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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K


|  |  |                                                                                              
|- |  | ---------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.    
| 
|  |  | For the fiscal year ended December 31, 2004.                                                 
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.
| 
|  |  | For the transition period
    from           to           .                                  

Commission File Number


000-50438


Myogen, Inc.


(Exact name of Registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 84-1348020                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

7575 West 103rd Avenue, Suite 102


Westminster, Colorado 80021


(303) 410-6666


(Address, including zip code, and telephone number,


including area code, of principal executive offices)


Securities registered pursuant to Section 12(b) of the
Act: None


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock $.001 Par Value


(Title of Class)


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS


|                                                                                                 |  |                                                                                                                          |  |      |    | 
|------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                 |  |                                                                                                                          |  | Page |   
|                                                                                                 |  |                                                                                                                          |  |      |   
|PART I                                                                                          
|ITEM 1.                                                                                          |  | BUSINESS                                                                                                                 |  |      | 1  | 
|ITEM 2.                                                                                          |  | PROPERTIES                                                                                                               |  |      | 40 | 
|ITEM 3.                                                                                          |  | LEGAL PROCEEDINGS                                                                                                        |  |      | 41 | 
|ITEM 4.                                                                                          |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                                  |  |      | 41 | 
|                                                                                                
|PART II                                                                                         
|ITEM 5.                                                                                          |  | MARKET FOR THE REGISTRANTS COMMON
    EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
    EQUITY SECURITIES |  |      | 41 | 
|ITEM 6.                                                                                          |  | SELECTED FINANCIAL DATA                                                                                                  |  |      | 44 | 
|ITEM 7.                                                                                          |  | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                |  |      | 45 | 
|ITEM 7A.                                                                                         |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ON
    MARKET RISK                                                              |  |      | 59 | 
|ITEM 8.                                                                                          |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA                                                                          |  |      | 60 | 
|ITEM 9.                                                                                          |  | CHANGES IN AND DISAGREEMENTS WITH
    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                 |  |      | 60 | 
|ITEM 9A.                                                                                         |  | CONTROLS AND PROCEDURES                                                                                                  |  |      | 60 | 
|ITEM 9B.                                                                                         |  | OTHER INFORMATION                                                                                                        |  |      | 61 | 
|                                                                                                
|PART III                                                                                        
|ITEM 10.                                                                                         |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT                                                                   |  |      | 61 | 
|ITEM 11.                                                                                         |  | EXECUTIVE COMPENSATION                                                                                                   |  |      | 61 | 
|ITEM 12.                                                                                         |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT                                                       |  |      | 62 | 
|ITEM 13.                                                                                         |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                                                       |  |      | 62 | 
|ITEM 14.                                                                                         |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                   |  |      | 62 | 
|                                                                                                
|PART IV                                                                                         
|ITEM 15.                                                                                         |  | EXHIBITS, FINANCIAL STATEMENTS SCHEDULES                                                                                 |  |      | 62 | 
|Form of Employment Agreement                                                                    
|Third Amendment to the License Agreement by and between Aventis Pharmaceuticals, Inc. and Myogen
|2003 Employee Stock Purchase Plan                                                               
|Consent of PricewaterhouseCoopers LLP                                                           
|Certification of Principal Executive Officer                                                    
|Certification of Principal Financial Officer                                                    
|Section 1350 Certification                                                                      



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PART I


Unless the context requires otherwise, references in this
report to Myogen, the Company,
we, us, and our refer to
Myogen, Inc.


This report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements include, but
are not limited to, statements concerning our plans to continue
development of our current product candidates; conduct clinical
trials with respect to our product candidates; seek regulatory
approvals; address certain markets; engage third-party
manufacturers to supply our clinical trial and commercial
requirements; hire sales and marketing personnel; and evaluate
additional product candidates for subsequent clinical and
commercial development. In some cases, these statements may be
identified by terminology such as may,
will, should, expects,
plans, anticipates,
believes, estimates,
predicts, potential, or
continue or the negative of such terms and other
comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements
contained herein are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. These
statements involve known and unknown risks and uncertainties
that may cause our or our industrys results, levels of
activity, performance or achievements to be materially different
from those expressed or implied by the forward-looking
statements. Factors that may cause or contribute to such
differences include, among other things, those discussed under
the captions Business, Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations. Forward-looking
statements not specifically described above also may be found in
these and other sections of this report.







|        |         
|------- | --------
|ITEM 1. | BUSINESS

Overview








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enoximone. We currently market an intravenous (i.v.)
    formulation of enoximone, Perfan® I.V., in eight
    countries in Europe for the treatment of acute decompensated
    heart failure. We believe that chronic oral administration of
    low doses of enoximone capsules has the potential to alleviate
    symptoms and reduce hospitalizations for patients with advanced
    chronic heart failure, resulting in a decrease in associated
    health care costs and improvement in patients quality of
    life. We are evaluating enoximone capsules in three
    Phase III trials (ESSENTIAL I & II and
    EMPOWER) and we completed one additional Phase III trial in
    February 2004 (EMOTE). In November 2004, we announced the
    completion of the treatment phase of both ESSENTIAL trials. We
    plan to report preliminary data for the ESSENTIAL trials in the
    middle of 2005.
|
| |  | Ambrisentan. We believe that ambrisentan may have several
    clinical benefits over existing PAH therapies, including greater
    and more durable efficacy, low incidence of liver toxicity, once
    daily dosing and lower incidence of interactions with other
    drugs. We completed a Phase II clinical trial of
    ambrisentan in September 2003 and announced the initiation of
    the two pivotal Phase III trials,                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | ARIES-1 & -2, in January 2004. We expect to complete
    enrollment in ARIES-2 by the end of June 2005 and ARIES-1 in the
    fourth quarter of 2005. We plan to report preliminary results
    from each of the ARIES trials approximately six months following
    the completion of enrollment in each trial.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Darusentan. We believe that there is a significant need
    for a therapeutic agent that, when added to currently available
    medications, is capable of lowering blood pressure in patients
    suffering from resistant systolic hypertension (i.e., patients
    whose blood pressure cannot be adequately controlled with
    existing medication). We believe that darusentan may be an agent
    that is capable of improving control of blood pressure in this
    patient population, leading to the potential for enhanced
    patient outcomes, such as a reduction in the number of serious
    cardiac events and the progression of chronic kidney disease. In
    July 2004, we announced the initiation of a Phase IIb
    clinical trial to evaluate the safety and efficacy of darusentan
    in patients with resistant systolic hypertension. We expect this
    trial to be completed in the middle of 2005 and we intend to
    report results of the trial one or two months thereafter.





www.myogen.com,


The Cardiovascular Market






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Our Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Complete the clinical development of our late-stage
    cardiovascular therapeutic product portfolio. We are
    currently focused on developing and obtaining regulatory
    approval for three late-stage product candidates: enoximone
    capsules, ambrisentan and darusentan.                                                                                                             
|
| |  | Discover and develop novel therapeutics for the treatment of
    cardiovascular diseases. We will continue to focus our
    target and drug discovery research programs and our
    collaborations on discovering and developing disease-modifying
    therapeutics for cardiovascular disease. We entered into a
    research collaboration with Novartis to support these programs.           
|
| |  | Develop sales and marketing capabilities. We expect to
    retain significant commercial rights to all of our product
    candidates and plan to develop a direct sales force focused on
    targeted markets. We also intend to establish co-promotion and
    licensing arrangements with larger pharmaceutical or
    biotechnology firms to address larger markets.                         
|
| |  | Establish and build upon strategic collaborations. We
    intend to continue to complement our internal capabilities by
    establishing and building upon collaborations with
    pharmaceutical and biotechnology companies, such as Novartis,
    that improve our ability to move new compounds into the clinic
    and new products into the marketplace.                                  
|
| |  | Acquire additional product candidates. We intend to
    pursue attractive development compounds through acquisition or
    in-licensing. We believe our expertise in cardiovascular
    medicine and understanding of the biological pathways associated
    with cardiovascular disorders makes us an attractive partner for
    companies seeking to out-license or divest product candidates.

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Our Product Portfolio









| |          
| | ---------
| | Enoximone





| |                        
| | -----------------------
| | Therapeutic Opportunity





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| |                   
| | ------------------
| | Enoximone Capsules





| |                                  
| | ---------------------------------
| | Overview of Prior Clinical Trials



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enoximone capsules administered at doses of 25 and 50 milligrams
    three times a day increased maximal exercise capacity with no
    increase in mortality in patients with Class II and III
    chronic heart failure after 12 weeks of treatment (two
    placebo-controlled trials involving a total of
    273 patients);                                                                                                        
|
| |  | enoximone capsules administered at doses of 25 to 75 milligrams
    three times a day extended the survival times of patients with
    Class IV chronic heart failure awaiting a heart transplant
    (186-patient parallel-control, open label trial, meaning that
    both the researcher and patient know the patient was receiving
    the drug); and                                                                              
|
| |  | enoximone capsules administered at doses of 25 and 50 milligrams
    three times a day enabled patients with Class IV chronic
    heart failure, and otherwise too weak to tolerate beta-blockers,
    to receive and benefit from beta-blocker therapy. These benefits
    included a significant reduction in the severity of their
    chronic heart failure symptoms and hospitalization events
    (30-patient, open-label trial).





| |                                     
| | ------------------------------------
| | Overview of Current Phase III Trials





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | ESSENTIAL I is a randomized, double-blind,
    placebo-controlled pivotal Phase III trial of approximately
    900 patients with Class III and IV chronic heart
    failure that are being treated with beta- blockers and other
    therapies according to current guidelines. The trial will track
    the time from randomization to cardiovascular hospitalization or
    death and changes from baseline in exercise capacity and quality
    of life for each patient as the three co-primary endpoints. This
    trial is being conducted in North and South America. Patient
    enrollment occurred between February 2002 and May 2004.
|
| |  | ESSENTIAL II is a pivotal Phase III trial identical in
    design and size to ESSENTIAL I. This trial is being
    conducted in Western and Eastern Europe. Patient enrollment
    occurred between April 2002 and May 2004.                                                                                                                                                                                                                                                                                                                                                                                                                    

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | EMOTE was a randomized, double-blind, placebo-controlled
    Phase III trial of approximately 200 patients with the
    most advanced stage of chronic heart failure, and who were
    dependent on intravenous inotrope therapy. The trial was
    designed to evaluate the use of enoximone capsules to wean
    patients off of intravenous inotrope therapy. On March 25,
    2004, we announced preliminary results of EMOTE. Analysis of the
    primary endpoint, wean success at 30 days, demonstrated a
    wean success rate of 61% in the enoximone-treated group and 51%
    in the placebo-treated group. This difference did not reach
    statistical significance. The key secondary endpoints, which
    also evaluated wean from i.v. inotrope therapy, but over time
    rather than at a fixed 30-day time point, were achieved,
    demonstrating a statistically significant therapeutic benefit
    over periods of 45, 60 and 90 days of treatment with
    enoximone. The safety results demonstrated no statistical
    difference in serious adverse events or mortality between the
    groups receiving placebo or enoximone capsules. Detailed results
    were presented at the 8th Annual Scientific Meeting of the Heart
    Failure Society of America on September 15, 2004 in
    Toronto, Canada.
|
| |  | EMPOWER is a randomized, double-blind, placebo-controlled
    Phase III trial designed to study 175 patients with
    Class III and IV chronic heart failure. Patients will be
    treated for 26 to 36 weeks with either (i) placebo,
    (ii) extended release metoprolol, a frequently prescribed
    beta-blocker or (iii) extended release metoprolol in
    combination with enoximone capsules. The primary objective of
    this study is to determine whether enoximone capsules can
    increase the tolerability to metoprolol in patients previously
    shown to be intolerant to beta-blocker treatment. Patient
    enrollment began in September 2003. The study has enrolled
    substantially slower than anticipated and we expect to revise
    the study protocol if the ESSENTIAL trials are positive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          







| |             
| | ------------
| | Perfan® I.V.







| |                                                                               
| | ------------------------------------------------------------------------------
| | Selective Oral Endothelin Receptor Antagonists:
    Ambrisentan and Darusentan



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| |            
| | -----------
| | Ambrisentan





| |                        
| | -----------------------
| | Therapeutic Opportunity





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tm






| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | greater and more durable efficacy;                                                            
|
| |  | low incidence of liver toxicity that does not appear to be dose
    related;                  
|
| |  | high potency and bioavailability allowing low doses for
    therapeutic effect;               
|
| |  | multiple dose options;                                                                        
|
| |  | once daily dosing based on its half-life; and                                                 
|
| |  | lower incidence of interactions with other drugs, including
    anticoagulants and sildenafil.



| |                                      
| | -------------------------------------
| | Overview of Phase II Clinical Results









| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a statistically significant and clinically meaningful increase
    in the primary efficacy endpoint (six-minute walk test) in all
    four ambrisentan dose groups;
|
| |  | an improvement in all secondary endpoints and cardiopulmonary
    hemodynamics;                                                                                    
|
| |  | ambrisentan appears to be generally safe and well tolerated in
    patients who have received it;                                                                  
|
| |  | among the patients taking anticoagulant therapy, there are no
    apparent interactions with anticoagulants requiring dose
    adjustments;                        
|
| |  | a low incidence of potential liver toxicity as assessed by liver
    function tests;                                                                               

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a survival benefit to patients treated with ambrisentan when
    compared with predicted survival based on the National
    Institutes of Health Registry formula; and                                                                                                                                                                                                                                            
|
| |  | patients with less severe symptoms (Class II disease)
    appear to achieve a comparable benefit in exercise capacity as
    do patients with more severe symptoms (Class III disease).
    Clinical trial results of other compounds tested for PAH
    indicate that certain compounds are comparatively less effective
    in patients with early stages of the disease, referred to as a
    ceiling effect.





| |                             
| | ----------------------------
| | Overview of Phase III Trials









| |           
| | ----------
| | Darusentan





| |                        
| | -----------------------
| | Therapeutic Opportunity



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| |                                            
| | -------------------------------------------
| | Overview of Prior Phase II Clinical Results







| |                                             
| | --------------------------------------------
| | Overview of Current Phase IIb Clinical Trial



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| |                  
| | -----------------
| | Other Indications



Discovery Research












| |                        
| | -----------------------
| | Drug discovery strategy





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Sales and Marketing






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Build direct selling capability. We believe that a
    relatively small sales force could effectively reach the
    specialists and medical institutions that treat a significant
    percentage of patients with conditions such as advanced chronic
    heart failure and PAH. We intend to build a specialty sales
    force in the United States ourselves or in partnership with a
    contract sales organization. Our approach and participation in
    the commercialization process in Europe is under evaluation.
|
| |  | Build an internal marketing and sales support
    organization. We plan to build the necessary internal
    commercial organization to develop and implement product plans
    and support our sales force activities in the United States. Our
    strategy outside of the United States is under evaluation.                                                                                                                                                                                                             
|
| |  | Establish co-promotion alliances. We intend to enter into
    co-promotion and licensing arrangements with larger
    pharmaceutical or biotechnology firms when necessary to reach
    larger markets. We intend to explore co-promotion and geographic
    licensing arrangements for enoximone and ambrisentan and we
    intend to explore co-development and/or co-promotion partnership
    opportunities for darusentan.                                                                                            

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Licensing Agreements and Collaborations












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Intellectual Property, Patents and Market Exclusivity




| |          
| | ---------
| | Enoximone









| |                           
| | --------------------------
| | Ambrisentan and Darusentan





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| |                            
| | ---------------------------
| | Other Intellectual Property





Competition








| |          
| | ---------
| | Enoximone





| |            
| | -----------
| | Ambrisentan



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A






| |           
| | ----------
| | Darusentan





Manufacturing




Governmental Regulation and Product Approval








| |   |                                          
| | - | -----------------------------------------
| |  | pre-clinical laboratory and animal tests;

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| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | submission of an investigational new drug application, or IND,
    which must become effective before clinical trials may begin;          
|
| |  | adequate and well-controlled human clinical trials to establish
    the safety and efficacy of the proposed drug for its intended
    use;
|
| |  | pre-approval inspection of manufacturing facilities and selected
    clinical investigators; and                                          
|
| |  | FDA approval of a new drug application, or NDA, or NDA
    supplement.                                                                    









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Phase I: The drug is initially given to healthy
    human subjects or patients and tested for safety, dosage
    tolerance, absorption, metabolism, distribution and excretion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Phase II: Studies are conducted in a limited patient
    population to identify possible adverse effects and safety
    risks, to determine the efficacy of the product for specific
    targeted diseases and to determine dosage tolerance and optimal
    dosage. Multiple Phase II clinical trials may be conducted
    by the sponsor to obtain information prior to beginning larger
    and more expensive Phase III clinical trials. In some
    cases, a sponsor may decide to run what is referred to as a
    Phase IIb evaluation, which is a second,
    confirmatory Phase II trial that could, if positive, serve
    as a pivotal trial in the approval of a drug.
|
| |  | Phase III: When Phase II evaluations
    demonstrate that a dosage range of the product is effective and
    has an acceptable safety profile, Phase III trials are
    undertaken to further evaluate dosage, to provide statistically
    significant evidence of clinical efficacy and to further test
    for safety in an expanded patient population at multiple
    clinical study sites.                                                                                                                                                                                                                                                                                    



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Employees




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RISK FACTORS


Our business faces significant risks. These risks include
those described below and may include additional risks of which
we are not currently aware or which we currently do not believe
are material. If any of the events or circumstances described in
the following risks actually occurs, our business, financial
condition or results of operations could be materially adversely
affected. These risks should be read in conjunction with the
other information set forth in this report.


Risks Related to Our Business




| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | We are at an early stage of development as a company and
    we do not have, and may never have, any products that generate
    significant revenues.





| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | our product candidates may not prove to be safe and effective in
    clinical trials;                                                        
|
| |  | we may not be able to obtain regulatory approvals for our
    product candidates or approvals may be narrower than we seek;                  
|
| |  | we may not have adequate financial or other resources to
    complete the development and commercialization of our product
    candidates; or
|
| |  | any products that are approved may not be accepted in the
    marketplace.                                                                   





| |                                                                              
| | -----------------------------------------------------------------------------
| | We have a history of operating losses and we may never
    become profitable.





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to obtain additional financing, we may be
    unable to complete the development and commercialization of our
    product candidates or continue our research and development
    programs.



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| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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, license or otherwise dispose of rights to
    technologies, product candidates or products that we would
    otherwise seek to develop or commercialize ourselves on terms
    that are less favorable than might otherwise be available.



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We may experience delays in our clinical trials that could
    adversely affect our financial position and our commercial
    prospects.







