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Delaware		2834		84-1568247
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

James C.T. Linfield, Esq.		David J. Segre, Esq.
Laura M. Medina, Esq.		Jose F. Macias, Esq.
Cooley Godward LLP		Wilson Sonsini Goodrich & Rosati
380 Interlocken Crescent		Professional Corporation
Suite 900		650 Page Mill Road
Broomfield, CO 80021		Palo Alto, California 94304
(720) 566-4000		(650) 493-9300

			Proposed Maximum
Title of Each Class of Securities			Aggregate			Amount of
to Be Registered			Offering Price(1)			Registration Fee
Common Stock, $0.001 par value per share			$100,000,000			$10,700

(1)	Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

		Per Share				Total
Price to Public			$				$
Underwriting Discounts and Commissions			$				$
Proceeds to Replidyne			$				$

Merrill Lynch & Co.	Morgan Stanley

Cowen & Company	Pacific Growth Equities, LLC

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		Page
Prospectus Summary			1
Risk Factors			6
Forward-Looking Statements			27
Use of Proceeds			28
Dividend Policy			28
Capitalization			29
Dilution			31
Selected Financial Data			33
Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Business			48
Management			71
Related Party Transactions			86
Principal Stockholders			90
Description of Capital Stock			93
Shares Eligible for Future Sale			98
Underwriters			100
Legal Matters			103
Experts			103
Where You Can Find Additional Information			104
Index to Financial Statements			F-1
Restated Certificate of Incorporation
Certificate of Amendment of Restated Certificate of Incorporation
Amendment and Restated Bylaws
Form of Amended and Restated Bylaws
Form of Warrant to Purchase Shares of Series A Convertible Preferred Stock
Form of Warrant to Purchase Shares of Series C Preferred Stock
Fourth Amended and Restated Stockholders' Agreement
Form of Indemnification Agreement for Directors
Form of Indemnification Agreement for Executive Officers
2006 Equity Incentive Plan
Form of Option Grant Notive and Option Agreement
2006 Employee Stock Purchase Plan
Form of Offering Document
Employment Agreement - Kenneth J. Collins
Employment Agreement - Nebojsa Janjic, Ph.D.
Employment Agreement - Peter Letendre Pharm.D.
Employment Agreement - Roger M. Echols, M.D.
Employment Agreement - Mark Smith
Employment Agreement - Donald Morrissey
Summary of Director Compensation Program
License Agreement
Amendment to License Agreement
Second Amendment to License Agreement
Supply Agreement
Lease Agreement - Crown Milford LLC
Lease Agreement - Triumph 1450 LLC
Collaboration and Commercialization Agreement
Letter from PricewaterhouseCoopers LLP
Consent of KPMG LLP

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	•	We and Forest Laboratories could disagree as to development plans, including clinical trials or regulatory approval strategy, or as to which additional indications for Orapem should be pursued. Disputes regarding the collaboration agreement that delay or terminate the development, commercialization or receipt of regulatory approvals of Orapem would harm our business and could result in significant litigation or arbitration.
	•	Forest Laboratories could fail to devote sufficient resources to the development, approval, commercialization, or marketing and distribution of Orapem. After the time periods stated in the collaboration agreement, Forest Laboratories could shift its research, development and

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		commercialization resources to other product opportunities including those that might be competitive with Orapem.
	•	Forest Laboratories has the contractual right to delay launch of Orapem following the initial FDA approval if that approval does not include both (i) acute sinusitis and (ii) either community-acquired pneumonia or acute exacerbation of chronic bronchitis.
	•	Forest Laboratories has the contractual right to delay launch of Orapem following the initial FDA approval until sufficient supplies of Orapem having at least an 18 month shelf-life are available, which we have not achieved to date.

	•	obtaining U.S. and foreign regulatory approvals for our lead product candidate, Orapem;
	•	successfully developing and securing regulatory approval for our other product candidate, REP8839; and
	•	successfully commercializing any product candidates for which we receive FDA approval.

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	•	the clinical indications for which the product candidate is approved;
	•	acceptance by physicians and patients of each product candidate as a safe and effective treatment;
	•	perceived advantages over alternative treatments;
	•	the cost of treatment in relation to alternative treatments, including numerous generic antibiotics;
	•	the extent to which the product candidate is approved for inclusion on formularies of hospitals and managed care organizations;
	•	the extent to which bacteria develop resistance to the product candidate, thereby limiting its efficacy in treating or managing infections;
	•	whether the product candidate is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections;
	•	the availability of adequate reimbursement by third parties;
	•	relative convenience and ease of administration; and
	•	prevalence and severity of side effects.

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	•	an uncured material breach of the supply agreement by us;
	•	our liquidation or insolvency; or
	•	in some circumstances, following a change of control.

	•	reliance on the third party for regulatory compliance and quality assurance;
	•	the possible breach of the manufacturing agreement by the third party because of factors beyond our control; and
	•	the possibility of termination or nonrenewal of the agreement by the third party because of our breach of the manufacturing agreement or based on its own business priorities.

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	•	Pre-clinical testing and clinical trials are protracted, expensive and uncertain processes. It might take us and our partner several years to complete the testing process, and failure can occur at any stage of the process. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful. These risks are potentially more pronounced in clinical tests involving children.
	•	We have not completed any clinical trials in children to date. A clinical trial conducted by Bayer for tonsillitis/pharyngitis in adults did not meet its primary end point.
	•	Any regulatory approval we ultimately obtain may be limited or subject to post-approval commitments that render the product not commercially viable.
	•	Any NDA or other marketing authorization applications that we may file might be denied by the FDA and analogous foreign regulators.
	•	This product candidate, even if found to be safe and effective, might be difficult to develop into a commercially viable drug or to manufacture on a large scale or might be uneconomical to market commercially.
	•	Third parties might market superior drugs or be more effective in marketing equivalent drugs.
	•	Even if this product candidate is successfully developed and effectively marketed, the size of the potential market might change such that our sales revenue is less than initially contemplated.
	•	Because of our relationship with our partner, Forest Laboratories, we are dependent on Forest Laboratories to commercialize Orapem.

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	•	we may be unable 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;
	•	the results of clinical trials may not meet the level of statistical significance required by the FDA or other regulatory authorities for approval;
	•	the FDA or other regulatory authorities may disagree with the design of our clinical trials;
	•	we may be unable to demonstrate that a product candidate’s benefits outweigh its risks;
	•	we may be unable to demonstrate that the product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;
	•	the FDA or comparable foreign regulatory authorities may disagree with out interpretation of data from pre-clinical studies or clinical trials;
	•	the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application or to obtain regulatory approval in the U.S. or elsewhere;
	•	the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
	•	the approval policies or regulations of the FDA or comparable foreign regulatory authorities may change.

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	•	decreased demand for our product candidates;
	•	injury to our reputation;
	•	withdrawal of clinical trial participants;
	•	significant litigation costs;
	•	substantial monetary awards to or costly settlement with patients;
	•	product recalls;
	•	loss of revenue; and
	•	the inability to commercialize our product candidates.

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	•	complete the clinical development of Orapem and REP8839;
	•	license or acquire additional product candidates;
	•	launch and commercialize any product candidates for which we receive regulatory approval, including building our own sales force to address certain markets; and
	•	continue our research and development programs.

	•	seek collaborators for our product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; and
	•	relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

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	•	manage our development efforts effectively;
	•	manage our clinical trials effectively;
	•	integrate additional management, administrative, manufacturing and sales and marketing personnel;
	•	maintain sufficient administrative, accounting and management information systems and controls; and
	•	hire and train additional qualified personnel.

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	•	collaborators may not pursue further development and commercialization of compounds resulting from collaborations or may elect not to renew research and development programs;
	•	collaborators may delay clinical trials, underfund a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require the development of a new formulation of a product candidate for clinical testing;
	•	a collaborator with marketing and distribution rights to one or more of our products may not commit sufficient resources to the marketing and distribution of our products, limiting our potential revenues from the commercialization of these products; and
	•	disputes may arise delaying or terminating the research, development or commercialization of our product candidates, or result in significant litigation or arbitration.

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	•	others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of our licensed patents, or for which we are not licensed under our license agreements;
	•	we or our licensors might not have been the first to make the inventions covered by our pending patent application or the pending patent applications and issued patents of our licensors;
	•	we or our licensors might not have been the first to file patent applications for these inventions;
	•	others may independently develop similar or alternative technologies or duplicate any of our technologies;
	•	it is possible that our pending patent applications will not result in issued patents;
	•	our issued patents and the issued patents of our licensors may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third parties;
	•	we may not develop additional proprietary technologies that are patentable; or
	•	the patents of others may have an adverse effect on our business.

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	•	announcement of FDA approval or non-approval of our product candidates, or specific label indications for their use, or delays in the FDA review process;
	•	actions taken by regulatory agencies with respect to our product candidates, clinical trials, manufacturing process or sales and marketing activities;
	•	changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;
	•	the success of our development efforts and clinical trials;
	•	the success of our efforts to acquire or in-license additional products or product candidates;
	•	developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners;
	•	actual or anticipated variations in our quarterly operating results;
	•	announcements of technological innovations by us, our collaborators or our competitors;
	•	new products or services introduced or announced by us or our commercialization partners, or our competitors and the timing of these introductions or announcements;
	•	actual or anticipated changes in earnings estimates or recommendations by securities analysts;
	•	conditions or trends in the biotechnology and biopharmaceutical industries;
	•	announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
	•	general economic and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors;
	•	changes in the market valuations of similar companies;
	•	sales of common stock or other securities by us or our stockholders in the future;
	•	additions or departures of key scientific or management personnel;
	•	developments relating to proprietary rights held by us or our competitors;
	•	disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
	•	trading volume of our common stock; and
	•	sales of our common stock by us or our stockholders.

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	•	authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
	•	limiting the removal of directors by the stockholders;
	•	prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
	•	eliminating the ability of stockholders to call a special meeting of stockholders; and
	•	establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

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	•	the success and timing of our pre-clinical studies and clinical trials;
	•	our ability to obtain and maintain regulatory approval of our product candidates and the labeling under any approval we may obtain;
	•	our plans to develop and commercialize our product candidates;
	•	the loss of key scientific or management personnel;
	•	the size and growth of the potential markets for our product candidates and our ability to serve those markets;
	•	regulatory developments in the U.S. and foreign countries;
	•	the rate and degree of market acceptance of any future products;
	•	our use of the proceeds from this offering;
	•	the accuracy of our estimates regarding expenses, future revenues and capital requirements;
	•	our ability to obtain and maintain intellectual property protection for our product candidates;
	•	the successful development of our sales and marketing capabilities;
	•	the success of competing drugs that are or become available; and
	•	the performance of third party manufacturers.

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	•	approximately $      million to fund clinical trials and other research and development activities;
	•	approximately $      million in future milestone payments to licensors;
	•	approximately $      million to fund activities in preparation for the potential commercial launch of Orapem; and
	•	the remainder to fund working capital, capital expenditures and other general corporate purposes.

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	•	on an actual basis,
	•	on a pro forma as adjusted basis to reflect:

	•	the filing of a restated certificate of incorporation to authorize                      shares of common stock and                      shares of undesignated preferred stock;
	•	the sale of                      shares of common stock in this offering at an assumed initial offering price of $           per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses;
	•	the conversion of all of our outstanding shares of preferred stock into shares of common stock upon the closing of this offering; and
	•	the issuance of                      shares of common stock upon the closing of this offering in satisfaction of accumulated dividends on our Series A, B, C and D convertible preferred stock, assuming an initial public offering price of $           per share, and the closing of this offering occurs on                     , 2006.

				As of December 31, 2005
								Pro Forma
				Actual				As Adjusted
								(unaudited)
				(in thousands, except
				share data)
Cash, cash equivalents and short-term investments				$	59,420			$
Preferred stock, $0.01 to $0.001 par value: 88,862,226 authorized, 88,522,222 issued and outstanding shares, actual; no authorized, issued and outstanding shares, as adjusted					136,815
Stockholders’ deficit:
	Common stock, $0.001 par value: 115,000,000 authorized shares; 9,306,129 issued shares and 9,156,129 outstanding shares, actual;            authorized shares;            issued shares and            outstanding shares, as adjusted				9
	Additional paid-in capital				—
	Treasury stock, $0.01 par value; 150,000 shares				(2	)
	Deferred stock-based compensation				(4	)
	Accumulated other comprehensive income				479
	Deficit accumulated during the development stage				(83,114	)
		Total stockholders’ (deficit) equity			(82,632	)
Total capitalization				$	54,183			$

	•	shares of common stock issuable upon the exercise of outstanding options, with a weighted average exercise price of $           per share;
	•	shares of common stock reserved for future issuance under our benefit plans; and

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	•	shares of common stock issuable upon the exercise of outstanding warrants, with a weighted average exercise price of $           per share.

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Assumed initial public offering price per share				$
Historical net tangible book value per share as of           , 2006		$
Decrease in net tangible book value per share attributable to conversion of convertible preferred stock and issuance of shares of common stock in satisfaction of accumulated dividends on convertible preferred stock
Pro forma net tangible book value per share before this offering		$
Increase in net tangible book value per share attributable to investors participating in this offering
Pro forma as adjusted net tangible book value per share after this offering				$
Dilution per share to investors participating in this offering				$

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			Shares Purchased								Total Consideration
																			Average Price
			Number				Percent				Amount				Percent				Per Share
Existing stockholders before this offering								%			$						%		$
Investors participating in this offering
	Total							100%			$					100	%

	•	shares of common stock subject to outstanding options, having a weighted average exercise price of $           per share;
	•	shares of common stock reserved for future issuance under our benefit plans as of the completion of this offering; and
	•	shares of common stock subject to outstanding warrants, having a weighted average exercise price of $           per share.

