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		Per Share				Total
Public offering price		$	15.00			$	105,000,000
Underwriting discounts and commissions		$	1.05			$	7,350,000
Proceeds, before expenses, to Altus Pharmaceuticals Inc.		$	13.95			$	97,650,000

Merrill Lynch & Co.	Morgan Stanley

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		Page
Prospectus Summary			1
Risk Factors			7
Special Note Regarding Forward-Looking Statements			28
Use of Proceeds			29
Dividend Policy			29
Capitalization			30
Dilution			32
Selected Consolidated Financial Data			34
Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Business			50
Management			82
Related Party Transactions			95
Principal Stockholders			97
Description of Capital Stock			102
Shares Eligible for Future Sale			107
Underwriting			110
Legal Matters			113
Experts			113
Where You Can Find Additional Information			114
Index to Financial Statements			F-1

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	•	the progress and results of our toxicology studies and proposed Phase III clinical trial and long-term safety study for ALTU-135 and any other trials we may initiate based on the results of these trials;
	•	the progress and results of our Phase II clinical trial for ALTU-238 and any other trials we may initiate based on the Phase II results;
	•	the results of our preclinical studies and testing for our earlier stage product candidates, and any decisions to initiate clinical trials if supported by the preclinical results;
	•	the costs, timing and outcome of regulatory review of ALTU-135 and ALTU-238, and any of our preclinical product candidates that progress to clinical trials;
	•	the costs of establishing sales and marketing functions, if any of our product candidates are approved, and of establishing commercial manufacturing arrangements;
	•	the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our issued patents, and defending intellectual property-related claims;
	•	our ability to establish and maintain collaborative arrangements and obtain milestone, royalty and other payments from collaborators; and
	•	the extent to which we acquire or invest in businesses, products or technologies.

	•	terminate or delay preclinical studies, clinical trials or other development activities for one or more of our product candidates; or
	•	delay our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.

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	•	ALTU-135. If approved, ALTU-135, the product candidate we are developing for the treatment of malabsorption due to exocrine pancreatic insufficiency, will compete with currently marketed porcine-derived pancreatic enzyme replacement therapies from companies such as Axcan Pharma, Johnson & Johnson, and Solvay Pharmaceuticals, as well as from generic drug manufacturers such as KV Pharmaceutical and IMPAX Laboratories. In addition, we understand that Biovitrium and Meristem Therapeutics have product candidates in clinical development that could compete with ALTU-135.
	•	ALTU-238. If approved, ALTU-238, the product candidate we are developing as a once-weekly treatment for hGH deficiency and related disorders, will compete with approved hGH therapies from companies such as Genentech, Pfizer, Serono, Novo Nordisk, Teva Pharmaceutical Industries and Eli Lilly. In addition, we understand that ALTU-238 may compete with product candidates in clinical development from some of these companies and others, including LG Life Sciences, which is developing a long-acting hGH therapy based on an encapsulated microparticle technology.

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	•	obtaining supplies of ALTU-135 and ALTU-238 for completion of our clinical trials and toxicology studies on a timely basis;
	•	receiving marketing approvals from the FDA and foreign regulatory authorities;
	•	arranging for commercial-scale supplies of our products with contract manufacturers whose manufacturing facilities are operated in compliance with current good manufacturing practice regulations, or cGMP;
	•	establishing sales, marketing and distribution capabilities on our own or through third parties;
	•	establishing favorable pricing from foreign regulatory authorities; and
	•	obtaining commercial acceptance of ALTU-135 and ALTU-238, if approved, in the medical community and by third-party payors.

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	•	we may be required to conduct additional pre-clinical or clinical trials, make changes in labeling of any such products, reformulate any such products, or implement changes to or obtain new approvals of our or our contractors’ manufacturing facilities;
	•	regulatory authorities may be unwilling to approve our product candidates or may withdraw approval of our products;
	•	we may experience a significant drop in the sales of the affected products;
	•	our reputation in the marketplace may suffer; and
	•	we may become the target of lawsuits, including class action suits.

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	•	conditions imposed on us by the FDA or any foreign regulatory authority regarding the scope or design of our clinical trials;
	•	delays in obtaining, or our inability to obtain or maintain, required approvals from institutional review boards, or IRBs, or other reviewing entities at clinical sites selected for participation in our clinical trials;
	•	insufficient supply or deficient quality of our product candidates or other materials necessary to conduct our clinical trials;
	•	difficulties enrolling subjects in our clinical trials, including finding pediatric subjects with hGH deficiency who have not previously received hGH therapy for our pediatric trials of ALTU-238;
	•	high drop-out rates of subjects in our clinical trials;
	•	negative or inconclusive results from clinical trials, or results that are inconsistent with earlier results, that necessitate additional clinical studies;
	•	serious or unexpected drug-related side effects experienced by subjects in clinical trials; or
	•	failure of our third-party contractors or our investigators to comply with regulatory requirements or otherwise meet their contractual obligations to us in a timely manner.

	•	our failure to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for a particular indication;

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	•	the results of clinical trials may not meet the level of statistical significance required by the FDA or other regulatory authorities for approval;
	•	our inability to demonstrate that a product candidate’s benefits outweigh its risks;
	•	our inability to demonstrate that the product candidate presents an advantage over existing therapies;
	•	the FDA’s or comparable foreign regulatory authorities’ disagreement with the manner in which we interpret the data from preclinical studies or clinical trials;
	•	the FDA’s or comparable foreign regulatory authorities’ failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
	•	a change in the approval policies or regulations of the FDA or comparable foreign regulatory authorities or a change in the laws governing the approval process.

	•	an NDA filing under Section 505(b)(1) of the FDCA utilizing a “right of reference” to the supplier’s safety and efficacy data previously approved by the FDA;
	•	an NDA filing under Section 505(b)(2) relying on published literature and the FDA’s previous findings regarding the safety and efficacy of hGH products; or
	•	an NDA submission under Section 505(b)(1) in which we include our own safety and efficacy data.

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	•	restrictions on the products, manufacturers or manufacturing processes;
	•	warning letters;
	•	civil or criminal penalties;
	•	fines;
	•	injunctions;
	•	product seizures or detentions;
	•	import or export bans or restrictions;
	•	voluntary or mandatory product recalls and related publicity requirements;
	•	suspension or withdrawal of regulatory approvals;
	•	total or partial suspension of production; and
	•	refusal to approve pending applications for marketing approval of new products or supplements to approved applications.

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	•	reliance on the third party for manufacturing process development, regulatory compliance and quality assurance;
	•	limitations on supply availability resulting from capacity and scheduling constraints of the third party;
	•	the possible breach of the manufacturing agreement by the third party because of factors beyond our control; and
	•	the possible termination or non-renewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

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	•	lower demonstrated clinical safety and efficacy compared to other products;
	•	prevalence and severity of adverse side effects;
	•	other potential advantages of alternative treatment methods;
	•	ineffective marketing and distribution support;
	•	lack of availability of reimbursement from managed care plans and other third-party payors;
	•	lack of cost-effectiveness; and
	•	timing of market introduction of competitive products.

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	•	liabilities that substantially exceed our product liability insurance, which we would then be required to pay from other sources, if available;
	•	an increase of our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, or at all;
	•	withdrawal of clinical trial volunteers or patients;
	•	damage to our reputation and the reputation of our products, resulting in lower sales;
	•	regulatory investigations that could require costly recalls or product modifications;
	•	litigation costs; and
	•	the diversion of management’s attention from managing our business.

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	•	results of clinical trials or studies for our product candidates;
	•	our entry into or the loss of a significant collaboration;
	•	results of clinical trials conducted by others on drugs that would compete with our product candidates;
	•	failure or delays in advancing product candidates from our preclinical programs, or other product candidates we may discover or acquire in the future, into clinical trials;
	•	failure or discontinuation of any of our research programs;
	•	delays or other problems with manufacturing our product candidates or approved products;
	•	regulatory developments or enforcement in the United States and foreign countries;
	•	developments or disputes concerning patents or other proprietary rights;
	•	introduction of technological innovations or new commercial products by us or our competitors;
	•	changes in estimates or recommendations by securities analysts, if any, who cover our common stock;
	•	failure to meet estimates or recommendations by securities analysts, if any, who cover our common stock;
	•	public concern over our product candidates or any approved products;
	•	litigation;
	•	future sales or anticipated sales of our common stock by us or our stockholders;
	•	general market conditions;
	•	changes in the structure of health care payment systems;
	•	failure of any of our product candidates, if approved, to achieve commercial success;
	•	economic and other external factors or other disasters or crises; and
	•	period-to-period fluctuations in our financial results.

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	•	delaying, deferring or preventing a change in control;
	•	entrenching our management and the board of directors;
	•	impeding a merger, consolidation, takeover or other business combination involving Altus; or
	•	discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of Altus.

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	•	allow the authorized number of directors to be changed only by resolution of our board of directors;
	•	establish a classified board of directors, such that not all members of the board be elected at one time;
	•	authorize our board of directors to issue without stockholder approval blank check preferred stock that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our board of directors;
	•	require that stockholder actions must be effected at a duly called stockholder meeting and prohibit stockholder action by written consent;
	•	establish advance notice requirements for stockholder nominations to our board of directors or for stockholder proposals that can be acted on at stockholder meetings;
	•	limit who may call stockholder meetings; and
	•	require the approval of the holders of 80% of the outstanding shares of our capital stock entitled to vote in order to amend certain provisions of our restated certificate of incorporation and restated bylaws.

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	•	the expected timing, progress or success of our preclinical research and development and clinical programs;
	•	the potential benefits of our product candidates over other therapies;
	•	the timing, costs and other limitations involved in obtaining regulatory approval for any of our product candidates;
	•	our ability to enter into any collaboration with respect to product candidates;
	•	our ability to market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop in the future;
	•	our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;
	•	our estimates of market sizes and anticipated uses of our product candidates;
	•	our estimates of future performance; and
	•	our estimates regarding anticipated operating losses, future revenue, expenses, capital requirements and our needs for additional financing.

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	•	approximately $37 million to fund a portion of ALTU-135 development activities, including a Phase III clinical trial and long-term safety study for the solid form of ALTU-135, a Phase II clinical trial for the liquid form of ALTU-135, and related toxicology studies and manufacturing and materials costs;
	•	approximately $30 million to fund a portion of ALTU-238 development activities, including a Phase III clinical trial in adults, a Phase II/III clinical trial in children, and related toxicology studies and manufacturing and materials costs; and
	•	the remainder to fund research and development activities for our preclinical product candidates and general corporate purposes, including capital expenditures and working capital.