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| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Adverse events in our clinical trials may force us to stop
    development of our product candidates or prevent regulatory
    approval of our product candidates.





| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our applications for regulatory approval could be delayed
    or denied due to problems with studies conducted before we
    in-licensed the product candidates.





| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our product candidates do not meet safety or efficacy
    endpoints in clinical evaluations, they will not receive
    regulatory approval and we will be unable to market them.













| |   |                                                  
| | - | -------------------------------------------------
| |  | a product candidate may not be safe or effective;

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| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | the manufacturing processes or facilities we have selected may
    not meet the applicable requirements; and
|
| |  | changes in their approval policies or adoption of new
    regulations may require additional work.          





| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Even if our products meet safety and efficacy endpoints in
    clinical trials, regulatory authorities may not approve them, or
    we may face post-approval problems that require withdrawal of
    our products from the market.









| |                                                                                 
| | --------------------------------------------------------------------------------
| | There can be no assurance that enoximone capsules do not
    increase mortality.



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| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Abnormal elevations of liver function test results have
    been reported as complications in trials of endothelin receptor
    antagonists.





| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | Endothelin receptor antagonists, including ambrisentan and
    darusentan, have demonstrated toxicity in animals.





| |                                                              
| | -------------------------------------------------------------
| | Market acceptance of our product candidates is
    uncertain.





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| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | If we become subject to product liability claims, the
    damages may exceed our insurance.









| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | decreased demand for our products and product candidates;              
|
| |  | injury to our reputation;                                              
|
| |  | withdrawal of clinical trial participants;                             
|
| |  | costs of related litigation;                                           
|
| |  | substantial monetary awards to patients and others;                    
|
| |  | loss of revenues; and                                                  
|
| |  | the inability to commercialize our products and product
    candidates.



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| |                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to develop adequate sales, marketing or
    distribution capabilities or enter into agreements with third
    parties to perform some of these functions, we will not be able
    to commercialize our products effectively.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Since we will rely on third-party manufacturers, we may be
    unable to control the availability or cost of producing our
    products.





| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our third-party manufacturers and their manufacturing
    facilities and processes are subject to regulatory approval,
    which may delay or disrupt our development and commercialization
    efforts.



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| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Due to our reliance on contract research organizations and
    other third parties to conduct clinical trials, we are unable to
    directly control the timing, conduct and expense of our clinical
    trials.





| |                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not find development and commercialization
    collaborators for our product candidates, we may have to reduce
    or delay our rate of product development and commercialization
    and increase our expenditures.







| |   |                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 enough 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
    resulting in significant legal proceedings.                                                                                                          



| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | Even if we receive regulatory approval for our product
    candidates, we will be subject to ongoing regulatory obligations
    and review.



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| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Our success depends on retention of our President and
    Chief Executive Officer and other key personnel.







| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | If our discovery research program is not successful, we
    may be unable to develop additional product candidates.





| |                                                                                 
| | --------------------------------------------------------------------------------
| | Our operations may be impaired unless we can successfully
    manage our growth.



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| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | If we engage in any acquisition, we will incur a variety
    of costs, and we may never realize the anticipated benefits of
    the acquisition.





| |                                                                               
| | ------------------------------------------------------------------------------
| | Our attempts to increase future sales of
    Perfan® I.V. may be unsuccessful.





| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | Our corporate compliance program cannot guarantee that we
    are in compliance with all potentially applicable
    regulations.





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| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | Our operations involve hazardous materials, and compliance
    with environmental laws and regulations is expensive.





| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Changes in the economic, political, legal and business
    environments in foreign countries in which we do business could
    limit or disrupt our current and future international sales and
    operations.





| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | economic problems that disrupt foreign healthcare payment
    systems;                                
|
| |  | the imposition of governmental controls;                                                              
|
| |  | less favorable intellectual property or other applicable laws;                                        
|
| |  | the inability to obtain any necessary foreign regulatory
    approvals of products in a timely manner;

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| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | import and export license requirements;                                                                          
|
| |  | economic weakness, including inflation, or political instability
    in particular foreign economies and markets;
|
| |  | business interruptions resulting from geo-political actions,
    including war and terrorism;                    
|
| |  | compliance with tax, employment, immigration and labor laws;                                                     
|
| |  | unexpected changes in tariffs, trade barriers and regulatory
    requirements;                                   
|
| |  | difficulties in staffing and managing international
    operations; and                                          
|
| |  | slower payment terms.                                                                                            



| |                                                                         
| | ------------------------------------------------------------------------
| | Currency fluctuations may negatively affect our financial
    condition.



Risks Related to Our Industry




| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | Our competitors may develop and market drugs that are less
    expensive, more effective or safer than our product
    candidates.







34



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| |                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The status of reimbursement from third-party payors for
    newly approved health care drugs is uncertain and failure to
    obtain adequate reimbursement could limit our ability to
    generate revenue.





| |   |                                                  
| | - | -------------------------------------------------
| |  | government and health administration authorities;
|
| |  | private health insurers;                         
|
| |  | managed care programs; and                       
|
| |  | other third-party payors.                        





| |                                                                     
| | --------------------------------------------------------------------
| | Health care reform measures could adversely affect our
    business.







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| |                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Changes in or interpretations of accounting rules and
    regulations, including recently enacted changes relating to the
    expensing of stock options, could result in unfavorable
    accounting charges or require us to change our compensation
    policies.





Risks Related to Our Intellectual Property




| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Since we will not obtain additional patent protection for
    enoximone capsules, we expect to rely solely on the Hatch-Waxman
    Act and similar foreign statutes to obtain market
    exclusivity.





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| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | We may not be able to extend market exclusivity for
    enoximone capsules by developing an extended release
    formulation.





| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We rely on compounds and technology licensed from third
    parties and termination of any of those licenses would result in
    the loss of significant rights.







| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | If we are unable to protect our proprietary technology, we
    may not be able to compete effectively.





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| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be accused of infringing on the proprietary rights
    of third parties, which could impair our ability to successfully
    commercialize our product candidates.





| |   |                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | defending a lawsuit, which is very expensive and time consuming;                                                                                                                                                                                                                                                                                                                             
|
| |  | defending against an interference proceeding in the United
    States Patent and Trademark Office, which also can be very
    expensive and time consuming;                                                                                                                                                                                                                                  
|
| |  | an adverse decision in a lawsuit or in an interference
    proceeding resulting in the loss of some or all of our rights to
    our intellectual property;                                                                                                                                                                                                                                   
|
| |  | paying a large sum for damages if we are found to be infringing;                                                                                                                                                                                                                                                                                                                             
|
| |  | being prohibited from making, using, selling or offering for
    sale our product candidates or our products, if any, until we
    obtain a license from the patent holder. Such a license may not
    be granted to us on satisfactory terms, if at all, and even if
    we are granted a license, we may have to pay substantial
    royalties or grant cross- licenses to our patents; and
|
| |  | redesigning the manufacturing methods or the use claims of our
    product candidates so that they do not infringe on the other
    partys patent in the event that we are unable to obtain a
    license, which, even if possible, could require substantial
    additional capital, could necessitate additional regulatory
    approval, and could delay commercialization.              

Risks Related to Our Stock




| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | The market price of our common stock has been and may
    continue to be highly volatile.



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| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | actual or anticipated results of our clinical trials;                                                                                                                         
|
| |  | actual or anticipated regulatory approvals of our products or of
    competing products;                                                                                      
|
| |  | changes in laws or regulations applicable to our products;                                                                                                                    
|
| |  | changes in the expected or actual timing of our development
    programs;                                                                                                     
|
| |  | actual or anticipated variations in 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
    competitors;                                                                                                
|
| |  | changes in financial estimates or recommendations by securities
    analysts;                                                                                                 
|
| |  | conditions or trends in the biotechnology and pharmaceutical
    industries;                                                                                                  
|
| |  | changes in the market valuations of similar companies;                                                                                                                        
|
| |  | announcements by us of significant acquisitions, strategic
    partnerships, joint ventures or capital commitments;                                                           
|
| |  | additions or departures of key personnel;                                                                                                                                     
|
| |  | disputes or other developments relating to proprietary rights,
    including patents, litigation matters and our ability to obtain
    patent protection for our technologies;
|
| |  | the loss of a collaborator, including Novartis;                                                                                                                               
|
| |  | developments concerning our collaborations;                                                                                                                                   
|
| |  | trading volume of our common stock; and                                                                                                                                       
|
| |  | sales of our common stock by us or our stockholders.                                                                                                                          





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Our principal stockholders and management own a
    significant percentage of our stock and will be able to exercise
    significant influence.



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| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Issuance of shares in connection with financing
    transactions or under stock plans and outstanding warrants will
    dilute current stockholders.





| |                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Some provisions of our charter documents and Delaware law
    may have anti-takeover effects that could discourage, delay or
    prevent a change of control or management, even if such changes
    would be beneficial to our stockholders.





| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | authorizing the issuance of blank check preferred
    stock;                                                                                                                  
|
| |  | limiting the removal of directors by the stockholders to removal
    for cause;                                                                                                 
|
| |  | 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.








|        |           
|------- | ----------
|ITEM 2. | PROPERTIES



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|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS








|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES

Market Information and Holders




|                             |  |      |       |  |     |   |       | 
|---------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|Year Ended December 31, 2004 |  | High |       |  | Low |  
|                             |  |      |       |  |     |  
|First Quarter                |  | $    | 18.40 |  |     | $ | 10.50 | 
|Second Quarter               |  |      | 13.20 |  |     |   | 7.49  | 
|Third Quarter                |  |      | 8.21  |  |     |   | 5.40  | 
|Fourth Quarter               |  |      | 9.21  |  |     |   | 7.15  | 

|                                       |  |      |       |  |     |   |       | 
|-------------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|Year Ended December 31, 2003           |  | High |       |  | Low |  
|                                       |  |      |       |  |     |  
|Fourth Quarter (from October 30, 2003) |  | $    | 16.90 |  |     | $ | 11.70 | 



Dividends




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Equity Compensation Plan Information




|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  |  |           |  | 
|------------------------------------------------------------ |  |  | -------------------- | --------- |  | ----------------- |  | -------------------- | ----- |  |  |  | --------- |  | 
|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  | 
|                                                             |  |  | (a)                  |           |  | (b)               |  | (c)                  |      
|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  | 
|                                                             |  |  |                      |           |  |                   |  | Number of Securities |      
|                                                             |  |  |                      |           |  |                   |  | Remaining Available  |      
|                                                             |  |  |                      |           |  | Weighted-Average  |  | for Future Issuance  |      
|                                                             |  |  | Number of Securities |           |  | Exercise Price of |  | Under Equity         |      
|                                                             |  |  | to be Issued Upon    |           |  | Outstanding       |  | Compensation Plans   |      
|                                                             |  |  | Exercise of          |           |  | Options,          |  | (Excluding           |      
|                                                             |  |  | Outstanding Options, |           |  | Warrants and      |  | Securities Reflected |      
|Plan
Category                                                |  |  | Warrants and Rights  |           |  | Rights(3)         |  | in Column (a))       |      
|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  | 
|Equity compensation plans approved by security holders(1)(2) |  |  |                      | 3,330,861 |  |                   |  |                      | $3.96 |  |  |  | 1,184,195 |  | 
|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  | 
|Equity compensation plans not approved by security holders   |  |  |                      | 0         |  |                   |  |                      | $0.00 |  |  |  | 0         |  | 
|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  | 
|Total                                                        |  |  |                      | 3,330,861 |  |                   |  |                      | $3.96 |  |  |  | 1,184,195 |  | 
|                                                             |  |  |                      |           |  |                   |  |                      |       |  |  | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of December 31, 2004, 4,265,056 shares were
    authorized and unissued under our 2003 Equity Incentive Plan. On
    January 1 of each year during the term of our 2003 Equity
    Incentive Plan, beginning on January 1, 2004 through and
    including January 1, 2013, the number of shares in the
    reserve automatically will be increased by the lesser of 5%
    percent of our then-outstanding shares on a fully-diluted basis,
    or 2,500,000 shares of common stock subject to the ability
    of our board of directors to prevent or reduce such increase. On
    January 1, 2005, the share reserve of our 2003 Equity
    Incentive Plan was increased by 1,000,000 shares.                                             
|   
|(2) | As of December 31, 2004, 250,000 shares were reserved
    for issuance under our 2003 Employee Stock Purchase Plan. On
    January 1 of each year during the term of our 2003 Employee
    Stock Purchase Plan, beginning on January 1, 2004 through
    and including January 1, 2013, the number of shares in the
    reserve automatically will be increased by the lesser of 1.25%
    percent of our then-outstanding shares on a fully-diluted basis,
    or 500,000 shares of common stock, subject to the ability
    of our board of directors to prevent or reduce such increase. As
    a result of board action, there was no increase in the share
    reserve of our 2003 Employee Stock Purchase Plan as of
    January 1, 2005.
|   
|(3) | Column (b) does not include the shares issued or available
    for issuance under our 2003 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Recent Sales of Unregistered Securities








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Use of Proceeds from Sales of Registered Securities








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|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA



|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |   |         |       |  |   |          |         | 
|------------------------------------------------------------------------------------- | -------------------------------------- | ----------------------------------------------- | ---------- | ------- | ------------ | - | --------- | ------ |  | - | --------- | ------------------- |  | ---- | ------- | ------ | ---- | - | ------- | ----- |  | - | -------- | ------- | 
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           | Cumulative Period   | 
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           | from June 10, 1996, | 
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           | (Date of Inception) | 
|                                                                                      |                                        |                                                 |            | Through |             
|                                                                                      |                                        | Years Ended December 31,                        |            |         | December 31, |  
|                                                                                      |                                        |                                                 |            |         |              |  
|                                                                                      |                                        | 2004                                            |            |         | 2003         |   |           | 2002   |  |   | 2001      |                     |  | 2000 |         |        | 2004 |  
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|                                                                                      |                                        | (In thousands, except share and per share data) |           
|Statement of Operations Data:                                                         |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |   |         |       |  |   |          |        
|Revenues:                                                                             |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |   |         |       |  |   |          |        
|                                                                                      | Product sales                          |                                                 | $          | 3,318   |              |   | $         | 2,846  |  |   | $         | 2,343               |  |      | $       | 1,808  |      |   | $       | 427   |  |   | $        | 10,741  | 
|                                                                                      | Research and development contracts     |                                                 |            | 6,606   |              |   |           | 1,010  |  |   |           |                    |  |      |         |       |      |   |         |      |  |   |          | 7,617   | 
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|                                                                                      |                                        |                                                 | 9,924      |         |              |   | 3,856     |        |  |   | 2,343     |                     |  |      | 1,808   |        |      |   | 427     |       |  |   | 18,358   |        
|Costs and expenses:                                                                   |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |   |         |       |  |   |          |        
|                                                                                      | Cost of product sold                   |                                                 |            | 1,077   |              |   |           | 885    |  |   |           | 877                 |  |      |         | 756    |      |   |         | 167   |  |   |          | 3,764   | 
|                                                                                      | Research and development(1)            |                                                 |            | 54,124  |              |   |           | 37,365 |  |   |           | 24,950              |  |      |         | 15,288 |      |   |         | 7,672 |  |   |          | 142,843 | 
|                                                                                      | Selling, general and administrative(1) |                                                 |            | 9,259   |              |   |           | 4,387  |  |   |           | 4,650               |  |      |         | 3,497  |      |   |         | 2,830 |  |   |          | 27,098  | 
|                                                                                      | Stock-based compensation               |                                                 |            | 3,948   |              |   |           | 4,192  |  |   |           | 681                 |  |      |         | 38     |      |   |         | 14    |  |   |          | 8,873   | 
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|                                                                                      |                                        |                                                 | 68,408     |         |              |   | 46,829    |        |  |   | 31,158    |                     |  |      | 19,579  |        |      |   | 10,683  |       |  |   | 182,578  |        
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|Loss from operations                                                                  |                                        |                                                 | (58,484    | )       |              |   | (42,973   | )      |  |   | (28,815   | )                   |  |      | (17,771 | )      |      |   | (10,256 | )     |  |   | (164,220 | )      
|Interest income (expense), net                                                        |                                        |                                                 | 821        |         |              |   | (136      | )      |  |   | 786       |                     |  |      | 659     |        |      |   | 836     |       |  |   | 3,221    |        
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|Loss before income taxes                                                              |                                        |                                                 | (57,663    | )       |              |   | (43,109   | )      |  |   | (28,029   | )                   |  |      | (17,111 | )      |      |   | (9,420  | )     |  |   | (160,999 | )      
|Income taxes                                                                          |                                        |                                                 | 22         |         |              |   | 39        |        |  |   | 18        |                     |  |      | 3       |        |      |   |        |       |  |   | 83       |        
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|Net loss                                                                              |                                        |                                                 | (57,685    | )       |              |   | (43,148   | )      |  |   | (28,048   | )                   |  |      | (17,114 | )      |      |   | (9,420  | )     |  |   | (161,082 | )      
|Accretion of mandatorily redeemable convertible preferred stock                       |                                        |                                                 |           |         |              |   | (13,187   | )      |  |   | (14,684   | )                   |  |      | (607    | )      |      |   | (3,696  | )     |  |   | (32,500  | )      
|Dividend related to beneficial conversion feature of preferred
    stock(2)           |                                        |                                                 |           |         |              |   | (39,935   | )      |  |   |          |                     |  |      |        |        |      |   |        |       |  |   | (39,935  | )      
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|Net loss attributable to common stockholders                                          |                                        | $                                               | (57,685    | )       |              | $ | (96,270   | )      |  | $ | (42,731   | )                   |  | $    | (17,721 | )      |      | $ | (13,116 | )     |  | $ | (233,517 | )      
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|Basic and diluted net loss per common share                                           |                                        | $                                               | (2.00      | )       |              | $ | (17.79    | )      |  | $ | (42.59    | )                   |  | $    | (19.80  | )      |      | $ | (14.95  | )     |  |   |          |        
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  
|Weighted-average shares used in computing basic and diluted net
    loss per share(3) |                                        |                                                 | 28,839,076 |         |              |   | 5,411,891 |        |  |   | 1,003,426 |                     |  |      | 894,865 |        |      |   | 877,400 |       |  |   |          |        
|                                                                                      |                                        |                                                 |            |         |              |   |           |        |  |   |           |                     |  |      |         |        |      |  