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				For the Period from
				December 6, 2000				Years Ended December 31,
				(Date of Inception)
				to December 31, 2001				2002				2003				2004				2005
				(in thousands, except share and per share amounts)
				(unaudited )				(unaudited)
Statement of Operations Data:
Revenue				$	49			$	—			$	726			$	834			$	441
Costs and expenses:
	Research and development				125				2,517				12,331				16,282				29,180
	Sales, general and administrative				397				1,275				2,155				2,994				5,329
		Total costs and expenses			522				3,792				14,486				19,276				34,509
		Loss from operations			(473	)			(3,792	)			(13,760	)			(18,442	)			(34,068	)
Other (expense) income, net					(12	)			30				(190	)			(797	)			399
Net loss					(485	)			(3,762	)			(13,950	)			(19,239	)			(33,669	)
Preferred stock dividends and accretion					—				(915	)			(1,294	)			(3,560	)			(7,191	)
Net loss attributable to common stockholders				$	(485	)		$	(4,677	)		$	(15,244	)		$	(22,799	)		$	(40,860	)
Basic and diluted net loss attributable to common stockholders per share(1):
	Historical			$	(0.15	)		$	(1.34	)		$	(4.25	)		$	(6.23	)		$	(7.99	)
	Pro forma (unaudited)																			$
Weighted average shares outstanding(1):
	Historical				3,308,238				3,479,725				3,589,945				3,659,885				5,111,873
	Pro forma (unaudited)

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		As of December 31,
		2001				2002				2003				2004				2005
		(unaudited)
		(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments		$	80			$	8,549			$	692			$	27,018			$	59,420
Working capital			(498	)			7,400				(1,657	)			24,409				50,755
Total assets			412				11,988				4,169				30,067				63,579
Long-term debt, net of current portion and discount			—				1,688				1,208				84				—
Deficit accumulated during the development stage			(485	)			(4,963	)			(20,108	)			(42,238	)			(83,114	)
Preferred stock			—				13,764				20,058				69,447				136,815
Total stockholders’ deficit			(428	)			(4,918	)			(20,115	)			(42,202	)			(82,632	)

(1)	Please see Note 1 to our financial statements for an explanation of the method used to calculate the historical and pro forma net loss attributable to common stockholders per share and the number of shares used in the computation of the per share amounts.

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	•	external research and development expenses, including the costs of materials relating to our pre-clinical studies and clinical trials;
	•	third party supplier, consultant and employee related expenses, including compensation and benefits;
	•	license fees associated with acquiring in-process research and development; and
	•	facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, information technology, laboratory and office supplies and depreciation of capital assets used to research and develop our product candidates.

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	Comparison of Years Ended December 31, 2005 and 2004

	•	the commencement of clinical trials for Orapem higher dose therapy for acute exacerbation of chronic bronchitis and an oral liquid formulation for pediatric use;
	•	activities related to completing our NDA for Orapem that was submitted in December 2005;
	•	expenses of $2.1 million payable to Daiichi Asubio upon submission of our NDA for Orapem in accordance with the terms of our license agreement;
	•	expanded pre-clinical development spending on REP8839; and
	•	increased personnel related costs to support our pre-clinical studies, clinical trials and other discovery efforts.

		Years Ended
		December 31,								Change
		2004				2005				$				%
		(in thousands)
Orapem		$	12,626			$	24,689			$	12,063				96	%
REP8839			2,629				3,634				1,005				38
Other research and development			1,027				857				(170	)			(17	)
		$	16,282			$	29,180			$	12,898				79	%

	•	advance our Phase III clinical trials for a higher dose adult Orapem therapy;
	•	complete our Phase II clinical trials for an oral liquid formulation of Orapem among pediatric patients; and
	•	initiate clinical development of REP8839.

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	Comparison of Years Ended December 31, 2004 and 2003

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		Years Ended
		December 31,								Change
		2003				2004				$				%
		(in thousands)
Orapem		$	634			$	12,626			$	11,992				1,891	%
REP8839			6,239				2,629				(3,610	)			(58	)
Other research and development			5,458				1,027				(4,431	)			(81	)
		$	12,331			$	16,282			$	3,951				33	%

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	•	the rate of progress and cost of our pre-clinical studies, clinical trials and other research and development activities;
	•	the scope and number of clinical development and research programs we pursue;
	•	the costs, timing and outcomes of regulatory approvals;
	•	the costs of establishing or contracting for marketing and sales capabilities, including the establishment of our own sales force;
	•	the extent to which we acquire or in-license new products, technologies or businesses;
	•	the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
	•	the terms and timing of any additional collaborative, strategic partnership or licensing agreements that we may establish.

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		Payments Due by Period
						Less than												Over
		Total				1 Year				1-3 Years				3-5 Years				5 Years
		(in thousands)
Operating lease obligations		$	3,592			$	712			$	1,213			$	1,256			$	411
Equipment financing obligations			172				172				—				—
		$	3,764			$	884			$	1,213			$	1,256			$	411

	•	contractual obligations for clinical trials that are payable on a per patient basis;
	•	royalty obligations, which would be payable based on sales of Orapem in future periods; and
	•	amounts due to Daiichi Asubio and GSK under our license agreements, which amounts are uncertain as to timing and dependent on the achievement of milestones.

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	•	Maximize commercial potential for Orapem as a leading community antibiotic. If approved, we intend to establish Orapem as a leading community antibiotic and a preferred branded oral beta-lactam in adult and pediatric markets. We believe that Orapem’s safety profile and spectrum of activity make it suitable for use against a wide variety of common bacterial infections. Forest Laboratories will market Orapem in the U.S. to primary care physicians using its established primary care sales force. We will seek to commercialize Orapem outside the U.S. and Canada through additional strategic collaborations.
	•	Develop specialty sales and marketing capabilities. We intend to build our own sales and marketing capabilities to target specialist physicians in major metropolitan areas. If Orapem is approved for adult use, we intend to promote Orapem directly to otolaryngologists (ear, nose and throat physicians) and Forest Laboratories will reimburse us for most of the related marketing and sales force costs. If Orapem is approved for pediatric use, we intend to expand our sales force to market Orapem to pediatricians. We plan to leverage this sales force to market other products that we may develop, acquire or in-license.
	•	Develop REP8839 to treat S. aureus infections. We are developing REP8839 for topical use in three target indications: treatment of skin and wound infections; eradication of S. aureus in hospital settings; and prevention of MRSA infections in hospital settings. Our pre-clinical studies have shown promising activity in each of these target indications. We expect to file an IND application for the development of a REP8839/mupirocin

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		combination product in 2006 and to aggressively pursue clinical development if the IND is approved.
	•	Discover and develop novel anti-infective products. We intend to expand our pipeline of novel anti-infective product candidates by continuing to pursue our discovery research programs. We plan to use our DNA replication inhibitor expertise to develop anti-infective products with novel mechanisms of action based on inhibition of bacterial DNA replication, which we believe may limit development of resistance to those products. We also have an active program to develop a treatment for C. difficile, a growing medical problem in hospital settings for which existing therapies have significant limitations, and are conducting pre-clinical testing of several small molecules to treat C. difficile.
	•	Acquire or in-license additional products or product candidates. We plan to leverage our development, regulatory and commercial resources by acquiring or in-licensing additional products or product candidates. These may include anti-infective products or other products that are prescribed by the physicians targeted by our sales force.

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										Drug Class Share of Indication
						Adult
						Oral Market				Beta-				Macrolides/								Other
Bacterial Infection Type				Indication		Prescriptions				Lactams				Ketolides				Quinolones				Antibiotics
						(in millions)
Upper Respiratory Tract Infections				Acute Bacterial Sinusitis			34.4				49.3	%			32.7	%			13.2	%			4.8	%
				Acute Otitis Media			9.0				68.2	%			21.4	%			6.8	%			3.6	%
				Tonsilitis/ Pharyngitis			19.0				70.8	%			25.4	%			2.4	%			1.3	%
Lower Respiratory Tract Infections				Acute Exacerbation of Chronic Bronchitis			33.5				21.5	%			50.5	%			19.2	%			8.9	%
				Community-Acquired Pneumonia			6.6				11.5	%			35.5	%			49.6	%			3.4	%
	Skin Infections			Uncomplicated Skin & Skin Structure Infections			34.2				62.8	%			6.7	%			14.3	%			16.1	%
Total											42.9	%			26.1	%			19.9	%			11.1	%

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										Drug Class Share of Indication
						Pediatric
						Oral Market				Beta-												Other
Bacterial Infection Type				Indication		Prescriptions				Lactams				Macrolides				Quinolones				Antibiotics
						(in millions)
Upper Respiratory Tract Infections				Acute Bacterial Sinusitis			4.8				84.8	%			14.0	%			0.0	%			1.1	%
				Acute Otitis Media			22.7				88.9	%			9.2	%			0.0	%			1.9	%
				Tonsillitis/Pharyngitis			9.3				89.0	%			10.0	%			0.0	%			1.0	%
Lower Respiratory Tract Infections				Acute Exacerbation of Chronic Bronchitis			3.5				43.0	%			53.7	%			0.0	%			3.3	%
				Community-Acquired Pneumonia			1.5				49.3	%			50.7	%			0.0	%			0.0	%
	Skin Infections			Uncomplicated Skin & Skin Structure Infections			2.8				81.8	%			8.6	%			0.0	%			9.6	%
Total											82.0	%			14.6	%			0.0	%			3.4	%

	•	Emergence of Drug-resistant Bacteria. Over the past several decades, many of the most prevalent bacteria that cause adult and pediatric respiratory and skin infections have developed resistance to currently marketed antibiotics. If bacteria are resistant, the infection can become difficult or impossible to treat and may lead to serious complications, including death. The two most prevalent bacteria in respiratory infections include Streptococcus pneumoniae, or S. pneumoniae and Haemophilus influenzae, or H. influenzae. According to the 2006 PROTEKT U.S. surveillance study, designed to track antibiotic resistance, more than 29% of the Streptococcus species are resistant to at least one of the drugs most commonly used to treat these infections. The rate of H. influenzae resistance to at least one of the drugs most commonly used to treat infections caused by this bacteria has reached 30%, as reported in the 2005 Journal of Clinical Infectious Disease. The U.S. Centers for Disease Control has stated that antibiotic resistance is now among that organization’s top concerns.
	•	Tolerability Issues. Many current oral antibiotics have been associated with tolerability issues that cause patients extreme discomfort and compliance issues that can lead to product failures. The most widely reported adverse event among leading oral antibiotics is diarrhea. The prescribing label for two of the leading oral beta-lactam antibiotics for use in adults, Augmentin and Omnicef, list diarrhea incidence levels that are approximately 15%.
	•	Safety Issues. Many of the common oral antibiotics in the quinolone and macrolide/ketolide classes are burdened with safety issues such as hepatotoxicity (drug related liver damage), heart rhythm abnormalities, photosensitivity (increased sensitivity to sunlight), hypoglycemia (low blood sugar), hyperglycemia (high blood sugar) or rash. Macrolide and ketolide class antibiotics are also associated with clinically meaningful drug

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		interaction issues with frequently prescribed drugs such as cholesterol lowering agents. To date, four of the nine quinolone antibiotics that have been marketed have been withdrawn from the market due to safety issues.

						Commercial Rights
Product Candidate
(Dosage Form)		Target Indications		Development Status		Replidyne		Partner
Orapem
300 mg tablet		Acute bacterial sinusitis Community-acquired pneumonia Acute exacerbation of chronic bronchitis Uncomplicated skin and skin structure infections		NDA submitted December 2005; currently under review		U.S.: specialists; co-promote option to exclusively promote to pediatricians Canada Sole negotiation right in rest of world, except Japan		Forest: U.S. primary care physicians and other non- specialists First refusal right in Canada
600 mg tablet		Acute exacerbation of chronic bronchitis		Phase III
Oral liquid		Acute otitis media		Phase II
formulation		(pediatric)
REP8839		Skin and skin structure infections Eradication of S. aureus in hospital settings Prevention of MRSA infections in hospital settings		Pre-clinical		Worldwide		Not applicable

	Orapem Program

	•	First oral penem available in the U.S. If approved by the FDA, Orapem would represent the first new sub-class of beta-lactams (penems) to be introduced in oral form for community use in more than 30 years. According to IMS Health, beta-lactams are the most widely used first-line therapy; however, over the years many bacteria have developed resistance to older beta-lactam antibiotics. Penems are intrinsically able to resist degradation by beta-lactamase enzymes. Because Orapem is a first product in a new class of

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		antibiotics, its introduction should not be burdened with the resistance issues at the levels associated with other existing antibiotics.
	•	Potency Profile. In vitro studies have indicated that Orapem is four times more active than Augmentin (amoxicillin/clavulanate) against S. pneumoniae, including those strains that have evolved resistance to penicillin or amoxicillin. Orapem is also generally twice as active as Augmentin against H. influenzae, including those strains that have evolved resistance to other beta-lactam antibiotics. In vitro potency does not always correlate to clinical efficacy.
	•	Safety profile consistent with other beta-lactam antibiotics. Due to its safety profile, we believe that Orapem would be appropriate as a first-line treatment for common respiratory and skin infections in the primary care setting. We believe that Orapem would allow physicians to reserve quinolones for second-line therapy, reducing quinolone resistance and improving the risk-to-benefit ratio for individual patients. Unlike carbapenems, Orapem has a low potential for neurotoxicity. In Phase III clinical testing, Orapem did not exhibit the potentially serious safety issues that affect the macrolide/ketolide and quinolone classes of antibiotics. Due to the safety issues previously listed for the ketolide and quinolone antibiotics, we do not anticipate competitive activity from products in these classes in the leading pediatric disease states (i.e. acute otitis media).
	•	Tolerability Profile. In the Phase II and Phase III clinical studies referenced in our NDA, the overall incidence of diarrhea was less than 5% in over 5,000 patients treated with Orapem. This rate of incidence compares favorably with the incidence of diarrhea reported in other commonly used beta-lactam antibiotics. Further, in two Phase III clinical studies in which Orapem was compared directly to Augmentin, the incidence of diarrhea was two to three times lower in the Orapem-treated patients.