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	•	on an actual basis;
	•	on a pro forma basis to reflect the conversion of all then outstanding shares of our convertible preferred stock into an aggregate of 10,767,306 shares of common stock, which will occur automatically upon the closing of this offering, and the issuance of 1,391,828 shares of common stock upon the closing of this offering in satisfaction of accumulated dividends on our Series B and C convertible preferred stock; and
	•	on a pro forma as adjusted basis to adjust the pro forma balances to reflect the sale of 7,000,000 shares of common stock by us in this offering at the initial public offering price of $15.00 per share and our receipt of the estimated net proceeds of that sale, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

			As of September 30, 2005
											Pro Forma
			Actual				Pro Forma				As Adjusted
			(in thousands, except share and per share amounts)
Cash and cash equivalents and short-term investments			$	32,009			$	32,009			$	127,309
Long-term debt and capital lease obligations, net of current portion			$	4,210			$	4,210			$	4,210
Redeemable preferred stock:
	Redeemable preferred stock, par value $0.01 per share; 450,000 shares authorized, issued and outstanding actual, pro forma and pro forma as adjusted (liquidation value of $6,000 at September 30, 2005), shown at accreted redemption value			5,779				5,779				5,779
	Series B convertible preferred stock, par value $0.01 per share; 12,928,155 shares authorized actual; 11,773,609 shares issued and outstanding actual (liquidation value of $62,852 at September 30, 2005), shown at accreted redemption value			61,033				—				—
	Series C convertible preferred stock, par value $0.01 per share; 14,420,359 shares authorized actual; 11,819,959 shares issued and outstanding actual (liquidation value of $58,307 at September 30, 2005), shown at accreted redemption value			49,822				—				—
Stockholders’ (deficit) equity(1):
	Series A convertible preferred stock, par value $0.01 per share; 87,500 shares authorized, issued and outstanding actual (liquidation value of $4 at September 30, 2005)			897				—				—
	Common stock, par value $0.01 per share; 47,113,986 shares authorized actual; 100,000,000 shares authorized pro forma and pro forma as adjusted; 1,820,161 shares issued and outstanding actual; 13,979,295 shares issued and outstanding pro forma; and 20,979,295 shares issued and outstanding pro forma as adjusted(2)			18				140				210

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			As of September 30, 2005
											Pro Forma
			Actual				Pro Forma				As Adjusted
			(in thousands, except share and per share amounts)
	Additional paid-in capital			16,687				128,317				223,547
	Accumulated deficit			(112,119	)			(112,119	)			(112,119	)
	Total stockholders’ (deficit) equity			(94,517	)			16,338				111,638
Total capitalization			$	26,327			$	26,327			$	121,627

(1)	On a pro forma as adjusted basis, excludes 4,550,000 additional shares of preferred stock, par value $0.01 per share, to be authorized upon filing of the restated certificate of incorporation immediately following the closing of this offering, in addition to the 450,000 shares of redeemable preferred stock that will be authorized, issued and outstanding as set forth above.
(2)	Excludes:

	•	3,034,111 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2005 at a weighted average exercise price of $4.04 per share;
	•	4,121,189 shares of common stock issuable upon exercise of warrants outstanding as of September 30, 2005 at a weighted average exercise price of $7.17 per share; and
	•	an aggregate of 342,380 shares available for future issuances under our 2002 Director, Employee and Consultant Stock Plan as of September 30, 2005.

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Initial public offering price per share							$	15.00
	Historical net tangible book value (deficit) per share as of September 30, 2005		$	(53.01	)
	Pro forma increase per share attributable to pro forma conversion of convertible preferred stock and issuance of shares of common stock in satisfaction of accumulated dividends on Series B and C convertible preferred stock		$	54.10
	Pro forma net tangible book value per share as of September 30, 2005, before this offering		$	1.09
	Increase per share attributable to this offering		$	4.18
Pro forma as adjusted net tangible book value per share as of September 30, 2005, after this offering							$	5.27
Dilution per share to new investors in this offering							$	9.73

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			Shares Purchased								Total Consideration								Average
																			Price
			Number				Percent				Amount				Percent				Per Share
Existing stockholders				13,979,295				67	%		$	129,817,311				55	%		$	9.29
New investors				7,000,000				33				105,000,000				45				15.00
	Total			20,979,295				100	%		$	234,817,311				100	%

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																								Nine Months Ended
				Year Ended December 31,																				September 30,
				2000				2001				2002				2003				2004				2004				2005
				(in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue:
	Contract revenue			$	5,685			$	4,995			$	1,885			$	2,613			$	4,045			$	2,891			$	6,727
	Product sales				610				1,130				483				1,268				185				185				—
		Total revenue			6,295				6,125				2,368				3,881				4,230				3,076				6,727
Operating expenses:
	Cost of product sales				282				709				241				578				87				87				—
	Research and development				3,495				7,235				13,174				13,282				19,095				11,995				19,792
	General, sales and administrative				3,645				4,236				6,859				5,533				6,320				4,623				6,003
	Non-cash contract modification expense(1)				—				759				—				—				—				—				—
		Total operating expenses			7,422				12,939				20,274				19,393				25,502				16,705				25,795
Loss from operations					(1,127	)			(6,814	)			(17,906	)			(15,512	)			(21,272	)			(13,629	)			(19,068	)
Interest income					91				284				853				405				646				405				701
Interest expense					(288	)			(275	)			(156	)			(251	)			(469	)			(351	)			(617	)
Other (expense) income, net					—				—				(81	)			164				138				138				(125	)
Net loss					(1,324	)			(6,805	)			(17,290	)			(15,194	)			(20,957	)			(13,437	)			(19,109	)
Preferred stock dividends and accretion					(401	)			(1,319	)			(4,905	)			(4,905	)			(8,588	)			(5,845	)			(8,169	)
Net loss attributable to common stockholders				$	(1,725	)		$	(8,124	)		$	(22,195	)		$	(20,099	)		$	(29,545	)		$	(19,282	)		$	(27,278	)
Basic and diluted net loss per common share				$	(1.39	)		$	(5.94	)		$	(13.16	)		$	(11.92	)		$	(17.33	)		$	(11.34	)		$	(15.84	)
Shares used in computing basic and diluted net loss per common share					1,239				1,367				1,687				1,687				1,704				1,700				1,722
Pro forma basic and diluted net loss per common share																				$	(1.96	)						$	(1.46	)
Shares used in computing pro forma basic and diluted net loss per common share
																					10,915								13,328

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(1)

Non-cash contract modification expense reflects the fair value of warrants issued to CFFTI and warrants held by Vertex that were repriced in conjunction with the sale of the Series B convertible preferred stock in 2001. We granted warrants to CFFTI to purchase 87,221 shares of our common stock at an exercise price of $0.02 per common share as consideration for modifying specified terms and provisions of our collaboration agreement. In addition, we reduced the exercise price for warrants to purchase 1,962,494 shares of our common stock held by Vertex to $5.64 per share.

		As of December 31,																				As of
																						September 30,
		2000				2001				2002				2003				2004				2005
		(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and short-term investments		$	1,354			$	43,008			$	31,808			$	22,636			$	52,638			$	32,009
Working capital			69				39,299				30,020				16,817				41,612				22,302
Total assets			3,419				47,105				41,792				29,117				62,824				44,171
Deferred revenue			—				1,337				9,888				12,865				10,617				10,426
Long-term debt, net of current portion			779				47				1,664				1,964				3,821				4,210
Redeemable preferred stock			3,870				48,420				53,325				58,230				108,465				116,634
Total stockholders’ deficit			(4,023	)			(6,176	)			(27,920	)			(47,627	)			(68,112	)			(94,517	)

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	•	salaries and related expenses for personnel, including stock-based compensation expenses;
	•	fees paid to professional service providers in conjunction with independently monitoring our clinical trials and acquiring and evaluating data in conjunction with our clinical trials;
	•	performance of non-clinical trials, including toxicity studies in animals;

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	•	costs of contract manufacturing services;
	•	costs of materials used in clinical and non-clinical trials; and
	•	depreciation of capital resources used to develop our products and costs of facilities.

	•	the scope, rate of progress and expense of our clinical trials and other research and development activities;
	•	the potential benefits of our product candidates over other therapies;
	•	our ability to market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop in the future;
	•	future clinical trial results;
	•	the terms and timing of any collaborative, licensing and other arrangements that we may establish;
	•	the expense and timing of regulatory approvals; and
	•	the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

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	•	pricing of private sales of our convertible preferred stock;
	•	prior valuations of stock grants and convertible preferred stock sales and the effect of events, including the progression of our product candidates, that have occurred between the time of the grants or sales;
	•	comparative rights and preferences of the security being granted compared to the rights and preferences of our other outstanding equity;
	•	comparative values of public companies discounted for the risk and limited liquidity provided for in the shares we are issuing;
	•	perspective provided by valuation specialists;
	•	any perspective provided by any investment banks, including the likelihood of an initial public offering and the potential value of the company in an initial public offering; and
	•	general economic trends.

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	Nine Months Ended September 30, 2005 and 2004

	Revenue

		Nine Months Ended
		September 30,								Change
		2004				2005				$				%
		(dollars in thousands)
Contract revenue		$	2,891			$	6,727			$	3,836				133	%
Product sales			185				—				(185	)			(100	)
Total revenue		$	3,076			$	6,727			$	3,651				119	%

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	Cost of product sales

	Research and development expense

		Nine Months Ended
		September 30,								Change
		2004				2005				$				%
		(dollars in thousands)
ALTU-135		$	7,871			$	9,134			$	1,263				16	%
ALTU-238			1,775				5,865				4,090				230
Other research and development			2,349				4,793				2,444				104
Total research and development		$	11,995			$	19,792			$	7,797				65	%

	General, sales and administrative expense

	Interest income and interest expense

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	Other income (expense), net

	Preferred stock dividends and accretion

	Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

	Revenue

		Years Ended
		December 31,								Change
		2003				2004				$				%
		(dollars in thousands)
Contract revenue		$	2,613			$	4,045			$	1,432				55	%
Product sales			1,268				185				(1,083	)			(85	)
Total revenue		$	3,881			$	4,230			$	349				9	%

	Cost of product sales

	Research and development expense

		Years Ended
		December 31,								Change
		2003				2004				$				%
		(dollars in thousands)
ALTU-135		$	9,440			$	11,540			$	2,100				22	%
ALTU-238			1,376				3,604				2,228				162
Other research and development			2,466				3,951				1,485				60
Total research and development		$	13,282			$	19,095			$	5,813				44	%

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	General, sales and administrative expense

	Interest income and interest expense

	Other income (expense), net

	Preferred stock dividends and accretion

	Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

	Revenue

		Years Ended
		December 31,								Change
		2002				2003				$				%
		(dollars in thousands)
Contract revenue		$	1,885			$	2,613			$	728				39	%
Product sales			483				1,268				785				163
Total revenue		$	2,368			$	3,881			$	1,513				64	%

	Cost of product sales

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	Research and development expense

		Years Ended
		December 31,								Change
		2002				2003				$				%
		(dollars in thousands)
ALTU-135		$	10,091			$	9,440			$	(651	)			(6	)%
Other research and development			3,083				3,842				759				25
Total research and development		$	13,174			$	13,282			$	108				1	%

	General, sales and administrative expense

	Interest income and interest expense

	Other income (expense), net

	Preferred stock dividends and accretion

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							October
							2005
							Through				2006				2008
							December				Through				Through				After
			Total				2005				2007				2009				2009
			(in thousands)
Contractual Obligations(1):
	Short and long-term debt(2)		$	7,307			$	717			$	4,575			$	2,015			$	—
	Capital lease obligations(2)			320				66				254				—				—
	Operating lease obligations			2,143				389				1,354				400				—
	Purchase obligations(3)			—				—				—				—				—
	Total contractual cash obligations		$	9,770			$	1,172			$	6,183			$	2,415			$	—

(1)	Excludes estimated payment of $7.2 million to Vertex in connection with its optional redemption of shares of our redeemable preferred stock on or after December 31, 2010, plus dividends accruing after that date, and amounts payable to CFFTI upon FDA approval of ALTU-135 and royalties to CFFTI on product sales of ALTU-135.
(2)	Includes interest expense.
(3)	On October 28, 2005 and on December 15, 2005, we entered into non-cancelable purchase orders for a total of €2.5 million, all of which is due in 2006.

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	•	benefits associated with a drug that is microbially-derived, rather than a drug derived from pig pancreases, and manufactured in a controlled environment;
	•	a significantly lower pill burden, allowing patients to take, on average, one capsule per meal or snack compared to, on average, four or five larger capsules per meal or snack with existing products;
	•	more consistent and reliable dosing;
	•	resistance to degradation early in the gastrointestinal tract, permitting enzyme activity where most digestion and absorption of fats, proteins and carbohydrates occurs;
	•	the potential for a liquid formulation, which is currently unavailable, for children and adults who are unable to swallow capsules; and
	•	testing in what we believe is the largest well-controlled, scientifically-rigorous prospective clinical trial conducted to date in the treatment of cystic fibrosis patients with pancreatic insufficiency.

