreements set out under the heading "European Economic
Area" above shall apply to Italy.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed
upon for us by Heller Ehrman LLP and certain matters will be
passed upon for the underwriters by Shearman & Sterling
LLP.
EXPERTS
The financial statements as of December 31, 2003 and
December 31, 2004 and for each of the three years in the
period ended December 31, 2004 and cumulative for the
period of inception (November 20, 2000) through
December 31, 2004 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
The financial statements as of December 31, 2003 and
December 31, 2004 and for each of the two years then ended
for Hormos Medical Oy included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers Oy,
independent accountants, given on authority of said firm as
experts in auditing and accounting.
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Table of Contents
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form
S-1
under the
Securities Act that registers the shares of our common stock to
be sold in this offering. This prospectus does not contain all
of the information set forth in the registration statement and
the exhibits and schedules filed as part of the registration
statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the
exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus concerning
the contents of any contract or any other document are not
necessarily complete. If a contract or document has been filed
as an exhibit to the registration statement, we refer you to the
copy of the contract or document that has been filed. Each
statement in this prospectus relating to a contract or document
filed as an exhibit is qualified in all respects by the filed
exhibit. The reports and other information we file with the SEC
can be read and copied at the SEC's Public Reference Room
at 100 F Street, NE, Washington D.C. 20549. Copies of these
materials can be obtained at prescribed rates from the Public
Reference Section of the SEC at the principal offices of the
SEC, 100 F Street, NE, Washington D.C. 20549. You may
obtain information regarding the operation of the Public
Reference Room by calling
1(800)
SEC-0330.
The SEC also maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
SEC.
Upon completion of this offering, we will become subject to the
reporting and information requirements of the Exchange Act and,
as a result, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy
statements and other information will be available for
inspection and copying at the SEC's public reference room
and the web site of the SEC referred to above.
104
QuatRx Pharmaceuticals Company
(A development stage company)
Index to Consolidated Financial Statements
Page
QuatRx Pharmaceuticals Company
Report of Independent Registered Public
    Accounting Firm
F-2
Consolidated Balance Sheets
F-3
Consolidated Statements of Operations
F-4
Consolidated Statements of
    Stockholders' Equity (Deficit)
F-5
Consolidated Statements of Cash Flows
F-6
Notes to Consolidated Financial
    Statements
F-7
Hormos Medical Oy
Report of Independent Auditors
F-29
Income Statements
F-30
Balance Sheets
F-31
Cash Flow Statements
F-32
Accounting Policies and Notes to Financial
    Statements
F-33
Unaudited Pro Forma Condensed Combined
    Financial Statements
F-46
Statement of Operations for the Nine Months Ended
    September 30, 2005
F-48
Statement of Operations for the Year Ended December 31, 2004
F-49
Notes to Unaudited Pro Forma Condensed Combined Financial
    Statements
F-50
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
QuatRx Pharmaceuticals Company
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations,
stockholders' equity and cash flows present fairly, in all
material respects, the financial position of QuatRx
Pharmaceuticals Company and its subsidiary at December 31,
2004 and 2003 and the results of its operations and its cash
flows for each of the three years in the period ended
December 31, 2004 and, cumulatively, for the period from
November 20, 2000 (date of inception) to December 31,
2004 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers LLP
March 21, 2005
Detroit, Michigan
F-2
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Consolidated Balance Sheets
Pro Forma
Redeemable
Convertible
Preferred Stock
December 31,
and Stockholders'
September 30,
Equity at
2003
2004
2005
September 30, 2005
(unaudited)
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
$
10,546,216
$
31,128,076
$
22,867,632
Accounts receivable
—
—
207,149
Prepaid expenses and other
97,529
306,638
651,213
Total current assets
10,643,745
31,434,714
23,725,994
Property and equipment, net
40,846
59,909
767,398
Intangibles, net
—
—
438,260
Total assets
$
10,684,591
$
31,494,623
$
24,931,652
Liabilities, Redeemable Convertible Preferred Stock and
    Stockholders' Equity (Deficit)
Current Liabilities:
Current portion of long-term debt
$
—
$
—
$
35,929
Loan advances
—
—
2,445,655
Accounts payable
123,638
552,350
303,153
Accrued payroll and benefits
72,790
45,194
358,348
Accrued contract services
924,865
1,005,780
1,388,435
Accrued liabilities
—
—
374,549
Deferred income
—
—
34,553
Total current liabilities
1,121,293
1,603,324
4,940,622
Long-term debt, less current portion
—
—
13,607,837
Long-term deferred income
—
—
431,918
Accrued contingent consideration
—
—
1,593,025
Commitments and contingencies
Redeemable convertible preferred stock, liquidation value of
    $56,697,445 at December 31, 2004 and $67,224,113 at
    September 30, 2005 (unaudited), no shares outstanding pro
    forma (unaudited)
23,955,812
55,907,373
66,735,741
$
—
Stockholders' Equity (Deficit):
Common stock, $0.01 par value; 30,402,852, 72,502,056 and
    94,919,416 shares authorized at December 31, 2003,
    2004 and September 30, 2005 (unaudited), respectively;
    3,976,000, 3,976,000 and 13,526,154 shares issued and
    outstanding at December 31, 2003, 2004 and
    September 30, 2005 (unaudited), respectively;
    61,934,977 shares outstanding pro forma (unaudited)
39,760
39,760
135,262
619,350
Additional paid-in capital
—
—
1,031,185
67,282,838
Deficit accumulated during the development stage
(14,432,274
)
(26,055,834
)
(64,014,191
)
(64,014,191
)
Accumulated other comprehensive income
—
—
470,253
470,253
Total stockholders' equity (deficit)
(14,392,514
)
(26,016,074
)
(62,377,491
)
$
4,358,250
Total liabilities, redeemable convertible preferred stock and
    stockholders' equity (deficit)
$
10,684,591
$
31,494,623
$
24,931,652
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Consolidated Statements of Operations
Cumulative
Cumulative
Period From
Period From
Inception
Inception
(November 20,
Nine Months Ended
(November 20,
Years Ended December 31,
2000) to
September 30,
2000) to
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2005
(unaudited)
(unaudited)
(unaudited)
Operating Expenses:
Research and development
$
2,713,105
$
8,372,368
$
7,724,562
$
19,230,557
$
5,872,804
$
9,156,597
$
28,387,154
General and administrative
716,671
886,093
1,723,505
3,597,838
1,121,004
2,199,592
5,797,430
Purchased in-process research and development
—
—
—
—
—
25,800,000
25,800,000
Total operating expenses
3,429,776
9,258,461
9,448,067
22,828,395
6,993,808
37,156,189
59,984,584
Loss from operations
(3,429,776
)
(9,258,461
)
(9,448,067
)
(22,828,395
)
(6,993,808
)
(37,156,189
)
(59,984,584
)
Other Income (Expense):
Contract research income
—
—
—
—
—
826,303
826,303
Consulting income
1,094
221,099
—
247,347
—
—
247,347
Interest income
38,860
72,823
143,991
328,409
52,232
498,195
826,604
Interest expense
—
—
—
—
—
(404,896
)
(404,896
)
Total other income
39,954
293,922
143,991
575,756
52,232
919,602
1,495,358
Net loss
(3,389,822
)
(8,964,539
)
(9,304,076
)
(22,252,639
)
(6,941,576
)
(36,236,587
)
(58,489,226
)
Accretion of redeemable preferred stock
(390,147
)
(1,503,791
)
(2,319,484
)
(4,360,333
)
(1,428,885
)
(3,457,130
)
(7,817,463
)
Net loss available to common stockholders
$
(3,779,969
)
$
(10,468,330
)
$
(11,623,560
)
$
(26,612,972
)
$
(8,370,461
)
$
(39,693,717
)
$
(66,306,689
)
Net Loss Per Share, Basic and Diluted:
Net loss per share available to common stockholders, basic and
    diluted
$
(6.30
)
$
(7.57
)
$
(4.79
)
$
(3.61
)
$
(5.17
)
Weighted average common shares
600,000
1,382,723
2,425,592
2,319,573
7,680,211
Pro forma net loss per share available to common stockholders
    (unaudited)
$
(0.45
)
$
(0.75
)
Weighted average shares used to compute pro forma net loss per
    share available to common stockholders (unaudited)
25,841,981
53,212,900
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Consolidated Statements of Stockholders' Equity
(Deficit)
Deficit
Accumulated
Accumulated
Common Stock
Additional
Other
During
Total
Paid-In
Comprehensive
Development
Stockholders'
Comprehensive
Shares
Amount
Capital
Income (Loss)
Stage
Deficit
Loss
Balance — Inception, November 20, 2000
—
$
—
$
—
$
—
$
—
$
—
Issuance of shares to founders
3,405,000
34,050
136,200
—
—
170,250
Issuance of stock for cash, at $0.10 per share
200,000
2,000
18,000
—
—
20,000
Issuance of option to purchase Series B Preferred Stock
—
—
351,000
—
—
351,000
Unrealized loss on investments
—
—
—
(4,332
)
—
(4,332
)
$
(4,332
)
Accretion of preferred stock to redemption value
—
—
(146,911
)
—
—
(146,911
)
Net loss
—
—
—
—
(594,204
)
(594,204
)
(594,204
)
Comprehensive loss
$
(598,536
)
Balance at December 31, 2001
3,605,000
36,050
358,289
(4,332
)
(594,204
)
(204,197
)
Exercise of stock rights for cash
371,000
3,710
51,940
—
—
55,650
Realized loss on maturity of investments
—
—
—
4,332
—
4,332
$
4,332
Accretion of preferred stock to redemption value
—
—
(390,147
)
—
—
(390,147
)
Net loss
—
—
—
—
(3,389,822
)
(3,389,822
)
(3,389,822
)
Comprehensive loss
$
(3,385,490
)
Balance at December 31, 2002
3,976,000
39,760
20,082
—
(3,984,026
)
(3,924,184
)
Net loss
—
—
—
—
(8,964,539
)
(8,964,539
)
$
(8,964,539
)
Accretion of preferred stock to redemption value
—
—
(20,082
)
—
(1,483,709
)
(1,503,791
)
Comprehensive loss
$
(8,964,539
)
Balance at December 31, 2003
3,976,000
39,760
—
—
(14,432,274
)
(14,392,514
)
Net loss
—
—
—
—
(9,304,076
)
(9,304,076
)
$
(9,304,076
)
Accretion of preferred stock to redemption value
—
—
—
—
(2,319,484
)
(2,319,484
)
Comprehensive loss
$
(9,304,076
)
Balance at December 31, 2004
3,976,000
39,760
—
—
(26,055,834
)
(26,016,074
)
Issuance or common stock upon exercise of stock option
    (unaudited)
30,000
300
5,700
—
—
6,000
Issuance of shares in connection with acquisition (unaudited)
9,520,154
95,202
2,760,845
—
—
2,856,047
Net loss (unaudited)
—
—
—
—
(36,236,587
)
(36,236,587
)
$
(36,236,587
)
Accretion of preferred stock to redemption value (unaudited)
—
—
(1,735,360
)
—
(1,721,770
)
(3,457,130
)
Foreign currency translation adjustment (unaudited)
—
—
—
470,253
—
470,253
470,253
Comprehensive loss (unaudited)
$
(35,766,334
)
Balance at September 30, 2005 (unaudited)
13,526,154
$
135,262
$
1,031,185
$
470,253
$
(64,014,191
)
$
(62,377,491
)
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Consolidated Statements of Cash Flows
Cumulative
Cumulative
Period From
Period From
Inception
Inception
(November 20,
Nine Months Ended
(November 20,
Years Ended December 31,
2000) to
September 30,
2000) to
December 31,
September 30,
2002
2003
2004
2004
2004
2005
2005
(unaudited)
(unaudited)
(unaudited)
Cash Flows from Operating Activities:
Net loss
$
(3,389,822
)
$
(8,964,539
)
$
(9,304,076
)
$
(22,252,639
)
$
(6,941,576
)
$
(36,236,587
)
$
(58,489,226
)
Adjustments to reconcile net loss to net cash used in operating
    activities:
Depreciation and amortization
13,803
16,894
19,663
56,501
13,777
437,842
494,343
Loss from maturity of short-term investments
6,907
—
—
7,475
—
—
7,475
Accrued interest expense on long-term debt
—
—
—
—
—
135,095
135,095
Purchased in-process research and development
—
—
—
—
—
25,800,000
25,800,000
Increase (decrease) in cash resulting from changes in assets and
    liabilities, net of acquisitions
—
—
—
—
—
—
—
Accounts receivable
—
—
—
—
—
(181,726
)
(181,726
)
Prepaid expenses and other
7,219
(88,028
)
(209,109
)
(306,638
)
(127,940
)
(223,161
)
(529,799
)
Accounts payable
(98,204
)
103,777
428,712
552,348
139,544
(466,542
)
85,806
Accrued payroll and benefits
(60,608
)
67,582
(27,596
)
45,194
(18,265
)
(41,358
)
3,836
Accrued contract services
212,220
712,645
80,915
1,005,780
(181,976
)
394,713
1,400,493
Accrued liabilities
—
—
—
—
—
163,088
163,088
Deferred income
—
—
—
—
—
(158,818
)
(158,818
)
Net cash used in operating activities
(3,308,485
)
(8,151,669
)
(9,011,491
)
(20,891,979
)
(7,116,436
)
(10,377,454
)
(31,269,433
)
Cash Flows from Investing Activities:
Purchases of short-term investments
(1,175,000
)
(100,000
)
—
(3,947,475
)
—
—
(3,947,475
)
Maturities of short-term investments
1,158,000
875,000
—
3,940,000
—
—
3,940,000
Cash paid for acquisition costs
—
—
—
—
—
(878,778
)
(878,778
)
Cash acquired in Hormos transaction
—
—
—
—
—
1,014,364
1,014,364
Purchases of property and equipment
(12,897
)
(10,944
)
(38,726
)
(116,410
)
(28,081
)
(135,374
)
(251,784
)
Net cash used in investing activities
(29,897
)
764,056
(38,726
)
(123,885
)
(28,081
)
212
(123,673
)
Cash Flows from Financing Activities:
Proceeds from the issuance of preferred stock, net of issuance
    costs
2,078,671
16,570,372
29,632,077
51,898,040
—
1,400,000
53,298,040
Proceeds from the issuance of common stock
55,650
—
—
245,900
—
6,000
251,900
Proceeds from issuance of long-term debt
—
—
—
—
—
653,954
653,954
Principal payments on capital leases
—
—
—
—
—
(21,580
)
(21,580
)
Other financing activities
—
—
—
—
—
45,720
45,720
Net cash provided by financing activities
2,134,321
16,570,372
29,632,077
52,143,940
—
2,084,094
54,228,034
Effect of Exchange Rate Changes on Cash
—
—
—
—
—
32,704
32,704
Net Increase (Decrease) in Cash and Cash Equivalents
(1,204,061
)
9,182,759
20,581,860
31,128,076
(7,144,517
)
(8,260,444
)
22,867,632
Cash — Beginning of Period
2,567,518
1,363,457
10,546,216
—
10,546,216
31,128,076
—
Cash — End of Period
$
1,363,457
$
10,546,216
$
31,128,076
$
31,128,076
$
3,401,699
$
22,867,632
$
22,867,632
Supplemental Disclosure of Non-Cash Flow Activity:
Issuance of preferred and common stock in connection with Hormos
    transaction
$
—
$
—
$
—
$
—
$
—
$
8,827,285
$
8,827,285
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial Statements
1.
Organization and Summary of Significant Accounting
    Policies
Organization and Business
QuatRx Pharmaceuticals Company ("QuatRx" or the
"Company") was incorporated in Delaware in November
2000, and is engaged in the discovery, licensing, development
and commercialization of compounds in the endocrine, metabolic
and cardiovascular therapeutic areas. QuatRx has four product
candidates in clinical development and one product candidate
expected to enter clinical development in the first half of
2006. QuatRx's two lead product candidates treat hormone
deficiencies that result from aging in men and women.
Ospemifene, a treatment for vaginal atrophy in post-menopausal
women, will enter phase III clinical testing in early 2006,
and fispemifene, a treatment for the symptoms of andropause in
aging males, is expected to enter phase II clinical testing
in the first half of 2006. QuatRx also has two product
candidates for the treatment of elevated cholesterol levels,
QRX-401 and QRX-431, in phase I clinical trials and
preclinical development, respectively. Becocalcidiol, our
topical product candidate for the treatment of mild to moderate
psoriasis, has completed a phase IIb clinical trial which
the Company believes demonstrated clinical proof of efficacy. In
addition, QuatRx has two research programs for targeted
endocrine therapies.