	Pre-clinical Data

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			MIC90 (Ug/mL)
			Orapem				Augmentin				Omnicef				Zithromax				Levaquin
Respiratory Pathogens
S. pneumoniae
	Penicillin-susceptible			0.008				0.03				0.12				0.25				1
	Penicillin-intermediate			0.25				1				4				³512				1
	Penicillin-resistant			1				4				>4				³512				1
H. influenzae
	b-Lactamase-positive			0.5				2				0.5				4				0.015
	b-Lactamase-negative			1				1				1				4				0.015
M. catarrhalis
	b-Lactamase-positive			0.5				0.5				0.25				£0.06				0.06
	b-Lactamase-negative			0.12				0.03				0.12				£0.06				0.06
Skin Pathogens
S. aureus
	Methicillin-susceptible			0.12				1				0.5				>64				0.25
	Methicillin-resistant			>32				>32				—				>64				—
S. pyogenes				0.03				£0.015				£0.03				0.25				1

	Orapem for the Adult Market

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							Cefuroxime
			Orapem		Orapem		Axetil		Statistical
			300 mg		300 mg		250 mg		Result
Study			2x/day		2x/day		2x/day		95% CI
Population			n/n		n/n		n/n		%
Study 100288			7 days		10 days		10 days		Clinically Non-Inferior
	Clinically Evaluable		237/295(80%)		229/280(82%)		213/286(74%)		0.1, 13.6 (7 day) 1.7, 15.2 (10 day)
	Intent-to-Treat		262/366(72%)		255/363(70%)		250/370(68%)		-2.7, 10.5 (7 day) -3.9, 9.5 (10 day)
Study 10186			7 days				7 days		Clinically Non-Inferior
	Clinically Evaluable		203/228(89%)		—		198/224(88%)		-5.2, 6.4
	Intent-to-Treat		237/274(86%)		—		239/273(88%)		-7.0, 4.0
Study 100287			7 days						Open Label
	Clinically Evaluable		246/300(82%)		—		—		Not relevant
	Intent-to-Treat		269/353(76%)		—		—		Not relevant

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			Orapem				Statistical Result
Study			300 mg 2x/day 10 days		Comparator		95% CI
Population			n/n		n/n		%
					Amoxicillin		Clinically
Study 10188					1g 3x/day 10 days		Non-Inferior
	Clinically Evaluable		260/284 (92%)		237/268 (88%)		-1.9, 8.1
	Intent-to-Treat		289/314 (92%)		270/304 (89%)		-1.4, 7.8
					Amoxicillin/Clavulanate		Clinically
Study 10189					625 mg 3x/ day 10 days		Non-Inferior
	Clinically Evaluable		222/257 (86%)		223/253 (88%)		-7.6, 3.9
	Intent-to-Treat		242/305(79%)		242/309(78%)		-5.4, 5.9
					Cefpodoxime		Clinically
Study 100290					200 mg 2x/day 14 days		Non-Inferior
	Clinically Evaluable		205/229 (90%)		203/229 (89%)		-4.1, 7.1
	Intent-to-Treat		223/304 (73%)		224/298 (75%)		-7.4, 6.3
Study 100289							Open Label
	Clinically Evaluable		252/294 (86%)		—		Not relevant
	Intent-to-Treat		287/388 (74%)		—		Not relevant

			Orapem				Statistical Result
Study			300 mg 2x/day 5 days		Comparator		95% CI
Population			n/n		n/n		%
					Azithromycin		Clinically
Study 100291					500 mg 1 day, 200 mg 4 days		Non-Inferior
	Clinically Evaluable		225/278 (81%)		236/279 (85%)		-9.5, 2.6
	Intent-to-Treat		277/410 (68%)		283/405 (70%)		-8.5, 4.0
					Clarithromycin		Clinically
Study 10187					500 mg 2x/day 7days		Non-Inferior
	Clinically Evaluable		262/299 (88%)		288/318 (91%)		-7.9, 2.0
	Intent-to-Treat		316/369 (86%)		337/379 (89%)		-7.2, 2.0

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			Orapem				Statistical Result
Study			300 mg 2x/day 7 days		Comparator		95% CI
Population			n/n		n/n		%
					Cephalexin
Study 100292					500 mg 2x/day 7 days		Clinically Inferior
	Clinically Evaluable		210/246 (85%)		226/246 (92%)		-12.3, -1.3
	Intent-to-Treat		220/290 (76%)		228/283 (81%)		-11.5, 2.1
					Amoxicillin/Clavulanate		Clinically
Study 10190					625 mg 3x/day 7 days		Non-Inferior
	Clinically Evaluable		224/246 (91%)		207/227 (91%)		-5.1, 5.3
	Intent-to-Treat		258/298 (87%)		254/295 (86%)		-4.7, 6.4

	Safety and Tolerability Data

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	Orapem for the Pediatric Market

	REP8839 Program

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	Market Opportunity

	Differentiating Characteristics

	•	Novel mechanism of action. REP8839 is a synthetic antibiotic with a distinct mechanism of action from mupirocin and other marketed antibiotics. REP8839 is a selective inhibitor of methionyl tRNA synthetase, a previously unexploited drug target. REP8839 showed potent antibacterial activity in vitro against important skin pathogens such as S. aureus and S. pyogenes and is more potent than mupirocin in vitro against these skin pathogens.
	•	Low rate of spontaneous resistance emergence. Antibiotics are sometimes used in combination to prevent or delay the emergence of drug-resistant strains of bacteria. When drugs that act on different molecular targets are used in combination, the probability of emergence of strains resistant to both drugs is substantially reduced. Since REP8839 and mupirocin act on two distinct essential enzymes (tRNA synthetases), the probability that bacterial resistance will develop during therapy is low.

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	•	REP8839/mupirocin combination is unlikely to compromise the effectiveness of antibiotics used for the treatment of systemic infections. Because REP8839 and mupirocin have different mechanisms of action from the systemic antibacterial agents that are commonly used to treat more serious hospital infections, development of resistance to mupirocin or REP8839 would not jeopardize the efficacy of these systemic agents.

	Pre-Clinical Data and Clinical Development Strategy

	•	treatment of uncomplicated skin and skin structure infections, including secondarily infected traumatic skin lesions caused by S. aureus, MRSA and S. pyogenes;
	•	eradication of S. aureus, including MRSA, in hospital settings from nasal passages; and
	•	prevention of infections with S. aureus in hospital settings through eradication from nasal passages.

	•	DNA Replication Inhibitors Program. Bacterial DNA replication is an attractive target system for new antibacterial drugs since it is an essential process and stalled DNA replication can trigger cell death. However, to date, this is an underexploited drug target. We have reconstituted nine high-throughput assays targeting the central DNA replication complex from the following bacteria: Escherichia coli, S. pyogenes, Pseudomonis aeruginosa, S. aureus and Bacillus subtilis. Each high- throughput assay includes at least six protein components and many include twelve or more proteins that constitute the replication system of bacteria that need to work together in highly cooperative DNA replication reactions. These assays simultaneously target multiple sites that are amenable to inhibition by small molecules. We have screened a library of approximately 250,000 compounds assembled from various sources that are currently at the stage of lead optimization.
	•	Clostridium difficile Program. Another one of our discovery programs is focused on the identification of novel antibacterial drugs that are active against C. difficile. In recent years, C. difficile associated diarrhea (CDAD) has emerged as a major public health threat among

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		elderly patients in health care or long-term care institutions. Oral vancomycin is the only antibiotic that is currently approved by the FDA for the treatment of CDAD. Metronidazole is also used extensively in clinical practice following early reports of its efficacy in CDAD. However, recent studies have noted relatively high and growing incidence of treatment failure and relapse following both vancomycin and metronidazole therapy. Furthermore, widespread vancomycin use raises resistance concerns. Overall, options for the treatment of CDAD are currently limited and a need exists for the development of new agents to address this emerging problem.

		An ideal drug for treating CDAD would have good activity against C. difficile but limited activity against normal intestinal flora, low oral bioavailability and a mechanism-of-action that is distinct from antibiotics currently used for the treatment of systemic infections. We have recently identified a class of compounds with in vitro activity against C. difficile that may meet the above criteria. To date, we have synthesized and tested approximately 140 structurally related compounds and identified several compounds that have considerably improved antibacterial activity against C. difficile. We are currently studying pharmacology, toxicology and animal efficacy of several representative compounds.

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	•	Phase I. After an IND becomes effective, Phase I human clinical trials may begin. These trials evaluate a drug’s safety profile and the range of safe dosages that can be administered to healthy volunteers and/or patients, including the maximum tolerated dose that can be given to a trial subject with the target disease or condition. Phase I trials also determine how a drug is absorbed, distributed, metabolized and excreted by the body and the duration of its action.
	•	Phase II. Phase II clinical trials are typically designed to evaluate the potential effectiveness of the drug in patients and to further ascertain the safety of the drug at the dosage given in a larger patient population.
	•	Phase III. In Phase III clinical trials, the drug is usually tested in one or more controlled, randomized trials comparing the investigational new drug to an approved form of therapy or placebo in an expanded and well defined patient population and at multiple clinical sites. The goal of these trials is to obtain definitive statistical evidence of safety and effectiveness of the investigational new drug regimen as compared to a placebo or an approved standard therapy in defined patient populations with a given disease and stage of illness.
	•	Phase IV. Clinical trials are studies required of or agreed to by a sponsor that are conducted after the FDA has approved a product for marketing. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase IV clinical trial requirement. These clinical trials are often referred to as Phase III/ IV post approval clinical trials. Failure to promptly conduct Phase IV clinical trials could result in withdrawal of approval for products approved under accelerated approval regulations.

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Name		Age				Position
Kenneth J. Collins(1)			59			President, Chief Executive Officer and Director
Roger M. Echols, M.D.(1)			58			Chief Medical Officer
Nebojsa Janjic, Ph.D.(1)			45			Chief Scientific Officer and Secretary
Peter W. Letendre, Pharm.D.(1)			48			Chief Commercial Officer
Donald J. Morrissey, Jr.(1)			40			Senior Vice President, Corporate Development
Mark L. Smith(1)			44			Chief Financial Officer and Treasurer
Kirk K. Calhoun(2)			61			Director
Ralph E. Christoffersen, Ph.D.(4)			68			Director
Geoffrey Duyk, M.D., Ph.D.(3)			46			Director
Christopher D. Earl, Ph.D.(2)			49			Director
Augustine Lawlor(2)(3)			49			Director
Daniel J. Mitchell(3)(4)			49			Director
Henry Wendt(4)			72			Director

(1)	Executive officer.
(2)	Member of the audit committee.
(3)	Member of the compensation committee.
(4)	Member of the corporate governance and nominating committee.

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	•	Class I, which will consist of                     , and whose term will expire at our annual meeting of stockholders to be held in 2007;
	•	Class II, which will consist of                     , and whose term will expire at our annual meeting of stockholders to be held in 2008; and
	•	Class III, which will consist of                     , and whose term will expire at our annual meeting of stockholders to be held in 2009.

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	Audit Committee

	•	evaluating the performance of our independent auditors and deciding whether to retain their services;
	•	reviewing and pre-approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;
	•	reviewing our annual and quarterly financial statements and reports and discussing the statements and reports with our independent auditors and management;
	•	reviewing and approving all related-party transactions;
	•	reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation, and matters concerning the scope, adequacy and effectiveness of our financial controls; and
	•	establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters.

	Compensation Committee

	•	determining the compensation and other terms of employment of our executive officers and senior management and reviewing and approving corporate performance goals and objectives relevant to such compensation;
	•	evaluating and recommending to our board of directors the equity incentive plans, compensation plans and similar programs advisable for us, as well as modification or termination of existing plans and programs;
	•	reviewing and approving appropriate insurance coverage for our officers and directors; and
	•	reviewing and approving the terms of any employment agreements, severance arrangements, change-in-control protections and any other compensatory arrangements for our executive officers.

	Corporate Governance and Nominating Committee

	•	developing and maintaining a current list of the functional needs and qualifications of members of our board of directors;
	•	evaluating director performance on the board and applicable committees of the board and determining whether continued service on our board is appropriate;
	•	interviewing, evaluating, nominating and recommending individuals for membership on our board of directors;

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	•	evaluating nominations by stockholders of candidates for election to our board;
	•	reviewing and reporting annually to our board of directors an assessment of our board’s performance;
	•	reviewing and recommending to our board of directors any amendments to our corporate governance documents; and
	•	reviewing and recommending to our board of directors changes with respect to corporate governance issues, issues of broad social significance and our overall conduct as a responsible corporate citizen.