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	•	Focus on advancing our lead product candidates. We have two product candidates in clinical trials. We are preparing ALTU-135 for a pivotal Phase III clinical trial for the treatment of malabsorption due to exocrine pancreatic insufficiency. In addition, we recently initiated a Phase II clinical trial of ALTU-238 in adult growth hormone deficient patients. If this trial is successful, we plan to initiate a Phase III clinical trial in adults and plan to initiate a Phase II/III clinical trial in pediatric patients, which we plan to request that the FDA consider to be a pivotal trial. However, the FDA may not agree with our proposed combined Phase II/III clinical trial in pediatric patients and may require additional studies in children. We believe that these product candidates, if approved, will offer significant advantages over existing therapies. In addition, because these product candidates are based on well-understood proteins with known mechanisms of action, we believe we may be able to reduce their development risk and time to market. Our primary focus is on aggressively advancing the clinical development of these two product candidates to NDA submission.
	•	Continue to build and advance our product pipeline for gastrointestinal and metabolic disorders. In addition to our product candidates in clinical development, we have built a pipeline of preclinical product candidates based on our proprietary protein crystallization technology. These product candidates are designed to address unmet needs for the treatment of hyperoxalurias, phenylketonuria, and other chronic gastrointestinal and metabolic diseases. We plan to apply the manufacturing, clinical and regulatory experience gained from our two lead product candidates to advance a number of these preclinical product candidates into clinical trials over the next few years. We also plan to add additional product candidates to our pipeline through the application of our proprietary protein crystallization technology to existing protein therapeutics or known proteins with potential therapeutic use.
	•	Establish a commercial infrastructure. We plan to establish a commercial infrastructure and targeted specialty sales force to market our two lead product candidates in North America. In addition, we plan to leverage our sales and marketing capabilities by targeting the same groups of physician specialists with additional products that we bring to market either through our own development efforts or by in-licensing from others.
	•	Selectively establish collaborations for our product candidates with leading pharmaceutical and biotechnology companies. We currently have a collaboration with Dr. Falk for the commercialization of ALTU-135 in Europe, the countries of the former Soviet Union, Israel and Egypt. We intend to develop additional collaborations in markets outside of North America where we believe that having a collaborator will enable us to gain better access to those markets. We may also collaborate with other companies to accelerate the development of some of our early-stage product candidates, or to co-promote our product candidates in North America in instances where we believe that a larger sales and marketing presence will expand the market or accelerate penetration.
	•	Establish additional collaborations to apply our technology to other therapeutic proteins. We believe that our technology has broad applicability to many classes of proteins and can be used to enhance protein therapeutics developed by other parties. We intend to derive value from our technology by selectively collaborating with biotechnology and pharmaceutical companies that will use our technology for products that they are either currently marketing or developing.

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Product Candidate (Delivery) Indication		Stage of Development		Commercial Rights		Status
ALTU-135 (oral) Exocrine Pancreatic Insufficiency		Phase II completed		Dr. Falk (Europe, the countries of the former Soviet Union, Israel and Egypt)		Phase III clinical trial and long-term safety study of the solid form expected to begin in the second half of 2006; Phase II clinical trial of the liquid form expected to begin in early 2007
				Altus (United States and rest of world)
ALTU-238 (injectable) Growth Disorders		Phase II		Altus		Data from Phase II clinical trial in adults expected in the first half of 2006; Phase III clinical trial in adults and Phase II/III clinical trial in children expected to begin in the second half of 2006
ALTU-237 (oral) Hyperoxalurias		Preclinical		Altus		IND enabling work in progress, with IND filing expected in early 2007
ALTU-236 (oral) Phenylketonuria		Preclinical		Altus		Preclinical testing in animal models

	ALTU-135 for Exocrine Pancreatic Insufficiency

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	•	Lipase. We selected the lipase in ALTU-135, which is used for the digestion of fats, because it demonstrated the ability in in vitro and animal testing to be active across a wide range of acidity levels and more resistant to degradation in the harsh environment of the gastrointestinal tract when compared to other lipases. It also demonstrated the ability to break down a broader range of fats than existing animal-derived lipases. Because lipases are the most susceptible of the three enzymes to degradation in the gastrointestinal tract, we use our proprietary technology to both crystallize and cross-link the lipase for increased activity and stability;
	•	Protease. We selected the protease in ALTU-135, which is used for the digestion of proteins, because it demonstrated the ability in in vitro and animal testing to break down as many types of proteins as the multiple proteases contained in existing products. We crystallize the protease for greater stability and concentration;
	•	Amylase. We selected the amylase in ALTU-135, which is used for the digestion of carbohydrates, because it demonstrated the ability in in vitro testing to be active in the highly acidic environment of the upper gastrointestinal tract. Because the amylase is stable in soluble form, we do not crystallize it.

	Disease Background and Market Opportunity

	•	Cystic fibrosis — Cystic fibrosis is one of the most prevalent genetic disorders in the Caucasian population, according to the Medical Genetics Institute of Cedars-Sinai. According to the Cystic Fibrosis Foundation, this disease affects approximately 30,000 people in the United States. Approximately 90% of cystic fibrosis patients are prescribed pancreatic enzymes to treat exocrine pancreatic insufficiency. Cystic fibrosis patients with exocrine pancreatic insufficiency have a median life expectancy of 31 years, compared to 50 years for those cystic fibrosis patients who have sufficient pancreatic enzymes.
	•	Chronic pancreatitis — In many patients, chronic pancreatitis is clinically silent and many patients with unexplained abdominal pain may have chronic pancreatitis that eludes diagnosis. Therefore, according to The New England Journal of Medicine, the true prevalence of the disease is not known, although estimates range from 0.04% to 5%. Based on survey data reported in Medscape General Medicine, we believe chronic pancreatitis results in more than 500,000 physician visits per year in the United States.
	•	Pancreatic cancer — The American Cancer Society estimates that approximately 30,000 people in the United States are diagnosed with pancreatic cancer each year.

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		According to an industry estimate, approximately 65% of patients with pancreatic cancer will have some degree of fat malabsorption.
	•	HIV/AIDS — According to the U.S. Centers for Disease Control and Prevention, there were approximately 1.1 million people with HIV/AIDS in the United States in 2003. Approximately 50% of HIV-positive patients in an industry study had evidence of pancreatic insufficiency.

	Limitations of Existing Products

	•	High pill burden. Patients on existing pancreatic enzyme therapies are generally required to take, on average, four or five larger capsules per meal or snack, resulting in poor compliance and therefore reduced long-term efficacy, due to the following factors:

	•	Degradation of enzymes in the gastrointestinal tract. A significant portion of the enzymes in existing products are degraded in the gastrointestinal tract prior to exerting their therapeutic effect. As a result, many patients are required to take many capsules to achieve a desired level of absorption of fats, proteins and carbohydrates. Some manufacturers have tried to address this issue by adding a protective coating to the enzymes, but this often results in a failure of the enzyme to dissolve and become active early enough in the gastrointestinal tract to break down foods and effectively assist with the digestive process.
	•	Low concentration. Existing therapies are comprised of a mixture of enzymes and other materials found in a pig’s pancreas. Based on comments submitted in response to the FDA’s PEP Guidance in 2004 by manufacturers of existing products and the components of such products, we believe that manufacturers of these products are unable to concentrate the enzymes in the mixture to reduce the amount of material a patient must consume.

	•	Variability of therapeutic effect. Because existing products are extracted from pig pancreases, there is significant variability between different manufacturing batches. As a result, we believe that the therapeutic effect of these therapies is also significantly variable. Each time a patient refills a prescription the patient may need to experiment with the number of pills taken per meal or snack to achieve effective digestion of food intake.
	•	Short shelf life. Existing enzyme therapies tend to lose activity quickly relative to other types of drugs. Many manufacturers try to overcome this limitation by filling each capsule with more drug than specified in order to achieve the stated label claim over time, which leads to inconsistent efficacy and raises safety concerns. We believe this also contributes to patient uncertainty about the number of capsules to take per meal or snack.

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	•	Product impurities. Existing enzyme therapies are poorly characterized and may contain impurities, including porcine viruses, tissue components and other contaminants. Impurities may increase the risk of antigenicity.

	Anticipated Advantages of ALTU-135

	•	Reduced pill burden. ALTU-135 is a highly concentrated, pure and stable enzyme replacement therapy designed to be as effective as existing products with significantly fewer capsules. Based on the clinical trials we have conducted to date, we believe that most patients will be effectively treated with, on average, one capsule per meal or snack. We believe that this dosing will result in greater convenience for the patient, which will improve compliance and, therefore, long-term effectiveness of therapy. We believe that ALTU-135 will reduce the pill burden for patients due to the following factors:

	•	Stability of enzymes in the gastrointestinal tract. We have designed ALTU-135 to withstand degradation, maintain its activity across the different pH levels in the gastrointestinal tract, and exert its therapeutic effect in the first part of the small intestine, or the duodenum, where most fats, proteins and carbohydrates are broken down and absorbed. We believe this design will provide a more effective treatment for patients than current pancreatic enzyme replacement products, which are often degraded earlier in the gastrointestinal tract.
	•	High concentration. Two of the three enzymes in ALTU-135 are crystallized, resulting in a highly concentrated product that requires less material to achieve a desired therapeutic effect.

	•	Consistent activity. We have designed ALTU-135 to exhibit consistent enzyme activity from batch to batch. The enzymes in ALTU-135 are microbially derived and produced through fermentation. The amount of material and related enzyme activity in a capsule of ALTU-135 is tightly controlled, as each of the three enzymes in ALTU-135 is individually manufactured and added to the final drug product in a specific amount. We believe this will result in consistent product performance, eliminating the need for dose experimentation each time a patient refills a prescription.
	•	Longer shelf life. Based on stability studies performed as part of our development program, we believe that ALTU-135 capsules are significantly more stable than existing porcine-derived products, which we expect will lead to a longer effective shelf life.
	•	Potential liquid formulation. We have completed in vivo studies of a liquid formulation of ALTU-135. We believe that a liquid formulation will significantly benefit children and adults who are unable to swallow capsules.

	ALTU-135 Development Activities and Strategy

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Trial		Number of Subjects		Primary Study Objective
Phase Ia		20 healthy volunteers		Safety and tolerability over 7 days of dosing
Phase Ib		23 cystic fibrosis patients		Safety, tolerability and clinical activity over 3 days of dosing
Phase Ic		8 cystic fibrosis patients		Safety, tolerability and clinical activity over 14 days of dosing
Phase II		129 cystic fibrosis patients		Safety, tolerability and efficacy over 28 days of dosing

	Phase I Clinical Trials

	Phase II Clinical Trial

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	•	a formulation of ALTU-135 consisting of 25,000 units of lipase, 25,000 units of protease and 3,750 units of amylase, representing a ratio of 1:1:0.15, is the minimal dose combination that provides a clinically meaningful improvement in fat and protein absorption;
	•	most patients will be able to be treated with one small capsule of ALTU-135 per meal or snack; and
	•	patients with the most severe fat and protein malabsorption will realize the greatest benefit from treatment with ALTU-135.

	Study Design and Demographics

	•	Treatment arm 1— 5,000 units lipase: 5,000 units protease: 750 units amylase per meal or snack;
	•	Treatment arm 2 — 25,000 units lipase: 25,000 units protease: 3,750 units amylase per meal or snack, which is the dose we have selected to use in our planned Phase III clinical trials; and
	•	Treatment arm 3 — 100,000 units lipase: 100,000 units protease: 15,000 units amylase per meal or snack.