On May 25, 2005, QuatRx completed the acquisition of Hormos
Medical Oy ("Hormos"), a privately held Finnish
development-stage pharmaceuticals company. Hormos focuses on the
discovery and development of novel pharmaceutical compounds
involving the tissue specific regulation of estrogen effects for
the treatment of certain age-related diseases. The acquisition
allowed QuatRx to expand its existing pipeline and technologies
to include potential therapies for endocrine deficiencies
associated with aging in men and women, including ospemifene and
fispemifene. The accompanying financial statements include the
operating results of Hormos since the date of acquisition.
QuatRx complements its internal drug development expertise by
entering into collaborations and agreements with third parties
including pharmaceutical companies, academic laboratories, and
contract service providers. In the course of its activities,
QuatRx has sustained significant operating losses and expects
such losses, which will likely increase as QuatRx expands its
research and development activities, to continue for at least
the next several years. QuatRx has not generated any product
sales or any significant revenues and has not achieved
profitable operations or positive cash flows from operations.
QuatRx's cumulative net loss during the development stage
totaled $58,489,226 through September 30, 2005. QuatRx
plans to finance its operations with a combination of stock
issuances, Finnish government sponsored loans and grants, and
payments from license and other strategic research and
development arrangements and, if its product candidates are
commercialized, with revenues from product sales. There are no
assurances that QuatRx will be successful in obtaining an
adequate level of financing needed for the long-term development
and commercialization of its planned products.
Basis of Presentation
QuatRx has generated no revenue to date and its activities have
consisted primarily of raising capital, acquiring compounds,
planning and conducting clinical trials, recruiting personnel,
and negotiating licensing arrangements. Accordingly, QuatRx is
considered to be in the development stage as of
September 30, 2005 as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7,
Accounting and Reporting by Development Stage Enterprises.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Hormos, from the
date of acquisition, May 25, 2005. All significant
intercompany balances and transactions have been eliminated.
F-7
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Unaudited Pro Forma Presentation
The unaudited pro forma stockholders' equity as of
September 30, 2005 and net loss per share available to
common stockholders for the year ended December 31, 2004
and the nine months ended September 30, 2005 reflect the
automatic conversion of all outstanding shares of Series A,
Series B, Series C, Series D and Series D-1
Redeemable Convertible Preferred Stock into 43,143,653 and
48,408,823 shares of common stock, respectively, upon the
closing of the Company's initial public offering.
Unaudited Interim Financial Information
The consolidated financial statements as of September 30,
2005, and for the nine months ended September 30, 2004 and
2005, are unaudited and have been prepared on the same basis as
the audited consolidated financial statements and, in the
opinion of management, include all adjustments, consisting of
only normal recurring adjustments, necessary for fair
presentation of the financial position at such date, and the
operating results and cash flows for such periods, in accordance
with generally accepted accounting principles. Results for the
interim period are not necessarily indicative of the results to
be expected for any subsequent period.
Foreign Currency Translation
The financial statements of QuatRx's foreign subsidiary are
translated from Euros to U.S. dollars using exchange rates
in effect at period end for assets and liabilities and at
average rates during the period for results of operations. The
resulting foreign currency translation adjustment is reflected
as a separate component of stockholders' equity (deficit).
Foreign currency transaction loss resulting from expenses in
foreign denominated currencies totaled approximately $32,525 for
the nine months ended September 30, 2005, and is included
in general and administrative expense in the accompanying
consolidated statements of operations.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
QuatRx considers all highly liquid investments with an original
maturity of three months or less at the date of purchase to be
cash equivalents.
Short-term Investments
Investments with an original maturity of more than three months
and less than one year are considered short-term investments and
have been classified by QuatRx as securities available-for-sale.
Such investments are carried at fair value, with unrealized
gains and losses included as a separate component of
stockholders' equity.
Fair Value Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable, accounts payable, accrued liabilities are considered
to be representative of their respective fair values because of
the short-term nature of those instruments and obligations.
Because the Company's loans bear interest generally at
below-market rates,
F-8
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
an adjustment related to the carrying value of the loans has
been recorded to approximate fair value (see note 2). No
significant change in value has occurred since May 2005, the
revaluation date.
Concentration of Credit Risk
Financial instruments that potentially subject QuatRx to a
significant concentration of credit risk consist primarily of
cash and cash equivalents. QuatRx maintains deposits in
federally insured financial institutions in excess of federally
insured limits. Management, however, believes the Company is not
exposed to significant credit risk due to the financial position
of the depository institutions in which those deposits are held.
Property and Equipment
Property and equipment are stated at cost and are depreciated
over the estimated useful lives of the assets (ranging from
three to five years) using the straight-line method. Equipment
under capital leases is amortized over their estimated useful
lives or the remaining lease term, whichever is shorter. Repairs
and maintenance are expensed as incurred.
Impairment of Long-Lived Assets
In accordance with SFAS No. 144,
Accounting for the
Impairment or Disposal of Long-Lived Assets
, if indicators
of impairment exist, QuatRx assesses the recoverability of the
affected long-lived assets by determining whether the carrying
value of such assets can be recovered through undiscounted
future operating cash flows. If impairment is indicated, QuatRx
measures the amount of such impairment by comparing the fair
value to the carrying value and reduces the carrying value
accordingly.
Contract Research Income
Contract research income consists of a collaborative discovery
program which includes quarterly payments to QuatRx for research
performed and reimbursement of outsourced costs incurred by
QuatRx on the project. The agreement expires January 2006.
Deferred Income
Certain non-core technology has been out-licensed to others. The
upfront payment of approximately $480,000 is being amortized
into income over the period of the agreement.
Consulting Fee Income
Consulting fee income consists of fees paid by a pharmaceutical
company to QuatRx for consultation on design, implementation,
and assessment of certain clinical trials. There has been no
consulting fee income since 2003.
Research and Development
Research and development expenses consist primarily of costs
associated with the clinical trials of QuatRx's product
candidates, up-front license fees and milestone obligations for
access to technology, compensation and other expenses for
research and development personnel, supplies and development
materials, costs for clinical research organizations and
contract manufacturers. Expenditures relating to research and
development, including up-front license fees and milestone
obligations, are expensed as incurred.
F-9
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Clinical Trials
QuatRx accrues and expenses costs for clinical trial activities
performed by third parties based upon estimates of the
percentage of work completed over the life of the individual
study in accordance with agreements established with contract
research organizations and clinical trial sites. QuatRx
determines the estimates through discussion with internal
clinical personnel and outside service providers as to progress
or stage of completion of trials or services and the agreed upon
fee to be paid for such services. Costs of setting up clinical
trial sites for participation in the trials are expensed
immediately as research and development expenses. Clinical trial
site costs related to patient enrollment are accrued as patients
are entered into the trial and reduced by any initial payment
made to the clinical trial site when the first patient is
enrolled.
Comprehensive Income (Loss)
In accordance with SFAS No. 130,
Reporting
Comprehensive Income
, all components of comprehensive income
(loss), including, net income (loss), are reported in the
financial statements in the period in which they are recognized.
Comprehensive income (loss) is defined as the change in equity
during the period from transactions and other events and
circumstances from non-owner sources. Net income (loss) and
other comprehensive income (loss) are reported net of their
related tax effect to arrive at comprehensive income (loss). For
the period from inception (November 20, 2000) to
September 30, 2005, the comprehensive loss is equal to the
net loss, unrealized loss on investments and cumulative
translation adjustment as presented in the statement of
stockholders' equity.
Stock-Based Compensation
QuatRx has elected to follow Accounting Principles Board Opinion
("APB") No. 25,
Accounting for Stock Issued to
Employees
, and related interpretations in accounting for its
employee stock options. Under APB 25, if the exercise price
of the Company's employee stock options equals or exceeds
the estimated fair value of the underlying stock on the date of
grant, no compensation expense is recognized. Since November
2004, the Company has used independent contemporaneous
valuations to determine the fair value of the Company's
common stock. Because QuatRx's option grants have been made
at fair value on the grant date and are fixed plan options under
APB 25, no compensation expense has been recorded.
As required under SFAS No. 123 (amended by
SFAS No. 148), the pro forma effects of stock-based
compensation on net loss are estimated at the date of grant
based on the fair value method using the Black-Scholes
option-pricing model.
The fair value of these options was estimated at the date of
grant using the Black-Scholes option valuation model with the
following weighted average assumptions for the year ended
December 31, 2003 and 2004 and the nine months ended
September 30, 2004 and 2005: risk-free interest rate of
2.97%, 3.43%, 3.32% and 4.00%, respectively; no dividend yield,
expected volatility of 70%, and weighted-average expected lives
of the options of 4 years. The estimated fair value of
stock options granted during 2003 and 2004, and the nine months
ended September 30, 2004 and 2005 was $0.11, $0.11, $0.11 and
$0.19, respectively. Risk-free interest rates were determined
using government securities with original maturities similar to
the respective expected option life at the date of grant.
F-10
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Had employee and director compensation cost for QuatRx's
stock-based compensation plans been determined based on the fair
value at the grant dates for awards using the fair value method
prescribed by SFAS No. 123, QuatRx's pro forma
net loss would be as follows:
Nine Months Ended
Years Ended December 31,
September 30,
2002
2003
2004
2004
2005
(unaudited)
(unaudited)
Net loss available to common stockholders as reported
$
(3,779,969
)
$
(10,468,330
)
$
(11,623,560
)
$
(8,370,461
)
$
(39,693,717
)
Deduct total stock-based employee compensation expense
    determined under the fair value method for all awards
—
(47,038
)
(76,596
)
(76,513
)
(278,622
)
Pro forma net loss available to common stockholders
$
(3,779,969
)
$
(10,515,368
)
$
(11,700,156
)
$
(8,446,974
)
$
(39,972,339
)
Net loss per share available to common stockholders (basic and
    diluted)
As reported
$
(6.30
)
$
(7.57
)
$
(4.79
)
$
(3.61
)
$
(5.17
)
Pro forma
$
(6.30
)
$
(7.60
)
$
(4.82
)
$
(3.64
)
$
(5.20
)
Income Taxes
QuatRx utilizes the liability method of accounting for income
taxes as required by SFAS No. 109,
Accounting for
Income Taxes
. Under this method, deferred tax assets and
liabilities are determined based on differences between
financial reporting and tax reporting bases of assets and
liabilities and are measured using enacted tax rates and laws
that are expected to be in effect when the differences are
expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected
to be realized.
Net Loss Per Share
Basic and diluted net loss per share amounts have been presented
in conformity with SFAS No. 128,
Earnings Per
Share
, for all periods presented. The shares used to compute
basic and diluted net loss per share represent the weighted
average common shares outstanding, reduced by the weighted
average unvested common shares subject to repurchase, and
including the assumed conversion of all outstanding shares of
F-11
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
preferred stock into shares of common stock using the as-if
converted method as of January 1, 2004 or the date of
issuance, if later.
Nine Months Ended
Years Ended December 31,
September 30,
2002
2003
2004
2004
2005
(unaudited)
(unaudited)
Historical:
Net loss
$
(3,389,822
)
$
(8,964,539
)
$
(9,304,076
)
$
(6,941,576
)
$
(36,236,587
)
Accretion of redeemable convertible preferred stock
(390,147
)
(1,503,791
)
(2,319,484
)
(1,428,885
)
(3,457,130
)
Net loss available to common stockholders
$
(3,779,969
)
$
(10,468,330
)
$
(11,623,560
)
$
(8,370,461
)
$
(39,693,717
)
Basic and diluted —
Weighted average common shares outstanding
3,821,326
3,976,000
3,976,000
3,976,000
8,492,007
Weighted average unvested common shares subject to repurchase
(3,221,326
)
(2,593,277
)
(1,550,408
)
(1,656,427
)
(811,796
)
Net weighted average common shares outstanding
600,000
1,382,723
2,425,592
2,319,573
7,680,211
Net loss per share available to common stockholders
$
(6.30
)
$
(7.57
)
$
(4.79
)
$
(3.61
)
$
(5.17
)
Pro forma for Conversion:
Pro forma net loss
$
(11,623,560
)
$
(39,693,717
)
Basic and diluted —
Net weighted average common shares used above
2,425,592
7,680,211
Pro forma adjustment to reflect assumed weighted average effect
    of conversion of preferred stock
23,416,390
45,532,691
Pro forma shares used to compute basic and diluted net loss per
    share
25,841,981
53,212,900
Pro forma basic and diluted net loss per share
$
(0.45
)
$
(0.75
)
Pro Forma
The Company has excluded all common stock subject to repurchase
by the Company, convertible preferred stock and outstanding
stock options from the calculation of diluted net loss per share
because all of these securities are anti-dilutive due to the net
loss for each period. The total number of shares excluded from
F-12
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
the calculations of diluted net loss per share was 24,966,798 in
2004 and was 46,344,487 for the nine months ended
September 30, 2005.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board
issued SFAS No. 123(R)
"Share-Based
Payment,"
which amends SFAS No. 123. The
standard set forth in SFAS No. 123(R) requires that
all share-based payments to employees, including grants of
employee stock options, be recognized in the consolidated
statements of operations based on their fair values. The pro
forma disclosure previously permitted under
SFAS No. 123 will not be an acceptable alternative to
recognition of expenses in the financial statements. The
standard is effective for public companies for annual periods
beginning after June 15, 2005. The Company expects adoption
of SFAS No. 123(R) may have a material impact on its
results of operations and net loss per share. The Company is
currently in the process of evaluating the extent of such impact.
2.
Hormos Medical Oy Acquisition
On May 25, 2005, the Company completed the acquisition of
Hormos, a Finnish development-stage pharmaceuticals company.
Hormos is in the development stage and is presumed not to be a
business according to the Emerging Issues Task Force
("EITF") 98-3,
Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a
Business.
The transaction therefore was accounted for as a
purchase of assets and assumption of liabilities. In connection
with the acquisition, the Company acquired all of the
outstanding capital stock of Hormos in exchange for
857,145 shares of Series D and 3,408,025 shares
of Series D-1 Preferred Stock and 9,520,154 shares of
common stock and assumed current liabilities and notes payable
totaling $20,289,423. The Company also incurred $1,000,000 in
acquisition-related costs.
Adjustments were made to record the acquired net assets of
Hormos at fair value, including allocating a portion of the
total purchase price to in-process research and development.
Based on management's review of the analysis of the
tangible and intangible assets and liabilities of Hormos, the
purchase price has been allocated as follows:
Total acquisition costs:
Issuance of Series D Preferred Stock
$
1,200,003
Issuance of Series D-1 Preferred Stock
4,771,235
Issuance of common stock
2,856,047
Acquisition-related costs
1,000,000
Assumed liabilities and notes payable
20,289,423
$
30,116,708
Allocated to assets and liabilities as follows:
Current assets
$
1,170,596
Property and equipment acquired
776,995
In-process research and development
25,800,000
Work force
480,000
Favorable loan discount
2,101,923
Note receivable
1,380,219
Accrued contingent consideration
(1,593,025
)
$
30,116,708
F-13
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Contingent consideration associated with the acquisition
includes an additional 321,415 shares and
1,277,995 shares of Series D and Series D-1
Preferred Stock, respectively, and 3,570,046 shares of
common stock with an aggregate value of $3,310,188, held in
escrow and payable upon the occurrence of certain future events.
One-third of the contingent shares secure indemnification
obligations of the Hormos selling shareholders and will be
released to the Company in satisfaction of an indemnification
claim or to the Hormos shareholders one year after the closing
date of the acquisition. The remaining contingent shares will
generally be released to Hormos selling shareholders upon the
first to occur of: the closing of a qualified public offering of
QuatRx's common stock or the dosing of the first patient in
a second phase III clinical trial of ospemifene. Additional
purchase consideration will be recorded as the contingent
consideration is released. The additional purchase consideration
will be allocated to the assets acquired based upon their
relative fair value and will result in additional expense for
in-process research and development of $585,000, and accrued
contingent consideration totaling $1,593,000 will be
reclassified to stockholders' equity.
The principle technology acquired in the acquisition of Hormos
consisted of two clinical-stage compounds which were under
development for the treatment of endocrine diseases of aging. In
accordance with FASB Interpretation No. 4,
Applicability
of FASB Statement No. 2 to Business Combinations Accounted
for by the Purchase Method
, purchased in-process research
and development of $25,800,000 related to these two
clinical-stage compounds was expensed since ultimate
commercialization of the compounds is uncertain and the
technology has no alternative uses. The fair value of each of
the in-process research and development projects was based on an
income approach which attempts to estimate the income-producing
capability of the asset.