	•	$17,500 per year for service as a board member;
	•	$7,500 per year for service as chairman of the audit committee;
	•	$2,500 per year for service as chairman of the compensation committee or the nominating and corporate governance committee;
	•	$1,500 for each board meeting attended in person ($750 for meetings attended by video or telephone conference);
	•	$1,500 for each audit or compensation committee meeting attended by the chairman of such committee in person ($750 for meetings attended by video or telephone conference); and
	•	$1,000 for each committee meeting attended in person by members who are not chairman of such committee ($500 for meetings attended by video or telephone conference).

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			Annual Compensation								Number of
											Securities				All Other
Name and Principal Position			Salary				Bonus				Underlying Options				Compensation
Kenneth J. Collins			$	305,000			$	122,000
	President, Chief Executive Officer and Member of the Board of Directors
Roger M. Echols, M.D.				325,000				149,500
	Chief Medical Officer
Nebojsa Janjic, Ph.D.				250,000				75,000
	Chief Scientific Officer and Secretary
Peter W. Letendre, Pharm.D				217,708				210,000							$	299,603	(1)
	Chief Commercial Officer
Donald J. Morrissey, Jr.				205,000				61,500
	Senior Vice President, Corporate Development

(1)	Represents housing and relocation costs.

Individual Grants(1)

% of Total

Potential Realizable

Options

Value at Assumed

Number of

Granted to

Annual Rates of

Securities

Employees in

Stock Price Appreciation

Underlying

the Year Ended

Exercise or

for Option Term(3)

Options

December 31,

Base Price

Expiration

Name

Granted

2005(2)

($/Sh)

Date

5%

10%

Kenneth J. Collins

Roger M. Echols M.D.

Nebojsa Janjic, Ph.D.

Peter W. Letendre, Pharm.D.

Donald J. Morrissey, Jr.

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(1)	These options, which are immediately exercisable, vest as follows, subject to cessation of vesting upon the termination of the optionholder’s continued service to us:
(2)	Based on                     options granted during the fiscal year ended December 31, 2005 under our amended and restated 2006 Equity Incentive Plan, including grants to executive officers.
(3)	Potential realizable values are computed by (a) multiplying the number of shares of common stock subject to a given option by an assumed initial public offering price of $           per share, (b) assuming that the aggregate 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 (c) subtracting from that result the aggregate option exercise price. The 5% and 10% assumed annual rates of stock price appreciation are mandated by the rules of the SEC and do not represent our estimate or projection of future common stock prices.

Number of Securities

Value of Unexercised

Underlying Unexercised

In-the-Money Options

Shares

Options at Fiscal Year-End

at Fiscal Year-End(1)

Acquired

Value

Name

on Exercise

Realized

Exercisable

Unexercisable

Exercisable

Unexercisable

Kenneth J. Collins

Roger M. Echols, M.D.

Nebojsa Janjic, Ph.D.

Peter W. Letendre, Pharm.D.

Donald J. Morrissey, Jr.

(1)	The value of an unexercised in-the-money option as of December 31, 2005 is equal to the excess of an assumed initial public offering price of $           per share over the exercise price for the option, multiplied by the number of shares subject to the option, without taking into account any taxes that may be payable in connection with the transaction.

	Employment Agreements

	•	salary continuation for a period of 12 months from the date of termination; and
	•	reimbursement for the cost of continued medical insurance coverage through the end of this 12 month period or, if earlier, the date on which the employee obtains alternative group health insurance.

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	•	salary continuation for a period of 12 months (or 18 months with respect to Mr. Collins and Dr. Janjic) from the date of termination;
	•	reimbursement for the cost of continued medical insurance coverage through the end of this 12 month period (or 18 month period with respect to Mr. Collins and Dr. Janjic) or if earlier, the date on which the employee obtains alternative group health insurance; and
	•	acceleration of vesting of all of the employee’s outstanding unvested options to purchase our common stock.

Officer		Base Salary				Bonus Eligibility
Kenneth J. Collins		$	350,000				50% of Base Salary
Roger M. Echols, M.D.		$	345,000				30% of Base Salary
Nebojsa Janjic, Ph.D.		$	275,000				30% of Base Salary
Peter W. Letendre, Pharm.D.		$	295,000				40% of Base Salary
Donald J. Morrissey, Jr.		$	240,000				30% of Base Salary
Mark L. Smith		$	280,000				30% of Base Salary

	Confidential Information and Inventions Agreement

	2006 Equity Incentive Plan

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	•	Initial Option Grant. Each non-employee member of our board of directors who has been a non-employee member of our board of directors for at least 12 months as of the effective date of this offering will, on the effective date of this offering, receive an option to purchase                      shares of our common stock. In addition, each new non-employee member of our board of directors elected or appointed after the effective date of this offering will, at the time of his or her initial election or appointment to the board of directors, receive an option

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		to purchase                      shares of our common stock. An option grant described in this paragraph is referred to as an “initial option grant.”
	•	Annual Awards. On the date of each annual meeting of our stockholders, commencing with the annual meeting in 2007 (the “annual award date”), each non-employee member of our board of directors who has been a non-employee member of our board of directors for at least 6 months as of the date of such annual meeting, will be automatically granted a stock award (the “annual award”) as follows:

	•	Form of Annual Award. The annual award will be either in the form of a nonstatutory stock option grant or stock bonus award. In the calendar year prior to the grant of an annual award, the board of directors decides whether the annual award will be in the form of a nonstatutory stock option or stock bonus award. If the board of directors does not make such a determination by December 31st of the preceding calendar year, the annual awards to be granted in the subsequent calendar year will be granted in the form of a nonstatutory stock option.
	•	Number of Shares for Annual Awards. If the annual award is in the form of a nonstatutory stock option (the “annual option grant”), each non-employee director receiving an annual award will receive an option to purchase                      shares of our common stock. If the annual award is in the form of a restricted stock award, the annual award will not be more favorable to a non-employee director than that number of unvested shares of our common stock equal to the quotient obtained by dividing (a) the “fair value” of an annual option grant at such time, as determined under generally accepted accounting principles and using the option pricing model employed by us for purposes of estimating the value of compensatory stock options, by (b) the fair market value of our common stock on the date of grant. In addition, the board of directors has the authority to provide that the issuance of a stock bonus will be delivered in a stock unit award with shares to be delivered when shares would have otherwise vested under the annual stock bonus award.

	•	Terms of Non-Discretionary Grant Program Options. The exercise price of each option granted under the non-discretionary grant program shall be equal to 100% of the fair market value of the common stock subject to the option on the date of grant. The maximum term of options granted under the non-discretionary grant program is 10 years. Annual option grants will vest on the one-year anniversary of the grant date. Initial option grants will vest in 3 equal installments on each anniversary of the grant date. Vesting ceases when the optionee is no longer in our service as a director, employee or consultant. The remaining terms and conditions of each option is set forth in an option agreement in the form adopted from time to time by the board of directors.
	•	Terms of Non-Discretionary Grant Program Restricted Stock Awards. Restricted stock awards under the non-discretionary grant program are granted in consideration for past or future services rendered to us. Annual stock bonus awards will vest on the one-year anniversary of the grant date. Vesting ceases when the optionee is no longer in our service as a director, employee or consultant. The remaining terms and conditions of each stock bonus award is set forth in the stock bonus award agreement in the form adopted form time to time by the Board.
	•	Change in Control. In the event of certain significant corporate transactions constituting a change in control, the vesting of stock awards granted under the non-discretionary grant program will automatically accelerate in full, unless provided otherwise in an applicable award agreement.

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	2006 Employee Stock Purchase Plan

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	•	85% of the fair market value of a share on the first day of the offering, or
	•	85% of the fair market value of a share on the purchase date.

	•	85% of the fair market value of a share on the day they began participating in the purchase plan, or
	•	85% of the fair market value of a share on the purchase date.

	401(k) Plan

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	•	breach of their duty of loyalty to the corporation or its stockholders,
	•	act or omission not in good faith or that involves intentional misconduct or a knowing violation of law,
	•	unlawful payment of dividends or redemption of shares, or
	•	transaction from which the directors derived an improper personal benefit.

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Stockholder(1)		Series A Preferred				Series C Preferred				Series D Preferred
Holders of More than 5%
HealthCare Investment Partners Holdings III, LLC											5,555,556
Entities affiliated with HealthCare Ventures VI, L.P.(2)			8,250,300				7,200,000				3,447,188
Morgenthaler Partners VII, L.P.			2,000,000				6,400,000				1,874,163
OZ Master Fund, Ltd.											7,777,778
Perseus-Soros Biopharmaceutical Fund, LP							5,600,000				1,110,554
Entities affiliated with Sequel Limited Partnership III(3)			2,000,000				3,200,000				1,160,196
Entities affiliated with TPG Biotechnology Partners, L.P.(4)							9,600,000				2,705,756
Entities affiliated with Duquesne Capital Management LLC(5)											6,388,889

(1)	Additional detail regarding these stockholders and their equity holdings is provided in “Principal Stockholders.”
(2)	Includes: (a) 8,250,300 shares of Series A preferred stock held by HealthCare Ventures VI, L.P.; (b) 7,200,000 shares of Series C preferred stock held by HealthCare Ventures VI, L.P.; and (c) 3,447,188 shares of Series D preferred Stock held by HealthCare Ventures VIII, L.P. Upon completion of this offering, these shares will convert into                      shares of common stock.
(3)	Includes: (a) 1,945,920 shares of Series A preferred stock held by Sequel Limited Partnership III; (b) 54,080 shares of Series A preferred stock held by Sequel Entrepreneurs’ Fund III, L.P.; (c) 3,113,472 shares of Series C preferred stock held by Sequel Limited Partnership III; (d) 86,528 shares of Series C preferred stock held by Sequel Entrepreneurs’ Fund III, L.P.; (e) 1,128,824 shares of Series D preferred stock held by Sequel Limited Partnership III; and (f) 31,372 shares of Series D preferred stock held by Sequel Entrepreneurs’ Fund III., L.P. Upon completion of this offering, these shares will convert into                      shares of common stock.
(4)	Includes: (a) 2,880,000 shares of Series C preferred stock held by TPG Ventures, L.P.; (b) 6,720,000 shares of Series C preferred stock held by TPG Biotechnology Partners, L.P.; (c) 811,727 shares of Series D preferred stock held by TPG Ventures, L.P.; and (d) 1,894,029 shares of Series D preferred stock held by TPG Biotechnology Partners, L.P. Upon completion of this offering, these shares will convert into                      shares of common stock.
(5)	Includes: (a) 1,111,111 shares of Series D preferred stock held by Juggernaut Fund, L.P.; (b) 211,111 shares of Series D preferred stock held by Iron City Fund, Ltd.; and (c) 5,066,667 shares of Series D preferred stock held by Windmill Master Fund, L.P. Upon completion of this offering, these shares will convert into                      shares of common stock.

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Director		Principal Stockholder
Henry Wendt		HealthCare Investment Partners
Augustine Lawlor		HealthCare Ventures VI, L.P.
Ralph E. Christoffersen Ph.D.		Morgenthaler Partners VII, L.P.
Daniel J. Mitchell		Sequel Limited Partnership III
Geoffrey Duyk M.D., Ph.D.		TPG Biotechnology Partners, L.P.

						Shares of Series C
						Preferred Stock
		Principal Amount				Issued upon
Holders of More Than 5%		of Loan				Conversion
HealthCare Ventures VI, L.P.		$	2,800,000				2,240,000
Morgenthaler Partners, VII, L.P.		$	2,800,000				2,240,000
Entities affiliated with Sequel Limited Partnership III(1)		$	1,400,000				1,120,000

(1)	Includes: (a) a loan of $1,362,144 from Sequel Limited Partnership III and 1,089,715 shares of Series C preferred stock issued upon conversion; and (b) a loan of $37,856 from Sequel Entrepreneurs’ Fund III, L.P. and 30,285 shares of Series C preferred stock issued upon conversion.

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	•	each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;
	•	each of our directors;
	•	each of our named executive officers; and
	•	all of our directors and executive officers as a group.

Percentage of Shares

Beneficially Owned

Number of Shares

Name and Address of Beneficial Owner

Beneficially Owned

Before Offering

After Offering

5% Stockholders

Duquesne Capital Management LLC and its affiliates(1)

6.47%

HealthCare Investment Partners Holdings II LLC(2)

5.63%

HealthCare Ventures VI, L.P. and its affiliates(3)

19.24%

Morgenthaler Partners VII, L.P.(4)

10.48%

OZ Master Fund, Ltd

7.88%

Perseus-Soros Biopharmaceutical Fund, LP(5)

6.80%

Sequel Limited Partnership III and its affiliates(6)

6.48%

TPG Biotechnology Partners, L.P. and its affiliates(7)

12.46%

Named Executive Officers and Directors

Kenneth J. Collins(8)

2.63%

Kirk K. Calhoun(9)

*

Ralph E. Christoffersen Ph.D.(4)

*

Geoffrey Duyk M.D., Ph.D.(7)

*

Christopher D. Earl Ph.D.(10)

*

Augustine Lawlor(3)

*

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Percentage of Shares

Beneficially Owned

Number of Shares

Name and Address of Beneficial Owner

Beneficially Owned

Before Offering

After Offering

Daniel J. Mitchell(6)

*

Henry Wendt(2)

*

Roger M. Echols M.D.(11)

*

Nebojsa Janjic Ph.D.(12)

1.98%

Peter W. Letendre Pharm.D.(13)

*

Donald J. Morrissey, Jr.(14)

*

Mark Smith(15)

*

All directors and executive officers as a group (13 persons)(16)

6.07%

	*	Represents beneficial ownership of less than 1%.