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	Efficacy Results

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	•	an average increase in CFA of 31 percentage points for combined treatment arms 2 and 3, from the baseline period to the treatment period (number of patients, or n,=21)
	•	an average increase in CNA of 36 percentage points for combined treatment arms 2 and 3, from the baseline period to the treatment period (n=9)

	•	an average increase in CFA of 9 percentage points for combined treatment arms 2 and 3, from the baseline period to the treatment period (n=50)
	•	an average increase in CNA of 13 percentage points for combined treatment arms 2 and 3, from the baseline period to the treatment period (n=60)

	Safety and Tolerability Results

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	Phase III Clinical Trial in Cystic Fibrosis Patients

	Long-Term Safety Study

	ALTU-238 for Growth Hormone Deficiency and Related Disorders

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	Disease Background, Market Opportunity and Limitations of Existing Products

	•	1 in 3,500 children suffer from growth hormone deficiency;
	•	1 in 10,000 adults suffer from growth hormone deficiency;
	•	between 3% and 10% of births annually are small for gestational age; and
	•	between 2% and 3% of children are affected by idiopathic short stature.

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	Anticipated Advantages of ALTU-238

	•	Convenience of once-weekly dosing. Based on the results of our Phase I clinical trial, we believe that ALTU-238 will offer growth hormone deficient patients the convenience of a once-weekly injection. We believe this will improve compliance and thereby increase long-term effectiveness of therapy and potentially expand the market.
	•	Administration with a fine gauge needle. ALTU-238 is designed to provide extended release without using polymers to encapsulate the component hGH molecules. To date, there has not been an hGH therapy approved by the FDA for administration once per week. The only hGH therapy approved by the FDA for administration less frequently than once per week was withdrawn from the market and required polymeric encapsulation for its extended release formulation. This necessitated the use of a substantially larger needle and prolonged injection time, which we believe led to reduced market acceptance and eventual withdrawal of the product from the market. We have designed ALTU-238 using our protein crystallization technology so that, as the crystals dissolve, the hGH is released over an extended period. This allows ALTU-238 to be administered with the same size needle as used with currently marketed products.

	ALTU-238 Development Activities and Strategy

	Phase I Clinical Trial

Title		A Single Blind, Single Dose, Randomized, Placebo-Controlled, Parallel Group Study of ALTU-238 in Normal Healthy Adults to Determine Pharmacokinetics, Pharmacodynamics and Drug Safety
Design		Forty-five subjects received one of the following treatment regimens:
		• a single injection of ALTU-238 at a dose of 2.8 mg, 8.4 mg, or 16.8 mg of hGH, administered to 6 subjects at each dose;
		• a single injection of ALTU-238 at a dose of 24.5 mg of hGH administered to 7 subjects;
		• 7 daily injections of Nutropin AQ, a daily, FDA-approved hGH product, at a dose of 2.4 mg of hGH, administered to 6 subjects;
		• a single injection of Nutropin AQ at a dose of 3.5 mg of hGH, administered to 6 subjects; and
		• a single injection of placebo, administered to 8 subjects.
Administration		Each regimen was administered to patients as a subcutaneous injection.

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Safety Results		ALTU-238 was well tolerated and easily administered through 29 and 30 gauge needles. There were no serious adverse events reported in the clinical trial, and the percentage of subjects who experienced adverse events was comparable among treatment groups. Subjects across all treatment groups experienced injection site reactions, the most common of which were redness, hardening of the skin and swelling.
Clinical Activity Results		We observed a dose-dependent rise in hGH and IGF-1 concentrations following a single dose of ALTU-238. The pharmacokinetic profile of ALTU-238 at a dose of 16.8 mg indicated that the maximum concentration of hGH in the blood was achieved in approximately 51 hours and was less than the maximum concentration of hGH in the blood from a daily dose of 2.4 mg of Nutropin AQ. The IGF-1 pharmacodynamic profile over a seven-day period after a single injection of ALTU-238 at a dose of 16.8 mg was comparable to that observed with the same aggregate amount of hGH delivered through seven daily injections of Nutropin AQ.

	Phase II Clinical Trial

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	ALTU-237

	ALTU-236

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	•	Establish initial crystallization conditions. Once we choose a target protein, we rapidly screen hundreds of crystallization conditions both manually and using robotics. We define the conditions under which a soluble protein could crystallize, including protein concentration, pH and temperature of crystallization.
	•	Identify key crystallization conditions and initial crystallization scale up. After we identify the initial conditions, we focus on the critical crystallization conditions to define a robust and reproducible crystallization process. We then scale the process from single drops, to microliter scale, to milliliter scale, and finally, to liter scale.
	•	Select crystallization process and crystal. If there is more than one successful crystallization process and resulting crystals, we use our target product profile to choose the best protein crystal for the given application based on crystal size, shape and other characteristics.

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	ALTU-135

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	•	Build our own North American sales force. We plan to establish a commercial infrastructure and targeted specialty sales force to market our product candidates in North America. Our sales efforts for ALTU-135, if approved, will initially be focused on the 500 pediatric pulmonologists who are in approximately 100 cystic fibrosis care centers throughout the United States, as well as the 5,000 key gastroenterologists and pancreatologists who prescribe products for exocrine pancreatic insufficiency. For ALTU-238, we plan to focus initially on the approximately 400 key prescribing pediatric endocrinologists and approximately 3,000 adult endocrinologists who treat patients with growth hormone deficiency. Because the target groups for ALTU-238 are primarily hospital-based and concentrated in major metropolitan areas, we believe that we can effectively address the market for ALTU-238 with a specialized sales force that targets these key prescribers. We also plan to leverage our sales and marketing capabilities by targeting the same groups of physician specialists with multiple products that we bring to market either through our own development efforts or by in- licensing from others.
	•	Assemble a marketing organization. We plan to build a marketing, managed care and sales management organization to create and implement marketing strategies for ALTU-135, ALTU-238 and other product candidates in our product pipeline. We expect that our marketing organization will oversee any products that we market through our own sales force and oversee and support our sales and reimbursement efforts. The responsibilities of the marketing organization will include developing educational initiatives with respect to approved products and establishing relationships with thought leaders in relevant fields of medicine. We also plan to conduct post-approval marketing studies for our products to provide further data on the safety and efficacy. As we develop our pipeline products, we will evaluate whether to expand our marketing and sales efforts.
	•	Selectively establish collaborations for our product candidates with leading pharmaceutical and biotechnology companies. We may enter into additional collaborations in markets outside of North America where we believe that having a partner will enable us to gain better access to those markets. In addition, we may co-promote our product candidates in North America with pharmaceutical and biotechnology companies in instances where we believe that a larger sales and marketing presence will expand the market or accelerate penetration. We may also collaborate with such companies to accelerate the development of selected early-stage product candidates.

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	•	ALTU-135. If approved, ALTU-135, the product candidate we are developing for the treatment of malabsorption due to exocrine pancreatic insufficiency, will compete with currently marketed porcine-derived pancreatic enzyme replacement therapies from Axcan Pharma, Johnson & Johnson, and Solvay Pharmaceuticals, as well as from generic drug manufacturers such as KV Pharmaceutical and IMPAX Laboratories. In April 2004, the FDA issued a notice that manufacturers of existing pancreatic enzyme replacement products will be subject to regulatory action if they do not obtain approved NDAs for these products by April 28, 2008. We believe that some of the manufacturers of these products may not be able to satisfy the FDA’s requirements for NDAs. In addition, we understand that Biovitrum and Meristem Therapeutics have product candidates in clinical development that could compete with ALTU-135.
	•	ALTU-238. If approved, ALTU-238, the product candidate we are developing as a once-weekly treatment for hGH deficiency and related disorders, will compete with approved hGH therapies from companies such as Genentech, Pfizer, Serono, Novo Nordisk, Teva Pharmaceutical Industries and Eli Lilly. In addition, we understand that ALTU-238 may compete with product candidates in clinical development from some of these companies and from others, including LG Life Sciences, which is developing a long-acting hGH therapy based on an encapsulated microparticle technology.

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	•	the longer of 17 years from the issue date or 20 years from the earliest effective filing date, if the patent application was filed prior to June 8, 1995; and
	•	20 years from the earliest effective filing date, if the patent application was filed on or after June 8, 1995.

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	NDA and BLA Approval Processes

	•	the FDA’s refusal to approve pending applications;
	•	license suspension or revocation;
	•	withdrawal of an approval;
	•	a clinical hold;
	•	warning letters;
	•	product recalls;
	•	product seizures;
	•	total or partial suspension of production or distribution; or
	•	injunctions, fines, civil penalties or criminal prosecution.

	•	completion of nonclinical laboratory tests according to good laboratory practice regulations, or GLP;
	•	submission of an IND, which must become effective before human clinical trials may begin;
	•	performance of adequate and well-controlled human clinical trials according to GCP to establish the safety and efficacy of the proposed drug for its intended use;
	•	submission to the FDA of a NDA or BLA;
	•	satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity or to meet standards designed to ensure the biologic’s continued safety, purity and potency; and
	•	FDA review and approval of the NDA or BLA.

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	•	Phase I: The drug is initially introduced into healthy human subjects or patients with the disease and tested for safety, dosage tolerance, pharmacokinetics, pharmacodynamics, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.
	•	Phase II: Involves studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
	•	Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide, if appropriate, an adequate basis for product labeling.

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	Section 505(b)(2) Applications

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	•	the potential value of enhanced interaction, emphasizing the potential public health benefit resulting from development of the product;
	•	the likelihood that concentrated scientific dialogue will facilitate the availability of a promising novel therapy; and
	•	the applicant’s demonstration of commitment to product development as evidenced by a thorough consideration of the rationale for participation in Pilot 2.

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	Orphan Drug Designation

	Pediatric Exclusivity

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	FDA Policy on Drugs to Treat Exocrine Pancreatic Insufficiency

	Post-Approval Requirements

	•	record-keeping requirements;
	•	reporting of adverse experiences with the drug;
	•	providing the FDA with updated safety and efficacy information;
	•	drug sampling and distribution requirements;
	•	notifying the FDA and gaining its approval of specified manufacturing or labeling changes;
	•	complying with certain electronic records and signature requirements; and
	•	complying with FDA promotion and advertising requirements.

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		Approximate
		Square						Expiration
Location		Footage				Use		Date
625 Putnam Avenue, Cambridge, MA			15,750			Laboratory and Office			12/31/08
618 Putnam Avenue, Cambridge, MA			3,000			Laboratory			12/31/06
125 Sidney Street, Cambridge, MA			20,500			Laboratory and Office			04/14/06
195 Albany Street, Cambridge, MA			16,000			Laboratory and Office			12/31/08

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Name		Age				Position
Sheldon Berkle			60			President and Chief Executive Officer; Director
Don G. Burstyn, Ph.D.			51			Vice President, Regulatory Affairs and Quality Assurance
Richard D. Forrest, Esq.			38			Corporate Counsel and Secretary
Robert Gallotto			40			Vice President, Strategic Planning and Alliance Management
Alan Kimura, M.D., Ph.D.			51			Vice President, Clinical Development and Medical Affairs
Gerhard F. Klement			53			Vice President, Manufacturing and Technical Operations
Jonathan I. Lieber			36			Vice President, Chief Financial Officer and Treasurer
Alexey L. Margolin, Ph.D.			53			Chief Scientific Officer
John P. Richard(1)			48			Chairman of the Board
Richard H. Aldrich(2)			51			Director
Lynne H. Brum(3)			41			Director
Stewart Hen(2)(3)			38			Director
Peter L. Lanciano			49			Director
Jonathan S. Leff(1)			37			Director
Manuel A. Navia, Ph.D.(2)(3)			59			Director
Jonathan D. Root, M.D.(1)(2)			45			Director
Michael S. Wyzga(1)			50			Director

(1)	Member of the Audit Committee.
(2)	Member of the Compensation Committee.
(3)	Member of the Nominating and Governance Committee.