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|                                                      |  |                    |          |   |      |   |          |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------- |  | ------------------ | -------- | - | ---- | - | -------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                      |  | As of December 31, |         
|                                                      |  |                    |         
|                                                      |  | 2004               |          |   | 2003 |   |          | 2002 |  |   | 2001    |   |  | 2000 |        
|                                                      |  |                    |          |   |      |   |          |      |  |   |         |   |  |      |        
|                                                      |  | (In thousands)     |         
|Balance Sheet Data:                                   |  |                    |          |   |      |   |          |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash, cash equivalents and short-term investments     |  | $                  | 119,589  |   |      | $ | 114,252  |      |  | $ | 33,798  |   |  | $    | 56,504  |   |  | $ | 9,781   |  
|Working capital                                       |  |                    | 106,677  |   |      |   | 107,630  |      |  |   | 31,751  |   |  |      | 55,814  |   |  |   | 9,646   |  
|Total assets                                          |  |                    | 125,603  |   |      |   | 121,273  |      |  |   | 38,144  |   |  |      | 58,541  |   |  |   | 11,716  |  
|Long-term obligations                                 |  |                    | 1,901    |   |      |   | 5,064    |      |  |   | 3,740   |   |  |      | 33      |   |  |   | 108     |  
|Mandatorily redeemable convertible preferred stock(2) |  |                    |         |   |      |   |         |      |  |   | 106,566 |   |  |      | 91,917  |   |  |   | 29,073  |  
|Common stock                                          |  |                    | 36       |   |      |   | 26       |      |  |   | 1       |   |  |      | 1       |   |  |   | 1       |  
|Deficit accumulated during the development stage      |  |                    | (176,162 | ) |      |   | (118,477 | )    |  |   | (75,329 | ) |  |      | (35,408 | ) |  |   | (17,784 | )
|Total stockholders equity/(deficit)                  |  |                    | 107,314  |   |      |   | 103,922  |      |  |   | (76,829 | ) |  |      | (35,569 | ) |  |   | (17,934 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the years ended December 31, 2004, 2003 and 2002,
    research and development and selling, general and administrative
    expenses exclude stock-based compensation of $1,971 and $1,977,
    $2,373 and $1,819, and $431 and $250, respectively. For the
    cumulative period from June 10, 1996 (Inception) to
    December 31, 2004, research and development and selling,
    general and administrative expenses exclude stock-based
    compensation of $4,827 and $4,046, respectively.                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(2) | During the year ended December 31, 2003, we raised
    $39.9 million through the sale of additional shares of
    Series D preferred stock in August and upon the completion
    of our initial public offering in November, all of the
    outstanding Series A, C and D mandatorily redeemable
    convertible preferred stock was converted into approximately
    19.4 million shares of common stock. We recorded a non-cash
    beneficial conversion charge of $39.9 million in 2003,
    which is calculated as the difference between the Series D
    preferred stock offering price and the estimated fair value of
    the Series D preferred stock, limited to the amount of the
    proceeds from the sale of the Series D preferred stock.                                                                                                                               
|   
|(3) | The weighted average shares used in computing basic and diluted
    net loss per share is calculated based on the weighted-average
    number of common shares outstanding during the year and excludes
    all dilutive potential common stock, including options,
    mandatorily redeemable convertible preferred stock, convertible
    preferred stock, common stock subject to repurchase and
    warrants. In November 2003, we sold 5.75 million shares of
    common stock for net proceeds of $73.3 million in our
    initial public offering. Concurrently, we issued approximately
    19.6 million shares of common stock upon the conversion of
    all of the outstanding shares of Series A, B, C and D
    preferred stock. Accordingly, this resulted in the increase in
    the weighted average common shares outstanding for the year
    ended December 31, 2003.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

Overview






45



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enoximone. We currently market an intravenous (i.v.)
    formulation of enoximone, Perfan® I.V., in eight
    countries in Europe for the treatment of acute decompensated
    heart failure. We believe that chronic oral administration of
    low doses of enoximone capsules has the potential to alleviate
    symptoms and reduce hospitalizations for patients with advanced
    chronic heart failure, resulting in a decrease in associated
    health care costs and improvement in patients quality of
    life. We are evaluating enoximone capsules in three
    Phase III trials (ESSENTIAL I & II and
    EMPOWER) and we completed one additional Phase III trial in
    February 2004 (EMOTE). In November 2004, we announced the
    completion of the treatment phase of both ESSENTIAL trials. We
    plan to report preliminary data for the ESSENTIAL trials in the
    middle of 2005.                                                                                        
|
| |  | Ambrisentan. We believe that ambrisentan may have several
    clinical benefits over existing PAH therapies, including greater
    and more durable efficacy, low incidence of liver toxicity, once
    daily dosing and lower incidence of interactions with other
    drugs. We completed a Phase II clinical trial of
    ambrisentan in September 2003 and announced the initiation of
    the two pivotal Phase III trials, ARIES-1 & -2, in
    January 2004. We expect to complete enrollment in ARIES-2 by the
    end of June 2005 and ARIES-1 in the fourth quarter of 2005. We
    plan to report preliminary results from each of the ARIES trials
    approximately six months following the completion of enrollment
    in each trial.                                                                                                                                                                                                                                                 
|
| |  | Darusentan. We believe that there is a significant need
    for a therapeutic agent that, when added to currently available
    medications, is capable of lowering blood pressure in patients
    suffering from resistant systolic hypertension (i.e., patients
    whose blood pressure cannot be adequately controlled with
    existing medication). We believe that darusentan may be an agent
    that is capable of improving control of blood pressure in this
    patient population, leading to the potential for enhanced
    patient outcomes, such as a reduction in the number of serious
    cardiac events and the progression of chronic kidney disease. In
    July 2004, we announced the initiation of a Phase IIb
    clinical trial to evaluate the safety and efficacy of darusentan
    in patients with resistant systolic hypertension. We expect this
    trial to be completed in the middle of 2005 and we intend to
    report results of the trial shortly thereafter.









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47



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Results of Operations




| |                                             
| | --------------------------------------------
| | Years Ended December 31, 2004, 2003 and 2002



| |         
| | --------
| | Revenues

|          |                                    |                          |       |       |      |   |       |       |  |   |       |       | 
|--------- | ---------------------------------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|          |                                    | Years Ended December 31, |      
|          |                                    |                          |      
|          |                                    | 2004                     |       |       | 2003 |   |       | 2002  | 
|          |                                    |                          |       |       |      |   |       |       | 
|          |                                    | (In thousands)           |      
|Revenues: |                                    |                          |       |       |      |   |       |       |  |   |       |      
|          | Product sales                      |                          | $     | 3,318 |      |   | $     | 2,846 |  |   | $     | 2,343 | 
|          | Research and development contracts |                          |       | 6,606 |      |   |       | 1,010 |  |   |       |      | 
|          |                                    |                          |       |       |      |   |       |       | 
|          |                                    | $                        | 9,924 |       |      | $ | 3,856 |       |  | $ | 2,343 |      
|          |                                    |                          |       |       |      |   |       |       | 



| |              
| | -------------
| | Product Sales







| |                                           
| | ------------------------------------------
| | Research and development contracts revenue







| |                   
| | ------------------
| | Costs and Expenses

|                    |                                                                                      |                          |        |        |      |   |        |        |  |   |        |        | 
|------------------- | ------------------------------------------------------------------------------------ | ------------------------ | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                    |                                                                                      | Years Ended December 31, |       
|                    |                                                                                      |                          |       
|                    |                                                                                      | 2004                     |        |        | 2003 |   |        | 2002   | 
|                    |                                                                                      |                          |        |        |      |   |        |        | 
|                    |                                                                                      | (In thousands)           |       
|Costs and expenses: |                                                                                      |                          |        |        |      |   |        |        |  |   |        |       
|                    | Cost of product sold                                                                 |                          | $      | 1,077  |      |   | $      | 885    |  |   | $      | 877    | 
|                    | Research and development (excluding stock-based compensation)                        |                          |        | 54,124 |      |   |        | 37,365 |  |   |        | 24,950 | 
|                    | Selling, general and administrative (excluding stock-based
    compensation expense) |                          |        | 9,259  |      |   |        | 4,387  |  |   |        | 4,650  | 
|                    | Stock-based compensation                                                             |                          |        | 3,948  |      |   |        | 4,192  |  |   |        | 681    | 
|                    |                                                                                      |                          |        |        |      |   |        |        | 
|                    |                                                                                      | $                        | 68,408 |        |      | $ | 46,829 |        |  | $ | 31,158 |       
|                    |                                                                                      |                          |        |        |      |   |        |        | 

48



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| |                     
| | --------------------
| | Cost of Product Sold





| |                         
| | ------------------------
| | Research and Development



|                               |                    |                          |        |        |      |   |        |        |  |   |        |        | 
|------------------------------ | ------------------ | ------------------------ | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                               |                    | Years Ended December 31, |       
|                               |                    |                          |       
|                               |                    | 2004                     |        |        | 2003 |   |        | 2002   | 
|                               |                    |                          |        |        |      |   |        |        | 
|                               |                    | (In thousands)           |       
|Development                    |                    |                          |        |        |      |   |        |        |  |   |        |       
|                               | Enoximone capsules |                          | $      | 26,757 |      |   | $      | 19,718 |  |   | $      | 14,588 | 
|                               | Ambrisentan        |                          |        | 16,255 |      |   |        | 7,962  |  |   |        | 4,368  | 
|                               | Darusentan         |                          |        | 4,250  |      |   |        | 149    |  |   |        |       | 
|                               |                    |                          |        |        |      |   |        |        | 
|Total development              |                    |                          | 47,262 |        |      |   | 27,829 |        |  |   | 18,956 |       
|License fees                   |                    |                          |        |        |      |   |        |        |  |   |        |       
|                               | Enoximone          |                          |        |       |      |   |        |       |  |   |        | 1,500  | 
|                               | Ambrisentan        |                          |        | 1,500  |      |   |        | 1,000  |  |   |        | 1,000  | 
|                               | Darusentan         |                          |        |       |      |   |        | 5,000  |  |   |        |       | 
|                               | Other              |                          |        | 117    |      |   |        | 188    |  |   |        |       | 
|                               |                    |                          |        |        |      |   |        |        | 
|Total license fees             |                    |                          | 1,617  |        |      |   | 6,188  |        |  |   | 2,500  |       
|Discovery research             |                    |                          | 5,245  |        |      |   | 3,348  |        |  |   | 3,494  |       
|                               |                    |                          |        |        |      |   |        |        | 
|Total research and development |                    | $                        | 54,124 |        |      | $ | 37,365 |        |  | $ | 24,950 |       
|                               |                    |                          |        |        |      |   |        |        | 





| |   |                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $5.5 million increase in clinical investigator site
    payments and external contract costs associated with clinical
    monitoring and program management efforts as a result of higher
    patient enrollment and ongoing patient progress in the ESSENTIAL
    trials;
|
| |  | $765,000 increase in external contract costs associated with
    clinical monitoring, clinical trial materials, consulting and
    program management efforts related to other enoximone trials;                                                                          
|
| |  | $470,000 increase related to enoximone raw material costs
    expensed for expected use in manufacturing development and
    analytical testing;                                                                                                                          
|
| |  | $330,000 increase in costs associated with stability and release
    testing; and                                                                                                                                                                                         
|
| |  | $1.1 million increase in the internal costs associated with
    the management of the enoximone trials primarily due to an
    increase in the number of employees.                                                                                                       



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| |   |                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3.9 million increase in clinical investigator site
    payments and external contract costs associated with clinical
    monitoring and program management efforts, as a result of higher
    patient enrollment and ongoing patient progress in the ESSENTIAL
    trials;
|
| |  | $941,000 increase in the costs associated with work on
    developing the commercial manufacturing process for enoximone;                                                                                                                                                  
|
| |  | $511,000 increase in the internal costs associated with the
    management of the enoximone trials, primarily due to an increase
    in our staff; and                                                                                                                     
|
| |  | $255,000 increase in costs associated with producing clinical
    trial materials for the ESSENTIAL trial.                                                                                                                                                                 









| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $7.7 million increase in expenses due to the cost of our
    two Phase III ARIES trials and the related extension study,
    which were initiated in January 2004;
|
| |  | $2.4 million increase in expenses related to work on
    developing the commercial manufacturing process for ambrisentan;                                         
|
| |  | $130,000 increase in expenses due to the extension study
    associated with our Phase II PAH trial; and                                                          
|
| |  | $910,000 increase in internal expenses associated with the
    management of the ambrisentan trials, primarily due to an
    increase in the number of employees. 







| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | $1.9 million increase in expenses related to non-clinical
    toxicology studies;                                                
|
| |  | $1.4 million increase in expenses due to the cost of
    activities preparatory to initiating our two Phase III
    ARIES trials;
|
| |  | $819,000 increase in expenses due to the initiation of the
    extension study for our Phase II PAH trial; and                   
|
| |  | $337,000 increase in internal expenses associated with the
    management of the ambrisentan trials.                             





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| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3.2 million in expenses incurred from activities related
    to our Phase IIb clinical trial of darusentan in resistant
    systolic hypertension;   
|
| |  | $220,000 in consulting costs;                                                                                                                         
|
| |  | $130,000 in expenses related to analytical and regulatory
    work; and                                                                               
|
| |  | $375,000 in internal expenses associated with the management of
    the darusentan trials primarily due to an increase in the number
    of employees.











| |                                    
| | -----------------------------------
| | Selling, General and Administrative





| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $1.6 million increase in insurance and professional service
    costs related to being a public company for the full year,
    including costs related to compliance with the Sarbanes-Oxley
    Act;
|
| |  | $1.2 million related to increased staffing and related
    recruiting costs;                                                                                                                         
|
| |  | $780,000 increase in market research costs;                                                                                                                                                          
|
| |  | $410,000 increase related to facility and office maintenance
    costs related to increased space and staffing; and                                                                                  
|
| |  | $215,000 increase in conferences and consulting costs.                                                                                                                                               





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| |                         
| | ------------------------
| | Stock-Based Compensation



|                                    |  |                         |       |  |      |   |       |      |  |   |     | 
|----------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | --- | 
|                                    |  | Year Ended December 31, |      
|                                    |  |                         |      
|                                    |  | 2004                    |       |  | 2003 |   |       | 2002 | 
|                                    |  |                         |       |  |      |   |       |      | 
|                                    |  | (In thousands)          |      
|Research and development            |  | $                       | 1,971 |  |      | $ | 2,373 |      |  | $ | 431 | 
|Selling, general and administrative |  |                         | 1,977 |  |      |   | 1,819 |      |  |   | 250 | 
|                                    |  |                         |       |  |      |   |       |      | 
|                                    |  | $                       | 3,948 |  |      | $ | 4,192 |      |  | $ | 681 | 
|                                    |  |                         |       |  |      |   |       |      | 



| |                               
| | ------------------------------
| | Interest Income/(Expense), Net





| |                                                                    
| | -------------------------------------------------------------------
| | Accretion of Mandatorily Redeemable Convertible Preferred
    Stock





| |                
| | ---------------
| | Deemed Dividend

Accounting for
Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios.


52



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Liquidity and Capital Resources














53



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Obligations and Commitments




|                              |  |                |       |                        |          |   |        |             |  |         |            |            |       |   |   |  |  |   |   | 
|----------------------------- |  | -------------- | ----- | ---------------------- | -------- | - | ------ | ----------- |  | ------- | ---------- | ---------- | ----- | - | - |  |  | - | - | 
|                              |  |                |       | Payments Due by Period
|                              |  |                |       |                       
|                              |  |                |       | Less Than              |          |   | One to |             |  | Four to |            | After Five
|Contractual Obligations       |  | Total          |       |                        | One Year |   |        | Three Years |  |         | Five Years |            | Years
|                              |  |                |       |                        |          |   |        |             |  |         |            |            |      
|                              |  | (In thousands)
|Notes payable(1)              |  | $              | 2,132 |                        |          | $ | 1,960  |             |  | $       | 172        |            |       | $ |  |  |  | $ |  | 
|Capital lease obligations(2)  |  |                | 195   |                        |          |   | 79     |             |  |         | 116        |            |       |   |  |  |  |   |  | 
|Operating leases(3)           |  |                | 1,459 |                        |          |   | 380    |             |  |         | 1,079      |            |       |   |  |  |  |   |  | 
|                              |  |                |       |                        |          |   |        |             |  |         |            |            |       |   |  
|Total contractual obligations |  | $              | 3,786 |                        |          | $ | 2,419  |             |  | $       | 1,367      |            |       | $ |  |  |  | $ |  | 
|                              |  |                |       |                        |          |   |        |             |  |         |            |            |       |   |  






|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts are equal to the annual maturities of our long-term debt
    outstanding as of December 31, 2004.                                                                 
|   
|(2) | Amounts represent principal payments due under various capital
    lease obligations as of December 31, 2004. These
    arrangements expire in various years through 2008.
|   
|(3) | These commitments are associated with contracts that expire in
    various years through 2008. Payments due reflect fixed rent
    expense.                               



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Net Operating Loss and Tax Credit Carryforwards




Critical Accounting Policies and the Use of Estimates








| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | revenue recognition;                                                                                             
|
| |  | accounting for research and development expenses;                                                                
|
| |  | estimating the value of our equity instruments for use in
    deferred stock-based compensation calculations; and
|
| |  | accounting for income taxes.                                                                                     



| |                     
| | --------------------
| | Revenue Recognition.

Revenue Recognition in Financial
Statements Revenue Arrangements with
Multiple Deliverables,


Product Sales.


Research and development contracts.


55



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Accounting for research and development expenses.




56



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Valuation of equity instruments. Accounting for
Stock Appreciation Rights and Other Variable Stock Option or
Award Plans, an Interpretation of APB Opinions No. 15 and
25


Accounting for income taxes.