(1)	Includes                      shares held by Windmill Master Fund, L.P.,                      shares held by Juggernaut Fund, L.P. and                      shares held by Iron City Fund, Ltd. The address for all entities and individuals affiliated with Duquesne Capital Management LLC is 2579 Washington Road, Suite 322, Pittsburgh, PA 15241.
(2)	Henry Wendt is a managing director of HealthCare Investment Partners Holdings II LLC. The address for HealthCare Investment Partners Holdings II LLC is 400 West Dry Creek Road, Healdsburg, CA 95448.
(3)	Includes                      shares held by HealthCare Ventures VIII, L.P. Mr. Lawlor is a general partner of HealthCare Partners VI, L.P. which is the general partner of HealthCare Ventures VI, L.P. Mr. Lawlor is also the managing director of HealthCare Partners VIII LLC which is the general partner of HealthCare Partners VIII, L.P. which is the general partner of HealthCare Ventures VIII, L.P. of HealthCare Ventures VI, L.P. Mr. Lawlor disclaims beneficial ownership of these shares except to the extent of his proportionate pecuniary interest in these securities. The address for all entities and individuals affiliated with HealthCare Ventures VIII, L.P. is 55 Cambridge Parkway, Suite 301, Cambridge, MA 02142.
(4)	Includes                      shares that Morgenthaler Partners VII, L.P. has the right to acquire from us within 60 days of April 1, 2006 pursuant to the exercise of outstanding warrants. Ralph Christoffersen, Ph.D. is a General Partner of Morgenthaler Partners VII, L.P. Dr. Christoffersen disclaims beneficial ownership of these shares except to the extent of his proportionate pecuniary interest in these securities. The address for Morgenthaler Partners VII, L.P. is 4430 Arapahoe Avenue, Suite 220, Boulder, CO 80303.
(5)	Perseus-Soros Partners, LLC is the general partner of the Perseus-Soros BioPharmaceutical Fund, LP. Perseus BioTech Fund Partners, LLC and SFM Participation, L.P. are the managing members of Perseus-Soros Partners, LLC. Perseuspur, LLC is the managing member of Perseus BioTech Fund Partners, LLC. Frank Pearl is the sole member of Perseuspur, LLC and in such capacity may be deemed a beneficial owner of securities held for the account of the Perseus-Soros BioPharmaceutical Fund, LP. SFM AH, LLC is the general partner of SFM Participation, L.P. The sole managing member of SFM AH, LLC is Soros Fund Management LLC. George Soros is the Chairman of Soros Fund Management LLC and in such capacity may be deemed a beneficial owner of securities held for the account of the Perseus-Soros BioPharmaceutical Fund, LP. The address of Perseus-Soros BioPharmaceutical Fund, LP is 888 Seventh Avenue, 30th Floor, New York, New York 10106.
(6)	Includes                      shares held by Sequel Entrepreneurs’ Fund III, L.P. Also includes                      shares that Sequel Limited Partnership III and Sequel Entrepreneurs’ Fund III, L.P. have the right to acquire from us within 60 days of April 1, 2006 pursuant to the exercise of outstanding warrants. Daniel Mitchell is a manager of Sequel Venture Partners, the general partner of Sequel Limited Partnership III and Sequel Entrepreneurs’ Fund III, L.P. Mr. Mitchell disclaims beneficial ownership of these shares except to the extent of his proportionate pecuniary interest in these securities. The address for all entities and individuals affiliated with Sequel Limited Partnership III is 4430 Arapahoe Avenue, Suite 220, Boulder, CO 80303.

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	(7)	Includes                      shares held by TPG Ventures, L.P. Geoffrey Duyk, M.D., Ph.D. is Managing Partner of TPG Ventures, L.P. and TPG Biotechnology Partners, L.P. Dr. Duyk disclaims beneficial ownership of these shares except to the extent of his proportionate pecuniary interest in these securities. The address for all entities and individuals affiliated with TPG Biotechnology Partners, L.P. is 345 California Street, Suite 2600, San Francisco, CA 94104.
	(8)	Includes                     unvested shares which are subject to a right of repurchase in our favor as of                     , 2006,                      shares held by Ryan D. Collins and                      shares held by Brendan C. Collins, of which Mr. Collins is custodian. Also includes                      shares Mr. Collins has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.
	(9)	Includes                      shares Mr. Calhoun has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.

(10)	Christopher D. Earl does not have voting or dispositive power with respect to any of the shares owned by Perseus-Soros Biopharmaceutical Fund, LP.
(11)	Includes                     unvested shares which are subject to a right of repurchase in our favor as of                     , 2006. Also includes                      shares Dr. Echols has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.
(12)	Includes                     unvested shares which are subject to a right of repurchase in our favor as of                     , 2006. Also includes                      shares Dr. Janjic has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.
(13)	Includes                     unvested shares which are subject to a right of repurchase in our favor as of                     , 2006. Also includes                      shares Dr. Letendre has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.
(14)	Includes                      shares Mr. Morrissey has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.
(15)	Includes                      shares Mr. Smith has the right to acquire within 60 days of April 1, 2006 through the exercise of options,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.
(16)	Includes shares, options and warrants described in the notes above, as applicable to our directors and named executive officers. Includes an aggregate of                      shares subject to a repurchase option in favor of us and an aggregate of                     additional shares subject to options exercisable within 60 days of April 1, 2006 held by our directors and named executive officers,                     of which would be initially unvested and subject to a right of repurchase by us as of                     , 2006 that would lapse over the vesting schedule.

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	•	prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder,
	•	the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do

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		not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or
	•	on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3 % of the outstanding voting stock which is not owned by the interested stockholder.

	•	any merger or consolidation involving the corporation and the interested stockholder,
	•	any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation,
	•	subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder, and
	•	the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

	•	permit our board of directors to issue up to                      shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control);
	•	provide that the authorized number of directors may be changed only by resolution of the board of directors;
	•	provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
	•	divide our board of directors into three classes;
	•	require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;
	•	provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice;
	•	do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); and
	•	provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

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	•	no restricted shares will be eligible for immediate sale upon the completion of this offering;
	•	restricted shares, less shares subject to a repurchase option in our favor tied to the holders’ continued service to us, which will be eligible for sale upon lapse of the repurchase option, will be eligible for sale upon expiration of lock-up agreements 180 days after the date of this prospectus; and
	•	the remainder of the restricted shares will be eligible for sale from time to time thereafter upon expiration of their respective one-year holding periods, but could be sold earlier if the holders exercise any available registration rights.

	•	1% of the number of shares of our common stock then outstanding, which will equal approximately                      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 on Form 144 with respect to the sale.

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		Number of
Underwriters		Shares
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Cowen & Co., LLC
Pacific Growth Equities, LLC
Total

Per Share

Without Option

With Option

Public offering price

$

$

$

Underwriting discount

$

$

$

Proceeds, before expenses, to us

$

$

$

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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;
	•	otherwise dispose of or transfer any common stock;
	•	file or cause to be filed any registration statement related to the common stock; or
	•	enter into any swap or other arrangement or any transaction that transfers, in whole or in party, directly or indirectly, any of the economic consequences 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.

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	•	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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		Page(s)
Report of Independent Registered Public Accounting Firm			F-2
Balance Sheets			F-3
Statements of Operations			F-4
Statements of Preferred Stock, Stockholders’ Deficit, and Comprehensive Loss			F-5
Statements of Cash Flows			F-9
Notes to Financial Statements			F-10

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	/s/ KPMG LLP

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				December 31,
				2004				2005
ASSETS
Current assets:
	Cash and cash equivalents			$	4,640			$	4,353
	Short-term investments				22,378				55,067
	Notes receivable from officers				—				375
	Prepaid expenses and other current assets				105				275
		Total current assets			27,123				60,070
Property and equipment, net					2,904				3,248
Other assets					40				261
		Total assets		$	30,067			$	63,579
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
	Accounts payable and accrued expenses			$	1,216			$	9,154
	Current portion of deferred revenue				283				—
	Current portion of long-term debt, net of discount				1,215				161
		Total current liabilities			2,714				9,315
Deferred revenue, net of current portion					24				—
Long-term debt, net of current portion and discount					84				—
Other long-term liabilities					—				81
		Total liabilities			2,822				9,396
Commitments and contingencies
Preferred stock:
	Series A redeemable convertible preferred stock, $0.01 par value. Authorized 13,140,000 shares; issued and outstanding 13,000,000 shares (liquidation value of $17,015 at December 31, 2005); at accreted redemption value				15,886				16,940
	Series B convertible preferred stock, $0.01 par value. Authorized 4,000,000 shares; issued and outstanding 4,000,000 shares (liquidation value of $6,030 at December 31, 2005)				5,630				6,030
	Series C redeemable convertible preferred stock, $0.01 par value. Authorized 37,000,004 shares; issued and outstanding 36,800,000 shares (liquidation value of $51,764 at December 31, 2005); at accreted redemption value				47,931				51,635
	Series D redeemable convertible preferred stock, $0.001 par value. Authorized 34,722,222 shares; issued and outstanding 34,722,222 shares at December 31, 2005 (liquidation value of $64,364 at December 31, 2005); at accreted redemption value				—				62,210
Stockholders’ deficit:
	Common stock, $0.001 par value. Authorized 66,600,000 and 115,000,000 shares; issued 3,874,140 and 9,306,129 shares and outstanding 3,724,140 and 9,156,129 shares at December 31, 2004 and 2005, respectively				4				9
	Treasury stock, $0.01 par value; 150,000 shares				(2	)			(2	)
	Deferred stock-based compensation				(7	)			(4	)
	Accumulated other comprehensive income				41				479
	Deficit accumulated during the development stage				(42,238	)			(83,114	)
		Total stockholders’ deficit			(42,202	)			(82,632	)
		Total liabilities, preferred stock and stockholders’ deficit		$	30,067			$	63,579

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																Period from
																December 6,
																2000 (date of
				Year Ended December 31,												inception) to
																December 31,
				2003				2004				2005				2005
Revenue				$	726			$	834			$	441			$	2,050
Costs and expenses:
	Research and development				12,331				16,282				29,180				60,435
	Sales, general and administrative				2,155				2,994				5,329				12,150
		Total costs and expenses			14,486				19,276				34,509				72,585
		Loss from operations			(13,760	)			(18,442	)			(34,068	)			(70,535	)
Interest and other income					88				172				722				1,085
Interest and other expense					(278	)			(500	)			(323	)			(1,186	)
Loss on extinguishment of convertible notes payable					—				(469	)			—				(469	)
		Net loss			(13,950	)			(19,239	)			(33,669	)			(71,105	)
Preferred stock dividends and accretion					(1,294	)			(3,560	)			(7,191	)			(12,960	)
		Net loss attributable to common stockholders		$	(15,244	)		$	(22,799	)		$	(40,860	)		$	(84,065	)
Net loss attributable to common stockholders per share — basic and diluted				$	(4.25	)		$	(6.23	)		$	(7.99	)		$	(22.33	)
Weighted average shares outstanding — basic and diluted					3,589,945				3,659,885				5,111,873				3,764,497

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		Preferred Stock																																Stockholders’ Deficit
		Series A																Series C								Series D
		Redeemable								Series B								Redeemable								Redeemable																																				Deficit
		Convertible								Convertible								Convertible								Convertible																																Accumulated				Accumulated
		Preferred Stock								Preferred Stock								Preferred Stock								Preferred Stock								Common Stock								Treasury Stock								Additional				Deferred Stock-				Other				During the				Total
																																																		Paid-In				Based				Comprehensive				Development				Stockholders’
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Compensation				Income				Stage				Deficit
Balances, December 6, 2000 (date of inception)			—			$	—				—			$	—				—			$	—				—			$	—				—			$	—				—			$	—			$	—			$	—			$	—			$	—			$	—
Estimated fair value of common stock issued to founder in December 2000 for services ($27) and contributed assets (at historical cost of $24)			—				—				—				—				—				—				—				—				2,700,000				3				—				—				48				—				—				—				51
Issuance of common stock to employee in December 2000 for cash at $0.01 per share			—				—				—				—				—				—				—				—				540,000				1				—				—				5				—				—				—				6
Estimated fair value of common stock issued to university for license to technology in January 2001 at $0.01 per share			—				—				—				—				—				—				—				—				64,800				—				—				—				—				—				—				—				—
Estimated fair value of common stock issued to non- employee for services in July 2001 at $0.01 per share			—				—				—				—				—				—				—				—				15,000				—				—				—				—				—				—				—				—
Issuance of common stock upon exercise of stock options			—				—				—				—				—				—				—				—				6,500				—				—				—				—				—				—				—				—
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(485	)			(485	)
Comprehensive loss																																																																			(485	)
Balances, December 31, 2001			—				—				—				—				—				—				—				—				3,326,300				4				—				—				53				—				—				(485	)			(428	)
Return of common stock issued to founder in January 2002 at $0.01 per share			—				—				—				—				—				—				—				—				—				—				(1,000,000	)			(10	)			10				—				—				—				—
Estimated fair value of common stock issued to an employee in January 2002 for services, at $0.01 per share			—				—				—				—				—				—				—				—				310,000				—				—				—				3				—				—				—				3
Estimated fair value of common stock issued to an employee from treasury stock in January 2002 for services, at $0.01 per share			—				—				—				—				—				—				—				—				—				—				850,000				8				—				—				—				—				8
Issuance of Series A redeemable convertible preferred stock in February 2002 for cash of $1.00 per share, net of $151 of issuance costs			13,000,000				12,849				—				—				—				—				—				—				—				—				—				—				—				—				—				—				—
Stock-based compensation related to stock option grants to non-employees			—				—				—				—				—				—				—				—				—				—				—				—				5								—				—				5
Warrants issued in conjunction with debt			—				—				—				—				—				—				—				—				—				—				—				—				128				—				—				—				128
Accretion of offering costs on redeemable preferred stock			—				20				—				—				—				—				—				—				—				—				—				—				(20	)			—				—				—				(20	)