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	•	The Class I directors will be Messrs. Aldrich, Lanciano and Richard, and their terms will expire at the annual meeting of stockholders to be held in 2006;
	•	The Class II directors will be Ms. Brum, Mr. Leff and Dr. Root, and their terms will expire at the annual meeting of stockholders to be held in 2007; and
	•	The Class III directors will be Dr. Navia and Messrs. Berkle, Hen and Wyzga, and their terms will expire at the annual meeting of stockholders to be held in 2008.

	Audit Committee

	•	approve and retain the independent registered public accounting firm to conduct the annual audit of our books and records;
	•	review the proposed scope and results of the audit;
	•	review and pre-approve the independent registered public accounting firm’s audit and non-audit services rendered;
	•	approve the audit fees to be paid;
	•	review accounting and financial controls with the independent registered public accounting firm and our financial and accounting staff;
	•	review and approve transactions between us and our directors, officers and affiliates;
	•	recognize and prevent prohibited non-audit services;
	•	establish procedures for complaints received by us regarding accounting matters;
	•	oversee internal audit functions; and
	•	prepare the report of the audit committee that SEC rules require to be included in our annual meeting proxy statement.

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	Compensation Committee

	•	review and recommend the compensation arrangements for management, including the compensation for our president and chief executive officer;
	•	establish and review general compensation policies, with the objectives of attracting and retaining superior talent, rewarding individual performance and achieving our financial goals;
	•	administer our stock incentive plans; and
	•	prepare the report of the compensation committee that SEC rules require to be included in our annual meeting proxy statement.

	Nominating and Governance Committee

	•	identify and nominate members of the board of directors;
	•	develop and recommend to the board of directors a set of corporate governance principles applicable to our company; and
	•	oversee the evaluation of the board of directors.

	Compensation for Board Service

Directors		Cash				Stock Options(1)
John P. Richard		$	30,000				102,707
Richard H. Aldrich			35,000				43,611
Lynne H. Brum			17,500				—
Stewart Hen			15,000				—
Peter L. Lanciano			—				—
Jonathan S. Leff			15,000				—
Manuel A. Navia, Ph.D.			35,000				43,611
Jonathan D. Root, M.D.			17,500				—
Michael S. Wyzga			45,000				54,514

(1)

All options have a ten-year term and an exercise price of $3.92 per share, and vest quarterly over four years, except for 42,742 options granted to Mr. Richard, which were fully vested upon grant, and 5,451 options granted to Mr. Richard, which have an exercise price of $4.36 per share. In addition, all of these options may be exercised immediately for shares of restricted stock, which are subject to a repurchase right by us that lapses on the same vesting schedule as the options.

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															Long-Term
															Compensation
															Awards
															Securities
Name and Principal															Underlying				All Other
Position			Year				Salary				Bonus				Options(#)				Compensation
Sheldon Berkle,				2005			$	244,615			$	153,500				566,943			$	10,245	(3)
	President and Chief Executive Officer(1)			2004				—				—				—				—
Don G. Burstyn, Ph.D.,				2005				256,875				25,000				17,444				10,860	(4)
	Vice President, Regulatory Affairs and			2004				120,192				—				141,736				966	(4)
	Quality Assurance(2)
Robert Gallotto,				2005				210,000				38,000				37,069				10,729	(5)
	Vice President, Strategic Planning and			2004				200,325				40,976				28,347				10,904	(5)
	Alliance Management
Jonathan I. Lieber,				2005				206,000				38,000				21,805				10,734	(6)
	Vice President, Chief Financial Officer and			2004				198,430				31,000				28,347				11,089	(6)
	Treasurer
Alexey L. Margolin, Ph.D.,				2005				271,282				67,000				34,889				10,859	(7)
	Chief Scientific Officer			2004				269,585				52.000				39,250				11,140	(7)
Martin D. Williams,				2005				263,039				30,000				141,735				10,755	(9)
	Former Vice President and Head of			2004				—				—				—				—
	Corporate Development(8)

(1)	Sheldon Berkle was appointed our President and Chief Executive Officer in May 2005.
(2)	Mr. Burstyn joined the company in July 2004.
(3)	Represents $9,450 in matching contributions under our 401(k) plan and $795 in life insurance premiums in 2005.
(4)	Represents $966 in life insurance premiums in 2004 and $9,450 in matching contributions under our 401(k) plan and $1,410 in life insurance premiums in 2005.
(5)	Represents $9,225 in matching contributions under our 401(k) plan and $1,679 in life insurance premiums in 2004 and $9,450 in matching contributions under our 401(k) plan and $1,279 in life insurance premiums in 2005.
(6)	Represents $9,225 in matching contributions under our 401(k) plan and $1,864 in life insurance premiums in 2004 and $9,450 in matching contributions under our 401(k) plan and $1,284 in life insurance premiums in 2005.
(7)	Represents $9,225 in matching contributions under our 401(k) plan and $1,915 in life insurance premiums in 2004 and $9,450 in matching contributions under our 401(k) plan and $1,409 in life insurance premiums in 2005.
(8)	Mr. Williams was employed by the company from January 2005 through December 2005.
(9)	Represents $9,450 in matching contributions under our 401(k) plan and $1,305 in life insurance premiums.

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	•	multiplying the number of shares of common stock underlying each option by $15.00 per share, the initial public offering price per share;
	•	assuming that the total stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire ten-year term of the option; and
	•	subtracting from that result the total option exercise price.

						Individual Grants
																		Potential Realizable Value at
		Number of				% of Total												Assumed Annual Rates of
		Securities				Options												Stock Price Appreciation for
		Underlying				Granted to				Exercise								Option Term
		Options				Employees in				Price
Name		Granted				Fiscal Year				($/Share)				Expiration Date				5%				10%
Sheldon Berkle			566,943				37.5	%		$	3.92				May 8, 2015			$	11,629,940			$	19,835,145
Don G. Burstyn			17,444				1.2				3.92				January 26, 2015				357,836				610,298
Robert Gallotto			37,069				2.5				3.92				January 26, 2015				760,412				1,296,901
Jonathan I. Lieber			21,805				1.4				3.92				January 26, 2015				447,295				762,873
Alexey L. Margolin, Ph.D.			34,889				2.3				3.92				January 26, 2015				715,693				1,220,631
Martin D. Williams(1)			141,735				9.4				3.92				January 4, 2015				2,907,470				4,958,760

(1)	At December 31, 2005, Mr. Williams was no longer employed by the company. As a result, 115,161 of his unvested options were cancelled in December 2005 and 26,574 vested options remained outstanding.

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		Number of Securities								Value of Unexercised
		Underlying Unexercised								In-the-Money Options at
		Options at Fiscal Year-End								Fiscal Year-End
Name		Exercisable(1)				Unexercisable				Exercisable				Unexercisable
Sheldon Berkle			490,434				76,509			$	5,434,009			$	847,720
Don G. Burstyn			159,180				—				1,763,714				—
Robert Gallotto			141,735				—				1,519,398				—
Jonathan I. Lieber			185,346				—				2,053,634				—
Alexey L. Margolin, Ph.D.			195,158				—				2,107,892				—
Martin D. Williams			26,574				—				294,440				—

(1)	All of these options may be exercised immediately for shares of restricted stock, which are subject to a repurchase right by us that lapses on the same vesting schedule as the options.

	1993 Stock Option Plan

	Amended and Restated 2002 Employee, Director and Consultant Stock Plan

	•	1,500,000 shares;
	•	3% of the number of shares of our common stock outstanding on a fully diluted basis as of the close of business on the immediately preceding day, which is calculated by adding to the

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		number of shares of common stock outstanding, the number of shares of common stock issuable upon conversion or exercise of any convertible securities; and
	•	an amount determined by our board of directors.

	•	the determination of which employees, directors and consultants shall be granted options and other awards;
	•	the number of shares subject to options and other awards;
	•	the exercise price of each option which generally shall not be less than fair market value on the date of grant;
	•	the schedule upon which options become exercisable;
	•	the termination or cancellation provisions applicable to options;
	•	the terms and conditions of other awards, including conditions for repurchase, termination or cancellation, issue price and repurchase price; and
	•	all other terms and conditions upon which each award may be granted in accordance with our plan.

	•	provide that outstanding options shall be assumed or substituted by the successor corporation;
	•	terminate unexercised outstanding options immediately prior to the consummation of such transaction unless exercised by the optionee;
	•	make or provide for a cash payment to the participants equal to the difference between the merger price times the number of shares of our common stock subject to such outstanding options, to the extent then exercisable at prices not in excess of the merger price, and the aggregate exercise price of all such outstanding options, in exchange for the termination of such options;
	•	provide that all or any outstanding options shall become exercisable in full immediately prior to such event; and
	•	provide that outstanding awards shall be assumed or substituted by the successor corporation, become realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon the merger or reorganization event.

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	401(k) Plan

	•	the executive officer is terminated for any reason other than cause, as defined in our 2002 Stock Plan, or
	•	the executive officer, as a condition to his remaining an employee, is required to relocate at least 50 miles from his or her current location of employment, or

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	•	there occurs a material adverse change in the executive officer’s duties, authority or responsibilities which causes his position with us to become of significantly less responsibility or authority than his position was immediately prior to the change in control, or
	•	there occurs a material reduction in the executive officer’s base salary from the base salary received immediately prior to the change in control,

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	•	each stockholder known by us to own beneficially more than 5% of our common stock;
	•	each of the executive officers named in the summary compensation table;
	•	each of our directors; and
	•	all of our current directors and executive officers as a group.

							Percentage of Common Stock
							Beneficially Owned
			Number of Shares
Beneficial Owner			Beneficially Owned				Before Offering				After Offering
5% or more stockholders
Warburg Pincus Private Equity VIII, L.P.(1)				4,307,163				29.3	%			19.8	%
	466 Lexington Avenue New York, NY 10017
Entities affiliated with U.S. Venture Partners(2)				3,371,421				23.5				15.8
	2735 Sand Hill Road
	Menlo Park, CA 94025
Vertex Pharmaceuticals Incorporated(3)				2,780,243				17.4				12.1
	130 Waverly Street Cambridge, Massachusetts 02139
Entities affiliated with Nomura International plc(4)				1,956,962				13.8				9.2
	Nomura House
	1 St. Martin’s-le-Grand
	London EC1A 4NP
	United Kingdom
P/ S BI Biomedicinsk Venture III(5)				978,478				6.9				4.6
	Sundkrogsgade 7, P.O. Box 2672
	DK 2100 Copenhagen
	Denmark

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							Percentage of Common Stock
							Beneficially Owned
			Number of Shares
Beneficial Owner			Beneficially Owned				Before Offering				After Offering
Entities affiliated with CMEA Ventures(6)				974,530				6.9	%			4.6	%
	One Embarcadero Center, Suite 3250
	San Francisco, CA 94111
China Development Industrial Bank(7)				707,511				5.0				3.4
	125 Nanking East Road
	Section 5 Taipei 105
	Taiwan ROC 105
Named Executive Officers
Sheldon Berkle(8)				515,936				3.6				2.4
Don G. Burstyn(9)				159,180				1.1				*
Robert Gallotto(10)				141,735				1.0				*
Jonathan I. Lieber(11)				185,346				1.3				*
Alexey L. Margolin, Ph.D.(12)				405,362				2.9				1.9
Martin D. Williams(13)				26,574				*				*
Directors
John P. Richard(14)				111,429				*				*
Richard H. Aldrich(15)				85,041				*				*
Lynne H. Brum(16)				2,780,243				17.4				12.1
Stewart Hen(17)				4,307,163				29.3				19.8
Peter L. Lanciano(18)				699,394				4.9				3.3
Jonathan S. Leff(19)				4,307,163				29.3				19.8
Manuel A. Navia, Ph.D.(20)				119,930				*				*
Jonathan D. Root, M.D.(21)				3,380,143				23.5				15.8
Michael S. Wyzga(22)				54,514				*				*
All current executive officers and directors as a group (17 persons)(23)				13,371,712				69.8				51.1

	*	Less than 1%.