At the date of the acquisition, Hormos had $15,078,514 in loans,
including principal and accrued interest, from agencies of the
Finnish government. These loans include below-market interest
rates ranging from 1% to 5.25% annually. The loans were revalued
using both the favorable contractual interest rates as well as
the fair market yields. The difference in value under both
interest rate assumptions is $2,101,923 related to these loans
and has been recorded as a discount to long-term debt. This
discount is being amortized, using the effective interest
method, over the remaining lives of the underlying loans,
generally one to six years. Amortization expense of $199,619 is
included in interest expense in the accompanying statement of
operations for the nine months ended September 30, 2005.
In connection with the acquisition, Hormos's workforce of
37 people joined the Company. Using estimated costs primarily of
recruitment and training, it was determined the fair value of
the assembled workforce represents an intangible asset of
$480,000. This asset is being amortized over approximately
4 years based on historical employee turnover rates.
Amortization expense of $29,044 and $12,696 is included in
research and development expense and general and administrative
expense, respectively, in the accompanying statement of
operations for the nine months ended September 30, 2005.
Management was primarily responsible for the estimates and
assumptions used in determining each of the above factors and
believes that the analysis was performed based on the most
relevant available data.
The following pro forma unaudited financial data illustrates the
estimated effects of the Hormos acquisition as if it had
occurred on January 1, 2004. For the year ended
December 31, 2004, pro forma net loss available to common
stockholders and basic and diluted net loss per share would have
been $16,311,457 and $1.37, respectively (unaudited). For the
nine months ended September 30, 2005, pro forma net loss
available to common stockholders and basic and diluted net loss
per share would have been $15,702,157 and $1.24, respectively
(unaudited).
F-14
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
3.
Property and Equipment
Property and equipment consisted of the following:
At December 31,
At
September 30,
2003
2004
2005
(unaudited)
Computer equipment (depreciable life – 3 years)
$
40,781
$
78,359
$
129,041
Laboratory equipment (depreciable life – 3 years)
—
—
631,320
Office equipment and furniture (depreciable life –
    5 years)
36,903
38,051
244,119
77,684
116,410
1,004,480
Less: Accumulated depreciation
36,838
56,501
237,082
Total property and equipment
$
40,846
$
59,909
$
767,398
Property and equipment held under capital lease obligations
totaled approximately $305,805 and the related accumulated
depreciation totaled approximately $46,666 at September 30,
2005.
Total depreciation expense for property and equipment totaled
$13,803, $16,894, $19,663, $13,777, $185,649 and $242,150 for
the years ended December 31, 2002, 2003 and 2004, the nine
months ended September 30, 2004 and 2005, and the period
from inception (November 20, 2000) to September 30,
2005, respectively.
4.
Accrued Liabilities
Accrued liabilities consists of the following:
At December 31,
At
September 30,
2003
2004
2005
(unaudited)
Accrued acquisition costs
$
—
$
—
$
121,222
Accrued interest
—
—
100,848
Accrued professional fees
—
—
60,000
Other
—
—
92,479
Total accrued liabilities
$
—
$
—
$
374,549
F-15
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
5.
Long-Term Debt
Long-term debt consists of the following:
At December 31,
At
September 30,
2003
2004
2005
(unaudited)
Subordinated notes payable, due in varying amounts with interest
    rates ranging from 3% to 5.25%, net of unamortized discount of
    $1,831,431 at September 30, 2005
$
—
$
—
$
12,820,002
Note payable, with interest rate of 1%, net of unamortized
    discount of $70,874 at September 30, 2005
—
—
787,835
Capital lease obligation by Hormos, payable in monthly
    installments of approximately $5,400, plus interest at 9.5%,
    through February 2006
—
—
35,929
—
—
13,643,766
Current portion of debt
—
—
(35,929
)
Long-term debt, less current portion
$
—
$
—
$
13,607,837
Hormos finances a portion of its research and development
activities with loans from Finnish governmental agencies. These
loans are granted on a project-by-project basis and generally
carry interest at below-market rates. If a project fails or does
not reach commercial success, under certain circumstances and at
the discretion of the Finnish governmental agencies, the loan
can be forgiven.
Subordinated Notes Payable
Subordinated notes payable consists of 19 notes with Tekes, the
National Technology Agency in Finland, and one note with Sitra,
the Finnish National Fund for Research and Development. As of
September 30, 2005, Hormos had subordinated notes payable
of $12,820,002, including accrued interest of $1,558,254.
The terms of these unsecured subordinated loans generally
include interest at 1% below the Finnish base interest rate as
set by the Bank of Finland, but at a minimum of 3%, a loan
period of six to eight years, with no payments of principal or
interest due for the first three to five years. Repayment of
principal and accrued interest begins after the repayment-free
period. Under applicable Finnish law, interest or principal
related to subordinated notes can only be repaid when the
company has distributable retained earnings or adequate equity
capital. Because Hormos lacks the requisite retained earnings or
equity capital, no amounts outstanding under these loans is
considered currently payable.
Note Payable
Note payable consists of an industrial research and development
note with Tekes. The terms of the unsecured note payable
includes interest at 3% below the Finnish base interest rate as
set by the Bank of Finland, but a minimum of 1%, a loan period
of 10 years, with no payment of principle due for the first
five years. Repayment of principal and accrued interest begins
after the repayment-free period. Accrued interest is payable
annually.
F-16
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
6.
Commitments and Contingencies
Leases
The Company leases its office facilities under various
noncancelable operating lease agreements. Rent expense was
$44,205, $44,205, $44,457, $33,314, $235,892 and $379,044 for
the years ended December 31, 2002, 2003 and 2004, the nine
months ended September 30, 2004 and 2005, and the period
from inception (November 20, 2000) to September 30,
2005, respectively.
In 2004, the Company put in place a letter of credit from a
financial institution for $126,000 in favor of the
Company's landlord in the event of a breach of the
Company's Ann Arbor, Michigan facility lease, which expires
in 2011. The letter of credit is collateralized by $126,000 of
QuatRx's deposits with the issuing financial institution.
Future minimum lease payments under these noncancelable
operating leases at December 31, 2004 are approximately as
follows:
Year Ending December 31,
2005
$
98,000
2006
133,000
2007
136,000
2008
139,000
2009
142,000
Thereafter
179,000
$
827,000
With the acquisition of Hormos in May 2005, the Company has
assumed additional operating leases for facilities in Finland.
Hormos is party to five separate real estate leases of office
and laboratory space in Turku, Finland and Oulu, Finland. Two of
these leases are long-term leases through 2011 which require
monthly payments totaling approximately $750,000 annually. The
remaining facility leases require 15 months or less to
terminate and have monthly payments totaling approximately
$28,000 annually.
Licensing and Research Agreements
Temple University
In July 2001, QuatRx entered into a license agreement with
Temple University for certain pharmaceutical delivery methods.
In consideration for this license, QuatRx paid an upfront
license fee of $10,000. QuatRx is obligated to pay certain
amounts for patent maintenance costs, a payment of $20,000 for a
patent improvement milestone and royalties on future net sales
of products incorporating technology covered by this license. As
of September 30, 2005 patent maintenance costs totaled
$1,825. No patent improvement milestones or sales royalties have
been incurred under this license through September 30,
2005. The license agreement terminates upon expiration of the
last of any patent rights to licensed products that are
developed under the agreement. This agreement was terminated by
QuatRx in November 2005.
Deltanoid Pharmaceuticals
In November 2001, QuatRx entered into a license agreement with
Deltanoid Pharmaceuticals, Inc. for certain pharmaceutical
compounds for the topical treatment of skin disease. QuatRx is
obligated to make certain future payments of up to $3,500,000
based on reaching certain clinical and regulatory milestones. No
milestone or royalty expense has been incurred under this
license through September 30, 2005. The royalty
F-17
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
provision under this license agreement terminates upon
expiration of the last to expire licensed patent under this
agreement. QuatRx may terminate this agreement at any time upon
90 days' written notice.
Topical Pharmaceutical Compounds
In November 2001, QuatRx entered into a license with a research
organization for certain pharmaceutical compounds for topical
application. QuatRx paid upfront license fees of $50,000 in
connection with this license and is obligated to future
milestone payments of up to $2,750,000 based on achieving
certain clinical and regulatory milestones. QuatRx also is
obligated to royalty payments on net sales of products
incorporating the licensed compound. In addition, QuatRx has
agreed to pay from $5,000 to $20,000 per patent for costs
associated with domestic and foreign patents filed by the
research organization relating to the licensed compound.
Research and development costs incurred under this agreement in
2004 were $10,000. No costs were incurred for the nine months
ended September 30, 2005. Total amounts paid under this
agreement through September 30, 2005 are $50,000 in upfront
license fees and $25,000 in patent filing costs. The license
agreement terminates upon the earlier of the date that no
licensed patent under the agreement remains enforceable or the
payment of earned royalties, once begun, ceases for more than
eight calendar quarters. QuatRx has sent notification of its
intent to terminate this agreement.
Genzyme Corporation (formerly Ilex Products, Inc.)
In May 2003, QuatRx entered into a license agreement with
Genzyme Corporation (formerly Ilex Products, Inc.) for exclusive
rights to two novel classes of orally active compounds for the
treatment of lipid disorders and other cardiovascular diseases.
QuatRx paid a $2,500,000 upfront license fee under the agreement
and is obligated to future milestone and royalty payments. In
2004, QuatRx paid $1,500,000, in milestone payments under this
agreement, which is included in research and development
expense. Future milestone payments are based on achievement of
certain clinical and regulatory milestones and total up to
$37,500,000. Royalty payments are based on net sales of products
incorporating the licensed compounds. No royalty payments have
been incurred under the agreement. Under terms of the agreement,
maintenance costs of the licensed patents are the responsibility
of QuatRx. The agreement provides that patent maintenance costs
are shared equally between the licensor and QuatRx during the
first two years and 100% by QuatRx thereafter. Patent
maintenance costs paid by QuatRx under this agreement totaled
$59,792, $101,045, $88,006, none and $160,837 for the years
ended December 31, 2003, 2004, the nine months ended
September 30, 2004 and 2005, and the period from inception
(November 30, 2000) to September 30, 2005,
respectively. The royalty provision under the license terminates
when all valid claims under any patent included in the license
have expired or are no longer enforceable. QuatRx may terminate
the agreement at any time with 90 days' written notice.
EndoChem, Inc.
In February 2005, QuatRx entered into a license agreement with
EndoChem, Inc. for exclusive worldwide rights to certain
compounds for all human therapeutic applications including the
treatment of lipid disorders and obesity. QuatRx paid a $450,000
upfront license fee under the agreement in 2005, which is
included in research and development expense, and is obligated
to future license fee, milestone and royalty payments. A future
license fee of $100,000 is due within seven days of the one year
anniversary date of the agreement. Future development and
regulatory milestone payments total up to $3,500,000. Royalty
payments are based on net sales of products incorporating the
licensed compounds. No royalty payments have been incurred under
the agreement. Under terms of the agreement, maintenance costs
of the licensed patents are the responsibility of QuatRx. Patent
maintenance costs paid by QuatRx under this agreement totaled
$94,715 for the nine months ended September 30, 2005. The
royalty provision under the license terminates when all valid
claims under any patent included in the license have expired or
are no longer enforceable. QuatRx may terminate the agreement at
any time with 90 days' written notice.
F-18
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Orion and Tess Diagnostics and Pharmaceuticals for
    Ospemifene
In December 2002, Hormos entered into two agreements with
pharmaceutical products companies for pharmaceutical compounds
involved in the treatment of certain endocrine deficiencies of
aging in women. Under an agreement with Orion, Hormos paid an
upfront license fee of approximately $482,000 and is obligated
to pay future milestones and royalties. Future milestones are
based on achievement of certain clinical and regulatory
milestones and total up to approximately $2,231,000. Royalty
payments are based on net sales of products incorporating the
licensed compounds. No royalty payments have been incurred under
the agreement. Under terms of the agreement, maintenance costs
of the licensed patents are the responsibility of Orion. The
license terminates at the later of 19 years from date of
agreement or when all valid claims under any patent included in
the license have expired or are no longer enforceable.
Under an agreement with Tess Diagnostics and Pharmaceuticals,
Hormos paid a $700,000 upfront license fee and is obligated to
future milestone and royalty payments. Future milestone payments
are based on achievement of certain clinical and regulatory
milestones and total up to $8,500,000. Royalty payments are
based on net sales of products incorporating the licensed
compounds. No royalty payments have been incurred under the
agreement. QuatRx has the right, in its sole discretion, to
terminate this agreement upon written notice.
Orion for Fispemifene
In March 2004, Hormos entered into a license agreement with
Orion for triphenylalkene derivatives and their use as selective
estrogen receptor modulators. Under the agreement, Hormos paid
an upfront license fee of approximately $60,000 and is obligated
to future milestone and royalty payments. Future milestone
payments are based on achievement of certain clinical and
regulatory milestones and total up to approximately $1,085,000.
Royalty payments are based on net sales of products
incorporating the licensed compounds. No royalty payments have
been incurred under the agreement. Under terms of the agreement,
maintenance costs of the licensed patents are the responsibility
of Hormos. No patent maintenance costs have been incurred under
the agreement. The license terminates on a country by country
basis when all valid claims under any patent included in the
license have expired or are no longer enforceable.
University of Turku
Under a June 2004 patent assignment agreement with the
University of Turku, the Company was assigned rights to a patent
relating to the method of use of fispemifene for treatments for
lower urinary tract symptoms or pelvic pain. Under the terms of
the agreement, Hormos paid patent application and patent
approval fees to the inventors and a signing fee to the
University of Turku totaling approximately $13,700. The Company
has agreed to pay a milestone payment of approximately $12,100
and to pay a royalty based on net income. The requirement to pay
royalties continues on a country-by-country basis until the
expiration of the licensed patent in that country. The Company
has further agreed to pay a percentage of any purchase price
received for the outright license or assignment to a third party
of the applicable patent. The license terminates on a country by
country basis when all valid claims under any patent included in
the license have expired or are no longer enforceable.
Royalties and Research and Development Expense
Aggregate minimum royalties under licensing and research
agreements range from $250,000 to $450,000 on net sales of
products incorporating compounds under these agreements. There
were no minimum royalty payments required for the years ended
December 31, 2002, 2003, 2004 and the nine months ended
September 30, 2004 and 2005 (unaudited).
F-19
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
The amount charged to research and development expense in
connection with these agreements was none, $2,561,617,
$1,611,045, $1,598,005, $544,715 and $4,842,377 for the years
ended December 31, 2002, 2003 and 2004, the nine months
ended September 30, 2004 and 2005, and for the period from
inception (November 20, 2000) to September 30, 2005,
respectively.
Commitments and Contingencies
In the ordinary course of its business, QuatRx makes certain
indemnities, commitments and guarantees under which it may be
required to make payments in relation to certain transactions.
These include indemnities of clinical investigators,
consultants, and contract research organizations involved in the
development of QuatRx's pre-clinical and clinical stage
products and indemnities to QuatRx's directors and officers
to the maximum extent permitted under the laws of the State of
Delaware. The duration of these indemnities, commitments and
guarantees varies, and in certain cases is indefinite. The
majority of these indemnities, commitments and guarantees do not
provide for any limitation of the maximum potential future
payments the Company could be obligated to make. QuatRx has not
recorded any liability for these indemnities, commitments and
guarantees in the accompanying balance sheets. However, QuatRx
accrues for losses for any known contingent liability, including
those that may arise from indemnification provisions, when
future payment is probable. No such losses have been recorded to
date.
F-20
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
7.