F-5

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Table of Contents

		Preferred Stock																																Stockholders’ Deficit
		Series A																Series C								Series D
		Redeemable								Series B								Redeemable								Redeemable																																				Deficit
		Convertible								Convertible								Convertible								Convertible																																Accumulated				Accumulated
		Preferred Stock								Preferred Stock								Preferred Stock								Preferred Stock								Common Stock								Treasury Stock								Additional				Deferred Stock-				Other				During the				Total
																																																		Paid-In				Based				Comprehensive				Development				Stockholders’
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Compensation				Income				Stage				Deficit
Non-cash dividends on preferred stock			—			$	895				—			$	—				—			$	—				—			$	—				—			$	—				—			$	—			$	(179	)		$	—			$	—			$	(716	)		$	(895	)
Unrealized gain on available-for-sale equity securities			—				—				—				—				—				—				—				—				—				—				—				—				—				—				43				—				43
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(3,762	)			(3,762	)
Comprehensive loss																																																																			(3,719	)
Balances, December 31, 2002			13,000,000				13,764				—				—				—				—				—				—				3,636,300				4				(150,000	)			(2	)			—				—				43				(4,963	)			(4,918	)
Issuance of common stock upon exercise of stock options			—				—				—				—				—				—				—				—				47,644				—				—				—				4				—				—				—				4
Estimated fair value of common stock issued to university for license to technology in February 2003 at $0.10 per share			—				—				—				—				—				—				—				—				85,200				—				—				—				9				—				—				—				9
Issuance of Series B convertible preferred stock in June 2003 for research and development, at estimated fair value of $1.25 per share			—				—				4,000,000				5,000				—				—				—				—				—				—				—				—				—				—				—				—				—
Warrants issued in conjunction with convertible notes			—				—				—				—				—				—				—				—				—				—				—				—				69				—				—				—				69
Stock-based compensation related to stock option grants to non-employees			—				—				—				—				—				—				—				—				—				—				—				—				7				—				—				—				7
Deferred stock- based compensation related to stock option grants to employees			—				—				—				—				—				—				—				—				—				—				—				—				10				(10	)			—				—				—
Amortization of deferred stock-based compensation			—				—				—				—				—				—				—				—				—				—				—				—				—				1				—				—				1
Accretion of offering costs on redeemable preferred stock			—				24				—				—				—				—				—				—				—				—				—				—				(24	)			—				—				—				(24	)
Non-cash dividends on preferred stock			—				1,040				—				230				—				—				—				—				—				—				—				—				(75	)			—				—				(1,195	)			(1,270	)

F-6

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Table of Contents

		Preferred Stock																																Stockholders’ Deficit
		Series A																Series C								Series D
		Redeemable								Series B								Redeemable								Redeemable																																				Deficit
		Convertible								Convertible								Convertible								Convertible																																Accumulated				Accumulated
		Preferred Stock								Preferred Stock								Preferred Stock								Preferred Stock								Common Stock								Treasury Stock								Additional				Deferred Stock-				Other				During the				Total
																																																		Paid-In				Based				Comprehensive				Development				Stockholders’
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Compensation				Income				Stage				Deficit
Realized gain on available-for-sale equity securities			—				—				—				—				—				—				—				—				—				—				—				—				—				—				(43	)			—				(43	)
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(13,950	)			(13,950	)
Comprehensive loss																																																																			(13,993	)
Balances, December 31, 2003			13,000,000				14,828				4,000,000				5,230				—				—				—				—				3,769,144				4				(150,000	)			(2	)			—				(9	)			—				(20,108	)			(20,115	)
Issuance of common stock upon exercise of stock options			—				—				—				—				—				—				—				—				104,996				—				—				—				11				—				—				—				11
Issuance of Series C redeemable, convertible preferred stock in April, August, September, and November 2004 for cash of $1.25 per share and the conversion of $7,000 of convertible notes payable, net of $171 of issuance costs			—				—				—				—				36,800,000				45,829				—				—				—				—				—				—				—				—				—				—				—
Warrants issued in conjunction with convertible notes			—				—				—				—				—				—				—				—				—				—				—				—				652				—				—				—				652
Stock-based compensation related to stock option grants to non-employees			—				—				—				—				—				—				—				—				—				—				—				—				6				—				—				—				6
Amortization of deferred stock-based compensation			—				—				—				—				—				—				—				—				—				—				—				—				—				2				—				—				2
Accretion of offering costs on redeemable preferred stock			—				18				—				—				—				18				—				—				—				—				—				—				(36	)			—				—				—				(36	)
Non-cash dividends on preferred stock			—				1,040				—				400				—				2,084				—				—				—				—				—				—				(633	)			—				—				(2,891	)			(3,524	)
Unrealized gain on available-for-sale equity securities			—				—				—				—				—				—				—				—				—				—				—				—				—				—				41				—				41
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(19,239	)			(19,239	)
Comprehensive loss																																																																			(19,198	)
Balances, December 31, 2004			13,000,000				15,886				4,000,000				5,630				36,800,000				47,931				—				—				3,874,140				4				(150,000	)			(2	)			—				(7	)			41				(42,238	)			(42,202	)
Issuance of common stock upon exercise of stock options			—				—				—				—				—				—				—				—				5,431,989				5				—				—				286				—				—				—				291
Issuance of Series D redeemable, convertible preferred stock in August 2005 for cash of $1.80 per share, net of issuance costs of $2,323			—				—				—				—				—				—				34,722,222				60,177				—				—				—				—				—				—				—				—				—
Stock-based compensation related to stock option grants to an employee			—				—				—				—				—				—				—				—				—				—				—				—				54				—				—				—				54
Stock-based compensation related to stock option grants to non-employees			—				—				—				—				—				—				—				—				—				—				—				—				1				—				—				—				1

F-7

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Table of Contents

		Preferred Stock																																Stockholders’ Deficit
		Series A																Series C								Series D
		Redeemable								Series B								Redeemable								Redeemable																																				Deficit
		Convertible								Convertible								Convertible								Convertible																																Accumulated				Accumulated
		Preferred Stock								Preferred Stock								Preferred Stock								Preferred Stock								Common Stock								Treasury Stock								Additional				Deferred Stock-				Other				During the				Total
																																																		Paid-In				Based				Comprehensive				Development				Stockholders’
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Compensation				Income				Stage				Deficit
Reclassification of warrants on redeemable preferred stock			—				—				—				—				—				—				—				—				—				—				—				—				(341	)			—				—				(16	)			(357	)
Amortization of deferred stock-based compensation			—				—				—				—				—				—				—				—				—				—				—				—				—				3				—				—				3
Accretion of offering costs on redeemable preferred stock			—				14				—				—				—				24				—				169				—				—				—				—				—				—				—				(207	)			(207	)
Non-cash dividends on preferred stock			—				1,040				—				400				—				3,680				—				1,864				—				—				—				—				—				—				—				(6,984	)			(6,984	)
Realized gain on available-for-sale equity securities			—				—				—				—				—				—				—				—				—				—				—				—				—				—				(41	)			—				(41	)
Unrealized gain on available-for-sale equity securities			—				—				—				—				—				—				—				—				—				—				—				—				—				—				479				—				479
Net loss			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(33,669	)			(33,669	)
Comprehensive loss																																																																			(33,231	)
Balances, December 31, 2005			13,000,000			$	16,940				4,000,000			$	6,030				36,800,000			$	51,635				34,722,222			$	62,210				9,306,129			$	9			$	(150,000	)		$	(2	)		$	—			$	(4	)		$	479			$	(83,114	)		$	(82,632	)

F-8

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Table of Contents

																		Period from
																		December 6,
																		2000 (date of
						Year Ended December 31,												inception) to
																		December 31,
						2003				2004				2005				2005
Cash flows from operating activities:
	Net loss					$	(13,950	)		$	(19,239	)		$	(33,669	)		$	(71,105	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation					877				1,013				1,258				3,302
		Stock-based compensation					17				9				58				128
		Amortization of debt discount and issuance costs					39				282				35				357
		Issuance of Series B convertible preferred stock for research and development					5,000				—				—				5,000
		Loss on extinguishment of convertible notes payable					—				469				—				469
		Other					—				—				28				28
		Realized gains on investments					(77	)			(142	)			(469	)			(752	)
		Changes in operating assets and liabilities:
			Government grants receivable				155				124				—				72
			Prepaid expenses and other current assets				(201	)			134				(182	)			(272	)
			Other assets				(46	)			43				(288	)			(330	)
			Accounts payable and accrued expenses				197				528				6,996				8,118
			Deferred revenue				590				(283	)			(307	)			—
			Deferred grant revenue				(155	)			(124	)			—				—
			Other long-term liabilities				—				—				81				81
				Net cash used in operating activities			(7,554	)			(17,186	)			(26,459	)			(54,904	)
Cash flows from investing activities:
	Purchases of short-term investments						(6,984	)			(158,346	)			(157,281	)			(342,235	)
	Maturities of short-term investments						13,000				136,150				125,500				288,399
	Proceeds from sale of equipment						—				—				1				1
	Acquisition of property and equipment						(823	)			(886	)			(1,570	)			(6,475	)
				Net cash provided by (used in) investing activities			5,193				(23,082	)			(33,350	)			(60,310	)
Cash flows from financing activities:
	Advances from stockholder						—				—				—				90
	Repayment of advances from stockholder						—				—				—				(90	)
	Proceeds from debt						709				—				—				3,410
	Principal payments on debt						(894	)			(957	)			(1,173	)			(3,241	)
	Proceeds from convertible notes payable						667				6,333				—				7,000
	Proceeds from issuance of common stock						4				11				291				311
	Proceeds from sale of Series A redeemable convertible preferred stock, net						—				—				—				12,849
	Proceeds from sale of Series C redeemable convertible preferred stock, net						—				38,829				—				38,829
	Cash contributed from an affiliated entity upon formation						—				—				—				5
	Bank overdraft						—				—				227				227
	Proceeds from sale of Series D redeemable convertible preferred stock, net						—				—				60,177				60,177
				Net cash provided by financing activities			486				44,216				59,522				119,567
				Net (decrease) increase in cash and cash equivalents			(1,875	)			3,948				(287	)			4,353
Cash and cash equivalents:
	Beginning of period						2,567				692				4,640				—
	End of period					$	692			$	4,640			$	4,353			$	4,353
Supplemental cash flow information:
	Cash paid for interest					$	239			$	307			$	75			$	687
Supplemental disclosure of non-cash investing and financing activities:
	Net assets contributed by an affiliated entity upon formation:
		Cash				$	—			$	—			$	—			$	5
		Government grants receivable					—				—				—				72
		Property and equipment					—				—				—				42
		Accrued expenses					—				—				—				(95	)
				Net assets		$	—			$	—			$	—			$	24
	Warrants issued in conjunction with debt and convertible notes payable					$	69			$	652			$	—			$	848
	Conversion of convertible bridge note into Series C redeemable, convertible preferred stock					$	7,000			$	—			$	—			$	7,000
	Notes receivable issued to officers for the exercise of stock options					$	—			$	—			$	356			$	356

F-9

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Table of Contents

(1)	The Company and Summary of Significant Accounting Policies

(a)	The Company

(b)	Development Stage Risks

(c)	Basis of Presentation

(d)	Accounting Estimates in the Preparation of Financial Statements

F-10

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Table of Contents

(e)	Cash and Cash Equivalents

(f)	Short-Term Investments

(g)	Concentrations of Credit Risk

F-11

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Table of Contents

(h)	Derivative Instruments

(i)	Property and Equipment

(j)	Long-Lived Assets and Impairments

(k)	Segments

(l)	Stock-Based Compensation

F-12

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Table of Contents

														Inception to
		2003				2004				2005				Date
Net loss attributable to common stockholders, as reported		$	(15,244,000	)		$	(22,799,000	)		$	(40,860,000	)		$	(84,065,000	)
Add: stock-based employee compensation expense included in reported net loss attributable to common stockholders			1,000				3,000				57,000				101,000
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards			(6,000	)			(29,000	)			(98,000	)			(172,000	)
Pro forma net loss attributable to common stockholders		$	(15,249,000	)		$	(22,825,000	)		$	(40,901,000	)		$	(84,136,000	)
Net loss attributable to common stockholders per share — basic and diluted, as reported		$	(4.25	)		$	(6.23	)		$	(7.99	)		$	(22.33	)
Pro forma net loss attributable to common stockholders per share — basic and diluted		$	(4.25	)		$	(6.24	)		$	(8.00	)		$	(22.35	)

F-13

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Table of Contents

														Inception
		2003				2004				2005				to Date
Expected dividend yield			—	%			—	%			—	%			—	%
Risk-free interest rates			2.71	%			3.93	%			4.19	%			3.86	%
Volatility			0.001	%			0.001	%			0.001	%			0.001	%
Expected lives			5  years				5  years				5  years				5 years

(m)	Net Loss Per Share

(n)	Fair Value of Financial Instruments

(o)	Revenue Recognition

F-14

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(p)	Research and Development

(q)	Comprehensive Loss

F-15

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Table of Contents

(r)	Income Taxes

(s)	Recent Accounting Pronouncements

F-16

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Table of Contents

(2)	Property and Equipment

			December 31,
			2004				2005
Laboratory equipment			$	2,627,000			$	2,993,000
Furniture and fixtures				384,000				737,000
Computer equipment and software				438,000				871,000
Leasehold improvements				1,527,000				1,974,000
	Total property and equipment, at cost			4,976,000				6,575,000
Less accumulated depreciation and amortization				(2,072,000	)			(3,327,000	)
	Property and equipment, net		$	2,904,000			$	3,248,000

(3)	Accounts Payable and Accrued Expenses

		December 31,
		2004				2005
Accounts payable — trade		$	844,000			$	3,458,000
Accrued payments to Daiichi Asubio (Note 6)			—				2,122,000
Accrued clinical trial costs			—				493,000
Accrued employee bonuses			—				977,000
Proceeds from common shares subject to repurchase			—				373,000
Value of warrants on redeemable convertible preferred stock			—				580,000
Accrued rent under the straight-line method			212,000				220,000
Bank overdraft			—				227,000
Payroll taxes payable			4,000				149,000
Accrued professional fees			9,000				108,000
Accrued vacation			31,000				106,000
Other accrued expenses			116,000				341,000
		$	1,216,000			$	9,154,000

(4)	Long-Term Debt

(a)	Equipment Loan and Security Agreement

F-17

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(b)	Convertible Promissory Notes

F-18

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(5)	Related-Party Transactions

(a)	Clinical Trials Service Agreement with Quintiles, Inc.