(1)	Consists of 3,589,246 shares of common stock owned of record by and warrants to purchase 717,917 shares of common stock held by Warburg Pincus Private Equity VIII, L.P. and two affiliated partnerships, or collectively, WP VIII. Warburg Pincus Partners LLC, or WP Partners LLC, a subsidiary of Warburg Pincus & Co., or WP, is the sole general partner of WP VIII. WP VIII is managed by Warburg Pincus LLC, or WP LLC. Charles R. Kaye and Joseph P. Landy are each Managing General Partners of WP and Co-Presidents and Managing Members of WP LLC. Messrs. Hen and Leff are general partners of WP and Managing Directors and Members of WP LLC. Each of these individuals disclaims beneficial ownership of the shares held by WP VIII except to the extent of any pecuniary interest therein.
(2)	Consists of 2,947,459 shares of common stock owned of record by and warrants to purchase 359,823 shares of common stock held by U.S. Venture Partners VIII, L.P.; 21,696 shares of common stock owned of record by and warrants to purchase 2,592 shares of common stock held by USVP VIII Affiliates Fund, L.P.; 27,665 shares of common stock owned of record by and warrants to purchase 3,303 shares of common stock held by USVP Entrepreneur Partners VIII-A, L.P.; and 14,778 shares of common stock owned of record by and warrants to purchase 1,765 shares of common stock held by USVP Entrepreneur Partners VIII-B, L.P. Voting and/or dispositive decisions with respect to the shares held by U.S. Venture Partners VIII, L.P, USVP VIII Affiliates Fund, L.P., USVP Entrepreneur Partners VIII-A, L.P. and USVP Entrepreneur Partners VIII-B, L.P. are made by their managing members: Dr. Root, Timothy Connors, Irwin Federman, Winston Fu, Steven Krausz, David Liddle, Christopher Rust, and Philip Young. Each

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		disclaims beneficial ownership of the shares held by the entities except to the extent of any pecuniary interest therein.

(3)	Consists of 817,749 shares of common stock and warrants to purchase 1,962,494 shares of common stock held by Vertex. Vertex also holds 450,000 shares of redeemable preferred stock, which are not convertible into common stock and which are redeemable at the option of Vertex on or after December 31, 2010, or by us at any time following the completion of this offering. Voting and/or dispositive decisions with respect to the shares held by Vertex are made by Ms. Brum and other individuals. Each disclaims beneficial ownership of the shares held by Vertex except to the extent of any pecuniary interest therein.
(4)	Consists of 1,194,236 shares of common stock owned of record by and warrants to purchase 100,044 shares of common stock held by Nomura International plc; and 552,227 shares of common stock owned of record by and warrants to purchase 110,455 shares of common stock held by Nomura Phase4 Ventures L.P. Nomura Phase4 Ventures Limited, as appointee of Nomura International plc and as manager of Nomura Phase4 Ventures L.P. has voting and investment power over the shares held by Nomura International plc and Nomura Phase4 Ventures L.P. Nomura Phase4 Ventures Limited is a subsidiary of Nomura International plc which is a subsidiary of Nomura Holdings Inc., a publicly traded company. The address for Nomura Phase4 Ventures L.P., Nomura Phase4 Ventures Limited and Nomura International plc is Nomura House, 1 St Martins-le-Grand, London, EC1A 4NP. Mr. Yoshiki Hashimoto, the Head of Merchant Banking, Nomura International plc, and Dr. Denise Pollard-Knight, the Head of Nomura Phase4 Ventures, are the only two members of the board of directors of Nomura Phase4 Ventures Limited and both of them, acting together, exercise the voting and investment power of Nomura Phase4 Ventures Limited. Mr. Hashimoto and Dr. Pollard-Knight disclaim beneficial ownership over any of the above shares.
(5)	Consists of 873,230 shares of common stock owned of record and warrants to purchase 105,248 shares of common stock held by P/S BI Biomedicinsk Venture III. P/ S BI Biomedicinsk Venture III’s investment decisions are made by and voting powers allocated to the Board of Directors, consisting of Uffe Ellemann- Jensen, Bórge Obel, Lars Kolind, Asger Ib Mardahl-Hansen and Bent Pedersen, and to the Management Board, consisting of Jesper Zeuthen. Each of these individuals disclaims beneficial ownership of the shares held by the entity except to the extent of any pecuniary interest therein.
(6)	Consists of 816,314 shares of common stock owned of record by and warrants to purchase 98,906 shares of common stock held by CMEA Ventures Life Sciences 2000 L.P.; and 52,966 shares of common stock owned of record by and warrants to purchase 6,342 shares of common stock owned by CMEA Venture Life Sciences 2000 Civil Law Partnership. CMEA Ventures Life Sciences 2000, L.P. and CMEA Ventures Life Sciences 2000, Civil Law Partnership both have, as their general partner, CMEA Ventures LS Management 2000 L.P. The general partners of that entity are Thomas Baruch, David Collier, Karl Handelsman and Gordon Hull. Each of these individuals disclaims beneficial ownership of the shares held by the entity except to the extent of any pecuniary interest therein.
(7)	Consists of 593,172 shares of common stock owned of record and warrants to purchase 50,021 shares of common stock held by China Development Industrial Bank Inc.; and 59,316 shares of common stock owned of record and warrants to purchase 5,002 shares of common stock held by CDIB Biotech USA Investments. Voting and dispositive power for these shares is shared by the board of directors and managing directors of China Development Industrial Bank.
(8)	Consists of options to purchase 515,936 shares of common stock. One quarter of the options will vest on May 9, 2006, and thereafter an additional 1/48th of the total underlying option grant vests on a monthly basis, such that all options will be vested after four years. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth in the previous sentence.
(9)	Consists of options to purchase 159,180 shares of common stock. 148,277 of such options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. 10,903 of these options have a term of ten years, vesting over two years, with 1/8th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth in the previous sentences.

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(10)	Consists of options to purchase 141,735 shares of common stock. All of such options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth in the previous sentence.
(11)	Consists of options to purchase 185,346 shares of common stock. 174,443 of such options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. 10,903 of such options have a term of ten years, vesting over two years, with 1/8th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth in the previous sentences.
(12)	Consists of 210,204 shares of common stock and options to purchase 195,158 shares of common stock. 184,255 of such options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. 10,903 of these options have a term of ten years, vesting over two years with 1/8th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth in the previous sentences.
(13)	Consists of options to purchase 26,574 shares of common stock. The options are fully vested but will expire if not exercised by March 30, 2006.
(14)	Consists of options to purchase 111,429 shares of common stock. 68,687 of such options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. 42,742 of such options have a term of ten years and vested immediately upon grant. In addition, all of the options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth above.
(15)	Consists of 30,527 shares of common stock and options to purchase 54,514 shares of common stock. All options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth above.
(16)	Consists of the shares owned by Vertex as described in footnote 3 above. Ms. Brum disclaims beneficial ownership of the shares owned by Vertex except to the extent of her pecuniary interest therein.
(17)	Consists of the shares owned by WP VIII as described in footnote 1 above. Mr. Hen is a partner of WP and a managing director and member of WP LLC. Mr. Hen disclaims beneficial ownership of the shares owned by WP VIII except to the extent of his pecuniary interest therein.
(18)	Consists of 224,398 shares of common stock and options to purchase 222,074 shares of common stock held by Mr. Lanciano and 252,922 shares held in various trusts for the benefit of Mr. Lanciano’s minor children. Does not include 198,000 shares of common stock gifted by Mr. Lanciano to other members of his family. All of the options have a term of ten years and are exercisable until the earlier of three months after Mr. Lanciano ceases to be a member of our board of directors or December 31, 2006. The options were vested as of October 31, 2005.
(19)	Consists of the shares owned by WP VIII as described in footnote 1 above. Mr. Leff is a partner of WP and a managing director and member of WP LLC. Mr. Leff disclaims beneficial ownership of the shares owned by WP VIII except to the extent of his pecuniary interest therein.
(20)	Consists of 71,958 shares of common stock and options to purchase 47,972 shares of common stock. All options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth above.

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(21)	Consists of the shares owned by U.S. Venture Partners and affiliated entities as described in footnote 2 above, in addition to options to purchase 8,722 shares of common stock. All options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth above. Dr. Root disclaims beneficial ownership of the shares owned by the funds except to the extent of his pecuniary interest therein.
(22)	Consists of options to purchase 54,514 shares of common stock. All options have a term of ten years vesting over four years, with 1/16th of the options vesting every three months. In addition, all of these options are immediately exercisable for shares of restricted stock, which are subject to a repurchase right by us that lapses based on the vesting schedule set forth above.
(23)	See footnotes 7 through 12 and 14 through 22.

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Common Stock			1,842,809
Redeemable Preferred Stock			450,000
Series A Convertible Preferred Stock			87,500
Series B Convertible Preferred Stock			11,773,609
Series C Convertible Preferred Stock			11,819,959

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Number of Shares		Exercise Price				Expiration Date
1,962,494(1)		$	5.64				February 1, 2009
1,144,670(1)(2)		$	9.80				May 21, 2011
508,214(1)(2)		$	9.80				September 26, 2008
261,664(1)(2)		$	0.02				September 26, 2011 — February 22, 2013
187,708(2)		$	9.79				December 7, 2006 — October 28, 2009
43,610(2)		$	6.88				June 21, 2006
6,535(2)		$	9.88				August 31, 2009 — June 24, 2010
6,294(2)		$	9.79				April 4, 2007 — October 27, 2008

(1)	These warrants contain price-based anti-dilution provisions providing for adjustments to the exercise price upon the occurrence of specified events, excluding shares issuable upon exercise of options, warrants, conversion of convertible securities, stock splits or other distributions on our securities.
(2)	These warrants have net exercise provisions under which the holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our convertible preferred stock, or the fair market value of the underlying common stock, at the time of exercise of the warrant after deduction of the aggregate exercise price.

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Number of Shares		Date
465,011		On the date of this prospectus.
46,719		After 90 days from the date of this prospectus.
13,490,213		After 180 days from the date of this prospectus, subject, in some cases, to volume limitations.

	•	1% of our then-outstanding shares of common stock, which will equal approximately 210,000 shares immediately after this offering, or
	•	the average weekly trading volume of our common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice of the sale on Form 144.