Redeemable Convertible Preferred Stock
The authorized, issued and outstanding shares of redeemable
convertible preferred stock (preferred stock) by Series are as
follows:
Shares
Issued and
Authorized
Outstanding
Liquidation Value
December 31, 2000
Series A
1,575,000
1,575,000
$
1,575,000
December 31, 2001
Series A
1,575,000
1,575,000
$
1,716,750
Series B
5,600,000
1,400,000
2,100,000
7,175,000
2,975,000
$
3,816,750
December 31, 2002
Series A
1,575,000
1,575,000
$
1,858,500
Series B
5,600,000
2,800,000
4,389,000
7,175,000
4,375,000
$
6,247,500
December 31, 2003
Series A
1,575,000
1,575,000
$
1,994,425
Series B
4,200,000
4,200,000
7,276,068
Series C
12,885,963
12,885,963
15,374,237
18,660,963
18,660,963
$
24,644,730
December 31, 2004
Series A
1,575,000
1,575,000
$
2,120,425
Series B
4,200,000
4,200,000
7,780,068
Series C
25,596,491
25,596,491
31,315,741
Series D
29,071,429
10,964,285
15,481,211
60,442,920
42,335,776
$
56,697,445
September 30, 2005
Series A
1,575,000
1,575,000
$
2,214,925
Series B
4,200,000
4,200,000
7,969,069
Series C
25,596,491
25,596,491
33,066,541
Series D
34,428,570
12,821,430
19,067,441
Series D-1
4,260,031
3,408,025
4,906,137
70,060,092
47,600,946
$
67,224,113
The par value for all shares of Preferred Stock is $0.01.
During 2000, QuatRx issued 1,575,000 shares of
Series A Preferred Stock at $1.00 per share for
proceeds of $1,546,259, net of issuance costs of $28,741.
During 2001, QuatRx issued 1,400,000 shares of
Series B Preferred Stock at $1.50 per share for
proceeds of $2,070,661, net of issuance costs of $29,339.
During 2002, QuatRx issued 1,400,000 shares of
Series B Preferred Stock at $1.50 per share for
proceeds of $2,078,671 net of issuance costs of $21,329.
F-21
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
During 2003, QuatRx issued 1,400,000 shares of
Series B Preferred Stock at $1.50 per share for
proceeds of $2,084,977, net of issuance costs of $15,023. Also
during 2003, QuatRx issued 12,885,963 shares of
Series C Preferred Stock at $1.14 per share for
proceeds of $14,485,395, net of $204,603 of issuance costs.
During 2004, QuatRx issued 12,710,528 shares of
Series C Preferred Stock at $1.14 per share for
proceeds of $14,448,873, net of issuance costs of $41,129. Also
during 2004, QuatRx issued 10,964,285 shares of
Series D Preferred Stock at $1.40 per share for
proceeds of $15,183,204, net of issuance costs of $166,796.
During the nine months ended September 30, 2005, QuatRx
issued 1,000,000 shares of Series D Preferred Stock at
$1.40 per share for proceeds of $1,400,000. In addition, in
connection with the acquisition of Hormos, QuatRx issued
857,145 shares of Series D and 3,408,025 shares
of Series D-1 Preferred Stock.
The holders of Preferred Stock have the following rights and
preferences:
Voting Rights
The holders of shares of all series of preferred stock are
entitled to one vote for each share of common stock into which
each share of preferred stock could be converted. The holders of
preferred stock, voting equally with shares of common stock, are
entitled to vote upon any matters submitted to stockholders.
Election of Directors
The holders of Series A Preferred Stock, as a class, the
holders of Series B Preferred Stock, as a class, and the
holders of Series D-1 Preferred Stock, as a class, each are
entitled to elect one director to QuatRx's Board of
Directors. The holders of Series C Preferred Stock, as a
class, and the holders of Series D Preferred Stock, as a
class, each are entitled to elect two directors to QuatRx's
Board of Directors. The holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, and Series D-1
Preferred Stock, voting together as a single class, are entitled
to elect one director to QuatRx's Board of Directors. The
holders of the QuatRx common stock, voting as a single class,
are entitled to elect one member to QuatRx's Board of
Directors.
Dividends
The holders of Series D Preferred Stock and Series D-1
Preferred Stock are entitled to receive dividends, prior and in
preference to any declaration or payment of any dividend on
Series A, Series B or Series C Preferred Stock,
or common stock of QuatRx, at the rate of 8% per annum on
the original issue price of $1.40.
The holders of Series C Preferred Stock are entitled to
receive dividends, prior and in preference to any declaration or
payment of any dividend on Series A or Series B
Preferred Stock, or common stock of QuatRx, at the rate of
8% per annum on the original issue price of $1.14.
The holders of Series A and Series B Preferred Stock
are entitled to receive dividends, prior and in preference to
any declaration or payment of any dividend on common stock of
QuatRx, at the rate of 9% per annum for the period prior to
the issuance of the Series C shares and 8% per annum
subsequent to the issuance of the Series C shares on the
original issue price of $1.00 and $1.50, respectively.
Dividends are payable only when, as and if declared by the Board
of Directors. As of September 30, 2005, no dividends have
been declared.
F-22
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Liquidation
In the event of any liquidation, dissolution or winding up of
QuatRx, after payment of the full liquidation preference, any
remaining assets shall be distributed ratably to the holders of
all preferred stock, on an as-converted to common stock basis,
and common stock until the holders of all preferred stock have
received an aggregate amount per share equal to three times the
applicable original issue price; thereafter, the holders of
common stock shall receive all of the remaining assets in
proportion to their applicable share.
The liquidation preference is $1.00, $1.50, $1.14, $1.40 and
$1.40 per share for Series A, Series B,
Series C, Series D and Series D-1 Preferred
Stock, respectively, plus 9% per annum for Series A
and Series B shares prior to the issuance of Series C
Preferred Stock and 8% per annum thereafter, plus
8% per annum from the date of issuance for Series C,
Series D and Series D-1 Preferred Stock, shares less
any dividends declared and paid to the respective shareholders.
Redemption
The redemption provisions of the preferred stock stipulate that
at any time on or after December 31, 2008, upon request of
at least 65% of the then outstanding shares of Series D
Preferred Stock and 75% of the then outstanding shares of
Series C Preferred Stock, QuatRx is required to redeem the
Series A, Series B, Series C, Series D and
Series D-1 Preferred Stock. The redemption price is equal
to the liquidation preference. During the years ended
December 31, 2002, 2003 and 2004, the nine months ended
September 30, 2004 and 2005, and the period from inception
(November 30, 2000) to September 30, 2005 accretion of
$390,147, $1,503,791, $2,319,484, $1,428,885, $3,457,130 and
$7,817,463, respectively, was recorded to adjust the carrying
amounts of the preferred stock to their redemption value.
Conversion
All series of preferred stock are convertible, at the option of
the holder, at any time after the date of issuance, into fully
paid non-assessable shares of common stock as determined by the
then applicable conversion rate, which is generally
one-to
-one. The
conversion rate is subject to adjustment from time to time for
certain subdivisions, dividends, combinations, consolidations,
dilutive issuances and certain other factors. As of
September 30, 2005, 70,867,976 shares of common stock
are reserved for the conversion of the preferred shares.
Automatic conversion occurs immediately upon the closing of a
firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933 meeting
certain requirements set forth in the Company's certificate
of incorporation, or with respect to Series D-1 Preferred
Stock, conversion occurs upon the written election of the
holders of a majority of the outstanding shares of the
Series D-1 Preferred Stock, voting as a single class, or
with respect to Series D Preferred Stock, conversion occurs
upon written election of the holders of 65% of the outstanding
Series D Preferred Stock, voting as a single class, or with
respect to shares of Series C Preferred Stock, conversion
occurs upon the written election of the holders of 75% of the
outstanding shares of Series C Preferred Stock, voting as a
single class, or with respect to shares of Series A
Preferred Stock and Series B Preferred Stock, conversion
occurs upon the written election of 75% of the outstanding
shares of the Series A and Series B Preferred Stock
voting together as a single class.
8.
Common Stock
Certain issued and outstanding shares of QuatRx's common
stock are subject to vesting and the right of repurchase by
QuatRx. Vesting is generally over four years. Unvested shares
are subject to repurchase at a price equal to the original
purchase price of the stock. As of December 31, 2003 and
2004 and
F-23
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
September 30, 2005 there were 1,969,333, 1,125,333 and
492,333 unvested shares, respectively, subject to repurchase at
prices ranging from $0.05 to $0.15 per share.
9.
Stock Option Plans and Employee Benefits
2000 Equity Incentive Plan
In December 2000, the Board of Directors approved QuatRx's
2000 Equity Incentive Plan ("2000 Plan"), under
which QuatRx may grant options and restricted stock awards to
officers, employees, consultants and directors. Options granted
may be exercised for a period of not more than 10 years
from the date of grant or any shorter period as determined by
the Board of Directors. Options vest as determined by the Board
of Directors, generally over a four-year period.
Under the 2000 Plan, QuatRx granted 20,000 options to
purchase shares of common stock to a non-employee consultant
during 2004 at an exercise price of $0.20 per share. These
options vest immediately based upon the occurrence of a
qualifying transaction. As of September 30, 2005, none of
these options are exercisable.
2005 Stock Incentive Plan
In April 2005, the Board of Directors approved QuatRx's
2005 Stock Incentive Plan ("2005 Plan"). Under the
2005 Plan, QuatRx may grant options and restricted stock awards
to employees, directors and consultants of the Company.
Options granted may be exercised for a period of not more than
10 years from the date of grant or any shorter period as
determined by the administrator of the plan. Options vest as
determined by the administrator of the plan, generally over a
four-year period. The option price of any incentive stock option
shall equal or exceed the fair value per share on the date of
grant as determined by the administrator of the plan, or 110% of
the fair value per share in the case of a 10% or greater
stockholder.
At September 30, 2005, QuatRx had reserved an aggregate of
7,275,259 shares of common stock for issuance under the
plans and 806,769 shares were available for grant.
F-24
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Stock option activity under the plans is summarized in the
following table:
Incentive and Nonqualifying Stock Options
Weighted
Weighted
Average
Average
Number of
Exercise
Options
Exercise
Shares
Price
Exercisable
Price
Outstanding at December 31, 2002
—
$
—
—
$
—
Granted
1,727,894
0.20
Exercised
—
—
Expired
—
—
Forfeited
—
—
Outstanding at December 31, 2003
1,727,894
$
0.20
5,000
$
0.20
Granted
580,386
0.20
Exercised
—
—
Expired
—
—
Forfeited
(5,000
)
0.20
Outstanding at December 31, 2004
2,303,280
$
0.20
730,749
$
0.20
Granted (unaudited)
4,165,210
0.34
Exercised (unaudited)
(30,000
)
0.20
Expired (unaudited)
—
—
Forfeited (unaudited)
—
—
Outstanding at September 30, 2005
6,438,490
$
0.29
2,282,403
$
0.27
QuatRx did not grant any options prior to 2003. The total
options outstanding and exercisable under the plans as of
December 31, 2004 and September 30, 2005 are as
follows:
Options Outstanding
Options Exercisable
Weighted
Average
Weighted
Weighted
Remaining
Average
Average
Number
Contractual
Exercise
Number
Exercise
Exercise Prices
Outstanding
Life (Years)
Price
Exercisable
Price
December 31, 2004
$0.20
2,303,280
8.8
$
0.20
730,749
$
0.20
September 30, 2005
$0.20
2,303,280
8.8
$
0.20
730,749
$
0.20
$0.20
2,293,280
8.1
$
0.20
1,143,620
$
0.20
$0.34
3,193,210
9.6
$
0.34
1,138,783
$
0.34
$0.35
952,000
9.8
$
0.35
—
$
0.35
6,438,490
9.1
$
0.29
2,282,403
$
0.27
F-25
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
Employee Savings and Retirement Plans
In 2002, QuatRx adopted a safe-harbor profit sharing plan which
provided contributions to employee savings and retirement plans.
Contributions under the plan were $159,984 in 2002. No
contributions were made under the plan in 2003, 2004 or for the
nine months ended September 30, 2005.
In 2003, QuatRx adopted a safe-harbor 401(k) employee savings
and retirement plan which is qualified under
Sections 401(a) and 401(k) of the Internal Revenue Code of
1986, as amended. Eligible employees may elect to defer current
compensation up to the statutorily prescribed annual limits and
have the amount of such reduction contributed to the
401(k) Plan. As a safe-harbor plan, QuatRx contributes an
amount equal to 3% of certain eligible employee's
compensation annually as a nonelective contribution to the Plan.
Expense related to the plan totaled $29,006, $12,000, $3,000,
$18,592 and $59,598 in 2003 and 2004, the nine months ended
September 30, 2004 and 2005, and the period from inception
(November 20, 2000) to September 30, 2005,
respectively.
QuatRx's Finnish employees are covered by a defined
contribution pension plan as required by the TEL Employees
Pension Act. The pension plan payment levels are set annually by
the Finnish Ministry of Social Affairs and Health. In 2005,
QuatRx is required to contribute 17.3% of certain eligible
employees' compensation to the plan. Since the acquisition
of Hormos in May 2005, QuatRx has contributed $97,395 to the
plan through September 30, 2005.
10.
Income Taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets for financial
reporting and the amount reported for income tax purposes.
Significant components of QuatRx's deferred tax assets are
shown below. A valuation allowance has been established, as
realization of such assets is uncertain due to the
Company's history of generating net operating losses.
At December 31,
At September 30,
2002
2003
2004
2005
(unaudited)
Deferred tax assets (liabilities)
Net operating loss carryforwards
$
1,231,000
$
3,422,000
$
6,299,000
$
22,000,000
Start-up costs
35,000
25,000
14,000
7,000
Fixed assets
(6,000
)
(7,000
)
6,000
(10,000
)
License
—
746,000
1,262,000
1,332,000
Total net deferred tax assets
1,260,000
4,186,000
7,581,000
23,329,000
Valuation allowance
(1,260,000
)
(4,186,000
)
(7,581,000
)
(23,329,000
)
Net deferred asset
$
—
$
—
$
—
$
—
At December 31, 2004 and September 30, 2005, QuatRx
had U.S. federal tax net operating loss carryforwards of
approximately $18,527,000 and $26,772,000, respectively, which
can be used to offset future U.S. taxable income. The
U.S. federal tax loss carryforwards will begin to expire in
2021, unless previously utilized. QuatRx had Finnish tax net
operating loss carryforwards of $50,000,000 at
September 30, 2005, which can be used to offset future
Finnish taxable income. The Finnish tax loss carryforwards will
begin to expire in 2008.
Pursuant to Internal Revenue Code Section 382, use of
QuatRx's net operating loss carryforwards may be limited if
a cumulative change in ownership of more than 50% occurs within
a three-year period. The issuance of common or preferred stock
or the grant of stock options may result in such a change in
F-26
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
ownership. If certain substantial changes in the Company's
ownership occur, there would be an annual limitation on the
amount of carryforwards which can be utilized and this may
result in the expiration of net operating loss carryforwards
before utilization.
The Company's effective tax rate differs from the
U.S. federal statutory rate of 34% due to the Company
providing a valuation allowance against deferred tax assets,
which primarily consists of net operating loss carryforwards.
The Company's income tax provision (benefit) consisted of
the following:
At December 31,
At September 30,
2002
2003
2004
2005
(unaudited)
Current
$
—
$
—
$
—
$
—
Deferred
(1,117,000
)
(2,926,000
)
(3,395,000
)
(3,339,000
)
Change in valuation allowance
1,117,000
2,926,000
3,395,000
3,339,000
Net income tax provision
$
—
$
—
$
—
$
—
Additional deferred tax assets totalling $12,409,000 and a
related full valuation allowance resulted due to the net
operating losses acquired in the Hormos transaction.
11.
Segment Information
In accordance with SFAS No. 131,
Disclosures about
Segments of an Enterprise and Related Information
, the
Company has determined that it is principally engaged in one
operating segment: the research and development of therapeutic
compounds primarily for treatment of endocrine, metabolic and
cardiovascular diseases. Management uses consolidated financial
information in determining how to allocate resources to its
company-wide research and product development efforts and assess
financial performance.
The Company operates in two geographic locations: the United
States and Finland. The following table summarizes selected
financial information of the Company's operations by
geographic location:
At December 31,
At September 30,
2003
2004
2005
(unaudited)
Long-lived tangible assets
United States
$
40,846
$
59,909
$
141,778
Finland
—
—
625,620
Total long-lived tangible assets
$
40,846
$
59,909
$
767,398
12.
Subsequent Events
In October 2005, the Company issued 12,821,428 shares of
Series D Preferred Stock at $1.40 per share for
proceeds of $17,916,851, net of issuance costs of $33,148.
In December 2005, Tekes notified Hormos that repayment would not
be required for certain loans totaling $2,558,214, including
principal and accrued interest, associated with a research
project which did not reach commercial feasibility. Also in
December 2005, Sitra notified Hormos that a loan totaling
$123,353, including principal and accrued interest, would not be
required to be repaid.