Recent Accounting Pronouncements




The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments. Effective Date of
Paragraphs 10-20 of EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments


57



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(FSP 03-1-1)
















| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. A modified prospective method in which
    compensation cost is recognized beginning with the effective
    date (a) based on the requirements of
    SFAS No. 123(R) for all share-based payments granted
    after the effective date and (b) based on the requirements
    of SFAS No. 123 for all awards granted to employees
    prior to the effective date of SFAS No. 123(R) that
    remain unvested on the effective date.
|
| | 2. A modified retrospective method which
    includes the requirements of the modified prospective method
    described above, but also permits entities to restate based on
    the amounts previously recognized under SFAS No. 123 for
    purposes of pro forma disclosures either (a) all prior
    periods presented or (b) prior interim periods of the year
    of adoption.                                                   



58



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|         |                                                            
|-------- | -----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET
    RISK









59



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|                          |  |            |            |  |            |            |            |         |            |   |         |              |  |              |         |   |  |  |      |  
|------------------------- |  | ---------- | ---------- |  | ---------- | ---------- | ---------- | ------- | ---------- | - | ------- | ------------ |  | ------------ | ------- | - |  |  | ---- | -
|                          |  |            |            |  |            | Unrealized |            |         | Unrealized |   |         | Average Rate | 
|                          |  | Amortized  |            |  | Aggregate  |            |            | Holding |            |   | Holding |              |  | of Return    |        
|Security Type             |  | Cost Basis |            |  | Fair Value |            |            | Gains   |            |   | Losses  |              |  | (Annualized) |        
|                          |  |            |            |  |            |            |            |         |            |   |         |              |  |              |        
|December 31, 2004         |  |            |            |  |            |            |            |         |            |   |         |              |  |              |         |   |  |  |      |  
|Government securities     |  | $          | 27,729,433 |  |            | $          | 27,676,941 |         |            | $ |        |              |  | $            | (52,492 | ) |  |  | 2.23 | %
|Corporate debt securities |  |            | 17,395,063 |  |            |            | 17,371,309 |         |            |   |        |              |  |              | (23,754 | ) |  |  | 2.25 | %
|Asset-backed securities   |  |            | 3,294,831  |  |            |            | 3,282,569  |         |            |   |        |              |  |              | (12,262 | ) |  |  | 2.06 | %
|                          |  |            |            |  |            |            |            |         |            |   |         |              |  |              |        
|Total investments         |  | $          | 48,419,327 |  |            | $          | 48,330,819 |         |            | $ |        |              |  | $            | (88,508 | ) |  |  |      |  
|                          |  |            |            |  |            |            |            |         |            |   |         |              |  |              |        
|December 31, 2003         |  |            |            |  |            |            |            |         |            |   |         |              |  |              |         |   |  |  |      |  
|Government securities     |  | $          | 32,509,476 |  |            | $          | 32,519,386 |         |            | $ | 9,910   |              |  | $            |        |   |  |  | 1.37 | %
|Corporate debt securities |  |            | 24,056,490 |  |            |            | 24,040,418 |         |            |   |        |              |  |              | (16,072 | ) |  |  | 1.20 | %
|Commercial paper          |  |            | 9,093,506  |  |            |            | 9,093,736  |         |            |   | 230     |              |  |              |        |   |  |  | 1.12 | %
|Asset-backed securities   |  |            | 4,260,663  |  |            |            | 4,261,087  |         |            |   | 424     |              |  |              |        |   |  |  | 3.64 | %
|                          |  |            |            |  |            |            |            |         |            |   |         |              |  |              |        
|Total investments         |  | $          | 69,920,135 |  |            | $          | 69,914,627 |         |            | $ | 10,564  |              |  | $            | (16,072 | ) |  |  |      |  
|                          |  |            |            |  |            |            |            |         |            |   |         |              |  |              |        








|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures




Managements Report on Internal Control Over Financial
Reporting




60



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Internal Control 
Integrated Framework Internal
Control  Integrated Framework,




No Changes in Internal Control over Financial Reporting







ITEM 9B.     OTHER
INFORMATION







PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



www.myogen.com




| |                           
| | --------------------------
| | Myogen, Inc.              
| | Attn: Investor Relations  
| | 7575 West 103rd Ave., #102
| | Westminster, CO 80021-5426
| | Tel: (303) 410-6666       








|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION



61



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|         |                                                                   
|-------- | ------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT








|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES






PART IV







|         |                                        
|-------- | ---------------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES







|                                                                         |  |                |      | 
|------------------------------------------------------------------------ |  | -------------- | ---- | 
|                                                                         |  | Page Number in |     
|                                                                         |  | this Form 10-K |     
|                                                                         |  |                |     
|Report of Independent Registered Public Accounting Firm                  |  |                | F-2  | 
|Consolidated Balance Sheets                                              |  |                | F-4  | 
|Consolidated Statements of Operations                                    |  |                | F-5  | 
|Consolidated Statements of Changes in Stockholders
    Equity/(Deficit) |  |                | F-6  | 
|Consolidated Statements of Cash Flows                                    |  |                | F-11 | 
|Notes to Consolidated Financial Statements                               |  |                | F-12 | 







|            |    |             |  |                                                                                                                    
|----------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 3  | .1*         |  | Restated Certificate of Incorporation.                                                                             
|            | 3  | .2*         |  | Amended and Restated Bylaws.                                                                                       
|            | 4  | .1*         |  | Specimen Stock Certificate.                                                                                        
|            | 10 | .1*(1)      |  | 2003 Equity Incentive Plan of the Company, Form of Grant Notice
    and Form of Stock Option Agreement.            
|            | 10 | .2*(1)      |  | 2003 Employee Stock Purchase Plan of the Company.                                                                  
|            | 10 | .3*         |  | Series A Preferred Stock Purchase Agreement, dated
    May 21, 1998 between Myogen and the parties named therein.  
|            | 10 | .4*         |  | Series B Preferred Stock Purchase Agreement, dated
    March 16, 2000 between Myogen and the parties named therein.

62



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|            |    |             |  |                                                                                                                                                                                                           
|----------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 10 | .5*         |  | Series C Preferred Stock Purchase Agreement, dated
    November 23, 1999, as amended on December 8, 1999,
    between Myogen and the parties named therein.                                               
|            | 10 | .6*         |  | Series D Preferred Stock Purchase Agreement, dated
    August 21, 2001, as amended on November 2, 2001 and
    December 27, 2001, between Myogen and the parties named
    therein.                       
|            | 10 | .7*         |  | Series D Preferred Stock Purchase Agreement, dated
    August 27, 2003, between Myogen and the parties named
    therein.                                                                                 
|            | 10 | .8*         |  | Third Amended and Restated Investor Rights Agreement, dated
    August 21, 2001, as amended on August 27, 2003,
    between Myogen and certain of our stockholders.                                       
|            | 10 | .9*         |  | Third Amended and Restated Stockholders Agreement, dated
    August 21, 2001, as amended on December 27, 2001,
    between Myogen and certain of our stockholders.                                        
|            | 10 | .10(1)      |  | Form of Employment Agreement entered into between Myogen and
    certain of its executives, including reference schedule.                                                                                 
|            | 10 | .11*        |  | Form of Indemnification Agreement entered into by each of
    Myogens Executive Officers and Directors.                                                                                                  
|            | 10 | .12*        |  | Lease Agreement between the Company and Church Ranch Business
    Center, LLC, dated January 1, 2002.                                                                                                     
|            | 10 | .13*        |  | Warrant to purchase shares of Series C preferred stock
    issued to Silicon Valley Bank, dated January 26, 2000.                                                                                         
|            | 10 | .14*        |  | Venture Loan and Security Agreement by and among GATX Ventures,
    Inc., Silicon Valley Bank and the Company, dated
    December 6, 2002.                                                                
|            | 10 | .15*        |  | Warrant to purchase shares of Series D preferred stock
    issued to GATX Ventures, Inc., dated December 6, 2002.                                                                                         
|            | 10 | .16*        |  | Warrant to purchase shares of Series D preferred stock
    issued to Silicon Valley Bank, dated December 6, 2002.                                                                                         
|            | 10 | .17*=       |  | License Agreement between Aventis Pharmaceuticals, Inc.
    (formerly Hoechst Marion Roussel, Inc.) and the Company, dated
    October 1, 1998, as amended November 23, 1999 and
    June 2, 2003.        
|            | 10 | .18*=       |  | License Agreement between Abbott Deutschland Holding GmbH and
    the Company, dated October 8, 2001.                                                                                                     
|            | 10 | .19*=       |  | Intellectual Property License Agreement between the University
    Technology Corporation and the Company, dated September 1,
    1998, as amended January 26, 2001 and November 12,
    2002.            
|            | 10 | .20*=       |  | Materials Transfer Agreement between the Regents of the
    University of Colorado and the Company, dated September 4,
    1998, as amended January 4, 2001.                                              
|            | 10 | .21*=       |  | Patent and Technology License Agreement between the Board of
    Regents of The University Of Texas System and the Company, dated
    December 1, 1999, as amended July 7, 2000 and
    December 20, 2001.
|            | 10 | .22*=       |  | Exclusive Patent And Technology License Agreement between the
    Board of Regents of The University of Texas System and the
    Company, dated January 1, 2002.                                          
|            | 10 | .23*=       |  | License Agreement between Abbott Laboratories and the Company,
    dated June 30, 2003.                                                                                                                   
|            | 10 | .24*=       |  | Collaboration and Option Agreement between Novartis Institutes
    for BioMedical Research, Inc. and the Company, dated
    October 8, 2003.                                                              
|            | 10 | .25*=       |  | Form of License, Development and Commercialization Agreement
    between Novartis Institutes for BioMedical Research, Inc. and
    the Company.                                                           
|            | 10 | .26*=       |  | Materials Transfer Agreement between the Regents of the
    University of Colorado and the Company, dated September 12,
    2003.                                                                         
|            | 10 | .27%        |  | Indemnification Agreement between Kirk K. Calhoun and the
    Company, dated as of January 16, 2004.                                                                                                      
|            | 10 | .28%        |  | First Amendment to Lease Agreement between Sevo Miller, Inc., as
    receiver on behalf of Church Ranch Business Center, LLC, and the
    Company, dated December 2, 2003.                                

63



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|            |    |             |  |                                                                                                                                                                                                                                              
|----------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 10 | .29%=       |  | Third Amendment to Intellectual Property License Agreement
    between University License Equity Holdings, Inc. and the
    Company, dated November 24, 2003.                                                                                
|            | 10 | .30%=       |  | Amendment No. 3 to Patent and Technology License Agreement
    between the Board of Regents of the University of Texas System
    and the Company, dated November 6, 2003.                                                                   
|            | 10 | .31%=       |  | Amendment No. 1 to Patent and Technology License Agreement
    between the Board of Regents of the University of Texas System
    and the Company, dated as of February 10, 2004.                                                            
|            | 10 | .32%=       |  | Patent License Agreement between the University of Texas System,
    the University of North Texas Health Science Center at Fort
    Worth and the Company, dated January 13, 2000.                                                          
|            | 10 | .33^(1)     |  | 2003 Employee Stock Purchase Plan  August 1,
    2004 Offering.                                                                                                                                                                             
|            | 10 | .34#        |  | Securities Purchase Agreement, dated September 24, 2004, by
    and among the Company and the investors named therein.                                                                                                                       
|            | 10 | .35@        |  | Second Amendment to Lease Agreement between LaSalle Bank, N.A.
    (formerly known as LaSalle National Bank), as Trustee for the
    Certificateholders Under the Pooling and Servicing Agreement,
    and the Company, dated April 15, 2004.
|            | 10 | .36@        |  | Third Amendment to Lease Agreement between Scott Kaufman and the
    Company, dated September 30, 2004.                                                                                                                                      
|            | 10 | .37+        |  | Third Amendment to the License Agreement by and between Aventis
    Pharmaceuticals, Inc. and Myogen, dated January 27, 2005.                                                                                                                
|            | 10 | .38(1)      |  | 2003 Employee Stock Purchase Plan  February 1,
    2005 Offering.                                                                                                                                                                           
|            | 10 | .39$(1)     |  | 2004 and 2005 Discretionary Bonus Program.                                                                                                                                                                                                   
|            | 21 | .1*         |  | List of Subsidiaries.                                                                                                                                                                                                                        
|            | 23 | .1          |  | Consent of PricewaterhouseCoopers LLP, Independent Registered
    Public Accounting Firm.                                                                                                                                                    
|            | 24 | .1          |  | Powers of Attorney. Reference B made to page 65.                                                                                                                                                                                             
|            | 31 | .1          |  | Certification of principal executive officer required by
    Rule 13a-14(a).                                                                                                                                                                 
|            | 31 | .2          |  | Certification of principal financial officer required by
    Rule 13a-14(a).                                                                                                                                                                 
|            | 32 | .1          |  | Section 1350 Certification.                                                                                                                                                                                                                  




|    |  |                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   |  | Incorporated by reference to our Registration Statement on
    Form S-1 (File No. 333-108301) and amendments thereto,
    declared effective October 29, 2003.                         
|(%) |  | Incorporated by reference to our Annual Report on Form 10-K
    (File No. 000-50438), as filed with the Commission on
    March 1, 2004.                                               
|(^) |  | Incorporated by reference to our Quarterly Report on
    Form 10-Q (File No. 000-50438), as filed with the
    Commission on August 9, 2004.                                           
|(#) |  | Incorporated by reference to our Current Report on Form 8-K
    (File No. 000-50438), as filed with the Commission on
    September 29, 2004.                                          
|(@) |  | Incorporated by reference to our Current Report on Form 8-K
    (File No. 000-50438), as filed with the Commission on
    October 1, 2004.                                             
|($) |  | Incorporated by reference to our Current Report on
    Form 8-K/A (File No. 000-50438), as filed with the
    Commission on March 9, 2005.                                             
|(1) |  | Indicates Management Contract or Compensatory Plan or
    Arrangement.                                                                                                                 
|=   |  | We have been granted confidential treatment with respect to the
    omitted portions of this agreement.                                                                                
|+   |  | We have applied for confidential treatment with respect to
    portions of this agreement. Omitted portions have been filed
    separately with the Securities and Exchange Commission.

64



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SIGNATURES




|                     |  |                                                                                     
|-------------------- |  | ------------------------------------------------------------------------------------
|                     |  | MYOGEN, INC.                                                                        
|                    
|Date: March 15, 2005 |  | By: /s/ J. William FreytagJ.
    William FreytagPresidentand Chief Executive Officer

POWER OF ATTORNEY




Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, this Form 10-K has been signed by the
following persons on behalf of the Registrant on March 15,
2004, and in the capacities indicated:


|                                                   |  |                                                                                                                                                    |  |                |  | 
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Name                                               |  | Title                                                                                                                                              |  | Date          
|                                                   |  |                                                                                                                                                    |  |               
|                                                  
|/s/ J. William Freytag      J.
    William Freytag |  | President, Chief Executive Officer and Chairman (Principal
    Executive Officer)                                                                  |  | March 15, 2005
|                                                  
|/s/ Joseph L. Turner      Joseph
    L. Turner     |  | Senior Vice President, Finance and Chief Financial Officer,
    Treasurer and Assistant Secretary (Principal Financial and
    Accounting Officer) |  | March 15, 2005
|                                                  
|/s/ Michael R. Bristow      Michael
    R. Bristow |  | Chief Science and Medical Officer
    and Director                                                                                                 |  | March 15, 2005
|                                                  
|/s/ Kirk K. Calhoun      Kirk
    K. Calhoun       |  | Director                                                                                                                                           |  | March 15, 2005
|                                                  
|/s/ Jerry T. Jackson      Jerry
    T. Jackson     |  | Director                                                                                                                                           |  | March 15, 2005
|                                                  
|/s/ Daniel J. Mitchell      Daniel
    J. Mitchell |  | Director                                                                                                                                           |  | March 15, 2005

65



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|                                                |  |          |  |                |  | 
|----------------------------------------------- |  | -------- |  | -------------- |  | 
|Name                                            |  | Title    |  | Date          
|                                                |  |          |  |               
|                                               
|/s/ Arnold L. Oronsky     Arnold
    L. Oronsky |  | Director |  | March 15, 2005
|                                               
|/s/ Andrew N. Schiff     Andrew
    N. Schiff   |  | Director |  | March 15, 2005
|                                               
|/s/ Sigrid Van Bladel     Sigrid
    Van Bladel |  | Director |  | March 15, 2005

66



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Myogen, Inc.





Index to Consolidated Financial Statements


|                                                                         |  |  |      | 
|------------------------------------------------------------------------ |  |  | ---- | 
|Report of Independent Registered Public
    Accounting Firm              |  |  | F-2  | 
|Consolidated Balance Sheets                                              |  |  | F-4  | 
|Consolidated Statements of Operations                                    |  |  | F-5  | 
|Consolidated Statements of Changes in
    Stockholders Equity/(Deficit) |  |  | F-6  | 
|Consolidated Statements of Cash Flows                                    |  |  | F-11 | 
|Notes to Consolidated Financial
    Statements                           |  |  | F-12 | 

F-1



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##### Table of Contents



Report of Independent Registered Public Accounting Firm






Consolidated financial statements




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework




F-2



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##### Table of Contents













F-3



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)





CONSOLIDATED BALANCE SHEETS


|                                                       |                                                                                                                                                                                  |                                            |              |            |             |  |              |            |             | 
|------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------ | ---------- | ----------- |  | ------------ | ---------- | ----------- | 
|                                                       |                                                                                                                                                                                  | December 31,                               |             
|                                                       |                                                                                                                                                                                  |                                            |             
|                                                       |                                                                                                                                                                                  | 2004                                       |              |            | 2003        | 
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|ASSETS                                                
|Current assets:                                        |                                                                                                                                                                                  |                                            |              |            |             |  |              |           
|                                                       | Cash and cash equivalents                                                                                                                                                        |                                            | $            | 71,258,294 |             |  | $            | 44,337,721 |            
|                                                       | Short-term investments                                                                                                                                                           |                                            |              | 48,330,819 |             |  |              | 69,914,627 |            
|                                                       | Accrued interest receivable                                                                                                                                                      |                                            |              | 290,972    |             |  |              | 607,393    |            
|                                                       | Trade accounts receivable                                                                                                                                                        |                                            |              | 946,177    |             |  |              | 1,274,861  |            
|                                                       | Research and development contract amounts due within one year                                                                                                                    |                                            |              | 300,000    |             |  |              | 1,625,000  |            
|                                                       | Inventories                                                                                                                                                                      |                                            |              | 258,120    |             |  |              | 724,282    |            
|                                                       | Prepaid expenses and other current assets                                                                                                                                        |                                            |              | 1,679,340  |             |  |              | 1,434,174  |            
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|                                                       |                                                                                                                                                                                  | Total current assets                       |              |            | 123,063,722 |  |              |            | 119,918,058 | 
|Property and equipment, net                            |                                                                                                                                                                                  |                                            | 2,503,579    |            |             |  | 1,304,028    |           
|Other assets                                           |                                                                                                                                                                                  |                                            | 35,421       |            |             |  | 51,238       |           
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|                                                       |                                                                                                                                                                                  | Total assets                               |              | $          | 125,602,722 |  |              | $          | 121,273,324 | 
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|                                                      
|LIABILITIES AND STOCKHOLDERS EQUITY                  
|Current liabilities:                                   |                                                                                                                                                                                  |                                            |              |            |             |  |              |           
|                                                       | Accounts payable                                                                                                                                                                 |                                            | $            | 10,681,667 |             |  | $            | 7,594,935  |            
|                                                       | Accrued liabilities                                                                                                                                                              |                                            |              | 1,941,083  |             |  |              | 1,331,858  |            
|                                                       | Current portion of deferred revenue                                                                                                                                              |                                            |              | 1,823,188  |             |  |              | 1,666,667  |            
|                                                       | Current portion of deferred rent                                                                                                                                                 |                                            |              | 59,456     |             |  |              | 18,256     |            
|                                                       | Current portion of capital lease obligations                                                                                                                                     |                                            |              | 59,924     |             |  |              | 37,015     |            
|                                                       | Current portion of notes payable, net of discount                                                                                                                                |                                            |              | 1,821,806  |             |  |              | 1,639,246  |            
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|                                                       |                                                                                                                                                                                  | Total current liabilities                  |              |            | 16,387,124  |  |              |            | 12,287,977  | 
|Deferred revenue, net of current portion               |                                                                                                                                                                                  |                                            | 1,398,753    |            |             |  | 2,948,029    |           
|Deferred rent, net of current portion                  |                                                                                                                                                                                  |                                            | 217,616      |            |             |  |             |           
|Capital lease obligations, net of current portion      |                                                                                                                                                                                  |                                            | 112,728      |            |             |  | 121,617      |           
|Notes payable, net of current portion and discount     |                                                                                                                                                                                  |                                            | 172,100      |            |             |  | 1,993,906    |           
|Commitments and contingencies (see Note 8 and Note 13) |                                                                                                                                                                                  |                                            |              |            |             |  |              |           
|Stockholders equity:                                  |                                                                                                                                                                                  |                                            |              |            |             |  |              |           
|                                                       | Preferred Stock, $0.001 par value; 5,000,000 shares
    authorized at December 31, 2004 and 2003, no shares issued
    or outstanding                                            |                                            |              |           |             |  |              |           |            
|                                                       | Common stock, $0.001 par value; 100,000,000 shares
    authorized and 35,731,581 and 26,457,927 shares issued and
    outstanding as of December 31, 2004 and 2003, respectively |                                            |              | 35,732     |             |  |              | 26,458     |            
|Additional paid-in capital                             |                                                                                                                                                                                  |                                            | 286,017,266  |            |             |  | 229,080,380  |           
|Deferred stock-based compensation                      |                                                                                                                                                                                  |                                            | (2,534,535   | )          |             |  | (6,730,195   | )         
|Other comprehensive (loss)/income                      |                                                                                                                                                                                  |                                            | (42,203      | )          |             |  | 22,185       |           
|Deficit accumulated during the development stage       |                                                                                                                                                                                  |                                            | (176,161,859 | )          |             |  | (118,477,033 | )         
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|                                                       |                                                                                                                                                                                  | Total stockholders equity                 |              |            | 107,314,401 |  |              |            | 103,921,795 | 
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 
|                                                       |                                                                                                                                                                                  | Total liabilities and stockholders equity |              | $          | 125,602,722 |  |              | $          | 121,273,324 | 
|                                                       |                                                                                                                                                                                  |                                            |              |            |             | 