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		Number
Underwriter		of Shares
Merrill Lynch, Pierce, Fenner & Smith Incorporated			2,660,000
Morgan Stanley & Co. Incorporated			2,660,000
SG Cowen & Co., LLC			1,330,000
Leerink Swann & Company			87,500
Oppenheimer & Co. Inc.			87,500
Susquehanna Financial Group, LLLP			87,500
Toussaint Capital Partners, LLC			87,500
Total			7,000,000

		Per Share				Without Option				With Option
Public offering price		$	15.00			$	105,000,000			$	120,750,000
Underwriting discount		$	1.05			$	7,350,000			$	8,452,500
Proceeds, before expenses, to us		$	13.95			$	97,650,000			$	112,297,500

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	•	offer, pledge, sell or contract to sell any common stock,
	•	sell any option or contract to purchase any common stock,
	•	purchase any option or contract to sell any common stock,
	•	grant any option, right or warrant for the sale of any common stock,
	•	lend or otherwise dispose of or transfer any common stock,
	•	request or demand that we file a registration statement related to the common stock, or
	•	enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock, whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

	•	the valuation multiples of publicly traded companies that the representatives and the lead managers believe to be comparable to us;
	•	our financial information;
	•	the history of, and the prospects for, our company and the industry in which we compete;
	•	an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;
	•	the present state of our development; and
	•	the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

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	•	it has not made and will not make an offer of the shares to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares of our common

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		stock and the offer that has been approved by the Financial Services Authority (“FSA”) or, where appropriate, approved in another Member State and notified to the FSA, all in accordance with the Prospectus Directive, except that it may make an offer of the shares to persons who fall within the definition of “qualified investor” as that term is defined in Section 86(1) of the Financial Services and Markets Act 2000 (“FSMA”) or otherwise in circumstances which do not result in an offer of transferable securities to the public in the United Kingdom within the meaning of the FSMA;

	•	it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) received by it in connection with the issue or sale of any shares in circumstances in which Section 21(1) of FSMA does not apply to us; and
	•	it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

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		Page(s)
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets			F-3
Consolidated Statements of Operations			F-4
Consolidated Statements of Redeemable Preferred Stock and Stockholders’ Deficit			F-5
Consolidated Statements of Cash Flows			F-7
Notes to Consolidated Financial Statements			F-8

F-1

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Table of Contents

F-2

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Table of Contents

				December 31,
												September 30,
				2003				2004				2005
												(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	6,656			$	9,489			$	7,220
	Investments				15,980				43,149				24,789
	Accounts receivable				109				—				2,500
	Prepaid expenses and other current assets				1,370				954				1,233
		Total current assets			24,115				53,592				35,742
PROPERTY AND EQUIPMENT, Net					3,383				7,586				7,029
OTHER ASSETS, Net					1,619				1,646				1,400
TOTAL ASSETS				$	29,117			$	62,824			$	44,171
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
	Accounts payable and accrued expenses			$	2,713			$	6,125			$	5,017
	Current portion of long-term debt				972				1,908				2,401
	Current portion of deferred revenue				3,613				3,947				6,022
		Total current liabilities			7,298				11,980				13,440
	Long-term debt				1,964				3,821				4,210
	Long-term portion of deferred revenue				9,252				6,670				4,404
TOTAL LIABILITIES					18,514				22,471				22,054
COMMITMENTS AND CONTINGENCIES (Note 9)
REDEEMABLE PREFERRED STOCK:
	Redeemable Preferred stock, par value $.01 per share; 450,000 shares authorized, issued and outstanding in 2003, 2004 and 2005 (liquidation value of $5,831 at December 31, 2004 and $6,000 at September 30, 2005) at accreted redemption value				5,076				5,478				5,779
	Series B Convertible Preferred Stock, par value $.01 per share; 12,928,155 shares authorized; 11,773,609 shares issued and outstanding in 2003, 2004 and 2005 (liquidation value of $60,566 at December 31, 2004 and $62,852 at September 30, 2005) at accreted redemption value				53,154				57,656				61,033
	Series C Convertible Preferred Stock, par value $.01 per share; 14,420,359 shares authorized; 11,819,959 shares issued and outstanding in 2004 and 2005 (liquidation value of $53,817 at December 31, 2004 and $58,307 at September 30, 2005) at accreted redemption value				—				45,331				49,822
STOCKHOLDERS’ DEFICIT:
	Series A Convertible Preferred Stock, par value $.01 per share; 87,500 shares authorized, issued and outstanding in 2003, 2004 and 2005 (liquidation value of $4)				897				897				897
	Common stock, par value $.01 per share; 27,490,000 shares authorized in 2003 and 47,113,986 in 2004 and 2005; 1,688,831, 1,718,576, 1,820,161 shares issued and outstanding in 2003, 2004 and 2005, respectively				17				17				18
	Additional paid-in capital				23,512				23,984				16,687
	Accumulated deficit				(72,053	)			(93,010	)			(112,119	)
		Total stockholders’ deficit			(47,627	)			(68,112	)			(94,517	)
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT				$	29,117			$	62,824			$	44,171

F-3

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Table of Contents

																Nine Months Ended
				Year Ended December 31,												September 30,
				2002				2003				2004				2004				2005
																(Unaudited)
REVENUE:
	Contract revenue			$	1,885			$	2,613			$	4,045			$	2,891			$	6,727
	Product sales				483				1,268				185				185				—
		Total revenue			2,368				3,881				4,230				3,076				6,727
COSTS AND EXPENSES:
	Cost of product sales				241				578				87				87				—
	Research and development				13,174				13,282				19,095				11,995				19,792
	General, sales, and administrative				6,859				5,533				6,320				4,623				6,003
		Total costs and expenses			20,274				19,393				25,502				16,705				25,795
LOSS FROM OPERATIONS					(17,906	)			(15,512	)			(21,272	)			(13,629	)			(19,068	)
OTHER INCOME (EXPENSE):
	Interest income				853				405				646				405				701
	Interest expense				(156	)			(251	)			(469	)			(351	)			(617	)
	Foreign currency gain (loss)				—				157				138				138				(125	)
	Gain on sale of equipment				—				7				—				—				—
	Realized loss on investments				(81	)			—				—				—				—
		Other income (expense), net			616				318				315				192				(41	)
NET LOSS					(17,290	)			(15,194	)			(20,957	)			(13,437	)			(19,109	)
PREFERRED STOCK DIVIDENDS AND ACCRETION					(4,905	)			(4,905	)			(8,588	)			(5,845	)			(8,169	)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS				$	(22,195	)		$	(20,099	)		$	(29,545	)		$	(19,282	)		$	(27,278	)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE — BASIC AND DILUTED				$	(13.16	)		$	(11.92	)		$	(17.33	)		$	(11.34	)		$	(15.84	)
WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED					1,687				1,687				1,704				1,700				1,722
PRO FORMA NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE — BASIC AND DILUTED (UNAUDITED)												$	(1.96	)						$	(1.46	)
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED (UNAUDITED)													10,915								13,328

F-4

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Table of Contents

			Redeemable Preferred Stock																								Stockholders’ Deficit
											Series B								Series C								Series A
			Redeemable								Convertible								Convertible								Convertible																				Accumulated
			Preferred Stock								Preferred Stock								Preferred Stock								Preferred Stock								Common Stock								Additional				Other
																																											Paid-In				Comprehensive				Deferred				Accumulated
			Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Loss				Compensation				Deficit				Total
BALANCE — January 1, 2002				450,000			$	4,272				11,773,609			$	44,148				—			$	—				87,500			$	897				1,686,492			$	17			$	33,027			$	(75	)		$	(473	)		$	(39,569	)		$	(6,176	)
	Adoption of SFAS No. 123 (see Note 2)			—				—				—				—				—				—				—				—				—				—				(473	)			—				473				—				—
	Preferred stock dividends and accretion			—				402				—				4,503				—				—				—				—				—				—				(4,905	)			—				—				—				(4,905	)
	Exercise of stock options			—				—				—				—				—				—				—				—				13				—				—				—				—				—				—
	Stock-based compensation expense related to options granted to employees			—				—				—				—				—				—				—				—				—				—				352				—				—				—				352
	Stock-based compensation expense related to options granted to nonemployees			—				—				—				—				—				—				—				—				—				—				11				—				—				—				11
	Warrants issued in connection with debt financing			—				—				—				—				—				—				—				—				—				—				13				—				—				—				13
	Realized gain on marketable securities			—				—				—				—				—				—				—				—				—				—				—				75				—				—				75
	Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				(17,290	)			(17,290	)
BALANCE — December 31, 2002				450,000				4,674				11,773,609				48,651				—				—				87,500				897				1,686,505				17				28,025				—				—				(56,859	)			(27,920	)
	Preferred stock dividends and accretion			—				402				—				4,503				—				—				—				—								—				(4,905	)			—				—				—				(4,905	)
	Exercise of stock options			—				—				—				—				—				—				—				—				2,649				—				3				—				—				—				3
	Restricted common stock repurchased			—				—				—				—				—				—				—				—				(323	)			—				—				—				—				—				—
	Stock-based compensation expense related to options granted to employees			—				—				—				—				—				—				—				—				—				—				378				—				—				—				378
	Stock-based compensation expense related to options granted to nonemployees			—				—				—				—				—				—				—				—				—				—				3				—				—				—				3
	Warrants issued in connection with debt financing			—				—				—				—				—				—				—				—				—				—				8				—				—				—				8
	Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				(15,194	)			(15,194	)
BALANCE — December 31, 2003				450,000				5,076				11,773,609				53,154				—				—				87,500				897				1,688,831				17				23,512				—				—				(72,053	)			(47,627	)

F-5

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Table of Contents

			Redeemable Preferred Stock																								Stockholders’ Deficit
											Series B								Series C								Series A
			Redeemable								Convertible								Convertible								Convertible																				Accumulated
			Preferred Stock								Preferred Stock								Preferred Stock								Preferred Stock								Common Stock								Additional				Other
																																											Paid-In				Comprehensive				Deferred				Accumulated
			Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Loss				Compensation				Deficit				Total
BALANCE — December 31, 2003 (Carried forward)				450,000				5,076				11,773,609				53,154				—				—				87,500				897				1,688,831				17				23,512				—				—				(72,053	)			(47,627	)
	Preferred stock dividends and accretion			—				402				—				4,502				—				3,684				—				—				—				—				(8,588	)			—				—				—				(8,588	)
	Exercise of stock options			—				—				—				—				—				—				—				—				29,745				—				82				—				—				—				82
	Issuance of Series C Convertible Preferred Stock			—				—				—				—				11,819,959				51,000				—				—				—				—								—				—				—				—
	Warrants issued in connection with Series C Preferred Stock			—				—				—				—				—				(8,717	)			—				—				—				—				8,717				—				—				—				8,717
	Costs associated with issuance of Series C Preferred Stock			—				—				—				—				—				(636	)			—				—				—				—								—				—				—				—
	Stock-based compensation expense related to options granted to employees			—				—				—				—				—				—				—				—				—				—				253				—				—				—				253
	Stock-based compensation expense related to options granted to nonemployees			—				—				—				—				—				—				—				—				—				—				1				—				—				—				1
	Warrants issued in connection with debt financing			—				—				—				—				—				—				—				—				—				—				7				—				—				—				7
	Net loss			—				—				—				—				—				—				—				—				—				—								—				—				(20,957	)			(20,957	)
BALANCE — December 31, 2004				450,000				5,478				11,773,609				57,656				11,819,959				45,331				87,500				897				1,718,576				17				23,984				—				—				(93,010	)			(68,112	)
	Preferred stock dividends and accretion (unaudited)			—				301				—				3,377				—				4,491				—				—				—				—				(8,169	)			—				—				—				(8,169	)
	Exercise of stock options (unaudited)			—				—				—				—				—				—				—				—				102,335				1				295				—				—				—				296
	Restricted common stock repurchased (unaudited)			—				—				—				—				—				—				—				—				(750	)			—				—				—				—				—				—
	Stock-based compensation expense related to options granted to employees (unaudited)			—				—				—				—				—				—				—				—				—				—				571				—				—				—				571
	Warrants issued in connection with debt financing (unaudited)			—				—				—				—				—				—				—				—				—				—				6				—				—				—				6
	Net loss (unaudited)			—				—				—				—				—				—				—				—				—				—				—				—				—				(19,109	)			(19,109	)
BALANCE — September 30, 2005 (unaudited)				450,000			$	5,779				11,773,609			$	61,033				11,819,959			$	49,822				87,500			$	897				1,820,161			$	18			$	16,687			$	—			$	—			$	(112,119	)		$	(94,517	)