In January 2006, the Company entered into an $18,000,000 debt
agreement with a lending company. At closing, QuatRx drew
$6,000,000 under the agreement with $12,000,000 available for
future draws through the end of 2006. Each loan drawn under the
agreement bears interest at prime plus 3% with interest-only
F-27
Table of Contents
QuatRx Pharmaceuticals Company
(A development stage company)
Notes to Consolidated Financial
Statements — (Continued)
payments due during the first 12 months of each loan.
Principal is repaid over 36 months after the interest-only
period, with a balloon payment due at the end of the repayment
period. Loans under the agreement are collateralized by
substantially all of our assets other than our intellectual
property rights. In addition, the debt agreement contains
covenants restricting our ability to incur further indebtedness,
pay dividends or make investments, subject to exceptions
specified in the agreement. In connection with the debt
agreement, QuatRx issued a warrant to the lender to purchase
shares of QuatRx preferred stock. The number of shares and
exercise price in the warrant will be determined by a formula
based on the timing and price of the next round of equity
invested in the Company. The warrant is exercisable for seven
years from the date of issue, or three years after an initial
public offering of the Company's common stock.
F-28
Table of Contents
Report of Independent Auditors
To the Shareholders of Hormos Medical Oy:
In our opinion, the accompanying balance sheets and the related
income statements and cash flow statements present fairly, in
all material respects, the financial position of Hormos Medical
Oy at December 31, 2004 and December 31, 2003, and the
results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally
accepted in Finland. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Accounting standards generally accepted in Finland vary in
certain significant respects from accounting principles
generally accepted in the United States of America. Information
relating to the nature and effect of such differences is
presented in Note 31 to the financial statements.
Turku, Finland
February 1, 2006
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers Oy
Authorized Public Accountants
F-29
Table of Contents
Hormos Medical Oy
Income Statements
Year Ended December 31,
Notes
2004
€
2003
€
Net Sales
5
2,033,402.80
1,762,159.00
Research and development expenses
(3,656,828.62
)
(8,719,355.66
)
Business development expenses
(298,700.38
)
(643,111.97
)
Administrative expenses
(977,530.56
)
(922,543.21
)
Other operating income
6
360,643.56
677,095.19
Operating Loss
(2,539,013.20
)
(7,845,756.65
)
Financial income and expenses
11
(73,715.35
)
18,183.97
Net Loss
(2,612,728.55
)
(7,827,572.68
)
The accompanying notes are an integral part of these financial
statements.
F-30
Table of Contents
Hormos Medical Oy
Balance Sheets
As at December 31,
Notes
2004
€
2003
€
ASSETS
Non-current Assets
Intangible assets
12
1,147,135.69
1,192,215.01
Tangible assets
13
58,042.45
87,754.18
Current Assets
Short-term receivables
14, 15,16
260,020.16
148,506.97
Cash and cash equivalents
1,363,848.70
630,327.62
Total Assets
2,829,047.00
2,058,803.78
Shareholders' Equity and Liabilities
Shareholders' Equity
17
Share capital
206,031.33
206,031.33
Share premium
7,589,243.37
7,589,243.37
Retained deficit
(16,952,267.11
)
(9,124,694.43
)
Loss for the financial year
(2,612,728.55
)
(7,827,572.68
)
Capital loans
18
10,462,266.83
9,280,305.83
Shareholders' Equity in Total
(1,307,454.13
)
123,313.42
Liabilities
Long-term liabilities
20
566,256.00
346,110.00
Short-term liabilities
21,22,23,24,29
3,570,245.13
1,589,380.36
Total Shareholders' Equity and Liabilities
2,829,047.00
2,058,803.78
The accompanying notes are an integral part of these financial
statements.
F-31
Table of Contents
Hormos Medical Oy
Cash Flow Statements
Year Ended December 31,
2004
€
2003
€
Cash flows from operating activities
Operating loss
(2,539,013.20
)
(7,845,756.65
)
Adjustments to operating loss
238,310.24
4,550,264.78
Change in working capital
32,161.58
(652,753.14
)
Financial expenses
(89,618.81
)
(6,175.82
)
Financial income
15,903.46
24,359.79
Net cash flow from operating activities
(2,342,256.73
)
(3,930,061.04
)
Cash flows from investing activities
Purchases of tangible and intangible assets
(163,519.19
)
(166,475.08
)
Net cash flow from investing activities
(163,519.19
)
(166,475.08
)
Cash flows from financing activities
Change in loan advances
—
476,868.00
Change in capital loan advances
837,190.00
717,142.00
Proceeds from long-term liabilities (R&D loans)
220,146.00
346,110.00
Proceeds from long-term liabilities (capital loans)
1,181,961.00
1,543,098.43
Proceeds from issuance of convertible bond
1,000,000.00
—
Net cash flow from financing activities
3,239,297.00
3,083,218.43
Net change in cash and cash equivalents
733,521.08
(1,013,317.69
)
Cash and cash equivalents in the beginning of the year
630,327.62
1,643,645.31
Cash and cash equivalents at the end of the financial year
1,363,848.70
630,327.62
Change in working capital:
Increase in current receivables
(111,513.19
)
190,679.83
Increase in current liabilities
143,674.77
(843,432.97
)
Net change in working capital
32,161.58
(652,753.14
)
The accompanying notes are an integral part of these financial
statements.
F-32
Table of Contents
Hormos Medical Oy
Accounting Policies and Notes to Financial Statements
1.
Background and Description of Business
Hormos Medical Oy is a pharmaceutical discovery and development
company established in 1997 in Turku, Finland. Its core
competence involves research in tissue-specific regulation
mechanisms of hormones and development of patented
pharmaceuticals, based on the core competence, for the
international market.
The Company has a license and research collaboration agreement
with the Belgian Solvay Pharmaceuticals. The agreement will
exploit Hormos Medical's core competence in development of
a new medicine for the treatment of endometriosis. Net sales for
the financial year amounted to 2.03 million euros of which
1.94 million euros consist of research services delivered
to Solvay Pharmaceuticals.
During the reporting period the Company has continued its
development projects that all are involved in hormone dependent
treatment of diseases of the elderly. The company has research
and development activities in Turku and Oulu. In the end of the
financial period the number of personnel was 38, of whom in
Turku 30 employees and in Oulu 8 employees.
At the Annual General Meeting on March 15, 2004 it was
noted that the equity was less than half of the share capital.
The meeting decided to increase the share capital with not more
than 130.719 shares by issuing a convertible bond of
1 million euros. The loan was subscribed as a whole during
the financial year.
Prior to 2003, the Hormos Medical
"Group"
consisted of a parent company, Hormos Medical Oyj, and its
wholly owned subsidiary, Hormos Nutraceutical Oy. During
December 2003, Hormos Nutraceutical Oy was dissolved and merged
into Hormos Medical Oyj. As a result, the Company charged a
merger loss in 2003 to research and development expenses in the
amount of
€
3,528,747,
relating to the accumulated losses of Hormos Nutraceutical Oy.
Hormos Medical Oyj changed its name to Hormos Medical Oy in 2005.
2.
Preparation of the Financial Statements
The Company's financial statements have been prepared in
accordance with Finnish generally accepted accounting principles
("Finnish GAAP"). The accounting methods have not
changed from previous year and thus the financial statements are
comparable. The Company's financial statements are stated
in Euros
("
€
").
3.
Fixed Assets
Assets are recorded at historical cost less accumulated
depreciation. Grants received are recorded against the
acquisition cost of the related acquired assets.
Depreciation is calculated as follows:
•
Intangible assets (patents and in-licensing agreements) are
    amortized on a straight-line method over 10 years.
•
Office equipment and furniture are depreciated using the 25%
    residue value method.
•
The acquisition cost of machinery and equipment acquired for
    research and development purposes is expensed as incurred.
•
Computer software is depreciated on a straight-line method over
    4 years.
If the useful life for an asset is shorter than three years, the
acquisition costs are expensed as incurred.
4.
Foreign Currency Translation
Foreign currency denominated items are included only in trade
payables and all such foreign currency denominated payables have
been settled prior to the date of the signing of the financial
statements. As a result, all foreign currency denominated items
are valued by using the payment date rate.
F-33
Table of Contents
Hormos Medical Oy
5.
Net Sales
Year Ended December 31,
2004
€
2003
€
Domestic research services
93,655.00
53,000.00
Exported research services
1,939,747.80
1,709,159.00
Total
2,033,402.80
1,762,159.00
6.
Other Operating Income
Year Ended
December 31,
2004
€
2003
€
Tekes grants for R&D projects
291,979.62
621,752.84
Other operating income
68,663.94
55,342.35
Total
360,643.56
677,095.19
7.
Average Number of Personnel
Year Ended
December 31,
2004
2003
Average number of personnel
45
48
Number of personnel at December 31
38
50
in Administration and Business development
9
10
in Research and Development
29
40
8.
Personnel Expenses
Year Ended December 31,
2004
€
2003
€
Salaries and compensations
1,222,268.66
1,673,810.15
Pension expenses
214,389.89
278,018.29
Other indirect personnel expenses
64,379.53
82,952.83
Total
1,501,038.08
2,034,781.27
Taxation value of fringe benefits
52,943.00
56,050.00
Total
1,553,981.08
2,090,831.27
Personnel expenses are included in research and development
expenses, business development expenses and general and
administrative expenses.
9.
Executive Compensation
Year Ended
December 31,
2004
€
2003
€
Salaries and other compensations for the CEO and for the members
    of the Board of Directors
111,942.82
126,869.17
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Hormos Medical Oy
10.
Depreciation and Amortization
Year Ended
December 31,
2004
€
2003
€
Machinery and Equipment
18,844.14
20,439.51
R&D machinery and equipment
31,337.48
53,738.88
Intangible assets
188,128.61
182,709.16
Total
238,310.23
256,887.55
11.
Financial Income and Expenses
Year Ended
December 31,
2004
€
2003
€
Interest income
15,903.46
24,359.79
Interest expenses
(89,618.81
)
(6,175.82
)
Total
(73,715.35
)
(18,183.97
)
12.
Intangible Assets
Intangible
Assets
€
Acquisition cost on January 1, 2004
1,674,565.39
Increases
132,462.85
Grants received
271.14
Acquisition cost on December 31, 2004
1,806,757.10
Accumulated depreciation on January 1, 2004
482,350.38
Depreciation for the period
177,271.03
Accumulated depreciation on December 31, 2004
659,621.41
Book value on December 31, 2004
1,147,135.69
Book value on December 31, 2003
1,192,215.01
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Hormos Medical Oy
13.
Tangible Assets
R&D
Machinery and
Computer
Machinery and
Equipment
€
software
€
Equipment
€
Total
€
Acquisition cost on January 1, 2004
192,891.24
88,926.21
795,253.23
1,077,070.68
Increases
—
2,000.00
31,337.48
33,337.48
Decreases
2,010.00
—
—
2,010.00
Acquisition cost on December 31, 2004
190,881.24
90,926.21
826,590.71
1,108,398.16
Accumulated depreciation on January 1, 2004
115,495.97
78,567.34
795,253.20
989,316.51
Depreciation for the period
18,844.14
10,857.58
31,337.48
61,039.20
Accumulated depreciation on December 31, 2004
134,340.11
89,424.92
826,590.68
1,050,355.71
Book value on December 31, 2004
56,541.16
1,501.29
0.00
58,042.45
Book value on December 31, 2003
77,395.30
10,358.87
0.01
87,754.18
14.
Short-term Receivables — Trade Receivables
Year Ended
December 31,
2004
€
2003
€
Trade receivables
126,945.18
30,599.79
15.
Short-term Receivables — Other Receivables
Year Ended
December 31,
2004
€
2003
€
VAT receivable
60,734.87
34,432.35
16.
Short-term Receivables — Prepaid Expenses and
    Accrued Income
Year Ended
December 31,
2004
€
2003
€
Accrued income
34,919.43
68,105.10
Prepaid expenses
37,420.68
15,369.73
Total
72,340.11
83,474.83
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Hormos Medical Oy
17.
Shareholders' Equity
Year Ended December 31,
2004
€
2003
€
Share capital at the beginning of the financial year
    January 1,
206,031.33
206,031.33
Share capital at the end of the financial year December 31,
206,031.33
206,031.33
Share premium reserve, beginning of the financial year
    January 1,
7,589,243.37
7,589,243.37
Share premium reserve, end of the financial year
    December 31,
7,589,243.37
7,589,243.37
Retained deficit
(16,952,267.11
)
(9,124,694.43
)
Loss for the financial year
(2,612,728.55
)
(7,827,572.68
)
Shareholders' equity before capital loans
(11,769,720.96
)
(9,156,992.41
)
Capital loans
Sitra 1391
67,275.17
67,275.17
Tekes 729/97
287,584.54
287,584.54
Tekes 557/97
105,748.83
105,748.83
Tekes 129/99
504,563.78
504,563.78
Tekes 312/99
420,469.82
420,469.82
Tekes 313/99
420,469.82
420,469.82
Tekes 670/99
354,564.54
354,564.54
Tekes 677/00
420,469.82
420,469.82
Tekes 719/00
1,345,503.41
1,345,503.41
Tekes 720/00
1,194,134.28
1,194,134.28
Tekes 970/00
840,939.63
840,939.63
Tekes 225/01
1,295,047.03
1,295,047.03
Tekes 379/01
218,644.30
218,644.30
Tekes 539/01
456,382.00
456,382.00
Tekes 701/01
336,375.85
336,375.85
Tekes 291/02
92,382.00
43,798.00
Tekes 457/02
468,000.00
468,000.00
Tekes 835/02
227,010.00
128,747.00
Tekes 359/03
637,879.00
371,588.00
Tekes 439/04
768,823.00
—
Capital loans in total
10,462,266.82
9,280,305.82
Shareholders' equity in total
(1,307,454.14
)
123,313.41
18.
Capital Loans
Booked as
Paid to Hormos
Capital
Lender
Medical
€
Loan
€
Loan Period
Sitra nro 1391
67,275.17
67,275.17
3/24/1997-8/31/2001
— Interest rate of the capital loan is
    12 months' euribor rate + 3%
Tekes, loans with capital loan term
12,016,598.82
10,462,266.82
6-8 years including 3-5  years without paybacks
In addition Tekes, the National Technology Agency has granted to
Hormos Medical capital loans worth 1,993,468.00 euros,
which have not been withdrawn by the Company as at
December 31, 2004.
F-37
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Hormos Medical Oy
The terms for the Tekes loans
•
The interest rate is one percent below the Bank of
    Finland's reference interest rate, however the minimum is
    three percent.
•
The interest has been accounted in total as interest of a
    subordinated capital loan and it has not been booked as
    financial expense.
•
Tekes loans are not convertible into the company's shares.
•
The terms of the subordinated capital loans are recognized
    according to the chapter 5 in the Finnish Companies Act.
•
In addition the rules of Tekes are applied.
The capital loans can be repaid to the lenders only if the terms
in the Finnish Companies Act chapter 5 are fulfilled,
i.e. if the company has adequate equity capital after the
repayment of the loan.
19.
Accrued Interest for Capital Loans
Year Ended
December 31,
2004
€
2003
€
Tekes
1,062,055.38
734,349.22
Sitra
33,818.21
30,245.23
Total
1,095,873.59
764,594.45
20.
Long-term Liabilities
Year Ended December 31,
2004
€
2003
€
Tekes loans
566,256.00
346,110.00
Total
566,256.00
346,110.00
Long-term liabilities consist of loans granted by Tekes, the
National Technology Agency. In addition, Tekes has granted to
Hormos Medical R&D loans amounting to 546,436.00 euros,
which had not been withdrawn by the Company as at
December 31, 2004.
21.
Short-term Liabilities — Advances Received
Year Ended December 31,
2004
€
2003
€
Advances Received from Tekes (Capital loans and R&D loan)
2,031,200.00
1,194,010.00
22.
Short-term Liabilities — Trade Payables
Year Ended December 31,
2004
€
2003
€
Trade payables
243,710.71
129,101.15
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Hormos Medical Oy
23.
Short-term Liabilities — Accrued Expenses
Year Ended December 31,
2004
€
2003
€
Salaries & wages
1,581.54
—
Accrued holiday pay
170,028.85
259,223.42
Other
87,265.52
6,272.25
Total
258,875.91
265,495.67
24.
Other Short-term Liabilities
Year Ended
December 31,
2004
€
2003
€
Payroll tax
33,038.06
265.93
Social security
3,420.45
176.75
Other short-term liabilities
—
330.86
Total
36,458.51
773.54
25.