(b)	Notes Receivable from Officers

(6)	Commitments and Contingencies

(a)	Operating Leases

For the Year Ending December 31,
2006			$	712,000
2007				590,000
2008				623,000
2009				657,000
2010				599,000
Thereafter				411,000
	Total future minimum lease payments		$	3,592,000

F-19

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(b)	Indemnifications

(c)	Daiichi Asubio License Agreement

(d)	Daiichi Asubio and Nippon Soda Supply Agreement

F-20

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Table of Contents

(e)	Tropon Supply Agreement

(f)	Derivative Instruments

			Notional				Fair
			Amount				Value
Option contracts:
	Purchased		$	9,316,000			$	151,000
	Sold			—				—

(7)	Preferred Stock

						Shares				Aggregate
		Shares				Issued and				Liquidation
		Designated				Outstanding				Value
Series A			13,140,000				13,000,000			$	17,015,000
Series B			4,000,000				4,000,000				6,030,000
Series C			37,000,004				36,800,000				51,764,000
Series D			34,722,222				34,722,222				64,364,000
			88,862,226				88,522,222			$	139,173,000

(a)	Series A Redeemable Convertible Preferred Stock

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(b)	Series B Convertible Preferred Stock

(c)	Series C Redeemable Convertible Preferred Stock

(d)	Series D Redeemable Convertible Preferred Stock

(e)	Redeemable Convertible Preferred Stock Warrants

(f)	Preferred Stockholder Rights and Preferences

	Preferred Stockholders are entitled to receive, when and as declared or paid by the board of directors, dividends at the rate of 8% per annum of the applicable original purchase price, accrued on a quarterly basis. Dividends shall be payable, as accrued, and whether or not declared,

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	on any liquidation, sale, redemption or conversion of Series A, Series B, Series C, or Series D, respectively, to common stock. No dividend shall be declared or paid on common stock unless, concurrently, a similar dividend or distribution is declared or paid on each outstanding share of Series A, Series B, Series C, and Series D.
	If the funds of the Company are insufficient to pay the holders of Preferred Stock the full amount of accrued dividends to which each of them are entitled, then such funds will be distributed first among the holders of Series D at the time outstanding; thereafter, any remaining funds will be distributed among the holders of the remaining series of preferred stock at the time outstanding.

With respect to rights on liquidation, including a sale of substantially all of the Company’s assets, the shares of Series D shall rank senior and prior to the shares of Series A, Series B, and Series C stock. In the event of any liquidation, dissolution or winding-up of the Company, Series D stockholders shall be entitled to receive an amount per share equal to the original purchase price, plus an amount equal to accrued dividends and declared but unpaid dividends (without compounding) before any payment shall be made to the Series A, Series B, and Series C stockholders. In the event of any liquidation dissolution or winding-up of the Company, and after the payment of the full liquidation preference shall have been made to the Series D stockholders, Series C stockholders shall be entitled to receive an amount per share equal to the original purchase price, plus an amount equal to accrued and declared but unpaid dividends (without compounding) before any payment is made to the Series A and Series B stockholders (the Junior Preferred) or common stockholders. In the event of any liquidation, and after the payment of the full liquidation preference made to the Series D stockholders and Series C stockholders, the holders of shares of the Junior Preferred then outstanding shall be entitled to receive an amount per share equal to the original purchase price, plus an amount equal to accrued dividends and declared but unpaid dividends (without compounding) before any payment is made to the common stockholders. After all liquidation payments have been made in full to the Preferred Stockholders, the Preferred Stockholders participate with the common stockholders in the remaining proceeds on an as-if-converted to common stock basis.

	At the request of the holders of a majority of the shares of Series D then outstanding (a Series D Requesting Holder), the Company shall redeem at any time after July 31, 2010 (the Series D Redemption Date) all of the shares of Series D then outstanding at a redemption price per share equal to the original purchase price, plus an amount equal to accrued dividends and declared but unpaid dividends (without compounding).
	At the request of the holders of a majority of the shares of Series C (a Series C Requesting Holder), and subject to the approval of the holders of a majority of the shares of Series D then outstanding (the Required Holders), the Company shall redeem at any time after July 31, 2011 (the Series C Redemption Date) up to 25% of the Series C preferred stock owned of record by the requesting stockholder and in each subsequent year thereafter up to 25% of the Series C preferred stock that was owned of record by the requesting stockholder on the redemption date, plus the number of shares of Series C that could have been redeemed in the year or years following the redemption date which the requesting stockholder elected not to redeem, at a redemption price per share equal to the original purchase price, plus an amount equal to accrued dividends and declared but unpaid dividends (without compounding).

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	At the request of the holders of a majority of the shares of Series A (a Series A Requesting Holder and, together with a Series D Requesting Holder and a Series C Requesting Holder, a Requesting Holder), the Company, subject to the approval of the Required Holders, shall redeem at any time after July 31, 2011 (the Series A Redemption Date) up to 25% of the Series A preferred stock owned of record by the requesting stockholder and in each subsequent year thereafter up to 25% of the Series A preferred stock that was owned of record by the requesting stockholder on the redemption date, plus the number of shares of Series A preferred stock that could have been redeemed in the year or years following the redemption date which the requesting stockholder elected not to redeem, at a redemption price per share equal to the original purchase price, plus an amount equal to accrued dividends and declared but unpaid dividends (without compounding).
	Unless otherwise waived by the Required Holders, in no event shall any shares of Series A or Series C be redeemed prior to the redemption of all shares of Series D, whether or not a redemption request has been made by Requesting Holders.
	Pursuant to the Series A, Series C, and Series D redemption rights, the Company has accrued dividends of $4.0 million, $5.8 million and $1.9 million at December 31, 2005, respectively. Series B stockholders have no redemption rights; however, pursuant to Series B liquidation and conversion rights, the Company has accrued dividends of $1.0 million at December 31, 2005.

Preferred Stockholders are entitled to vote together with common stockholders as one class based on the number of common stock into which each share of Series A, Series B, Series C, and Series D preferred stock, respectively, is then convertible. Series D stockholders, voting as a separate class, shall have the exclusive right to elect one member of the board of directors. Series C stockholders, voting as a separate class, shall have the exclusive right to elect three members of the board of directors. Series A stockholders, voting as a separate class, shall have the exclusive right to elect two members of the board of directors.

	Preferred stockholders have the right, at any time, to convert any or all of their preferred stock into fully paid and nonassessable shares of common stock equal to the quotient of the respective original purchase price divided by the respective conversion price (at December 31, 2005, the conversion price equals the original purchase price for Series A, Series B, Series C, and Series D, respectively), as adjusted. For shares of Series B, the shares issuable upon conversion also includes accrued but unpaid dividends.
	Automatic conversion of the preferred stock into common stock occurs immediately prior to the closing of a firm commitment for an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, at a market capitalization of at least $300 million and cash proceeds to the Company of at least $50 million.
	At December 31, 2005, the Company has 13,140,000, 4,000,000, 37,000,004 and 34,722,222 shares of common stock reserved for the conversion of Series A, Series B, Series C and Series D, respectively.

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(8)	Common Stock

	Treasury Stock

(9)	Stock Options and Employee Benefits

F-25

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							Weighted
							Average
			Number of				Exercise
			Shares				Price
Balance at inception				—			$	—
	Granted			1,018,873				0.010
	Exercised			(6,500	)			0.010
Balance — December 31, 2002				1,012,373				0.098
	Granted			713,630				0.100
	Exercised			(47,644	)			0.080
	Cancelled			(59,500	)			0.100
Balance — December 31, 2003				1,618,859				0.099
	Granted			4,863,600				0.125
	Exercised			(104,996	)			0.110
	Cancelled			(66,563	)			0.110
Balance — December 31, 2004				6,310,900				0.119
	Granted			2,793,033				0.162
	Exercised			(5,431,989	)			0.127
	Cancelled			(75,646	)			0.108
Balance — December 31, 2005				3,596,298				0.140

Options Exerciseable at:
December 31, 2002			27,462
December 31, 2003			322,412
December 31, 2004			1,636,701
December 31, 2005			650,517

														Stock Options
		Stock Options Outstanding												Exercisable
						Weighted
						Average				Weighted								Weighted
						Remaining				Average								Average
		Number of				Contractual				Exercise				Number of				Exercise
Exercise Price		Shares				Life (years)				Price				Shares				Price
$0.100			536,854				7.02			$	0.100				360,427			$	0.100
0.125			2,578,819				9.01				0.125				290,090				0.125
0.270			480,625				9.82				0.270				—				—
			3,596,298				8.45				0.140				650,517				0.111

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										Estimated Fair
										Market Value per
		Shares of Common								share of the
		Stock Underlying				Exercise Price Per				Underlying Common
Grant Date		Option Grants				Share				Stock
March 9, 2005			1,195,000			$	0.125			$	0.125
May 26, 2005			367,408			$	0.125			$	0.125
June 10, 2005			510,000			$	0.125			$	0.125
August 18, 2005			180,625			$	0.27			$	0.19
September 8, 2005			230,000			$	0.27			$	0.19
November 30, 2005			230,000			$	0.27			$	0.27
December 8, 2005			80,000			$	0.27			$	0.27
Total 2005 Option Grants			2,793,033

	Stock-Based Compensation

		2003				2004				2005				Inception Period
Risk-free interest rate			3.34 - 4.41%				4.22 - 4.82%				4.05%				3.34% - 5.33%
Expected life (in years)			10				10				10				10
Expected volatility			100%				100%				100%				100%
Expected dividend yield			—%				—%				—%				—%

(10)	Income Taxes

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				2004				2005
Deferred tax assets:
	Net operating loss carryforwards			$	13,723,000			$	25,961,000
	Research and experimental credits				547,000				1,443,000
	Depreciation and amortization				114,000				283,000
	Accrued expenses				105,000				534,000
		Total deferred tax assets			14,489,000				28,221,000
Valuation allowance					(14,489,000	)			(28,221,000	)
		Net deferred tax assets		$	—			$	—

		December 31,
														Inception
		2003				2004				2005				Period
U.S. federal income tax benefit at statutory rates		$	(4,882,000	)		$	(6,739,000	)		$	(11,784,000	)		$	(24,892,000	)
State income tax benefit, net of federal benefit			(421,000	)			(557,000	)			(1,094,000	)			(2,224,000	)
Permanent differences			6,000				274,000				39,000				337,000
Research and experimentation credits			(55,000	)			(420,000	)			(905,000	)			(1,452,000	)
Other items			—				(43,000	)			12,000				10,000
Change in valuation allowance			5,352,000				7,485,000				13,732,000				28,221,000
		$	—			$	—			$	—			$	—

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															Basic and Diluted
											Net Loss				Net Loss Attributable
											Attributable				to Common
											to Common				Stockholders
			Revenue				Net Loss				Stockholders				per Share
Year ended December 31, 2004:
	First quarter		$	209			$	(2,526	)		$	(2,892	)		$	(0.80	)
	Second quarter			208				(6,947	)			(7,778	)			(2.14	)
	Third quarter			209				(3,225	)			(4,337	)			(1.18	)
	Fourth quarter			208				(6,541	)			(7,792	)			(2.10	)
Year ended December 31, 2005:
	First quarter		$	267			$	(5,390	)		$	(6,681	)		$	(1.66	)
	Second quarter			—				(7,138	)			(8,429	)			(1.68	)
	Third quarter			174				(8,062	)			(10,021	)			(1.87	)
	Fourth quarter			—				(13,079	)			(15,729	)			(2.61	)

(12)	Subsequent Events

(a)	Agreement with Forest Laboratories Holdings Limited

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(b)	Amendment of Agreement with Daiichi Asubio Pharma Co. Ltd.

(c)	Increase to the Stock Option Pool

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Item 13.	Other Expenses of Issuance and Distribution.