F-4



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##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |            |  |   |              |             | 
|------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ----------- | ---------- | ---- | - | ----------- | ----------------- |  | - | ----------------- | ---------- |  | - | ------------ | ----------- | 
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             | Cumulative Period | 
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             | June 10, 1996     | 
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             | (Inception) to    | 
|                                                                                |                                                                                                                                                           | 2004 |             |            | 2003 |   |             | 2002              |  |   | December 31, 2004 |           
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Revenues:                                                                       |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |            |  |   |              |            
|                                                                                | Product sales                                                                                                                                             |      | $           | 3,317,683  |      |   | $           | 2,845,713         |  |   | $                 | 2,342,899  |  |   | $            | 10,741,397  | 
|                                                                                | Research and development contracts                                                                                                                        |      |             | 6,606,498  |      |   |             | 1,010,305         |  |   |                   |           |  |   |              | 7,616,803   | 
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|                                                                                |                                                                                                                                                           |      | 9,924,181   |            |      |   | 3,856,018   |                   |  |   | 2,342,899         |            |  |   | 18,358,200   |            
|Costs and expenses:                                                             |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |            |  |   |              |            
|                                                                                | Cost of product sold                                                                                                                                      |      |             | 1,077,113  |      |   |             | 885,145           |  |   |                   | 877,434    |  |   |              | 3,763,799   | 
|                                                                                | Research and development (excluding stock-based compensation
    expense of $1,971,080, $2,372,888, $430,838, and $4,826,789
    respectively)            |      |             | 54,123,711 |      |   |             | 37,364,578        |  |   |                   | 24,949,510 |  |   |              | 142,843,381 | 
|                                                                                | Selling, general and administrative (excluding stock-based
    compensation expense of $1,976,559, $1,819,368, $250,405 and
    $4,046,332, respectively) |      |             | 9,259,430  |      |   |             | 4,386,635         |  |   |                   | 4,649,830  |  |   |              | 27,098,179  | 
|                                                                                | Stock-based compensation                                                                                                                                  |      |             | 3,947,639  |      |   |             | 4,192,256         |  |   |                   | 681,243    |  |   |              | 8,873,121   | 
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|                                                                                |                                                                                                                                                           |      | 68,407,893  |            |      |   | 46,828,614  |                   |  |   | 31,158,017        |            |  |   | 182,578,480  |            
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Loss from operations                                                            |                                                                                                                                                           |      | (58,483,712 | )          |      |   | (42,972,596 | )                 |  |   | (28,815,118       | )          |  |   | (164,220,280 | )          
|Interest income (expense), net                                                  |                                                                                                                                                           |      | 821,271     |            |      |   | (135,891    | )                 |  |   | 785,843           |            |  |   | 3,221,266    |            
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Loss before income taxes                                                        |                                                                                                                                                           |      | (57,662,441 | )          |      |   | (43,108,487 | )                 |  |   | (28,029,275       | )          |  |   | (160,999,014 | )          
|Income taxes                                                                    |                                                                                                                                                           |      | 22,385      |            |      |   | 39,346      |                   |  |   | 18,304            |            |  |   | 83,182       |            
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Net loss                                                                        |                                                                                                                                                           |      | (57,684,826 | )          |      |   | (43,147,833 | )                 |  |   | (28,047,579       | )          |  |   | (161,082,196 | )          
|Accretion of mandatorily redeemable convertible preferred stock                 |                                                                                                                                                           |      |            |            |      |   | (13,187,174 | )                 |  |   | (14,683,739       | )          |  |   | (32,499,556  | )          
|Deemed dividend related to beneficial conversion feature of
    preferred stock |                                                                                                                                                           |      |            |            |      |   | (39,935,388 | )                 |  |   |                  |            |  |   | (39,935,388  | )          
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Net loss attributable to common stockholders                                    |                                                                                                                                                           | $    | (57,684,826 | )          |      | $ | (96,270,395 | )                 |  | $ | (42,731,318       | )          |  | $ | (233,517,140 | )          
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Basic and diluted net loss per common share                                     |                                                                                                                                                           | $    | (2.00       | )          |      | $ | (17.79      | )                 |  | $ | (42.59            | )          |  |   |              |            
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           
|Weighted average common shares outstanding                                      |                                                                                                                                                           |      | 28,839,076  |            |      |   | 5,411,891   |                   |  |   | 1,003,426         |            |  |   |              |            
|                                                                                |                                                                                                                                                           |      |             |            |      |   |             |                   |  |   |                   |           



F-5



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##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            |            |            |   |            |            |            |  
|--------------------------------------------------------------------------------------------- | -------------------------- | -------------------------- | ------- |  | ------------ | - | --- | ---------- | - |  | ----------- |  | ---------- | ------- | --- | ------------- | ------------ | ----------- | ------------ | - | ------------- | ------ | - | ----- | - | - | ------- | - | - | - | - |  | - | - | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | -
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     | Deficit       |              |             |             
|                                                                                              |                            | Series B Convertible       |         |  |              |   |     |            |   |  | Notes       |  |            | Other   |     | Accumulated   |              |             |             
|                                                                                              |                            | Preferred Stock            |         |  | Common Stock |   |     | Additional |   |  | Deferred    |  | Receivable |         |     | Comprehensive |              | During the  |              |   | Total         |       
|                                                                                              |                            |                            |         |  |              |   |     | Paid-In    |   |  | Stock-Based |  | from       |         |     | Income        |              | Development |              |   | Stockholders |       
|                                                                                              |                            | Shares                     |         |  | Amount       |   |     | Shares     |   |  | Amount      |  |            | Capital |     |               | Compensation |             | Stockholders |   |               | (Loss) |   | Stage |   |   | Equity  |  
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |  
|Net loss                                                                                      |                            |                            |        |  |              | $ |    |            |   |  |            |  |            | $       |    |               |              | $           |             |   |               | $      |  |       |   | $ |        |   |   | $ |  |  |   | $ | (71,348    | )          |            | $ | (71,348    | )         
|Balance at December 31, 1996                                                                  |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             |             |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   | (71,348    | )          |            |   | (71,348    | )         
|Comprehensive income:                                                                         |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            |            |            |   |            |           
|                                                                                              |                            | Net loss                   |         |  |             |   |     |            |  |  |             |  |           |         |     |               |             |             |              |   |              |        |   |       |  |   |         |   |  |   |   |  |  |   |            |            | (285,383   | ) |            |            | (285,383   | )
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |  
|                                                                                              |                            | Total comprehensive income |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            |            | (285,383   | ) |            |            | (285,383   | )
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |  
|Balance at December 31, 1997                                                                  |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             |             |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   | (356,731   | )          |            |   | (356,731   | )         
|Issuance of common stock for cash and notes receivable                                        |                            |                            |        |  |              |   |    |            |   |  | 680,000     |  |            |         | 680 |               |              |             | 15,071       |   |               |        |  |       |   |   | (7,850  | ) |   |   |  |  |   |   |           |            |            |   | 7,901      |           
|Issuance of common stock in exchange for license agreements                                   |                            |                            |        |  |              |   |    |            |   |  | 46,542      |  |            |         | 47  |               |              |             | 23,224       |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 23,271     |           
|Issuance of common stock for notes receivable                                                 |                            |                            |        |  |              |   |    |            |   |  | 147,907     |  |            |         | 148 |               |              |             | 73,364       |   |               |        |  |       |   |   | (73,512 | ) |   |   |  |  |   |   |           |            |            |   |           |           
|Comprehensive income:                                                                         |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            |            |            |   |            |           
|                                                                                              |                            | Net loss                   |         |  |             |   |     |            |  |  |             |  |           |         |     |               |             |             |              |   |              |        |   |       |  |   |         |   |  |   |   |  |  |   |            |            | (1,990,914 | ) |            |            | (1,990,914 | )
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |  
|                                                                                              |                            | Total comprehensive income |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            |            | (1,990,914 | ) |            |            | (1,990,914 | )
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |  
|Balance at December 31, 1998                                                                  |                            |                            |        |  |              |   |    |            |   |  | 874,449     |  |            |         | 875 |               |              |             | 111,659      |   |               |        |  |       |   |   | (81,362 | ) |   |   |  |  |   |   | (2,347,645 | )          |            |   | (2,316,473 | )         
|Payments on notes receivable from stockholders                                                |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             |             |   |               |        |  |       |   |   | 5,671   |   |   |   |  |  |   |   |           |            |            |   | 5,671      |           
|Receipt of funds for par value of restricted stock                                            |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             | 739          |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 739        |           
|Other                                                                                         |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             | (303         | ) |               |        |  |       |   |   | 303     |   |   |   |  |  |   |   |           |            |            |   |           |           
|Accretion of mandatorily redeemable convertible preferred stock                               |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             | (112,095     | ) |               |        |  |       |   |   |        |   |   |   |  |  |   |   | (215,787   | )          |            |   | (327,882   | )         
|Comprehensive income:                                                                         |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            |            |            |   |            |           
|                                                                                              |                            | Net loss                   |         |  |             |   |     |            |  |  |             |  |           |         |     |               |             |             |              |   |              |        |   |       |  |   |         |   |  |   |   |  |  |   |            |            | (3,319,539 | ) |            |            | (3,319,539 | )
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |  
|                                                                                              | Total comprehensive income |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |   |   |  |   |   |            | (3,319,539 | )          |   |            | (3,319,539 | )         
|                                                                                              |                            |                            |         |  |              |   |     |            |   |  |             |  |            |         |     |               |              |             |              |   |               |        |   |       |   |   |         |   |   |  
|Balance at December 31, 1999                                                                  |                            |                            |        |  |              |   |    |            |   |  | 874,449     |  |            |         | 875 |               |              |             |             |   |               |        |  |       |   |   | (75,388 | ) |   |   |  |  |   |   | (5,882,971 | )          |            |   | (5,957,484 | )         
|Issuance of Series B convertible preferred stock                                              |                            |                            | 803,606 |  |              |   | 804 |            |   |  |            |  |            |         |    |               |              |             | 1,104,154    |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 1,104,958  |           
|Warrants issued in conjunction with note payable                                              |                            |                            |        |  |              |   |    |            |   |  |            |  |            |         |    |               |              |             | 10,815       |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 10,815     |           
|Issuance of common stock in August 2000 at $0.50 per share
    upon the exercise of options   |                            |                            |        |  |              |   |    |            |   |  | 4,354       |  |            |         | 4   |               |              |             | 2,173        |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 2,177      |           
|Issuance of common stock in November 2000 at $0.50 per
    share upon the exercise of options |                            |                            |        |  |              |   |    |            |   |  | 10,542      |  |            |         | 11  |               |              |             | 5,260        |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 5,271      |           
|Issuance of common stock in December 2000 at $1.15 per
    share upon the exercise of options |                            |                            |        |  |              |   |    |            |   |  | 3,000       |  |            |         | 3   |               |              |             | 3,447        |   |               |        |  |       |   |   |        |   |   |   |  |  |   |   |           |            |            |   | 3,450      |           



F-6



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        |  |        |        |   |  |             |             |   |  |             |             |  
|--------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------------------- | ------- | - | ------------ |  | --- | ---------- |  |  | ----------- | - |  | ---------- | --- | ------- | ------------- |  | ---------- | ------------ |  |  | ------------- | - |  | ----- | ------- | - | ------ |  | ------ | ------ | - |  | ----------- | ----------- | - |  | ----------- | ----------- | -
|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     | Deficit |               |  |           
|                                                                                              |                                                   | Series B Convertible |         |   |              |  |     |            |  |  | Notes       |   |  | Other      |     |         | Accumulated   |  |            |             
|                                                                                              |                                                   | Preferred Stock      |         |   | Common Stock |  |     | Additional |  |  | Deferred    |   |  | Receivable |     |         | Comprehensive |  |            | During the   |  |  | Total         |  
|                                                                                              |                                                   |                      |         |   |              |  |     | Paid-In    |  |  | Stock-Based |   |  | from       |     |         | Income        |  |            | Development  |  |  | Stockholders |  
|                                                                                              |                                                   | Shares               |         |   | Amount       |  |     | Shares     |  |  | Amount      |   |  | Capital    |     |         | Compensation  |  |            | Stockholders |  |  | (Loss)        |   |  | Stage |         |   | Equity | 
|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        | 
|Issuance of common stock upon the exercise of warrants                                        |                                                   |                      |        |   |              |  |    |            |  |  | 350         |   |  |            |    |         |               |  | 175        |              |  |  |              |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 175         |            
|Deferred stock- based compensation related to options granted to
    consultants              |                                                   |                      |        |   |              |  |    |            |  |  |            |   |  |            |    |         |               |  | 89,576     |              |  |  | (89,576       | ) |  |       |        |   |        |  |       |        |   |  |            |             |   |  |            |            
|Amortization of deferred stock-based compensation                                             |                                                   |                      |        |   |              |  |    |            |  |  |            |   |  |            |    |         |               |  |           |              |  |  | 13,987        |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 13,987      |            
|Accretion of mandatorily redeemable convertible preferred stock                               |                                                   |                      |        |   |              |  |    |            |  |  |            |   |  |            |    |         |               |  | (1,215,600 | )            |  |  |              |   |  |       |        |   |        |  |       |        |   |  | (2,480,557  | )           |   |  | (3,696,157  | )          
|Comprehensive income:                                                                         |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        |  |        |        |   |  |             |             |   |  |             |            
|                                                                                              | Foreign currency translation adjustment           |                      |         |  |              |  |     |           |  |  |             |  |  |            |     |        |               |  |            |             |  |  |               |  |  |       |         |  |        |  |        | (1,334 | ) |  |             |            |   |  |             | (1,334      | )
|                                                                                              | Net loss                                          |                      |         |  |              |  |     |           |  |  |             |  |  |            |     |        |               |  |            |             |  |  |               |  |  |       |         |  |        |  |        |       |   |  |             | (9,420,275  | ) |  |             | (9,420,275  | )
|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        | 
|                                                                                              | Total comprehensive income                        |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        |  |        | (1,334 | ) |  |             | (9,420,275  | ) |  |             | (9,421,609  | )
|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        | 
|Balance at December 31, 2000                                                                  |                                                   |                      | 803,606 |   |              |  | 804 |            |  |  | 892,695     |   |  |            | 893 |         |               |  |           |              |  |  | (75,589       | ) |  |       | (75,388 | ) |        |  | (1,334 | )      |   |  | (17,783,803 | )           |   |  | (17,934,417 | )          
|Issuance of common stock in May 2001 at $0.86 per share
    upon the exercise of options      |                                                   |                      |        |   |              |  |    |            |  |  | 250         |   |  |            |    |         |               |  | 288        |              |  |  |              |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 288         |            
|Issuance of common stock in July 2001 at $1.18 per share
    upon the exercise of options     |                                                   |                      |        |   |              |  |    |            |  |  | 255         |   |  |            |    |         |               |  | 301        |              |  |  |              |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 301         |            
|Issuance of common stock in August 2001 at $0.59 per share
    upon the exercise of options   |                                                   |                      |        |   |              |  |    |            |  |  | 375         |   |  |            |    |         |               |  | 223        |              |  |  |              |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 223         |            
|Issuance of common stock in December 2001 at $1.20 per
    share upon the exercise of options |                                                   |                      |        |   |              |  |    |            |  |  | 16,628      |   |  |            | 17  |         |               |  | 13,800     |              |  |  |              |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 13,817      |            
|Deferred stock- based compensation related to options granted to
    consultants              |                                                   |                      |        |   |              |  |    |            |  |  |            |   |  |            |    |         |               |  | 82,346     |              |  |  | (82,346       | ) |  |       |        |   |        |  |       |        |   |  |            |             |   |  |            |            
|Amortization of deferred stock-based compensation                                             |                                                   |                      |        |   |              |  |    |            |  |  |            |   |  |            |    |         |               |  |           |              |  |  | 37,996        |   |  |       |        |   |        |  |       |        |   |  |            |             |   |  | 37,996      |            
|Accretion of mandatorily redeemable convertible preferred stock                               |                                                   |                      |        |   |              |  |    |            |  |  |            |   |  |            |    |         |               |  | (96,958    | )            |  |  |              |   |  |       |        |   |        |  |       |        |   |  | (509,646    | )           |   |  | (606,604    | )          
|Comprehensive income:                                                                         |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        |  |        |        |   |  |             |             |   |  |             |            
|                                                                                              | Foreign currency translation adjustment           |                      |         |  |              |  |     |           |  |  |             |  |  |            |     |        |               |  |            |             |  |  |               |  |  |       |         |  |        |  |        | (2,554 | ) |  |             |            |   |  |             | (2,554      | )
|                                                                                              | Unrealized gain on investments available for sale |                      |         |  |              |  |     |           |  |  |             |  |  |            |     |        |               |  |            |             |  |  |               |  |  |       |         |  |        |  |        | 36,520 |   |  |             |            |   |  |             | 36,520      |  
|                                                                                              | Net loss                                          |                      |         |  |              |  |     |           |  |  |             |  |  |            |     |        |               |  |            |             |  |  |               |  |  |       |         |  |        |  |        |       |   |  |             | (17,114,499 | ) |  |             | (17,114,499 | )
|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        | 
|Total comprehensive income                                                                    |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        |  | 33,966 |        |   |  | (17,114,499 | )           |   |  | (17,080,533 | )          
|                                                                                              |                                                   |                      |         |   |              |  |     |            |  |  |             |   |  |            |     |         |               |  |            |              |  |  |               |   |  |       |         |   |        | 
|Balance at December 31, 2001                                                                  |                                                   |                      | 803,606 |   |              |  | 804 |            |  |  | 910,203     |   |  |            | 910 |         |               |  |           |              |  |  | (119,939      | ) |  |       | (75,388 | ) |        |  | 32,632 |        |   |  | (35,407,948 | )           |   |  | (35,568,929 | )          