Leases
Year Ended
December 31,
2004
€
2003
€
Liabilities from lease agreements
162,691.21
354,216.96
Of which due in following year
108,725.86
242,165.67
The Company has rented from PharmaCity's building a total
of
2,966 m
2
office and laboratory facilities under a
10-year
lease, which
ends in 2011. There is seven years left of the agreement. Of
these office and laboratory facilities, the Company has sublet
1,137 m
2
.
The rents due for the financial year 2005 of the
1,829 m
2
are approximately
€
390,000.
26.
Other Liabilities
The company has not booked the social security liability arising
from its share option plan.
27.
Income Taxes
Deferred tax assets from tax loss carry forwards as at
December 31, 2004 amounted to
€
10,352,893.30.
The company has not recorded the deferred tax asset in its
financial statements.
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Hormos Medical Oy
28.
Option Rights
Decision of
the
Decision of the
Number of
General
Total Face
Subscription
Subscription
Board of
Number of
Annulled
Meeting
Value
€
of the Share
Price
€
Directors
Issues
Options
2/16/1999
1,700.00
1/1/2002-
0.9082
10,000
6/30/2005
2/16/1999
5,100.00
1/1/2002-
0.9082
11/19/1999
20,000
10,000
6/30/2005
1/20/2000
10,000
4/15/1999
4,836.00
1/1/2000-
38.3468
5/31/1999
28,446
6/30/2005
3/28/2000
1,190.00
1/1/2002-
27.7006
9/12/2000
7,000
6/30/2005
3/28/2000
3,060.00
1/1/2004-
27.7006
9/12/2000
14,200
2,700
6/30/2005
10/25/2000
2,800
6/27/2001
425.00
1/1/2004-
58.00
9/5/2001
2,500
6/30/2007
6/27/2001
2,125.00
1/1/2005-
58.00
9/5/2001
12,500
4,500
6/30/2007
6/27/2001
1,700.00
1/1/2006-
58.00
9/5/2001
10,000
4,500
6/30/2007
Total
20,136.00
117,446
21,700
The rights to 21,700 options have been returned to the
Company and expired due to the fact that the option right
holders have left the company before the subscription period has
started.
The Company has deviated from the subscription right because the
options have been directed to the personnel. The option rights
accepted in the General Meeting on April 15, 1999 have been
given to the Company's advisers in year 1999 as
incentives for the execution of the round. These options expire
on June 30, 2005.
The subscription prices have been defined on basis of the
previous share issue's share price.
Other conditions attached to the subscription right: the company
has to be listed or all shareholders have been offered otherwise
a chance to discharge of 50 percent of the shares owned by
them, the employee has to be employed by the company
continuously until the beginning of the subscription period.
The terms and conditions for subscribing shares based on the
employee stock option plans did not fulfill and new shares
cannot be subscribed based on any of Hormos Medical's
employee stock option plans.
29.
Convertible Bond
Total
Decision of the
Face
Subscription
Subscription
Number
General Meeting
Value
€
of the Share
Price
€
of Shares
3/15/2004
22,222.23
10/15/2004- 3/15/2005
7.65
130,719.00
The nominal value for the convertible debt of
€
1,000,000
is included in short-term liabilities.
F-40
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Hormos Medical Oy
30.
Subsequent Events
Loss for the financial year and adequacy of
shareholders' equity
The Board proposes that the loss for the financial period
amounting to 2,612,728.55 euros shall be transferred to the
retained deficit account. There will be no dividends distributed.
The Extraordinary General Meeting approved the balance sheet
prepared under the Finnish Companies Act, which requires the
Board of Directors to follow shareholders' equity
continuously. According to Chapter 13 of the Companies Act,
if the Board of Directors, when preparing the annual accounts
notices or if it otherwise has a reason to assume that the
shareholders' equity of the Company is less than half of
its share capital, the Board of Directors must, as soon as
possible, prepare a balance sheet to ascertain the financial
situation of the company. If the shareholders' equity of
the company, according to the balance sheet, is less than half
of the share capital, the Board of Directors must, without a
delay, submit the balance sheet to be audited by the auditors
and to convene the General Meeting of the Shareholders to decide
on actions required by the ratio of shareholders' equity
and share capital.
In the Ordinary Shareholders' Meeting held on
March 15, 2004, the balance sheet indicated that the level
of shareholder's equity was less than half of the share
capital and, thus, the Board of Directors were given
12 months period to fix the ratio. Consequently, the Board
of Directors convened an Extraordinary Shareholders Meeting in
January 7, 2005 and presented an audited control balance
sheet demonstrating that on November 30, 2004 the
shareholders' equity was more than half of the share
capital.
Hormos Medical merger with QuatRx Pharmaceuticals in May
2005
Hormos Medical announced the merger with QuatRx Pharmaceuticals,
a biopharmaceutical company based in Ann Arbor, Michigan, USA on
May 16, 2005.
In late 2004 Hormos Medical initiated negotiations on project
out-licensing with QuatRx Pharmaceuticals. The negotiations lead
to QuatRx's offer to acquire all of Hormos Medical
Oy's capital stock in the spring 2005. All shareholders of
Hormos Medical accepted the offer and the transaction was closed
on May 25, 2005.
The transaction had a positive effect on Hormos Medical as it
created access to the US capital markets and improved
business development and commercialization capabilities in the
US market. Supported by QuatRx Pharmaceuticals' strong
financial standing the company has a possibility to advance the
expensive clinical development projects, ospemifene and
fispemifene in particular. Development of the earlier stage
discovery projects was also made possible through the secured
financing position.
31.
Summary of Significant Differences Between Generally Accepted
    Accounting Principles in Finland and Generally Accepted
    Accounting Principles in the United States
The Company is in the development stage. The Company's
financial statements have been prepared in accordance with
Finnish GAAP. The tables that follow are a reconciliation of the
significant differences relating to the profit and loss
statement and total shareholders' equity for the last two
years as permitted by
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Table of Contents
Hormos Medical Oy
the U.S. Securities and Exchange Commission. Cash flow
statements according to U.S. GAAP are included for the
years ended December 31, 2004 and 2003.
Year Ended
December 31,
Reconciliation of net loss
Notes
2004
€
2003
€
Net loss in accordance with Finnish GAAP
(2,612,729
)
(7,827,573
)
U.S. GAAP Adjustments:
Intangibles
(A
)
45,079
85,129
Depreciation expense
(B
)
(57,132
)
(185,621
)
Capital leases
(C
)
(8,115
)
129,782
Ospemifene milestone payment
(D
)
(200,000
)
—
Interest expense
(F
)
(331,279
)
(285,162
)
Grant income
(G
)
33,186
104,724
Hormos Nutraceutical
(H
)
—
3,528,747
Net loss in accordance with U.S. GAAP
(3,130,990
)
(4,449,974
)
Reconciliation of total shareholders' equity
Notes
2004
€
2003
€
Finnish GAAP — Shareholders' equity
(1,307,454
)
123,313
U.S. GAAP Adjustments:
Intangibles
(A
)
(1,147,136
)
(1,192,215
)
Depreciation expense
(B
)
24,806
81,938
Capital leases
(C
)
212,547
220,663
Ospemifene milestone payment
(D
)
(200,000
)
—
Long-term debt
(E
)
(10,462,267
)
(9,280,306
)
Interest expense
(F
)
(1,095,873
)
(764,594
)
Grant income
(G
)
(34,919
)
(68,105
)
U.S. GAAP — Shareholders' equity
(14,010,296
)
(10,879,306
)
Share Capital
Deficit
Accumulated
Series A
Series B
During
Total
Statements of Shareholders' Equity (Deficit)
Share
Development
Shareholders'
According to U.S. GAAP
Shares
Amount
€
Shares
Amount
€
Premium
€
Stage
€
Deficit
€
Balance at January 1, 2003
892,464
151,719
319,485
54,312
6,437,830
(13,073,193
)
(6,429,332
)
Net loss
—
—
—
—
—
(4,449,974
)
(4,449,974
)
Balance at December 31, 2003
892,464
151,719
319,485
54,312
6,437,830
(17,523,167
)
(10,879,306
)
Net loss
—
—
—
—
—
(3,130,990
)
(3,130,990
)
Balance at December 31, 2004
892,464
151,719
319,485
54,312
6,437,830
(20,654,157
)
(14,010,296
)
F-42
Table of Contents
Hormos Medical Oy
Cash Flow Statements According to U.S. GAAP
Year Ended
December 31,
2004
€
2003
€
Cash Flows from Operating Activities:
Net loss
(3,130,990
)
(4,449,974
)
Adjustment to reconcile net loss to net cash used in operating
    activities:
Depreciation and amortization
298,867
445,327
Write-off of in-process R&D
—
617,658
Loss on disposal of assets
—
9,503
Accrued interest expense on long-term debt
331,279
285,162
Increase (decrease) in cash resulting from changes in assets and
    liabilities, net of acquisitions —
Accounts receivable
(89,595
)
12,770
Prepaid expenses and other
(55,104
)
80,618
Accounts payable
114,610
(737,524
)
Accrued payroll & benefits
(52,095
)
(115,003
)
Accrued liabilities
281,159
(6,418
)
Net cash used in operating activities
(2,301,869
)
(3,857,881
)
Cash Flows from Investing Activities:
Purchase of property and equipment
(31,327
)
(18,226
)
Acquisition of Tess-Finland
—
(36,492
)
Cash acquired in Tess-Finland transaction
—
48,310
Net cash used in investing activities
(31,327
)
(6,408
)
Cash Flows from Financing Activities:
Proceeds from capital loans
1,181,961
1,543,098
Proceeds from convertible debt
1,000,000
—
Proceeds from loan advances
837,190
1,194,010
Proceeds from industrial loans
220,146
275,300
Principle payments on capital leases
(172,580
)
(297,897
)
Net cash provided by financing activities
3,066,717
2,714,511
Net Increase (Decrease) in cash and Cash Equivalents
733,521
(1,149,778
)
Cash — Beginning of Period
630,328
1,780,106
Cash — End of Period
1,363,849
630,328
Supplemental Disclosure of Cash Flow Activity:
Cash paid for interest
22,299
25,816
Supplemental Disclosure of Non-Cash Flow Activity:
Equipment purchased under capital lease obligations
—
251,600
Debt assumed in connection with acquisition of Tess-Finland
€
714,799
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Hormos Medical Oy
Notes to U.S. GAAP Adjustments
(A)
Intangible Assets
Under Finnish GAAP, patent costs have been capitalized as a
long-term asset and amortized. Under U.S. GAAP, patent
costs have been expensed in the period they were incurred.
(B)
Depreciation Expense
Under Finnish GAAP, research equipment has been fully
depreciated in the year of acquisition and other furniture and
office equipment has been depreciated using methods other than
straight-line. Under U.S. GAAP, depreciation expense has
been adjusted and recognized on the straight-line basis over the
underlying asset's depreciable lives consistent with QuatRx.
(C)
Capital Leases
Under Finnish GAAP, classification of leases into finance or
operating leases is optional. The Company has treated all leases
as operating leases. Under U.S. GAAP, Statement of
Financial Accounting Standards No. 13,
Accounting for
Leases
, leases are classified as either operating or capital
leases. A lease meeting certain criteria must be treated as a
capital lease under U.S. GAAP. The lessee records a capital
lease as an asset and an obligation at an amount equal to the
lesser of the present value of the minimum lease payments at the
beginning of the lease term or the fair value of the leased
property. Under U.S. GAAP those leasing agreements which
qualify as capital leases have been adjusted in the
U.S. GAAP reconciliation.
(D)
Ospemifene Milestone Payment
Under Finnish GAAP a 200,000 Euro milestone payment due in
December 2004 was expensed in March 2005, when it was
invoiced to Hormos and payment was made. Under U.S. GAAP,
the milestone payment has been accrued as of December 31,
2004.
(E)
Long-Term Debt
Under Finnish GAAP, subordinated loans with Tekes and Sitra have
been classified as equity. Under U.S. GAAP, the loans have
been reclassified as long-term debt.
(F)
Interest Expense
Under Finnish GAAP, interest expense on subordinated loans is
not recorded until the Company has distributable retained
profits and has paid the interest. To date, no interest expense
has been recognized or paid on these subordinated loans. Under
U.S. GAAP, interest expense on the subordinated loans has
been accrued at each balance sheet date.
(G)
Grant Income
Under Finnish GAAP, grant income has been recognized and a grant
receivable recorded at the balance sheet date when a grant
application is expected to be filed shortly thereafter. Under
U.S. GAAP, grant income has been adjusted to recognize
grant income at the time grant proceeds were received.
(H)
Hormos Nutraceutical
Under Finnish GAAP, with the merger of Hormos Nutraceutical and
Hormos Medical in 2003, a cumulative
loss-to
-date for Hormos
Nutraceutical as of December 2002 was recorded by Hormos
Medical as a current period research and development expense in
2003. Under U.S. GAAP, the December 2002 cumulative
loss-to
-date for Hormos
Nutraceutical has been reflected as a prior period adjustment in
Hormos Medical Oy's 2003 financial statements.
F-44
Table of Contents
Hormos Medical Oy
(I)
Net Sales
Under U.S. GAAP, the amounts recorded as Net Sales by
Hormos, have been classified as Other Income by QuatRx. The
amounts represent contract research income.
(J)
Accounts Payable
Under Finnish GAAP, accounts payable denominated in foreign
currencies are valued at the exchange rate in effect at the time
of payment. Under U.S. GAAP, foreign currency denominated
payables are valued at the exchange rate in effect as of each
balance sheet date. As the differences were determined to be
insignificant, no adjustment was recorded.
Additional Disclosures under U.S. GAAP:
Comprehensive income
Under U.S. GAAP, comprehensive income includes net income
and "other" comprehensive income. "Other"
comprehensive income (OCI) includes charges or credits to equity
that are not the result of transactions with owners, including
examples such as adjustments to minimum pension liabilities,
unrealized gains and losses on available-for-sale debt or equity
securities, and gains or losses on certain derivative
instruments qualifying for hedge accounting. During the periods
presented, the Company has not had any transactions that have
resulted in OCI, and accordingly, net income of the Company
represents total comprehensive income of the Company.
F-45
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On May 25, 2005, the QuatRx Pharmaceuticals Company
("QuatRx" or the "Company") completed the
acquisition of Hormos Medical Oy ("Hormos"), a Finnish
development-stage pharmaceuticals company. Hormos is in the
development stage and is presumed not to be a business according
to the Emerging Issues Task Force ("EITF") 98-3,
Determining Whether a Nonmonetary Transaction Involves
Receipt of Productive Assets or of a Business.
The
transaction was therefore accounted for as a purchase of assets
and assumption of liabilities. In connection with the
acquisition, the Company acquired all of the outstanding capital
stock of Hormos in exchange for 857,145 shares of
Series D and 3,408,025 shares of Series D-1
Preferred Stock and 9,520,154 shares of common stock and
assumed current liabilities and notes payable totaling
$20,289,423. The Company also incurred $1,000,000 in
acquisition-related costs.
Adjustments were made to record the acquired net assets of
Hormos at fair value, including allocating a portion of the
total purchase price to in-process research and development.
Based on management's review of the analysis of the
tangible and intangible assets and liabilities of Hormos, the
purchase price has been allocated as follows:
Total acquisition costs:
Issuance of Series D Preferred Stock
$
1,200,003
Issuance of Series D-1 Preferred Stock
4,771,235
Issuance of common stock
2,856,047
Acquisition-related costs
1,000,000
Assumed liabilities and notes payable
20,289,423
$
30,116,708
Allocated to assets and liabilities as follows:
Current assets
$
1,170,596
Property and equipment acquired
776,995
In-process research and development, expensed
25,800,000
Work force
480,000
Favorable loans
2,101,923
Note receivable
1,380,219
Accrued contingent consideration
(1,593,025
)
$
30,116,708
Contingent consideration associated with the acquisition
includes an additional 321,415 shares and
1,277,995 shares of Series D and Series D-1
Preferred Stock, respectively, and 3,570,046 shares of
common stock with an aggregate value of $3,310,188, held in
escrow and payable upon the occurrence of certain future events.