			Amount to be
			Paid
SEC registration fee			$	10,700
NASD filing fee				10,500
Nasdaq National Market filing fee				5,000
Blue sky qualification fees and expenses				*
Printing and engraving expenses				*
Legal fees and expenses				*
Accounting fees and expenses				*
Transfer agent and registrar fees and expenses				*
Miscellaneous expenses				*
	Total		$

*	To be provided by amendment.

Item 14.	Indemnification of Directors and Officers.

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	•	transaction from which the director derives an improper personal benefit;
	•	act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
	•	unlawful payment of dividends or redemption of shares; or
	•	breach of a director’s duty of loyalty to the corporation or its stockholders.

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Exhibit Document		Number
Form of Underwriting Agreement			1.1
Form of Amended and Restated Certificate of Incorporation to be effective upon completion of this offering			3.4
Form of Amended and Restated Bylaws to be effective upon completion of this offering			3.6
Fourth Amended and Restated Stockholders’ Agreement, dated August 17, 2005, between the Registrant and certain of its stockholders, as amended March 7, 2006			4.5
Form of Indemnification Agreement for Directors			10.1
Form of Indemnification Agreement for Officers			10.2

Item 15.	Recent Sales of Unregistered Securities.

	(1)	On February 1, 2003, we issued and sold                      shares of common stock to one investor for consideration of $                    .
	(2)	On February 20, 2002, we issued and sold an aggregate of 13,000,000 shares of Series A Convertible Redeemable Preferred Stock to a total of five institutional and accredited investors for aggregate consideration of $13,000,000. Upon completion of this offering, these shares will convert into                      shares of common stock.
	(3)	On July 31, 2002, we issued and sold warrants to purchase an aggregate of 140,000 shares of Series A Convertible Redeemable Preferred Stock (which will convert into                      shares of common stock upon the closing of this offering) at an exercise price of $          per share to two lenders in connection with credit facilities entered into by the registrant. The warrants are currently exercisable in whole or in part and shall terminate on the later of the tenth anniversary of the issue date or five years after the closing of this offering.
	(4)	On June 4, 2003, we issued and sold an aggregate of 4,000,000 shares of Series B Convertible Preferred Stock to an institutional and accredited investor for consideration of $5,000,000. Upon completion of this offering, these shares will convert into                      shares of common stock.
	(5)	On December 19, 2003, January 20, 2004, February 19, 2004, March 26, 2004, March 29, 2004, April 13, 2004 and April 14, 2004 we issued and sold convertible promissory notes in the aggregate principal amount of $7,000,000 to a total of four institutional and accredited investors. The principal outstanding under the notes was converted into 5,600,000 shares of Series C Convertible Redeemable Preferred Stock and were issued and sold as described in paragraph 11 below.
	(6)	On December 19, 2003, January 20, 2004 and February 19, 2004, in connection with the issuance of convertible promissory notes described in paragraph 9 above, we issued and sold warrants to purchase an aggregate of 200,004 shares of preferred stock to a total of four institutional and accredited investors. In February 2006, certain of the warrants were exercised in full and 80,001 shares of Series C Convertible Redeemable Preferred Stock were issued and sold as described in paragraph 11 below. The remaining warrants to purchase up to an aggregate of

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		120,003 shares of preferred stock (which will convert into                      shares of common stock upon the closing of this offering) at an exercise price of $          per share are currently exercisable in whole or in part and shall terminate on the later of the tenth anniversary after the issue date or five years after the closing of this offering.
	(7)	On April 28, 2004, August 12, 2004, September 14, 2004, November 12, 2004 and February 13, 2006, we issued and sold an aggregate of 36,880,001 shares of Series C Convertible Redeemable Preferred Stock to a total of nine institutional and accredited investors for aggregate consideration of $46,100,001.25. Upon completion of this offering, these shares will convert into                      shares of common stock.
	(8)	On August 17, 2005 and August 24, 2005, we issued and sold an aggregate of 34,722,222 shares of Series D Convertible Redeemable Preferred Stock to a total of seventeen institutional and accredited investors for aggregate consideration of $62,499,999.60. Upon completion of this offering, these shares will convert into                      shares of common stock.
	(9)	Since our inception through April 1, 2006, we have granted options under our 2006 Equity Incentive Plan, which is a restatement of our amended and restated 2001 long-term incentive plan, to purchase                      shares of common stock (net of expirations and cancellations) to employees, directors and consultants, having exercise prices ranging from $          to $          per share. Of these, options to purchase                      shares of common stock have been exercised for aggregate consideration of $          , at exercise prices ranging from $          to $          per share.

Item 16.	Exhibits and Financial Statement Schedules.

	(a) Exhibits.

Exhibit
Number				Description of Document
	1.	1†		Form of Underwriting Agreement.
	3.	1		Restated Certificate of Incorporation, dated August 17, 2005, currently in effect.
	3.	2		Certificate of Amendment of Restated Certificate of Incorporation, dated March 8, 2006, currently in effect.
	3.	3†		Form of Certificate of Amendment of Restated Certificate of Incorporation.
	3.	4†		Form of Restated Certificate of Incorporation to be effective upon completion of this offering.
	3.	5		Amendment and Restated Bylaws, currently in effect.
	3.	6		Form of Amended and Restated Bylaws to be effective upon completion of this offering.
	4.	1		Reference is made to exhibits 3.1 through 3.6.
	4.	2†		Specimen Common Stock Certificate.

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Exhibit
Number				Description of Document
	4.	3		Form of Warrant to purchase shares of Series A Convertible Preferred Stock (together with schedule prepared in accordance with Instruction 2 to Item 601 of Regulation S-K).
	4.	4		Form of Warrant to purchase shares of Series C Preferred Stock (together with schedule prepared in accordance with Instruction 2 to Item 601 of Regulation S-K).
	4.	5		Fourth Amended and Restated Stockholders’ Agreement, dated August 17, 2005, between the Registrant and certain of its stockholders, as amended March 7, 2006.
	5.	1†		Opinion of Cooley Godward LLP.
	10.	1+		Form of Indemnification Agreement for Directors.
	10.	2+		Form of Indemnification Agreement for Executive Officers.
	10.	3+		2006 Equity Incentive Plan.
	10.	4+		Form of Option Grant Notice and Form of Option Agreement under 2006 Equity Incentive Plan.
	10.	5+		2006 Employee Stock Purchase Plan.
	10.	6+		Form of Offering Document under 2006 Employee Stock Purchase Plan.
	10.	7+		Employment Agreement, dated April 3, 2006, between the Registrant and Kenneth J. Collins.
	10.	8+		Employment Agreement, dated April 3, 2006, between the Registrant and Nebojsa Janjic, Ph.D.
	10.	9+		Employment Agreement, dated April 3, 2006, between the Registrant and Peter Letendre, Pharm.D.
	10.	10+		Form of Employment Agreement, dated April 3, 2006, between the Registrant and Roger M. Echols, M.D.
	10.	11+		Employment Agreement, dated April 3, 2006, between the Registrant and Mark Smith.
	10.	12+		Employment Agreement, dated April 3, 2006, between the Registrant and Donald Morrissey.
	10.	13+		Summary of Director Compensation Program
	10.	14*		License Agreement, dated March 15, 2004, between the Registrant and Daiichi Suntory Pharma Co., Ltd.
	10.	14.1*		Amendment, dated April 5, 2005, to License Agreement, dated March 15, 2004, between the Registrant and Daiichi Suntory Pharma Co., Ltd.
	10.	14.2*		Second Amendment, dated February 10, 2006, to License Agreement, dated March 15, 2004, between the Registrant and Daiichi Suntory Pharma Co., Ltd.
	10.	15*		Supply Agreement, dated December 20, 2004, among the Registrant, Daiichi Suntory Pharma Co., Ltd. and Nippon Soda Co., Ltd.
	10.	16		Lease agreement, dated March 22, 2005, by and between the Registrant and Crown Milford LLC.
	10.	17		Lease agreement, dated October 25, 2005, by and between the Registrant and Triumph 1450 LLC.
	10.	18*		Collaboration and Commercialization Agreement, dated February 10, 2006, between the Registrant and Forest Laboratories Holdings Limited.
	16.	1		Letter from PricewaterhouseCoopers LLP, dated April 4, 2006.
	23.	1		Consent of KPMG LLP.
	23.	2		Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
	24.	1		Power of Attorney. Reference is made to the signature page hereto.

†		To be filed by amendment.
+		Indicates management contract or compensatory plan.
*		Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

	(b) Financial Statement Schedules.

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Item 17.	Undertakings.

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	REPLIDYNE, INC.

	By:	/s/ Kenneth Collins

	Kenneth Collins
	President and Chief Executive Officer

Signature				Title		Date
/s/ Kenneth J. Collins Kenneth J. Collins				President, Chief Executive Officer and Member of the Board of Directors (Principal Executive Officer)		April 5, 2006
/s/ Mark Smith Mark Smith				Chief Financial Officer, Treasurer, (Principal Financial and Accounting Officer)		April 5, 2006
/s/ Kirk K. Calhoun Kirk K. Calhoun				Member of the Board of Directors		April 5, 2006
/s/ Ralph E. Christoffersen Ralph E. Christoffersen, Ph.D.				Member of the Board of Directors		April 5, 2006
/s/ Geoffrey Duyk, M.D., Ph.D.  Geoffrey Duyk, MD, Ph.D.				Member of the Board of Directors		April 5, 2006
/s/ Christopher D. Earl, Ph.D. Christopher D. Earl, Ph.D.				Member of the Board of Directors		April 5, 2006

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Signature				Title		Date
/s/ Augustine Lawlor Augustine Lawlor				Member of the Board of Directors		April 5, 2006
/s/ Daniel J. Mitchell Daniel J. Mitchell				Member of the Board of Directors		April 5, 2006
/s/ Henry Wendt Henry Wendt				Member of the Board of Directors		April 5, 2006

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Exhibit
Number				Description of Document
	1.	1†		Form of Underwriting Agreement.
	3.	1		Restated Certificate of Incorporation, dated August 17, 2005, currently in effect.
	3.	2		Certificate of Amendment of Restated Certificate of Incorporation, dated March 8, 2006, currently in effect.
	3.	3†		Form of Certificate of Amendment of Restated Certificate of Incorporation.
	3.	4†		Form of Restated Certificate of Incorporation to be effective upon completion of this offering.
	3.	5		Amendment and Restated Bylaws, currently in effect.
	3.	6		Form of Amended and Restated Bylaws to be effective upon completion of this offering.
	4.	1		Reference is made to exhibits 3.1 through 3.6.
	4.	2†		Specimen Common Stock Certificate.
	4.	3		Form of Warrant to purchase shares of Series A Convertible Preferred Stock (together with schedule prepared in accordance with Instruction 2 to Item 601 of Regulation S-K).
	4.	4		Form of Warrant to purchase shares of Series C Preferred Stock (together with schedule prepared in accordance with Instruction 2 to Item 601 of Regulation S-K).
	4.	5		Fourth Amended and Restated Stockholders’ Agreement, dated August 17, 2005, between the Registrant and certain of its stockholders, as amended March 7, 2006.
	5.	1†		Opinion of Cooley Godward LLP.
	10.	1+		Form of Indemnification Agreement for Directors.
	10.	2+		Form of Indemnification Agreement for Executive Officers.
	10.	3+		2006 Equity Incentive Plan.
	10.	4+		Form of Option Grant Notice and Form of Option Agreement under 2006 Equity Incentive Plan.
	10.	5+		2006 Employee Stock Purchase Plan.
	10.	6+		Form of Offering Document under 2006 Employee Stock Purchase Plan.
	10.	7+		Employment Agreement, dated April 3, 2006, between the Registrant and Kenneth J. Collins.
	10.	8+		Employment Agreement, dated April 3, 2006, between the Registrant and Nebojsa Janjic, Ph.D.
	10.	9+		Employment Agreement, dated April 3, 2006, between the Registrant and Peter Letendre, Pharm.D.
	10.	10+		Form of Employment Agreement, dated April 3, 2006, between the Registrant and Roger M. Echols, M.D.
	10.	11+		Employment Agreement, dated April 3, 2006, between the Registrant and Mark Smith.
	10.	12+		Employment Agreement, dated April 3, 2006, between the Registrant and Donald Morrissey.
	10.	13+		Summary of Director Compensation Program
	10.	14*		License Agreement, dated March 15, 2004, between the Registrant and Daiichi Suntory Pharma Co., Ltd.
	10.	14.1*		Amendment, dated April 5, 2005, to License Agreement, dated March 15, 2004, between the Registrant and Daiichi Suntory Pharma Co., Ltd.
	10.	14.2*		Second Amendment, dated February 10, 2006, to License Agreement, dated March 15, 2004, between the Registrant and Daiichi Suntory Pharma Co., Ltd.
	10.	15*		Supply Agreement, dated December 20, 2004, among the Registrant, Daiichi Suntory Pharma Co., Ltd. and Nippon Soda Co., Ltd.
	10.	16		Lease agreement, dated March 22, 2005, by and between the Registrant and Crown Milford LLC.
	10.	17		Lease agreement, dated October 25, 2005, by and between the Registrant and Triumph 1450 LLC.
	10.	18*		Collaboration and Commercialization Agreement, dated February 10, 2006, between the Registrant and Forest Laboratories Holdings Limited.

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Exhibit
Number				Description of Document
	16.	1		Letter from PricewaterhouseCoopers LLP, dated April 4, 2006.
	23.	1		Consent of KPMG LLP.
	23.	2		Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
	24.	1		Power of Attorney. Reference is made to the signature page hereto.

†		To be filed by amendment.
+		Indicates management contract or compensatory plan.
*		Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.