F-7



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                               |                                                             |                      |         |   |              |  |     |            |  |  |             |   |  |            |       |         |               |  |            |              |  |  |               |   |  |       |        |   |        |  |         |         |  |  |             |             |   |  |             |             |  
|---------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------- | ------- | - | ------------ |  | --- | ---------- |  |  | ----------- | - |  | ---------- | ----- | ------- | ------------- |  | ---------- | ------------ |  |  | ------------- | - |  | ----- | ------ | - | ------ |  | ------- | ------- |  |  | ----------- | ----------- | - |  | ----------- | ----------- | -
|                                                                                               |                                                             |                      |         |   |              |  |     |            |  |  |             |   |  |            |       | Deficit |               |  |           
|                                                                                               |                                                             | Series B Convertible |         |   |              |  |     |            |  |  | Notes       |   |  | Other      |       |         | Accumulated   |  |            |             
|                                                                                               |                                                             | Preferred Stock      |         |   | Common Stock |  |     | Additional |  |  | Deferred    |   |  | Receivable |       |         | Comprehensive |  |            | During the   |  |  | Total         |  
|                                                                                               |                                                             |                      |         |   |              |  |     | Paid-In    |  |  | Stock-Based |   |  | from       |       |         | Income        |  |            | Development  |  |  | Stockholders |  
|                                                                                               |                                                             | Shares               |         |   | Amount       |  |     | Shares     |  |  | Amount      |   |  | Capital    |       |         | Compensation  |  |            | Stockholders |  |  | (Loss)        |   |  | Stage |        |   | Equity | 
|                                                                                               |                                                             |                      |         |   |              |  |     |            |  |  |             |   |  |            |       |         |               |  |            |              |  |  |               |   |  |       |        |   |        | 
|Issuance of common stock in January 2002 at $0.50 per share
    upon the exercise of options   |                                                             |                      |        |   |              |  |    |            |  |  | 6,000       |   |  |            | 6     |         |               |  | 2,994      |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 3,000       |            
|Issuance of common stock in February 2002 at $1.18 per
    share upon the exercise of options  |                                                             |                      |         |   |              |  |     |            |  |  | 52,083      |   |  |            | 52    |         |               |  | 61,542     |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 61,594      |            
|Issuance of common stock in March 2002 at $1.25 per share
    upon the exercise of options     |                                                             |                      |        |   |              |  |    |            |  |  | 833         |   |  |            | 1     |         |               |  | 1,040      |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 1,041       |            
|Issuance of common stock in April 2002 at $1.17 per share
    upon the exercise of options     |                                                             |                      |        |   |              |  |    |            |  |  | 11,616      |   |  |            | 12    |         |               |  | 13,576     |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 13,588      |            
|Issuance of common stock in May 2002 at $1.25 per share
    upon the exercise of options       |                                                             |                      |        |   |              |  |    |            |  |  | 1,250       |   |  |            | 1     |         |               |  | 1,561      |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 1,562       |            
|Issuance of common stock in June 2002 at $1.25 per share
    upon the exercise of options      |                                                             |                      |        |   |              |  |    |            |  |  | 2,083       |   |  |            | 2     |         |               |  | 2,602      |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 2,604       |            
|Issuance of common stock in October 2002 at $2.08 per share
    upon the exercise of options   |                                                             |                      |        |   |              |  |    |            |  |  | 1,892       |   |  |            | 2     |         |               |  | 3,936      |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 3,938       |            
|Issuance of common stock in December 2002 at $1.25 per
    share upon the exercise of options  |                                                             |                      |        |   |              |  |    |            |  |  | 3,751       |   |  |            | 4     |         |               |  | 4,685      |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 4,689       |            
|Issuance of common stock upon the exercise of warrants                                         |                                                             |                      |        |   |              |  |    |            |  |  | 34,650      |   |  |            | 35    |         |               |  | 17,290     |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 17,325      |            
|Deferred stock- based compensation related to options granted to
    employees and consultants |                                                             |                      |        |   |              |  |    |            |  |  |            |   |  |            |      |         |               |  | 2,287,996  |              |  |  | (2,287,996    | ) |  |       |       |   |        |  |        |         |  |  |            |             |   |  |            |            
|Amortization of deferred stock-based compensation                                              |                                                             |                      |        |   |              |  |    |            |  |  |            |   |  |            |      |         |               |  |           |              |  |  | 681,243       |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 681,243     |            
|Warrants issued in conjunction with note payable                                               |                                                             |                      |        |   |              |  |    |            |  |  |            |   |  |            |      |         |               |  | 412,844    |              |  |  |              |   |  |       |       |   |        |  |        |         |  |  |            |             |   |  | 412,844     |            
|Repayment of notes receivable                                                                  |                                                             |                      |        |   |              |  |    |            |  |  |            |   |  |            |      |         |               |  |           |              |  |  |              |   |  |       | 75,388 |   |        |  |        |         |  |  |            |             |   |  | 75,388      |            
|Accretion of mandatorily redeemable convertible preferred stock                                |                                                             |                      |        |   |              |  |    |            |  |  |            |   |  |            |      |         |               |  | (2,810,066 | )            |  |  |              |   |  |       |       |   |        |  |        |         |  |  | (11,873,673 | )           |   |  | (14,683,739 | )          
|Comprehensive income:                                                                          |                                                             |                      |         |   |              |  |     |            |  |  |             |   |  |            |       |         |               |  |            |              |  |  |               |   |  |       |        |   |        |  |         |         |  |  |             |             |   |  |             |            
|                                                                                               | Foreign currency translation adjustment                     |                      |         |  |              |  |     |           |  |  |             |  |  |            |       |        |               |  |            |             |  |  |               |  |  |       |        |  |        |  |         | 137,455 |  |  |             |            |   |  |             | 137,455     |  
|                                                                                               | Change in unrealized gain on investments available for sale |                      |         |  |              |  |     |           |  |  |             |  |  |            |       |        |               |  |            |             |  |  |               |  |  |       |        |  |        |  |         | 55,333  |  |  |             |            |   |  |             | 55,333      |  
|                                                                                               | Net loss                                                    |                      |         |  |              |  |     |           |  |  |             |  |  |            |       |        |               |  |            |             |  |  |               |  |  |       |        |  |        |  |         |        |  |  |             | (28,047,579 | ) |  |             | (28,047,579 | )
|                                                                                               |                                                             |                      |         |   |              |  |     |            |  |  |             |   |  |            |       |         |               |  |            |              |  |  |               |   |  |       |        |   |        | 
|                                                                                               | Total comprehensive income                                  |                      |         |   |              |  |     |            |  |  |             |   |  |            |       |         |               |  |            |              |  |  |               |   |  |       |        |   |        |  |         | 192,788 |  |  |             | (28,047,579 | ) |  |             | (27,854,791 | )
|                                                                                               |                                                             |                      |         |   |              |  |     |            |  |  |             |   |  |            |       |         |               |  |            |              |  |  |               |   |  |       |        |   |        | 
|Balance at December 31, 2002                                                                   |                                                             |                      | 803,606 |   |              |  | 804 |            |  |  | 1,024,361   |   |  |            | 1,025 |         |               |  |           |              |  |  | (1,726,692    | ) |  |       |       |   |        |  | 225,420 |         |  |  | (75,329,200 | )           |   |  | (76,828,643 | )          



F-8



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                                                                        |                                                             |                      |          |   |              |  |      |            |  |  |             |   |  |            |        |         |               |  |             |              |  |  |               |   |  |       |   |   |        |  |        |          |   |  |              |             |   |  |             |             |  
|--------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------- | -------- | - | ------------ |  | ---- | ---------- |  |  | ----------- | - |  | ---------- | ------ | ------- | ------------- |  | ----------- | ------------ |  |  | ------------- | - |  | ----- | - | - | ------ |  | ------ | -------- | - |  | ------------ | ----------- | - |  | ----------- | ----------- | -
|                                                                                                                                        |                                                             |                      |          |   |              |  |      |            |  |  |             |   |  |            |        | Deficit |               |  |            
|                                                                                                                                        |                                                             | Series B Convertible |          |   |              |  |      |            |  |  | Notes       |   |  | Other      |        |         | Accumulated   |  |             |             
|                                                                                                                                        |                                                             | Preferred Stock      |          |   | Common Stock |  |      | Additional |  |  | Deferred    |   |  | Receivable |        |         | Comprehensive |  |             | During the   |  |  | Total         |  
|                                                                                                                                        |                                                             |                      |          |   |              |  |      | Paid-In    |  |  | Stock-Based |   |  | from       |        |         | Income        |  |             | Development  |  |  | Stockholders |  
|                                                                                                                                        |                                                             | Shares               |          |   | Amount       |  |      | Shares     |  |  | Amount      |   |  | Capital    |        |         | Compensation  |  |             | Stockholders |  |  | (Loss)        |   |  | Stage |   |   | Equity | 
|                                                                                                                                        |                                                             |                      |          |   |              |  |      |            |  |  |             |   |  |            |        |         |               |  |             |              |  |  |               |   |  |       |   |   |        | 
|Issuance of common stock in January 2003 at $1.25 per share
    upon exercise of options                                                |                                                             |                      |         |   |              |  |     |            |  |  | 4,375       |   |  |            | 4      |         |               |  | 5,464       |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 5,468       |            
|Issuance of common stock in July 2003 at $1.05 per share
    upon exercise of options                                                   |                                                             |                      |         |   |              |  |     |            |  |  | 11,333      |   |  |            | 11     |         |               |  | 11,934      |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 11,945      |            
|Issuance of common stock in August 2003 at $1.25 per share
    upon exercise of options                                                 |                                                             |                      |         |   |              |  |     |            |  |  | 600         |   |  |            | 1      |         |               |  | 749         |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 750         |            
|Issuance of common stock in September 2003 at $0.63 per
    share upon exercise of options                                              |                                                             |                      |         |   |              |  |     |            |  |  | 14,625      |   |  |            | 15     |         |               |  | 9,267       |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 9,282       |            
|Issuance of common stock in October 2003 at $1.16 per share
    upon exercise of options                                                |                                                             |                      |         |   |              |  |     |            |  |  | 48,447      |   |  |            | 48     |         |               |  | 55,608      |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 55,656      |            
|Issuance of common stock for cash-initial public offering in
    November 2003, net of offering costs of $7,174,830                     |                                                             |                      |         |   |              |  |     |            |  |  | 5,750,000   |   |  |            | 5,750  |         |               |  | 73,319,420  |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 73,325,170  |            
|Deferred stock- based compensation related to options granted to
    employees and consultants                                          |                                                             |                      |         |   |              |  |     |            |  |  |            |   |  |            |       |         |               |  | 9,195,759   |              |  |  | (9,195,759    | ) |  |       |  |   |        |  |       |          |   |  |             |             |   |  |            |            
|Amortization of deferred stock-based compensation                                                                                       |                                                             |                      |         |   |              |  |     |            |  |  |            |   |  |            |       |         |               |  |            |              |  |  | 4,192,256     |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 4,192,256   |            
|Accretion of mandatorily redeemable convertible preferred stock                                                                         |                                                             |                      |         |   |              |  |     |            |  |  |            |   |  |            |       |         |               |  | (13,187,174 | )            |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | (13,187,174 | )          
|Discount associated with Series D mandatorily redeemable
    convertible preferred stock in August 2003 at $6.875 per
    share         |                                                             |                      |         |   |              |  |     |            |  |  |            |   |  |            |       |         |               |  | 39,935,388  |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 39,935,388  |            
|Beneficial conversion feature of Series D mandatorily
    redeemable convertible preferred stock in August 2003 at
    $6.875 per share |                                                             |                      |         |   |              |  |     |            |  |  |            |   |  |            |       |         |               |  | (39,935,388 | )            |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | (39,935,388 | )          
|Conversion of Series A mandatorily redeemable convertible
    preferred stock                                                           |                                                             |                      |         |   |              |  |     |            |  |  | 1,206,998   |   |  |            | 1,207  |         |               |  | 7,997,573   |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 7,998,780   |            
|Conversion of Series B convertible preferred stock                                                                                      |                                                             |                      | (803,606 | ) |              |  | (804 | )          |  |  | 160,713     |   |  |            | 161    |         |               |  | 643         |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  |            |            
|Conversion of Series C mandatorily redeemable convertible
    preferred stock                                                           |                                                             |                      |         |   |              |  |     |            |  |  | 2,618,175   |   |  |            | 2,618  |         |               |  | 23,884,293  |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 23,886,911  |            
|Conversion of Series D mandatorily redeemable convertible
    preferred stock                                                           |                                                             |                      |         |   |              |  |     |            |  |  | 15,618,300  |   |  |            | 15,618 |         |               |  | 127,786,844 |              |  |  |              |   |  |       |  |   |        |  |       |          |   |  |             |             |   |  | 127,802,462 |            
|Comprehensive income:                                                                                                                   |                                                             |                      |          |   |              |  |      |            |  |  |             |   |  |            |        |         |               |  |             |              |  |  |               |   |  |       |   |   |        |  |        |          |   |  |              |             |   |  |             |            
|                                                                                                                                        | Foreign currency translation adjustment                     |                      |          |  |              |  |      |           |  |  |             |  |  |            |        |        |               |  |             |             |  |  |               |  |  |       |   |  |        |  |        | (105,874 | ) |  |              |            |   |  |             | (105,874    | )
|                                                                                                                                        | Change in unrealized gain on investments available for sale |                      |          |  |              |  |      |           |  |  |             |  |  |            |        |        |               |  |             |             |  |  |               |  |  |       |   |  |        |  |        | (97,361  | ) |  |              |            |   |  |             | (97,361     | )
|                                                                                                                                        | Net loss                                                    |                      |          |  |              |  |      |           |  |  |             |  |  |            |        |        |               |  |             |             |  |  |               |  |  |       |   |  |        |  |        |         |   |  |              | (43,147,833 | ) |  |             | (43,147,833 | )
|                                                                                                                                        |                                                             |                      |          |   |              |  |      |            |  |  |             |   |  |            |        |         |               |  |             |              |  |  |               |   |  |       |   |   |        | 
|                                                                                                                                        | Total comprehensive income                                  |                      |          |   |              |  |      |            |  |  |             |   |  |            |        |         |               |  |             |              |  |  |               |   |  |       |   |   |        |  |        | (203,235 | ) |  |              | (43,147,833 | ) |  |             | (43,351,068 | )
|                                                                                                                                        |                                                             |                      |          |   |              |  |      |            |  |  |             |   |  |            |        |         |               |  |             |              |  |  |               |   |  |       |   |   |        | 
|Balance at December 31, 2003                                                                                                            |                                                             |                      |          |   |              |  |      |            |  |  | 26,457,927  |   |  |            | 26,458 |         |               |  | 229,080,380 |              |  |  | (6,730,195    | ) |  |       |  |   |        |  | 22,185 |          |   |  | (118,477,033 | )           |   |  | 103,921,795 |            



F-9



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                                                                  |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |   |  |   |         |         |   |   |              |             |   |   |             |             |  
|--------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------- | - | ------------ | ------ | - | ---------- | - |  | ----------- | ---------- | ----- | ---------- | - | ------------- | ------------ |  | ----------- | ------------ | - | ------------- | - | ---------- | ----- |  | - | ------ | - |  | - | ------- | ------- | - | - | ------------ | ----------- | - | - | ----------- | ----------- | -
|                                                                                                                                  |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               | Deficit      |  |             |             
|                                                                                                                                  |                                                             | Series B Convertible |   |              |        |   |            |   |  | Notes       |            | Other |            |   | Accumulated   |              |  |            
|                                                                                                                                  |                                                             | Preferred Stock      |   | Common Stock |        |   | Additional |   |  | Deferred    |            |       | Receivable |   | Comprehensive |              |  | During the  |              |   | Total         |  
|                                                                                                                                  |                                                             |                      |   |              |        |   | Paid-In    |   |  | Stock-Based |            |       | from       |   | Income        |              |  | Development |              |   | Stockholders |  
|                                                                                                                                  |                                                             | Shares               |   |              | Amount |   | Shares     |   |  | Amount      |            |       | Capital    |   |               | Compensation |  |             | Stockholders |   | (Loss)        |   |            | Stage |  |   | Equity |  
|                                                                                                                                  |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |  
|Issuance of common stock in February 2004 at $1.20 per
    share upon exercise of options                                         |                                                             |                      |  |              |        |   |           |   |  |             | 7,958      |       |            |   | 8             |              |  |             | 9,569        |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 9,577       |            
|Issuance of common stock in April 2004 at $1.17 per share
    upon exercise of options                                            |                                                             |                      |  |              |        |   |           |   |  |             | 8,077      |       |            |   | 8             |              |  |             | 9,441        |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 9,449       |            
|Issuance of common stock in May 2004 at $1.25 per share
    upon exercise of options                                              |                                                             |                      |  |              |        |   |           |   |  |             | 10,649     |       |            |   | 11            |              |  |             | 13,300       |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 13,311      |            
|Issuance of common stock in June 2004 at $1.40 per share
    upon exercise of options                                             |                                                             |                      |  |              |        |   |           |   |  |             | 23,925     |       |            |   | 24            |              |  |             | 33,415       |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 33,439      |            
|Issuance of common stock in July 2004 at $1.44 per share
    upon exercise of options                                             |                                                             |                      |  |              |        |   |           |   |  |             | 558        |       |            |   | 1             |              |  |             | 800          |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 801         |            
|Issuance of common stock in August 2004 at $1.42 per share
    upon exercise of options                                           |                                                             |                      |  |              |        |   |           |   |  |             | 2,839      |       |            |   | 3             |              |  |             | 4,027        |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 4,030       |            
|Issuance of common stock in September 2004 at $1.29 per
    share upon exercise of options                                        |                                                             |                      |  |              |        |   |           |   |  |             | 2,975      |       |            |   | 3             |              |  |             | 3,821        |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 3,824       |            
|Issuance of common stock in October 2004 at $1.33 per share
    upon exercise of options                                          |                                                             |                      |  |              |        |   |           |   |  |             | 8,223      |       |            |   | 8             |              |  |             | 10,890       |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 10,898      |            
|Issuance of common stock in December 2004 at $1.25 per
    share upon exercise of options                                         |                                                             |                      |  |              |        |   |           |   |  |             | 1,000      |       |            |   | 1             |              |  |             | 1,249        |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 1,250       |            
|Issuance of common stock upon the exercise of warrants                                                                            |                                                             |                      |  |              |        |   |           |   |  |             | 12,050     |       |            |   | 12            |              |  |             | (12          | ) |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   |            |            
|Issuance of common stock and warrants for cash in September
    2004, net of offering costs of $2,892,384 at $6.525 per
    share |                                                             |                      |  |              |        |   |           |   |  |             | 9,195,400  |       |            |   | 9,195         |              |  |             | 57,098,407   |   |               |   |           |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 57,107,602  |            
|Deferred stock- based compensation related to options granted to
    employees and consultants                                    |                                                             |                      |  |              |        |   |           |   |  |             |           |       |            |   |              |              |  |             | (248,021     | ) |               |   | 248,021    |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   |            |            
|Amortization of deferred stock-based compensation                                                                                 |                                                             |                      |  |              |        |   |           |   |  |             |           |       |            |   |              |              |  |             |             |   |               |   | 3,947,639  |       |  |   |       |   |  |   |        |         |   |   |             |             |   |   | 3,947,639   |            
|Comprehensive income:                                                                                                             |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |   |  |   |         |         |   |   |              |             |   |   |             |            
|                                                                                                                                  | Foreign currency translation adjustment                     |                      |   |             |        |   |            |  |  |             |            |      |            |   |               |             |  |             |              |  |               |   |            |      |  |   |        |  |  |   |         | 18,612  |   |   |              |            |   |   |             | 18,612      |  
|                                                                                                                                  | Change in unrealized gain on investments available for sale |                      |   |             |        |   |            |  |  |             |            |      |            |   |               |             |  |             |              |  |               |   |            |      |  |   |        |  |  |   |         | (83,000 | ) |   |              |            |   |   |             | (83,000     | )
|                                                                                                                                  | Net loss                                                    |                      |   |             |        |   |            |  |  |             |            |      |            |   |               |             |  |             |              |  |               |   |            |      |  |   |        |  |  |   |         |        |   |   |              | (57,684,826 | ) |   |             | (57,684,826 | )
|                                                                                                                                  |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |   |  |  
|                                                                                                                                  | Total comprehensive income                                  |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |   |  |   |         | (64,388 | ) |   |              | (57,684,826 | ) |   |             | (57,749,214 | )
|                                                                                                                                  |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |   |  |  
|Balance at December 31, 2004                                                                                                      |                                                             |                      |  |              |        | $ |           |   |  |             | 35,731,581 |       |            | $ | 35,732        |              |  | $           | 286,017,266  |   |               | $ | (2,534,535 | )     |  | $ |       |   |  | $ | (42,203 | )       |   | $ | (176,161,859 | )           |   | $ | 107,314,401 |            
|                                                                                                                                  |                                                             |                      |   |              |        |   |            |   |  |             |            |       |            |   |               |              |  |             |              |   |               |   |            |       |  |   |        |   |  |  