One-third of the contingent shares secure indemnification
obligations of the Hormos selling shareholders and will be
released to the Company in satisfaction of an indemnification
claim or to the Hormos shareholders one year after the closing
date of the acquisition. The remaining contingent shares will
generally be released to Hormos selling shareholders upon the
first to occur of: the closing of a qualified public offering of
QuatRx's common stock or the dosing of the first patient in
a second phase III clinical trial of ospemifene. Additional
purchase consideration will be recorded as the contingent
consideration is released. The additional purchase consideration
will be allocated to the assets acquired based upon their
relative fair value and will result in additional expense for
in-process research and development of $585,000, and accrued
contingent consideration totaling $1,593,025 will be
reclassified to equity.
The following sets forth pro forma condensed combined financial
statements (i) derived from the audited financial
statements of QuatRx for the year ended December 31, 2004
and the unaudited condensed financial statements of QuatRx for
the nine month period ended September 30, 2005 and
(ii) derived from the audited
F-46
Table of Contents
financial statements of Hormos for the fiscal year ended
December 31, 2004 and the unaudited financial statements of
Hormos for the period from January 1, 2005 to May 25,
2005.
The unaudited pro forma condensed combined financial statements
and notes are presented to give effect to the acquisition of
Hormos by QuatRx and represent the combined company's
unaudited pro forma statements of operations for the year ended
December 31, 2004 and the nine months ended
September 30, 2005. The statement of operations for the
year ended December 31, 2004 was derived by combining the
results for the year ended December 31, 2004 of QuatRx with
the results for the year ended December 31, 2004 of Hormos
and the statement of operations for the nine months ended
September 30, 2005 was derived by combining the results for
the nine months ended September 30, 2005 of QuatRx with the
results for the period from January 1, 2005 to May 25,
2005 of Hormos.
The following unaudited pro forma condensed combined statements
of operations give effect to the acquisition transaction between
QuatRx and Hormos as if it occurred on January 1, 2004, the
first day of QuatRx's fiscal year ended December 31,
2004. The unaudited pro forma condensed combined financial
statements include adjustments directly attributable to the
acquisition transaction. The pro forma adjustments are described
in the accompanying notes. The pro forma adjustments are based
upon available information and assumptions that are factually
supportable including the completion of the acquisition
transaction. These unaudited pro forma condensed combined
financial statements are not necessarily indicative of the
results of operations that would have been achieved had the
transaction actually taken place at the date indicated and do
not purport to be indicative of future operating results.
Hormos's historical condensed financial statements are
presented in Euros and were prepared in accordance with Finnish
GAAP, which differs in certain respects from U.S. GAAP.
QuatRx's condensed financial statements were prepared in
accordance with U.S. GAAP and are presented in
U.S. dollars. As described in Note 1 to these
unaudited pro forma condensed combined financial statements,
Hormos's historical condensed financial statements were
reconciled to U.S. GAAP and were translated from Euros to
U.S. dollars. As presented in Note 1, pro forma
adjustments have been made to the financial statements of Hormos
to conform to QuatRx's presentation under U.S. GAAP.
The unaudited pro forma condensed combined financial statements
and related notes should be read in conjunction with the
historical consolidated financial statements and related notes
and other financial information pertaining to QuatRx and Hormos,
including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and
"Risk Factors" which appear elsewhere in this
prospectus.
F-47
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
For the Nine Months Ended September 30, 2005
Pro Forma
Pro Forma
QuatRx
Hormos
Adjustments
Combined
(See Note 2)
Operating expenses:
Research and development
$
9,156,597
$
1,591,707
$
42,686
(A)
$
10,790,990
General and administrative
2,199,592
717,413
6,783
(B)
2,923,788
Total operating expenses
11,356,189
2,309,120
49,469
13,714,778
Loss from operations
(11,356,189
)
(2,309,120
)
(49,469
)
(13,714,778
)
Other income (expense):
Contract research income
826,303
996,151
—
1,822,454
Other income (expense), net
93,299
(285,678
)
(160,324
)(C)
(352,703
)
Total other income
919,602
710,473
(160,324
)
1,469,751
Net loss
(10,436,587
)
(1,598,647
)
(209,793
)
(12,245,027
)
Accretion of redeemable preferred stock
(3,457,130
)
—
—
(3,457,130
)
Net loss available to common stockholders
$
(13,893,717
)
$
(1,598,647
)
$
(209,793
)
$
(15,702,157
)
Net Loss Per Share, Basic and Diluted:
Loss per share available to common stockholders
$
(1.81
)
$
(1.24
)
Weighted average common shares
7,680,211
5,021,619
(D)
12,701,830
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F-48
Table of Contents
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
For the Year Ended December 31, 2004
Pro Forma
Pro Forma
QuatRx
Hormos
Adjustments
Combined
(See Note 2)
Operating expenses:
Research and development
$
7,724,562
$
4,283,347
$
293,585
(A)
$
12,301,494
General and administrative
1,723,505
1,619,954
97,603
(B)
3,441,062
Total operating expenses
9,448,067
5,903,301
391,188
15,742,556
Loss from operations
(9,448,067
)
(5,903,301
)
(391,188
)
(15,742,556
)
Other income (expense):
Contract research income
—
2,529,147
—
2,529,147
Other income (expense), net
143,991
(520,171
)
(402,384
)(C)
(778,564
)
Total other income
143,991
2,008,976
(402,384
)
1,750,583
Net loss
(9,304,076
)
(3,894,325
)
(793,572
)
(13,991,973
)
Accretion of redeemable preferred stock
(2,319,484
)
—
—
(2,319,484
)
Net loss available to common stockholders
$
(11,623,560
)
$
(3,894,325
)
$
(793,572
)
$
(16,311,457
)
Net Loss Per Share, Basic and Diluted:
Loss per share available to common stockholders
$
(4.79
)
$
(1.37
)
Weighted average common shares
2,425,592
9,520,154
(D)
11,945,746
See accompanying notes to unaudited pro forma condensed combined
financial statements.
F-49
Table of Contents
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
1.
U.S. GAAP and Reclassification Adjustments
Reconciliation for Nine Months Ended September 30,
2005
Hormos's financial statements were prepared in accordance
with Finnish GAAP, which differs in certain material respects
from U.S. GAAP. Hormos also classified certain costs
differently than QuatRx in their statement of operations. The
following schedule summarizes the necessary material adjustments
to conform the Hormos statement of operations for the period
from January 1, 2005 to May 25, 2005 to U.S. GAAP
and to reclassify certain amounts to QuatRx's basis of
presentation.
Hormos
Hormos
Finnish
U.S. GAAP
Hormos
Hormos
GAAP
Adjustments
Notes
Adjusted
Adjusted
(Euro)
(Euro)
(Euro)
(U.S. $)
(a)
Revenue
€
1,279,699
€
(1,279,699
)
(b
)
€
—
$
—
Cost of revenue
—
—
—
—
Gross profit
1,279,699
(1,279,699
)
—
—
Operating expenses:
Research and development
1,236,830
(11,875
)
(c
)
1,224,955
1,591,707
General and administrative
553,171
(1,060
)
(d
)
552,111
717,413
Other operating income
(33,950
)
33,950
(e
)
—
—
Total operating expenses
1,756,051
21,015
1,777,066
2,309,120
Loss from operations
(476,352
)
(1,300,714
)
(1,777,066
)
(2,309,120
)
Other income (expense):
Contract research income
—
766,624
(f
)
766,624
996,151
Other expense, net
(36,131
)
(183,723
)
(g
)
(219,854
)
(285,678
)
Total other income (expense)
(36,131
)
582,901
546,770
710,473
Net loss available to common stockholders
€
(512,483
)
€
(717,813
)
€
(1,230,296
)
$
(1,598,647
)
(a)
U.S. Dollar Exchange Rate
Hormos amounts have been translated into U.S. dollars at a
    rate of
€
1.00 =
    US$1.2994, the average daily exchange rate for the period from
    January 1, 2005 to May 25, 2005.
(b)
Revenue
Reclassification of Hormos contract research income to other
    income (expense) to conform to QuatRx's statement of
    operations classification
€
(1,279,699
)
(c)
Research and Development
To expense patent costs as incurred to conform to QuatRx's
    statement of operations presentation
€
162,510
U.S. GAAP adjustment for depreciation expense
20,169
U.S. GAAP adjustment for capital leases
5,440
U.S. GAAP adjustment to recognize license fee expense in
    period incurred rather than in the period the license fee was
    paid
(200,000
)
Reclassification of grant income from operations to other income
    (expense) to conform to QuatRx's statement of
    operations classification
(33,068
)
U.S. GAAP adjustment for grant income
33,074
€
(11,875
)
F-50
Table of Contents
(d)
General and administrative
U.S. GAAP adjustment for depreciation expense
€
510
U.S. GAAP adjustment for capital leases
(1,570
)
€
(1,060
)
(e)
Other operating income
Reclassification of grant income from operations to other income
    (expense) to conform to QuatRx's statement of
    operations classification
€
33,950
(f)
Contract research income
Reclassification of Hormos contract research income to other
    income (expense) to conform to QuatRx's statement of
    operations classification
€
1,279,699
U.S. GAAP adjustment for deferred revenue
(513,075
)
€
766,624
(g)
Other expense
U.S. GAAP adjustment for capital leases
€
(2,517
)
U.S. GAAP adjustment for interest expense on long-term debt
(182,088
)
Reclassification of other income from operations to other income
    (expense) to conform to QuatRx's statement of
    operations classification
882
€
(183,723
)
F-51
Table of Contents
Reconciliation for Year Ended December 31,
2004
The following schedule summarizes the necessary material
adjustments to conform the Hormos statement of operations for
the year ended December 31, 2004 to U.S. GAAP and to
reclassify certain amounts to QuatRx's basis of
presentation.
Hormos
Hormos
Finnish
U.S. GAAP
Hormos
Hormos
GAAP
Adjustments
Notes
Adjusted
Adjusted
(Euro)
(Euro)
(Euro)
(U.S. $)
(a)
Revenue
€
2,033,403
€
(2,033,403
)
(b
)
€
—
$
—
Cost of revenue
—
—
—
—
Gross profit
2,033,403
(2,033,403
)
—
—
Operating expenses:
Research and development
3,656,830
(213,071
)
(c
)
3,443,759
4,283,347
General and administrative
1,276,231
26,192
(d
)
1,302,423
1,619,954
Other operating income
(360,644
)
360,644
(e
)
—
—
Total operating expenses
4,572,417
173,765
4,746,182
5,903,301
Loss from operations
(2,539,014
)
(2,207,168
)
(4,746,182
)
(5,903,301
)
Other income (expense):
Contract research income
—
2,033,403
(f
)
2,033,403
2,529,147
Other expense, net
(73,715
)
(344,496
)
(g
)
(418,211
)
(520,171
)
Total other income (expense)
(73,715
)
1,688,907
1,615,192
2,008,976
Net loss available to common stockholders
€
(2,612,729
)
€
(518,261
)
€
(3,130,990
)
$
(3,894,325
)
(a)
U.S. Dollar Exchange Rate
Hormos amounts have been translated into U.S. dollars at a
    rate of
€
1.00 =
    US$1.2438, the average daily exchange rate for the year ended
    December 31, 2004.
(b)
Revenue
Reclassification of Hormos contract research income to other
    income (expense) to conform to QuatRx's statement of
    operations classification
€
(2,033,403
)
(c)
Research and development
To expense patent costs as incurred to conform to QuatRx's
    statement of operations presentation
€
(45,079
)
U.S. GAAP adjustment for depreciation expense
56,692
U.S. GAAP adjustment for capital leases
(31,518
)
U.S. GAAP adjustment to recognize license fee expense in
    period incurred rather than in the period
    the
license fee was paid
200,000
Reclassification of grant income from operations to other income
    (expense) to conform to
    QuatRx's
statement of operations
    classification
(359,980
)
U.S. GAAP adjustment for grant income
(33,186
)
€
(213,071
)
F-52
Table of Contents
(d)
General and administrative
U.S. GAAP adjustment for depreciation expense
€
440
U.S. GAAP adjustment for capital leases
25,752
€
26,192
(e)
Other operating income
Reclassification of grant income from operations to other income
    (expense) to conform to
    QuatRx's
statement of operations
    classification
€
360,644
(f)
Contract research income
Reclassification of Hormos contract research income to other
    income (expense) to conform to QuatRx's statement of
    operations classification
€
2,033,403
(g)
Other expense
U.S. GAAP adjustment for capital leases
€
(13,881
)
U.S. GAAP adjustment for interest expense on long-term debt
(331,279
)
Reclassification of other income from operations to other income
    (expense) to conform to
    QuatRx's
statement of operations
    classification
664
€
(344,496
)
2.
Pro Forma Adjustments
(A)
Reflects an increase in
depreciation and amortization expense from the step-up of
Hormos's tangible and intangible assets to their estimated
fair values as follows:
Nine Months
Ended
Year Ended
September 30, 2005
December 31, 2004
Increase (decrease) in depreciation expense resulting from the
    step-up of Hormos furniture and equipment to their estimated
    fair values
$
6,381
$
206,453
Increase in amortization expense resulting from the intangible
    asset associated with the Hormos work force
36,305
87,132
$
42,686
$
293,585
(B)
Reflects an increase in
depreciation and amortization expense from the
step-up
of
Hormos's tangible and intangible assets to their estimated
fair values as follows:
Nine Months
Ended
Year Ended
September 30, 2005
December 31, 2004
Increase (decrease) in depreciation expense resulting from the
    step-up of Hormos furniture and equipment to their estimated
    fair values
$
(9,087
)
$
59,515
Increase in amortization expense resulting from the intangible
    asset associated with the Hormos work force
15,870
38,088
$
6,783
$
97,603
(C)
Reflects an increase in
interest expense resulting from the amortization of discount
associated with the Hormos favorable loans of $402,384 and
$160,324 for December 31, 2004 and September 30, 2005,
respectively.
F-53
Table of Contents
(D)
The increase in weighted
average common shares outstanding for the basic and diluted
earnings per share calculations reflects the issuance of
9,520,154 shares of QuatRx common stock issued in the
acquisition.
3.
Other Transaction Related Costs
The objective of the unaudited pro forma condensed combined
financial statements and notes provided herein is to provide
information about the continuing impact of the acquisition by
showing how it might have affected historical operating results
if the acquisition had been consummated at the beginning of the
most recent full fiscal year. As such, charges directly
resulting from the transaction are necessarily excluded from the
unaudited pro forma condensed combined statement of operations.
The write off of in-process research and development of
$25,800,000 has been excluded from the above pro forma condensed
combined statements of operations.
F-54
Table of Contents
Shares
Common Stock
Prospectus
,
2006
Banc of America Securities
LLC
SG Cowen &
Co.
Lazard Capital Markets
Pacific Growth Equities,
LLC
Until                     ,
2006, all dealers that buy, sell or trade the common stock may
be required to deliver a prospectus, regardless of whether they
are participating in this offering. This is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth an itemization of the various
costs and expenses, all of which we will pay, in connection with
the issuance and distribution of the securities being
registered. All of the amounts shown are estimated except the
SEC Registration Fee, the Nasdaq National Market Listing Fee and
the NASD Filing Fee.
SEC Registration Fee
$
9,229
Nasdaq National Market Listing Fee
*
NASD Filing Fee
9,125
Printing and Engraving Fees
*
Legal Fees and Expenses
*
Accounting Fees and Expenses
*
NASD Legal Fees and Blue Sky Fees and Expenses
*
Transfer Agent and Registrar Fees
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
Item 14.
Indemnification of Directors and Officers.
Our restated certificate of incorporation and bylaws provide
that each person who was or is made a party or is threatened to
be made a party to or is otherwise involved (including, without
limitation, as a witness) in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director or an
officer of QuatRx or is or was serving at our request as a
director, officer, or trustee of another corporation, or of a
partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan, whether the
basis of such proceeding is alleged action in an official
capacity as a director, officer or trustee or in any other
capacity while serving as a director, officer or trustee, shall
be indemnified and held harmless by us to the fullest extent
authorized by the Delaware General Corporation Law against all
expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such.
Section 145 of the Delaware General Corporation Law permits
a corporation to indemnify any director or officer of the
corporation against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or
was a director or officer of the corporation, if such person
acted in good faith and in a manner that he reasonably believed
to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or
proceeding, if he or she had no reasonable cause to believe his
or her conduct was unlawful. In a derivative action, (i.e., one
brought by or on behalf of the corporation), indemnification may
be provided only for expenses actually and reasonably incurred
by any director or officer in connection with the defense or
settlement of such an action or suit if such person acted in
good faith and in a manner that he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be provided if such person
shall have been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action or
suit was brought shall determine that the defendant is fairly
and reasonably entitled to indemnity for such expenses despite
such adjudication of liability.