F-6

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Table of Contents

																		Nine Months Ended
						Year Ended December 31,												September 30,
						2002				2003				2004				2004				2005
																		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss					$	(17,290	)		$	(15,194	)		$	(20,957	)		$	(13,347	)		$	(19,109	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization					896				1,231				1,736				1,084				2,116
		Gain on sale of equipment					—				(7	)			—				—				—
		Stock-based compensation expense related to the issuance of stock options and restricted stock					363				381				254				145				571
		Realized loss on investments					81				—				—				—				—
		Noncash interest expense related to advance of milestone					—				—				225				169				169
		Noncash interest expense related to common stock warrants					13				7				—				—				6
		Provision for doubtful accounts					—				(42	)			—				—				—
		Changes in assets and liabilities:
			Accounts receivable				(3,925	)			4,583				109				(7	)			—
			Prepaid expenses and other current assets				(327	)			(982	)			416				(103	)			(279	)
			Other noncurrent assets				(166	)			6				(162	)			—				—
			Accounts payable and accrued expenses				1,391				(1,503	)			2,393				1,596				(661	)
			Milestones received as deferred revenue				9,580				5,000				1,500				1,500				3,974
			Deferred revenue recognized				(1,029	)			(2,023	)			(3,748	)			(2,552	)			(6,664	)
				Net cash used in operating activities			(10,413	)			(8,543	)			(18,234	)			(11,515	)			(19,877	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of investments						(79,627	)			(40,042	)			(51,206	)			(37,648	)			(31,844	)
	Maturities/sales of investments						65,299				45,309				24,036				8,689				50,204
	Purchases of property and equipment						(1,767	)			(1,295	)			(5,011	)			(2,466	)			(1,930	)
	Sale of equipment						—				10				—				—				—
				Net cash (used in) provided by investing activities			(16,095	)			3,982				(32,181	)			(31,425	)			16,430
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of preferred stock and related warrants						—				—				50,372				50,635				—
	Proceeds from exercise of stock options						—				3				82				81				296
	Proceeds from long-term debt						1,993				1,449				3,792				443				2,569
	Repayment of debt						(1,007	)			(796	)			(998	)			(716	)			(1,687	)
				Net cash provided by financing activities			986				656				53,248				50,443				1,178
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS							(25,522	)			(3,905	)			2,833				7,503				(2,269	)
CASH AND CASH EQUIVALENTS — Beginning of period							36,083				10,561				6,656				6,656				9,489
CASH AND CASH EQUIVALENTS — End of period						$	10,561			$	6,656			$	9,489			$	14,159			$	7,220
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for interest					$	155			$	249			$	243			$	190			$	491
	Equipment acquired under capital lease					$	598			$	394			$	—			$	—			$	—
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
	First and last months’ payments withheld from long-term debt proceeds					$	113			$	66			$	107			$	9			$	70

F-7

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Table of Contents

1.	Background

2.	Summary of Significant Accounting Policies

F-8

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Table of Contents

F-9

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Table of Contents

F-10

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Table of Contents

F-11

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Table of Contents

															Nine Months Ended
			Year Ended December 31,												September 30,
			2002				2003				2004				2004				2005
			(In thousands, except per share amounts)
Historical
Numerator:
Net loss attributable to common stockholders			$	(22,195	)		$	(20,099	)		$	(29,545	)		$	(19,282	)		$	(27,278	)
Denominator:
Weighted average common shares outstanding				1,687				1,687				1,704				1,700				1,722
Net loss attributable to common stockholders per share — basic and diluted			$	(13.16	)		$	(11.92	)		$	(17.33	)		$	(11.34	)		$	(15.84	)
Historical outstanding dilutive securities not included in diluted net loss per share attributable to common stockholders
Series A, B and C convertible preferred stock:
	Preferred shares			5,564				5,564				10,767				10,767				10,767
	Preferred stock warrants			508				508				1,653				1,653				1,653
Options to purchase common stock				1,183				1,598				2,118				1,721				3,034
Warrants to purchase common stock				2,460				2,464				2,468				2,464				2,468
Total				9,715				10,134				17,006				16,605				17,922
Unaudited Pro Forma
Numerator:
Net loss attributable to common stockholders used above											$	(29,545	)						$	(27,278	)
Pro forma adjustment to eliminate dividends and accretion on Series B and C convertible preferred stock												8,186								7,868
Pro forma net loss attributable to common stockholders											$	(21,359	)						$	(19,410	)
Denominator:
Shares used above												1,704								1,722
Pro forma adjustment to reflect weighted average effect of assumed conversion of Series A, B and C convertible preferred stock and accrued dividends payable in common stock												9,211								11,606
Shares used to compute pro forma basic and diluted net loss attributable to common stockholders												10,915								13,328
Pro forma net loss attributable to common stockholders per share — basic and diluted											$	(1.96	)						$	(1.46	)

F-12

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Table of Contents

3.	Related-Party Transactions

4.	Investments

						Gross
		Amortized				Unrealized				Aggregate
		Cost				Losses				Fair Value
Corporate fixed income		$	7,639,000			$	(1,000	)		$	7,638,000
Government securities			991,000				—				991,000
Auction rate preferred securities			7,150,000				—				7,150,000
Certificates of deposit			200,000				—				200,000
Total		$	15,980,000			$	(1,000	)		$	15,979,000

F-13

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Table of Contents

						Gross
		Amortized				Unrealized				Aggregate
		Cost				Losses				Fair Value
Corporate fixed income		$	20,892,000			$	(81,000	)		$	20,811,000
Government securities			18,707,000				(54,000	)			18,653,000
Auction rate preferred securities			3,050,000				—				3,050,000
Certificates of deposit			500,000				(2,000	)			498,000
Total		$	43,149,000			$	(137,000	)		$	43,012,000

5.	Property and Equipment

		December 31,
		2003				2004
Laboratory equipment		$	4,060,000			$	8,179,000
Computer equipment			755,000				840,000
Office equipment			306,000				372,000
Leasehold improvements			792,000				2,266,000
Software			261,000				321,000
Total property and equipment, at cost			6,174,000				11,978,000
Less accumulated depreciation			(2,791,000	)			(4,392,000	)
Property and equipment, net		$	3,383,000			$	7,586,000

6.	Other Assets

F-14

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Table of Contents

7.	Accounts Payable and Accrued Expenses

		December 31,
		2003				2004
Accounts payable — trade		$	1,475,000			$	2,768,000
Accounts payable — related party			8,000				57,000
Accrued compensation			436,000				445,000
Accrued clinical costs			362,000				1,120,000
Other accrued expenses			432,000				1,735,000
Total		$	2,713,000			$	6,125,000

8.	Indebtedness

			2003				2004
Borrowings under loan agreements:
	Equipment loans, due March 2006, June 2006, September 2006, February 2007, April 2007, June 2007, and October 2007, each bearing interest at 10.465%, payable in monthly installments of $18,715, $23,784, $7,174, $8,140, $6,060, $9,260, and $5,156, respectively, including interest		$	2,194,000			$	1,468,000
Equipment loans, due August 2008, November 2008, December 2008, January 2009, March 2009, April 2009, and June 2009 each bearing interest at 9.137%, 9.106%, 9.136%, 9.509%, 10.016%, 9.976%, and 9.786%, respectively, payable in monthly installments of $11,260, $11,264 $74,016, $37,395, $15,895, $5,717, and $5,346, respectively, including interest				—				3,761,000
Capital lease obligations				742,000				500,000
Total indebtedness				2,936,000				5,729,000
Less current portion				(972,000	)			(1,908,000	)
Long-term portion			$	1,964,000			$	3,821,000

F-15

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Table of Contents

		Capital				Loan				Total Long-
Year Ending December 31		Leases				Agreements				Term Debt
2005		$	266,000			$	1,657,000			$	1,923,000
2006			229,000				1,461,000				1,690,000
2007			25,000				1,129,000				1,154,000
2008			—				982,000				982,000
Total minimum payments			520,000				5,229,000				5,749,000
Less amount representing interest			20,000				—				20,000
Total principal			500,000				5,229,000				5,729,000
Less current portion			251,000				1,657,000				1,908,000
Total long-term debt		$	249,000			$	3,572,000			$	3,821,000

9.	Commitments and Contingencies

		Operating
Year Ending December 31		Leases
2005		$	1,557,000
2006			615,000
2007			400,000
2008			400,000
Total		$	2,972,000

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10.	Research and Development Arrangements and Significant Customers

			Year Ended
			December 31,
			2002				2003				2004
Customer:
	Dr. Falk			*	%			38	%			43	%
	CFFTI			36				11				43
	Pfizer, Inc.			*				16				*
	GlaxoSmithKline			10				*				*

*	Revenue derived from this customer was less than 10% of the Company’s total revenue for the applicable period.

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11.	Redeemable Preferred Stock

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12.	Stockholders’ Deficit

		Number				Exercise
Year Granted		Outstanding				Price				Expiration Date
2004			3,934			$	9.88				August 31, 2009 to December 17, 2009
2003			2,300				9.79				February 12, 2008 to October 27, 2008
			1,208				9.79				February 19, 2010 to April 17, 2010
2002			1,820				9.79				September 27, 2009 to October 28, 2009
			3,994				9.79				April 4, 2007 to September 27, 2007
2001			2,180				9.79				February 22, 2008
2000			11,915				9.79				October 20, 2007
			682				68.79				May 24, 2005
			1,017				7.86				January 18, 2005
1999			43,610				6.88				June 21, 2006
Total			72,660

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13.	Income Taxes

		2003				2004
Net operating loss carryforwards		$	8,339,000			$	17,092,000
Tax credit carryforwards			1,093,000				1,338,000
Deferred revenue			5,146,000				4,247,000
Capitalized research and development			1,319,000				1,579,000
Other			433,000				648,000
Net deferred tax assets			16,330,000				24,904,000
Valuation allowance			(16,330,000	)			(24,904,000	)
Net deferred tax balance		$	—			$	—

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14.	Stock Options

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							Average
							Exercise
			Shares				Price
Balance — January 1, 2002 (126,391 options vested)				710,377			$	4.33
	Granted			509,430				3.92
	Exercised			(13	)			5.02
	Canceled			(37,146	)			3.78
Balance — December 31, 2002 (320,075 options vested)				1,182,648				4.17
	Granted			496,642				3.92
	Exercised			(2,650	)			1.22
	Canceled			(78,110	)			4.13
Balance — December 31, 2003 (599,985 options vested)				1,598,530				4.10
	Granted			1,047,626				3.92
	Exercised			(29,745	)			2.82
	Canceled			(498,811	)			4.15
Balance — December 31, 2004 (826,570 options vested)				2,117,600				4.01
	Granted (unaudited)			1,263,192				3.94
	Exercised (unaudited)			(102,335	)			2.89
	Canceled (unaudited)			(244,346	)			3.92
Balance — September 30, 2005 (unaudited) (1,151,937 options vested)				3,034,111			$	4.04

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December 31, 2004
										Weighted-
										Average
										Remaining				Number
		Exercise				Number				Contractual				Vested and
		Price				Outstanding				Life (Years)				Exercisable
		$	0.11				11,895				4.8				11,895
			0.23				327				2.0				327
			0.92				39,904				3.0				39,904
			2.29				654				5.2				654
			3.44				14,391				5.6				14,391
			3.92				1,946,466				8.8				658,966
			7.25				80,849				6.0				80,849
			8.60				23,114				6.4				19,584
		$	0.11-$8.60				2,117,600				8.5				826,570

15.	Employee Benefit Plans

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16.	Selected Quarterly Financial Data (Unaudited)

															Basic and
															Diluted
															Net Loss
											Net Loss				Attributable
											Attributable				to Common
											to Common				Stockholders
(In thousands, except per share data)			Revenue				Net Loss				Stockholders				Per Share
Year Ended December 31, 2004
	First Quarter		$	1,072			$	(4,649	)		$	(5,873	)		$	(3.49	)
	Second Quarter			948				(3,647	)			(5,529	)			(3.27	)
	Third Quarter			1,056				(5,141	)			(7,880	)			(4.61	)
	Fourth Quarter			1,154				(7,520	)			(10,263	)			(5.98	)
Nine Months Ended September 30, 2005
	First Quarter			1,484				(7,099	)			(9,805	)			(5.71	)
	Second Quarter			1,118				(7,817	)			(10,540	)			(6.12	)
	Third Quarter			4,125				(4,193	)			(6,933	)			(4.01	)

17.	Subsequent Events (Unaudited)

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