F-10



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |           |            |              |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ----------- | -------------- | ----------- | ------------ | ---------- | ---------- | ----------- | ----------------- | ------- | -------- | ----------- | ------------ | --------- | ---------- | ------------ | -
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              | Cumulative |           
|                                                                                                                                                                        |                                                   |                                                     |                                                     | Period from |               
|                                                                                                                                                                        |                                                   | For the Years Ended December 31,                    |                                                     |             | June 10, 1996  |            
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             | (Inception) to |            
|                                                                                                                                                                        |                                                   | 2004                                                |                                                     |             | 2003           |             |              | 2002       |            |             | December 31, 2004 |        
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|Cash Flows From Operating Activities:                                                                                                                                   |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |          
|Net loss                                                                                                                                                                |                                                   | $                                                   | (57,684,826                                         | )           |                | $           | (43,147,833  | )          |            | $           | (28,047,579       | )       |          | $           | (161,082,196 | )        
|Adjustments to reconcile net loss to net cash used in operating
    activities:                                                                                         |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |          
|                                                                                                                                                                        | Depreciation and amortization                     |                                                     |                                                     | 616,996     |                |             |              | 413,522    |            |             |                   | 302,994 |          |             |              | 1,629,231 |           
|                                                                                                                                                                        | Amortization of deferred stock-based compensation |                                                     |                                                     | 3,947,639   |                |             |              | 4,192,256  |            |             |                   | 681,243 |          |             |              | 8,873,121 |           
|                                                                                                                                                                        | Amortization of debt discount                     |                                                     |                                                     | 137,615     |                |             |              | 137,615    |            |             |                   | 4,022   |          |             |              | 286,045   |           
|                                                                                                                                                                        | Amortization of investment (discount)/premium     |                                                     |                                                     | 582,304     |                |             |              | 75,701     |            |             |                   | 191,211 |          |             |              | 821,154   |           
|                                                                                                                                                                        | Stock exchanged for license                       |                                                     |                                                     |            |                |             |              |           |            |             |                   |        |          |             |              | 1,163,229 |           
|                                                                                                                                                                        | Loss on disposal of property and equipment        |                                                     |                                                     | 363         |                |             |              | 11,671     |            |             |                   | 22,638  |          |             |              | 34,672    |           
|                                                                                                                                                                        | Changes in operating assets and liabilities:      |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |           |           
|                                                                                                                                                                        |                                                   | Trade accounts receivable                           |                                                     |             | 426,121        |             |              |            | 154,936    |             |                   |         | (280,657 | )           |              |           | (64,342    | )           
|                                                                                                                                                                        |                                                   | Research and development contract amounts           |                                                     |             | 1,325,000      |             |              |            | (625,000   | )           |                   |         |         |             |              |           | 700,000    |             
|                                                                                                                                                                        |                                                   | Inventories                                         |                                                     |             | 466,162        |             |              |            | 135,918    |             |                   |         | 6,787    |             |              |           | (258,120   | )           
|                                                                                                                                                                        |                                                   | Prepaid expenses, accrued interest and other assets |                                                     |             | 228,850        |             |              |            | (1,295,551 | )           |                   |         | (750,468 | )           |              |           | (2,074,889 | )           
|                                                                                                                                                                        |                                                   | Accounts payable                                    |                                                     |             | 3,031,434      |             |              |            | 4,222,118  |             |                   |         | 840,154  |             |              |           | 10,017,447 |             
|                                                                                                                                                                        |                                                   | Deferred revenue                                    |                                                     |             | (1,392,755     | )           |              |            | 3,614,696  |             |                   |         |         |             |              |           | 2,221,941  |             
|                                                                                                                                                                        |                                                   | Accrued liabilities                                 |                                                     |             | 617,066        |             |              |            | 403,791    |             |                   |         | 570,201  |             |              |           | 1,726,972  |             
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|                                                                                                                                                                        |                                                   |                                                     | Net cash used in operating activities               |             |                | (47,698,031 | )            |            |            | (31,706,160 | )                 |         |          | (26,459,454 | )            |           |            | (136,005,735 | )
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|Cash Flows From Investing Activities:                                                                                                                                   |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |          
|Acquisitions of property and equipment                                                                                                                                  |                                                   |                                                     | (1,719,754                                          | )           |                |             | (275,640     | )          |            |             | (1,316,986        | )       |          |             | (4,156,310   | )        
|Proceeds from sale of property and equipment                                                                                                                            |                                                   |                                                     |                                                    |             |                |             | 318,201      |            |            |             | 14,272            |         |          |             | 332,473      |          
|Purchases of investments                                                                                                                                                |                                                   |                                                     | (111,470,158                                        | )           |                |             | (114,804,787 | )          |            |             | (66,472,688       | )       |          |             | (434,813,569 | )        
|Proceeds from maturities and sales of investments                                                                                                                       |                                                   |                                                     | 132,403,496                                         |             |                |             | 71,653,555   |            |            |             | 74,750,969        |         |          |             | 385,778,096  |          
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|                                                                                                                                                                        |                                                   |                                                     | Net cash provided by (used in) investing activities |             |                | 19,213,584  |              |            |            | (43,108,671 | )                 |         |          | 6,975,567   |              |           |            | (52,859,310  | )
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|Cash Flows From Financing Activities:                                                                                                                                   |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |          
|Proceeds from related party note                                                                                                                                        |                                                   |                                                     |                                                    |             |                |             |             |            |            |             | 75,388            |         |          |             | 370,275      |          
|Repayments of related party note                                                                                                                                        |                                                   |                                                     |                                                    |             |                |             |             |            |            |             |                  |         |          |             | (289,887     | )        
|Proceeds from notes payable                                                                                                                                             |                                                   |                                                     |                                                    |             |                |             |             |            |            |             | 5,000,000         |         |          |             | 5,250,000    |          
|Payments on notes payable                                                                                                                                               |                                                   |                                                     | (1,776,861                                          | )           |                |             | (1,091,619   | )          |            |             | (132,716          | )       |          |             | (3,118,480   | )        
|Proceeds from issuance of mandatorily redeemable convertible
    preferred stock, net of issuance costs                                                                 |                                                   |                                                     |                                                    |             |                |             | 39,935,388   |            |            |             | (35,110           | )       |          |             | 127,151,604  |          
|Proceeds from issuance of common stock, net of issuance costs                                                                                                           |                                                   |                                                     | 57,194,181                                          |             |                |             | 73,408,271   |            |            |             | 109,341           |         |          |             | 130,745,394  |          
|Payments on capital leases                                                                                                                                              |                                                   |                                                     | (49,405                                             | )           |                |             | (31,293      | )          |            |             | (25,599           | )       |          |             | (106,297     | )        
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|                                                                                                                                                                        |                                                   |                                                     | Net cash provided by financing activities           |             |                | 55,367,915  |              |            |            | 112,220,747 |                   |         |          | 4,991,304   |              |           |            | 260,002,609  |  
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|Effect of exchange rates on cash                                                                                                                                        |                                                   |                                                     | 37,105                                              |             |                |             | (61,341      | )          |            |             | 142,444           |         |          |             | 120,730      |          
|Net increase (decrease) in cash and cash equivalents                                                                                                                    |                                                   |                                                     | 26,920,573                                          |             |                |             | 37,344,575   |            |            |             | (14,350,139       | )       |          |             | 71,258,294   |          
|Cash and cash equivalents, beginning of period                                                                                                                          |                                                   |                                                     | 44,337,721                                          |             |                |             | 6,993,146    |            |            |             | 21,343,285        |         |          |             |             |          
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|Cash and cash equivalents, end of period                                                                                                                                |                                                   | $                                                   | 71,258,294                                          |             |                | $           | 44,337,721   |            |            | $           | 6,993,146         |         |          | $           | 71,258,294   |          
|                                                                                                                                                                        |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |        
|Supplemental Disclosure of Cash and Non-Cash Financing
    Activities:                                                                                                  |                                                   |                                                     |                                                     |             |                |             |              |            |            |             |                   |         |          |             |              |          
|Interest paid                                                                                                                                                           |                                                   | $                                                   | 321,352                                             |             |                | $           | 583,409      |            |            | $           | 14,089            |         |          | $           | 970,143      |          
|Acquisition of property and equipment under capital leases                                                                                                              |                                                   |                                                     | 63,423                                              |             |                |             | 53,532       |            |            |             | 158,437           |         |          |             | 275,392      |          
|Common stock issued in exchange for notes receivable                                                                                                                    |                                                   |                                                     |                                                    |             |                |             |             |            |            |             |                  |         |          |             | 81,362       |          
|Convertible preferred stock issued in exchange for license                                                                                                              |                                                   |                                                     |                                                    |             |                |             |             |            |            |             |                  |         |          |             | 1,163,229    |          
|Mandatorily redeemable convertible preferred stock issued in
    lieu of cash commission on issuance of Series D mandatorily
    redeemable convertible preferred stock |                                                   |                                                     |                                                    |             |                |             |             |            |            |             |                  |         |          |             | 928,961      |          
|Conversion of Series B convertible preferred stock for
    common stock upon initial public offering                                                                    |                                                   |                                                     |                                                    |             |                |             | 804          |            |            |             |                  |         |          |             | 804          |          
|Conversion of mandatorily redeemable preferred stock for common
    stock upon initial public offering                                                                  |                                                   |                                                     |                                                    |             |                |             | 159,688,153  |            |            |             |                  |         |          |             | 159,688,153  |          
|Deferred research and development contract revenue due within
    one year                                                                                              |                                                   |                                                     |                                                    |             |                |             | 1,000,000    |            |            |             |                  |         |          |             | 1,000,000    |          



F-11



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                       
|-- | --------------------------------------
|1. | Formations and Business of the Company

















|   |          
|-- | ---------
|2. | Liquidity



F-12



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                                           
|-- | ------------------------------------------
|3. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation

Accounting and Reporting by Development Stage Enterprises.






| |                            
| | ---------------------------
| | Principles of Consolidation





| |                 
| | ----------------
| | Use of Estimates





| |                        
| | -----------------------
| | Risks and Uncertainties





| |                  
| | -----------------
| | Advertising Costs



F-13



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |            
| | -----------
| | Investments

Accounting for
Certain Investments in Debt and Equity Securities


|                          |  |            |            |  |            |            |            |         |            |   |         |  |  |   |         |  
|------------------------- |  | ---------- | ---------- |  | ---------- | ---------- | ---------- | ------- | ---------- | - | ------- |  |  | - | ------- | -
|                          |  |            |            |  |            | Unrealized |            |         | Unrealized |  
|                          |  | Amortized  |            |  | Aggregate  |            |            | Holding |            |   | Holding | 
|Security Type             |  | Cost Basis |            |  | Fair Value |            |            | Gains   |            |   | Losses  | 
|                          |  |            |            |  |            |            |            |         |            |   |         | 
|December 31, 2004         |  |            |            |  |            |            |            |         |            |   |         |  |  |   |         |  
|Government securities     |  | $          | 27,729,433 |  |            | $          | 27,676,941 |         |            | $ |        |  |  | $ | (52,492 | )
|Corporate debt securities |  |            | 17,395,063 |  |            |            | 17,371,309 |         |            |   |        |  |  |   | (23,754 | )
|Asset-backed securities   |  |            | 3,294,831  |  |            |            | 3,282,569  |         |            |   |        |  |  |   | (12,262 | )
|                          |  |            |            |  |            |            |            |         |            |   |         | 
|Total investments         |  | $          | 48,419,327 |  |            | $          | 48,330,819 |         |            | $ |        |  |  | $ | (88,508 | )
|                          |  |            |            |  |            |            |            |         |            |   |         | 
|December 31, 2003         |  |            |            |  |            |            |            |         |            |   |         |  |  |   |         |  
|Government securities     |  | $          | 32,509,476 |  |            | $          | 32,519,386 |         |            | $ | 9,910   |  |  | $ |        |  
|Corporate debt securities |  |            | 24,056,490 |  |            |            | 24,040,418 |         |            |   |        |  |  |   | (16,072 | )
|Commercial paper          |  |            | 9,093,506  |  |            |            | 9,093,736  |         |            |   | 230     |  |  |   |        |  
|Asset-backed securities   |  |            | 4,260,663  |  |            |            | 4,261,087  |         |            |   | 424     |  |  |   |        |  
|                          |  |            |            |  |            |            |            |         |            |   |         | 
|Total investments         |  | $          | 69,920,135 |  |            | $          | 69,914,627 |         |            | $ | 10,564  |  |  | $ | (16,072 | )
|                          |  |            |            |  |            |            |            |         |            |   |         | 







F-14



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |            
| | -----------
| | Inventories





| |                       
| | ----------------------
| | Property and Equipment



|                                |  |                       |         | 
|------------------------------- |  | --------------------- | ------- | 
|                                |  | Estimated Useful Life |        
|                                |  |                       |        
|Laboratory equipment and other  |  |                       | 5 years | 
|Furniture and fixtures          |  |                       | 5 years | 
|Computer equipment and software |  |                       | 3 years | 
|Manufacturing equipment         |  |                       | 3 years | 



| |                                  
| | ---------------------------------
| | Long-Lived Assets and Impairments

Accounting for the Impairment or Disposal of Long-Lived
Assets




| |                    
| | -------------------
| | Revenue Recognition

Revenue Arrangements
with Multiple Deliverables




| |              
| | -------------
| | Product Sales



F-15



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                   
| | ----------------------------------
| | Research and development contracts











| |                         
| | ------------------------
| | Research and Development



F-16



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Net Loss Per Common Share



|                                                   |  |              |           |  |      |  |            |      |  |  |            | 
|-------------------------------------------------- |  | ------------ | --------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                                                   |  | December 31, |          
|                                                   |  |              |          
|                                                   |  | 2004         |           |  | 2003 |  |            | 2002 | 
|                                                   |  |              |           |  |      |  |            |      | 
|Common stock subject to repurchase                 |  |              |          |  |      |  |           |      |  |  | 15,738     | 
|Common stock options                               |  |              | 2,068,251 |  |      |  | 2,263,623  |      |  |  | 1,179,768  | 
|Warrants                                           |  |              | 123,266   |  |      |  | 33,544     |      |  |  | 11,820     | 
|Convertible preferred stock                        |  |              |          |  |      |  | 132,980    |      |  |  | 160,721    | 
|Mandatorily redeemable convertible preferred stock |  |              |          |  |      |  | 12,293,728 |      |  |  | 13,625,321 | 
|                                                   |  |              |           |  |      |  |            |      | 
|Total                                              |  |              | 2,191,517 |  |      |  | 14,723,875 |      |  |  | 14,993,368 | 
|                                                   |  |              |           |  |      |  |            |      | 



| |                                                                               
| | ------------------------------------------------------------------------------
| | Stock-Based Compensation and Unaudited Pro Forma Net Loss
    per Common Share

Accounting For
Stock Issued to Employees Accounting for Stock-Based
Compensation Accounting
for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or
Services.