II-1
Table of Contents
Pursuant to Section 102(b)(7) of the Delaware General
Corporation Law,
Article           of
our restated certificate of incorporation eliminates the
liability of a director to us or our stockholders for monetary
damages for such a breach of fiduciary duty as a director,
except for liabilities arising:
•
from any breach of the director's duty of loyalty to us or
    our stockholders;
•
from acts or omissions not in good faith or which involve
    intentional misconduct or a knowing violation of law;
•
under Section 174 of the Delaware General Corporation
    Law; and
•
from any transaction from which the director derived an improper
    personal benefit.
We carry insurance policies insuring our directors and officers
against certain liabilities that they may incur in their
capacity as directors and officers. In addition, we expect to
enter into indemnification agreements with each of our directors
and executive officers prior to completion of the offering.
Additionally, reference is made to the Purchase Agreement filed
as Exhibit 1.1 hereto, which provides for indemnification
by the underwriters of QuatRx, our directors and officers who
sign the registration statement and persons who control QuatRx,
under certain circumstances.
Item 15.
Recent Sales of Unregistered Securities.
In the three years preceding the filing of this registration
statement, we have sold the following securities that were not
registered under the Securities Act of 1933. No underwriters
were employed by us in connection with any of these transactions.
Issuances of Capital Stock
The sale and issuance of the securities set forth below were
deemed to be exempt from registration under the Securities Act
by virtue of Section 4(2) of Regulation D and
Regulation S promulgated thereunder.
1.     On March 6, 2003, we issued
    and sold 1,400,000 shares of our Series B Preferred
    Stock at a price per share of $1.50 for an aggregate purchase
    price of $2,100,000.
2.     Between May 20, 2003 and
    October 5, 2004, we issued and sold 25,596,491 shares
    of our Series C Preferred Stock at a purchase price per
    share of $1.14 for an aggregate purchase price of $29,179,999.74.
3.     Between November 22, 2004
    and October 31, 2005, we issued and sold
    24,785,713.43 shares of our Series D Preferred Stock
    at a purchase price per share of $1.40 for an aggregate purchase
    price of $34,699,998.80.
4.     On May 25, 2005, we issued
    1,071,422 shares of our Series D Preferred Stock,
    4,260,022 shares of our Series D-1 Preferred Stock and
    11,900,185 shares of our common stock to the shareholders
    of Hormos Medical Oy in exchange for shares and promissory notes
    of Hormos representing 100% of all the outstanding capital stock
    of Hormos and all securities or other instruments convertible
    into or exercisable for capital stock of Hormos.
Certain Grants and Exercises of Stock Options
The sale and issuance of the securities described below were
deemed to be exempt from registration under the Securities Act
in reliance on Rule 701 promulgated under Section 3(b)
of the Securities Act, as transactions by an issuer not
involving a public offering or transactions pursuant to
compensatory benefit plans and contracts relating to
compensation as provided under Rule 701.
II-2
Table of Contents
Pursuant to our stock plans, we have issued options to purchase
an aggregate of 6,655,990 shares of common stock. Of these
options:
•
options to purchase 85,000 shares of common stock have
    been canceled or lapsed without being exercised;
•
options to purchase 994,319 shares of common stock
    have been exercised; and
•
options to purchase a total of 5,576,671 shares of common
    stock are currently outstanding, at a weighted average exercise
    price of $0.31 per share.
Item 16.
Exhibits and Financial Statement Schedules.
(a)     Exhibits
Exhibit No.
Description
1
.1*
Form of Underwriting Agreement
2
.1
Exchange Agreement, dated May 20, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy and the shareholders
    of Hormos signatories thereto
2
.2
Escrow Agreement, dated May 25, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy, U.S. Bank
    National Association and the shareholders of Hormos signatories
    thereto
3
.1
Eighth Amended and Restated Certificate of Incorporation, as
    currently in effect
3
.2
Certificate of Amendment to Certificate of Incorporation, as
    currently in effect
3
.3
Second Certificate of Amendment of Certificate of Incorporation,
    as currently in effect
3
.4
Bylaws, as currently in effect
3
.5*
Form of Amended Restated Certificate of Incorporation (to be
    filed in connection with the closing of this offering and
    effective upon the closing of this offering)
3
.6*
Form of Amended and Restated Bylaws (to be effective upon the
    closing of this offering)
4
.1
Fourth Amended and Restated Investor Rights Agreement, entered
    into as of November 22, 2004, by and among QuatRx
    Pharmaceuticals Company. and certain investors named therein
4
.2
Amendment to Fourth Amended and Restated Investor Rights
    Agreement, entered into as of May 25, 2005, by and among
    QuatRx Pharmaceuticals Company and certain investors named
    therein
4
.3*
Specimen Common Stock Certificate
4
.4
Warrant to Purchase Shares of the Series D Preferred Stock
    of QuatRx Pharmaceuticals Company, dated as of January 26,
    2006, granted to Hercules Technology Growth Capital, Inc.
5
.1*
Opinion of Heller Ehrman LLP
10
.1**
Amended and Restated 2005 Stock Incentive Plan
10
.2**
Form of Stock Option Agreement for Employee under Amended and
    Restated 2005 Stock Incentive Plan
10
.3**
2000 Equity Incentive Plan
10
.4**
Form of Stock Option Agreement for Employee under 2000 Equity
    Incentive Plan
10
.5
Office Lease between Transwestern Great Lakes, L.P. and QuatRx
    Pharmaceuticals Company, dated November 11, 2004
10
.6
First Amendment to Lease, dated June 30, 2005, by and
    between Transwestern Great Lakes REIT, L.P. and QuatRx
    Pharmaceuticals Company
10
.7
†
Exclusive License Agreement, dated November 7, 2001, by and
    between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company
10
.8
†
Amendment, dated November 8, 2004, to the Exclusive License
    Agreement between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company dated November 7, 2001
II-3
Table of Contents
Exhibit No.
Description
10
.9†
Agreement, dated November 9, 2001, by and between Wisconsin
    Alumni Research Foundation and QuatRx Pharmaceuticals Company
10
.10
†
Exclusive License Agreement dated February 14, 2005, by and
    between EndoChem, Inc. and QuatRx Pharmaceuticals Company
10
.11
†
Letter, dated February 14, 2005, from The Regents of the
    University of California to QuatRx Pharmaceuticals Company
10
.12
†
Exclusive License Agreement, dated May 19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company
10
.13
Amendment No. 1, dated September 30, 2004, to
    Exclusive License Agreement, dated May 19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company
10
.14†
Patent License Agreement, dated March 25, 2004, by and
    between Hormos Medical Oy and Orion Corporation
10
.15†
Patent License Agreement, dated October 10, 2005, by and
    between Hormos Medical Oy and Orion Corporation
10
.16†
Restated Transfer Agreement, dated May 26, 2005, by and
    between Hormos Medical Oy and Tess Diagnostics and
    Pharmaceuticals Inc.
10
.17†
Patent Assignment Agreement, dated June 4, 2004, by and
    between Hormos Medical Oy and the University of Turku
10
.18†
Agreement on Manufacturing, Sales and Distribution License for
    HMRlignan, dated April 8, 2005, by and between Linnea S.A.
    and Hormos Medical Oy
10
.19**
Employment Agreement dated September 29, 2003 between
    QuatRx Pharmaceuticals Company and Gary Onn
10
.20
Loan and Security Agreement, dated January 26, 2006,
    between QuatRx Pharmaceuticals Company and Hercules Technology
    Growth Capital, Inc.
10
.21*
Loan Agreements between Tekes and Hormos Medical Oy
10
.22
Lease Agreement, dated November 29, 2001, between BioTie
    Therapies Oyj and Hormos Medical Oy (unofficial translation)
10
.23
Lease Agreement, dated November 15, 2001, between Turun
    Biolaakso Oy; and Hormos Medical Oy (unofficial translation)
21
.1
List of subsidiaries
23
.1
Consent of PricewaterhouseCoopers LLP
23
.2
Consent of PricewaterhouseCoopers Oy
23
.3*
Consent of Heller Ehrman LLP (included in Exhibit 5.1)
24
.1
Power of Attorney (included on signature page)
*
To be filed by amendment.
**
Indicates a management contract or compensatory plan.
†
Application has been made to the Securities and Exchange
    Commission to seek confidential treatment of certain provisions
    of this exhibit under Rule 406 of the Securities Act of
    1933. Omitted material for which confidential treatment has been
    requested has been filed separately with the Securities and
    Exchange Commission.
(b)     Financial Statement Schedules.
Financial Statement schedules are omitted because the
    information is included in our financial statements or notes to
    those financial statements.
Item 17.
Undertakings.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting
Agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-4
Table of Contents
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event a
claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)     For purposes of determining any
    liability under the Securities Act of 1933, the information
    omitted from the form of prospectus filed as part of this
    registration statement in reliance upon Rule 430A and
    contained in a form of prospectus filed by the registrant
    pursuant to Rule 424(b)(1) or (4) or 497(h) under the
    Securities Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.
(2)     For the purpose of determining
    any liability under the Securities Act of 1933, each
    post-effective amendment that contains a form of prospectus
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.
II-5
Table of Contents
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on
February 3, 2006.
QUATRX PHARMACEUTICALS COMPANY
By:
/s/ Robert Zerbe, M.D.
Robert Zerbe, M.D.
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of QuatRx
Pharmaceuticals Company. (the "Registrant"), hereby
severally constitute and appoint Robert Zerbe, M.D.,
President and Chief Executive Officer, and Gary Onn, Chief
Financial Officer, and each of them individually, with full
powers of substitution and resubstitution, our true and lawful
attorneys, with full powers to them and each of them to sign for
us, in our names and in the capacities indicated below, any and
all amendments (including post-effective amendments) to the
Registration Statement on
Form
S-1
filed
with the Securities and Exchange Commission, and any
registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933 in connection with the registration
under the Securities Act of 1933 of the Registrant's equity
securities, and to file or cause to be filed the same, with all
exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of
them, or their substitute or substitutes, shall do or cause to
be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert Zerbe, M.D.
Robert Zerbe, M.D.
President, Chief Executive Officer and Director (Principal
    Executive Officer)
February 3, 2006
/s/ Gary Onn
Gary Onn
Chief Financial Officer (Principal Financial and Accounting
    Officer)
February 3, 2006
/s/ Caley Castelein, M.D.
Caley Castelein, M.D.
Director
February 3, 2006
/s/ Chris Ehrlich
Chris Ehrlich
Director
February 3, 2006
/s/ Richard P. Fox
Richard P. Fox
Director
February 3, 2006
II-6
Table of Contents
Signature
Title
Date
/s/ William Greene, M.D.
William Greene, M.D.
Director
February 3, 2006
/s/ Patrick Heron
Patrick Heron
Director
February 3, 2006
/s/ Christopher Moller, Ph.D.
Christopher Moller, Ph.D.
Director
February 3, 2006
/s/ Nicholas Simon III
Nicholas Simon III
Director
February 3, 2006
/s/ August Watanabe, M.D.
August Watanabe, M.D.
Director
February 3, 2006
/s/ Anders Wiklund
Anders Wiklund
Director
February 3, 2006
II-7
Table of Contents
Exhibit Index
Exhibit No.
Description
1
.1*
Form of Underwriting Agreement
2
.1
Exchange Agreement, dated May 20, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy and the shareholders
    of Hormos signatories thereto
2
.2
Escrow Agreement, dated May 25, 2005, by and among QuatRx
    Pharmaceuticals Company, Hormos Medical Oy, U.S. Bank
    National Association and the shareholders of Hormos signatories
    thereto
3
.1
Eighth Amended and Restated Certificate of Incorporation, as
    currently in effect
3
.2
Certificate of Amendment to Certificate of Incorporation, as
    currently in effect
3
.3
Second Certificate of Amendment of Certificate of Incorporation,
    as currently in effect
3
.4
Bylaws, as currently in effect
3
.5*
Form of Amended Restated Certificate of Incorporation (to be
    filed in connection with the closing of this offering and
    effective upon the closing of this offering)
3
.6*
Form of Amended and Restated Bylaws (to be effective upon the
    closing of this offering)
4
.1
Fourth Amended and Restated Investor Rights Agreement, entered
    into as of November 22, 2004, by and among QuatRx
    Pharmaceuticals Company. and certain investors named therein
4
.2
Amendment to Fourth Amended and Restated Investor Rights
    Agreement, entered into as of May 25, 2005, by and among
    QuatRx Pharmaceuticals Company and certain investors named
    therein
4
.3*
Specimen Common Stock Certificate
4
.4
Warrant to Purchase Shares of the Series D Preferred Stock
    of QuatRx Pharmaceuticals Company, dated as of January 26,
    2006, granted to Hercules Technology Growth Capital, Inc.
5
.1*
Opinion of Heller Ehrman LLP
10
.1**
Amended and Restated 2005 Stock Incentive Plan
10
.2**
Form of Stock Option Agreement for Employee under Amended and
    Restated 2005 Stock Incentive Plan
10
.3**
2000 Equity Incentive Plan
10
.4**
Form of Stock Option Agreement for Employee under 2000 Equity
    Incentive Plan
10
.5
Office Lease between Transwestern Great Lakes, L.P. and QuatRx
    Pharmaceuticals Company, dated November 11, 2004
10
.6
First Amendment to Lease, dated June 30, 2005, by and
    between Transwestern Great Lakes REIT, L.P. and QuatRx
    Pharmaceuticals Company
10
.7
†
Exclusive License Agreement, dated November 7, 2001, by and
    between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company
10
.8
†
Amendment, dated November 8, 2004, to the Exclusive License
    Agreement between Deltanoid Pharmaceuticals, Inc. and QuatRx
    Pharmaceuticals Company dated November 7, 2001
10
.9†
Agreement, dated November 9, 2001, by and between Wisconsin
    Alumni Research Foundation and QuatRx Pharmaceuticals Company
10
.10
†
Exclusive License Agreement dated February 14, 2005, by and
    between EndoChem, Inc. and QuatRx Pharmaceuticals Company
10
.11
†
Letter, dated February 14, 2005, from The Regents of the
    University of California to QuatRx Pharmaceuticals Company
10
.12
†
Exclusive License Agreement, dated May 19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company
10
.13
Amendment No. 1, dated September 30, 2004, to
    Exclusive License Agreement, dated May 19, 2003, by and
    between ILEX Products, Inc. and QuatRx Pharmaceuticals Company
10
.14†
Patent License Agreement, dated March 25, 2004, by and
    between Hormos Medical Oy and Orion Corporation
10
.15†
Patent License Agreement, dated October 10, 2005, by and
    between Hormos Medical Oy and Orion Corporation
10
.16†
Restated Transfer Agreement, dated May 26, 2005, by and
    between Hormos Medical Oy and Tess Diagnostics and
    Pharmaceuticals Inc.
Table of Contents
Exhibit No.
Description
10
.17†
Patent Assignment Agreement, dated June 4, 2004, by and
    between Hormos Medical Oy and the University of Turku
10
.18†
Agreement on Manufacturing, Sales and Distribution License for
    HMRlignan, dated April 8, 2005, by and between Linnea S.A.
    and Hormos Medical Oy
10
.19**
Employment Agreement dated September 29, 2003 between
    QuatRx Pharmaceuticals Company and Gary Onn
10
.20
Loan and Security Agreement, dated January 26, 2006,
    between QuatRx Pharmaceuticals Company and Hercules Technology
    Growth Capital, Inc.
10
.21*
Loan Agreements between Tekes and Hormos Medical Oy
10
.22
Lease Agreement, dated November 29, 2001, between BioTie
    Therapies Oyj and Hormos Medical Oy (unofficial translation)
10
.23
Lease Agreement, dated November 15, 2001, between Turun
    Biolaakso Oyj and Hormos Medical Oy (unofficial translation)
21
.1
List of subsidiaries
23
.1
Consent of PricewaterhouseCoopers LLP
23
.2
Consent of PricewaterhouseCoopers Oy
23
.3*
Consent of Heller Ehrman LLP (included in Exhibit 5.1)
24
.1
Power of Attorney (included on signature page)
*
To be filed by amendment.
**
Indicates a management contract or compensatory plan.
†
Application has been made to the Securities and Exchange
    Commission to seek confidential treatment of certain provisions
    of this exhibit under Rule 406 of the Securities Act of
    1933. Omitted material for which confidential treatment has been
    requested has been filed separately with the Securities and
    Exchange Commission.