F-17



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                          |  |                          |             |                    |                |   |             |                   |  |   |             |   |  |   |              |  
|--------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | ------------------ | -------------- | - | ----------- | ----------------- |  | - | ----------- | - |  | - | ------------ | -
|                                                                                                          |  |                          |             |                    |                |   |             | Cumulative Period | 
|                                                                                                          |  |                          |             | From June 10, 1996 |               
|                                                                                                          |  | Years Ended December 31, |             |                    | (Inception) to |  
|                                                                                                          |  |                          |             |                    | December 31,   |  
|                                                                                                          |  | 2004                     |             |                    | 2003           |   |             | 2002              |  |   | 2004        |  
|                                                                                                          |  |                          |             |                    |                |   |             |                   |  |   |             |  
|Net loss attributable to common stockholders, as reported                                                 |  | $                        | (57,684,826 | )                  |                | $ | (96,270,395 | )                 |  | $ | (42,731,318 | ) |  | $ | (233,517,140 | )
|Deduct: total stock-based employee compensation expense
    determined under fair value based method      |  |                          | (5,823,676  | )                  |                |   | (3,508,779  | )                 |  |   | (476,234    | ) |  |   | (10,406,351  | )
|Add: total stock-based employee compensation expense recognized
    under the intrinsic rate based method |  |                          | 3,802,703   |                    |                |   | 3,412,815   |                   |  |   | 392,119     |   |  |   | 7,607,637    |  
|                                                                                                          |  |                          |             |                    |                |   |             |                   |  |   |             |  
|Pro forma net loss                                                                                        |  | $                        | (59,705,799 | )                  |                | $ | (96,366,359 | )                 |  | $ | (42,815,433 | ) |  | $ | (236,315,854 | )
|                                                                                                          |  |                          |             |                    |                |   |             |                   |  |   |             |  
|Pro forma basic and diluted net loss per share                                                            |  | $                        | (2.07       | )                  |                | $ | (17.81      | )                 |  | $ | (42.67      | ) |  |   |              |  
|                                                                                                          |  |                          |             |                    |                |   |             |                   |  |   |             |  
|Basic and diluted net loss per share, as reported                                                         |  | $                        | (2.00       | )                  |                | $ | (17.79      | )                 |  | $ | (42.59      | ) |  |   |              |  
|                                                                                                          |  |                          |             |                    |                |   |             |                   |  |   |             |  





| |             
| | ------------
| | Income Taxes



F-18



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                      
| | ---------------------
| | Concentration of Risk





|         |  |            |      |   |               |  |      |      |  |  |      |   |  |      |      |   |  |  |      |  
|-------- |  | ---------- | ---- | - | ------------- |  | ---- | ---- |  |  | ---- | - |  | ---- | ---- | - |  |  | ---- | -
|         |  | Trade      |      |   |               |  |      |      | 
|         |  | Accounts   |      |   |              
|         |  | Receivable |      |   | Product Sales | 
|         |  |            |      |   |               | 
|Customer |  | 2004       |      |   | 2003          |  |      | 2004 |  |  | 2003 |   |  | 2002 |     
|         |  |            |      |   |               |  |      |      |  |  |      |   |  |      |     
|A        |  |            | 24.9 | % |               |  | 26.3 | %    |  |  | 31.3 | % |  |      | 28.0 | % |  |  | 27.8 | %
|B        |  |            | 13.1 |   |               |  | 5.5  |      |  |  | 25.7 |   |  |      | 25.3 |   |  |  | 29.5 |  
|C        |  |            | 9.6  |   |               |  | 19.9 |      |  |  | 20.5 |   |  |      | 19.0 |   |  |  | 21.9 |  
|D        |  |            | 3.6  |   |               |  | 9.3  |      |  |  | 9.2  |   |  |      | 12.0 |   |  |  | 11.4 |  
|E        |  |            | 47.5 |   |               |  | 37.9 |      |  |  | 11.9 |   |  |      | 14.2 |   |  |  | 8.1  |  
|         |  |            |      |   |               |  |      |      |  |  |      |   |  |      |     
|Total    |  |            | 98.7 | % |               |  | 98.9 | %    |  |  | 98.6 | % |  |      | 98.5 | % |  |  | 98.7 | %
|         |  |            |      |   |               |  |      |      |  |  |      |   |  |      |     







| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements



F-19



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments. Effective Date of
Paragraphs 10-20 of EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments (FSP 03-1-1)










F-20



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. A modified prospective method in which
    compensation cost is recognized beginning with the effective
    date (a) based on the requirements of
    SFAS No. 123(R) for all share-based payments granted
    after the effective date and (b) based on the requirements
    of SFAS No. 123 for all awards granted to employees
    prior to the effective date of SFAS No. 123(R) that
    remain unvested on the effective date.
|
| | 2. A modified retrospective method which
    includes the requirements of the modified prospective method
    described above, but also permits entities to restate based on
    the amounts previously recognized under SFAS No. 123
    for purposes of pro forma disclosures either (a) all prior
    periods presented or (b) prior interim periods of the year
    of adoption.                                                   







| |                  
| | -----------------
| | Reclassifications





|   |            
|-- | -----------
|4. | Inventories



|                  |  |              |         |  |      |   |         | 
|----------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                  |  | December 31, |        
|                  |  |              |        
|                  |  | 2004         |         |  | 2003 |  
|                  |  |              |         |  |      |  
|Finished products |  | $            | 211,770 |  |      | $ | 207,262 | 
|Raw materials     |  |              | 46,350  |  |      |   | 517,020 | 
|                  |  |              |         |  |      |  
|                  |  | $            | 258,120 |  |      | $ | 724,282 | 
|                  |  |              |         |  |      |  

F-21



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|5. | Property and Equipment



|                                |  |              |            |   |      |   |           |  
|------------------------------- |  | ------------ | ---------- | - | ---- | - | --------- | -
|                                |  | December 31, |           
|                                |  |              |           
|                                |  | 2004         |            |   | 2003 |  
|                                |  |              |            |   |      |  
|Laboratory equipment and other  |  | $            | 1,576,320  |   |      | $ | 1,111,136 |  
|Furniture and fixtures          |  |              | 394,142    |   |      |   | 300,180   |  
|Computer equipment and software |  |              | 931,839    |   |      |   | 423,199   |  
|Leasehold improvements          |  |              | 858,149    |   |      |   | 235,365   |  
|Manufacturing equipment         |  |              | 48,000     |   |      |   | 48,000    |  
|Capital projects in progress    |  |              | 184,373    |   |      |   | 60,213    |  
|                                |  |              |            |   |      |  
|                                |  |              | 3,992,823  |   |      |   | 2,178,093 |  
|Less accumulated depreciation   |  |              | (1,489,244 | ) |      |   | (874,065  | )
|                                |  |              |            |   |      |  
|                                |  | $            | 2,503,579  |   |      | $ | 1,304,028 |  
|                                |  |              |            |   |      |  





|   |                                         
|-- | ----------------------------------------
|6. | Accounts Payable and Accrued Liabilities



|                                    |  |              |            |  |      |   |           | 
|----------------------------------- |  | ------------ | ---------- |  | ---- | - | --------- | 
|                                    |  | December 31, |           
|                                    |  |              |           
|                                    |  | 2004         |            |  | 2003 |  
|                                    |  |              |            |  |      |  
|Trade                               |  | $            | 171,311    |  |      | $ | 679,827   | 
|Research and development activities |  |              | 10,290,083 |  |      |   | 6,510,549 | 
|Related parties (Note 14)           |  |              | 220,273    |  |      |   | 404,559   | 
|                                    |  |              |            |  |      |  
|                                    |  | $            | 10,681,667 |  |      | $ | 7,594,935 | 
|                                    |  |              |            |  |      |  



F-22



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                            |  |              |           |  |      |   |           | 
|----------------------------------------------------------- |  | ------------ | --------- |  | ---- | - | --------- | 
|                                                            |  | December 31, |          
|                                                            |  |              |          
|                                                            |  | 2004         |           |  | 2003 |  
|                                                            |  |              |           |  |      |  
|Accrued personnel costs                                     |  | $            | 1,189,012 |  |      | $ | 388,641   | 
|Accrued professional services                               |  |              | 262,781   |  |      |   | 101,451   | 
|Accrued taxes                                               |  |              | 68,069    |  |      |   | 119,537   | 
|Accrued royalties                                           |  |              | 69,181    |  |      |   | 55,050    | 
|Advances for reimbursable research and development expenses |  |              | 312,515   |  |      |   | 644,940   | 
|Other                                                       |  |              | 39,525    |  |      |   | 22,239    | 
|                                                            |  |              |           |  |      |  
|                                                            |  | $            | 1,941,083 |  |      | $ | 1,331,858 | 
|                                                            |  |              |           |  |      |  



|   |           
|-- | ----------
|7. | Borrowings





|                                                      |                                       |   |           |            |  
|----------------------------------------------------- | ------------------------------------- | - | --------- | ---------- | -
|2005                                                  |                                       |   | 1,959,420 |           
|2006                                                  |                                       |   | 172,100   |           
|                                                      |                                       |   |          
|Principal portion of future notes payable obligations |                                       |   | 2,131,520 |           
|                                                      | Less unamortized discount             |   |           | (137,614   | )
|                                                      | Less current portion of notes payable |   |           | (1,821,806 | )
|                                                      |                                       |   |          
|Notes payable, net of current portion and discount    |                                       | $ | 172,100   |           
|                                                      |                                       |   |          





|   |                              
|-- | -----------------------------
|8. | Commitments and Contingencies





F-23



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |                                   |                |         |         |                  |   |           |  | 
|----------------------------------------------- | --------------------------------- | -------------- | ------- | ------- | ---------------- | - | --------- |  | 
|                                                |                                   | Capital Leases |         |         | Operating Leases |  
|                                                |                                   |                |         |         |                  |  
|2005                                            |                                   | $              | 78,975  |         |                  | $ | 379,977   | 
|2006                                            |                                   |                | 73,946  |         |                  |   | 375,933   | 
|2007                                            |                                   |                | 32,298  |         |                  |   | 379,810   | 
|2008                                            |                                   |                | 10,228  |         |                  |   | 323,075   | 
|                                                |                                   |                |         |         |                  |  
|Total future minimum lease payments             |                                   |                | 195,447 |         |                  | $ | 1,458,795 | 
|                                                |                                   |                |         |         |                  |  
|                                                | Less amount representing interest |                |         | (22,795 | )                |   |           |  | 
|                                                |                                   |                |         |         |                  |  
|Present value of future minimum lease payments  |                                   |                | 172,652 |         |                  |   |           | 
|                                                | Less current portion              |                |         | (59,924 | )                |   |           |  | 
|                                                |                                   |                |         |         |                  |  
|Capital lease obligations, less current portion |                                   | $              | 112,728 |         |                  |   |           | 
|                                                |                                   |                |         |         |                  |  



Accounting for Contingencies.




|   |                
|-- | ---------------
|9. | Preferred Stock





|    |                     
|--- | --------------------
|10. | Stockholders Equity



| |             
| | ------------
| | Common Stock





F-24



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |         
| | --------
| | Warrants



Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants






F-25



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                    
|--- | -----------------------------------
|11. | Stock Options and Employee Benefits







|                                 |                        |                                            |         |           |                  |   |      |             |  |  |                  |  |  |   |      |  | 
|-------------------------------- | ---------------------- | ------------------------------------------ | ------- | --------- | ---------------- | - | ---- | ----------- |  |  | ---------------- |  |  | - | ---- |  | 
|                                 |                        | Incentive and Non-Qualifying Stock Options |        
|                                 |                        |                                            |        
|                                 |                        | Number of                                  |         |           | Weighted Average |   |      | Options     |  |  | Weighted Average | 
|                                 |                        | Shares                                     |         |           | Exercise Price   |   |      | Exercisable |  |  | Exercise Price   | 
|                                 |                        |                                            |         |           |                  |   |      |             |  |  |                  | 
|Outstanding at December 31, 1997 |                        |                                            |        |           |                  | $ |     |             |  |  |                 |  |  |   |     | 
|                                 | Granted (at market)    |                                            |         | 61,500    |                  |   | $    | 0.50        |  |  |                  |  |  |   |      |  | 
|                                 | Exercised              |                                            |         |          |                  |   | $    |            |  |  |                  |  |  |   |      |  | 
|                                 | Canceled               |                                            |         | (3,000    | )                |   | $    | 0.50        |  |  |                  |  |  |   |      |  | 
|                                 |                        |                                            |         |           |                  |   |      |             |  |  |                  | 
|Outstanding at December 31, 1998 |                        |                                            | 58,500  |           |                  | $ | 0.50 |             |  |  |                 |  |  |   |     | 
|                                 | Granted (at market)    |                                            |         | 29,500    |                  |   | $    | 0.81        |  |  |                  |  |  |   |      |  | 
|                                 | Exercised              |                                            |         |          |                  |   | $    |            |  |  |                  |  |  |   |      |  | 
|                                 | Canceled               |                                            |         | (600      | )                |   | $    | 0.50        |  |  |                  |  |  |   |      |  | 
|                                 |                        |                                            |         |           |                  |   |      |             |  |  |                  | 
|Outstanding at December 31, 1999 |                        |                                            | 87,400  |           |                  | $ | 0.61 |             |  |  | 14,325           |  |  | $ | 0.50 | 
|                                 | Granted (at market)    |                                            |         | 240,300   |                  |   | $    | 1.15        |  |  |                  |  |  |   |      |  | 
|                                 | Exercised              |                                            |         | (17,896   | )                |   | $    | 0.60        |  |  |                  |  |  |   |      |  | 
|                                 | Canceled               |                                            |         | (1,000    | )                |   | $    | 1.15        |  |  |                  |  |  |   |      |  | 
|                                 |                        |                                            |         |           |                  |   |      |             |  |  |                  | 
|Outstanding at December 31, 2000 |                        |                                            | 308,804 |           |                  | $ | 1.03 |             |  |  | 25,568           |  |  | $ | 0.68 | 
|                                 | Granted (at market)    |                                            |         | 1,123,800 |                  |   | $    | 1.25        |  |  |                  |  |  |   |      |  | 
|                                 | Granted (above market) |                                            |         | 38,240    |                  |   | $    | 2.50        |  |  |                  |  |  |   |      |  | 
|                                 | Exercised              |                                            |         | (17,508   | )                |   | $    | 0.85        |  |  |                  |  |  |   |      |  | 
|                                 | Canceled               |                                            |         | (10,962   | )                |   | $    | 1.15        |  |  |                  |  |  |   |      |  | 
|                                 |                        |                                            |         |           |                  |   |      |             |  |  |                  | 

F-26



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  |  |  |   |      |  |  | 
|-------------------------------- | ------------------- | ------------------------------------------ | --------- | ------- | ---------------- | - | ---- | ----------- | ----- |  | ---------------- |  |  | - | ---- |  |  | 
|                                 |                     | Incentive and Non-Qualifying Stock Options |          
|                                 |                     |                                            |          
|                                 |                     | Number of                                  |           |         | Weighted Average |   |      | Options     |       |  | Weighted Average | 
|                                 |                     | Shares                                     |           |         | Exercise Price   |   |      | Exercisable |       |  | Exercise Price   | 
|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  | 
|Outstanding at December 31, 2001 |                     |                                            | 1,442,374 |         |                  | $ | 1.25 |             |       |  | 146,226          |  |  | $ | 1.13 | 
|                                 |                     | Granted (below market)                     |           |         | 474,280          |   |      | $           | 1.25  |  |                  |  |  |   |      |  |  | 
|                                 |                     | Granted (at market)                        |           |         | 180,724          |   |      | $           | 1.25  |  |                  |  |  |   |      |  |  | 
|                                 |                     | Exercised                                  |           |         | (79,508          | ) |      | $           | 1.20  |  |                  |  |  |   |      |  |  | 
|                                 |                     | Canceled                                   |           |         | (84,829          | ) |      | $           | 1.25  |  |                  |  |  |   |      |  |  | 
|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  | 
|Outstanding at December 31, 2002 |                     |                                            | 1,933,041 |         |                  | $ | 1.25 |             |       |  | 459,109          |  |  | $ | 1.22 | 
|                                 |                     | Granted (below market)                     |           |         | 850,427          |   |      | $           | 4.35  |  |                  |  |  |   |      |  |  | 
|                                 |                     | Granted (at market)                        |           |         | 26,500           |   |      | $           | 13.61 |  |                  |  |  |   |      |  |  | 
|                                 |                     | Exercised                                  |           |         | (79,380          | ) |      | $           | 1.06  |  |                  |  |  |   |      |  |  | 
|                                 |                     | Canceled                                   |           |         | (1,196           | ) |      | $           | 1.24  |  |                  |  |  |   |      |  |  | 
|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  | 
|Outstanding at December 31, 2003 |                     |                                            | 2,729,392 |         |                  | $ | 2.34 |             |       |  | 986,041          |  |  | $ | 1.43 | 
|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  | 
|                                 | Granted (at market) |                                            |           | 713,150 |                  |   | $    | 10.15       |       |  |                  |  |  |   |      |  | 
|                                 | Exercised           |                                            |           | (66,204 | )                |   | $    | 1.31        |       |  |                  |  |  |   |      |  | 
|                                 | Canceled            |                                            |           | (45,477 | )                |   | $    | 7.95        |       |  |                  |  |  |   |      |  | 
|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  | 
|Outstanding at December 31, 2004 |                     |                                            | 3,330,861 |         |                  | $ | 3.96 |             |       |  | 1,547,422        |  |  | $ | 2.02 | 
|                                 |                     |                                            |           |         |                  |   |      |             |       |  |                  | 



|                |  |                     |           |             |         |  |          |          |                     |   |           |          |  |          |           |  |  |   |       | 
|--------------- |  | ------------------- | --------- | ----------- | ------- |  | -------- | -------- | ------------------- | - | --------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|                |  | Options Outstanding |           |             |         |  |         
|                |  |                     |           |             |        
|                |  |                     |           | Weighted    |         |  |          |          | Options Exercisable |  
|                |  |                     |           | Average     |         |  |          |          |                     |  
|                |  |                     |           | Remaining   |         |  | Weighted |          |                     |   |           | Weighted | 
|                |  |                     |           | Contractual |         |  | Average  |          |                     |   |           | Average  | 
|                |  | Number of           |           |             | Life    |  |          | Exercise |                     |   | Number of |          |  | Exercise |          
|Exercise Prices |  | Shares              |           |             | (Years) |  |          | Price    |                     |   | Shares    |          |  | Price    |          
|                |  |                     |           |             |         |  |          |          |                     |   |           |          |  |          |          
|$0.50           |  |                     | 19,501    |             |         |  | 3.85     |          |                     | $ | 0.50      |          |  |          | 19,501    |  |  | $ | 0.50  | 
|$1.15           |  |                     | 121,585   |             |         |  | 5.24     |          |                     | $ | 1.15      |          |  |          | 121,585   |  |  | $ | 1.15  | 
|$1.25           |  |                     | 1,754,828 |             |         |  | 7.12     |          |                     | $ | 1.25      |          |  |          | 1,112,452 |  |  | $ | 1.25  | 
|$2.50 - $5.00   |  |                     | 682,123   |             |         |  | 8.52     |          |                     | $ | 4.75      |          |  |          | 249,976   |  |  | $ | 4.55  | 
|$5.40 - $8.10   |  |                     | 423,603   |             |         |  | 9.39     |          |                     | $ | 7.28      |          |  |          | 26,158    |  |  | $ | 7.48  | 
|$8.16 - $13.26  |  |                     | 169,275   |             |         |  | 9.49     |          |                     | $ | 10.47     |          |  |          | 4,000     |  |  | $ | 12.97 | 
|$13.57 - $18.30 |  |                     | 159,946   |             |         |  | 9.04     |          |                     | $ | 17.12     |          |  |          | 13,750    |  |  | $ | 14.98 | 
|                |  |                     |           |             |         |  |          |          |                     |   |           |          |  |          |          
|                |  |                     | 3,330,861 |             |         |  | 7.82     |          |                     | $ | 3.96      |          |  |          | 1,547,422 |  |  | $ | 2.02  | 
|                |  |                     |           |             |         |  |          |          |                     |   |           |          |  |          |          





| |                         
| | ------------------------
| | Stock-Based Compensation



F-27



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Stock Appreciation
Rights and Other Variable Stock Option or Award Plans, an
Interpretation of APB Opinions No. 15 and 25




|                         |  |            |  |            |  |      
|------------------------ |  | ---------- |  | ---------- |  | -----
|                         |  | 2004       |  | 2003       |  | 2002 
|                         |  |            |  |            |  |      
|Risk-free interest rate  |  | 3.28-3.77% |  | 2.74-3.36% |  | 3.06%
|Expected life (in years) |  | 10         |  | 10         |  | 10   
|Expected volatility      |  | 100%       |  | 100%       |  | 100% 
|Expected dividend yield  |  | 0%         |  | 0%         |  | 0%   



| |            
| | -----------
| | 401(k) Plan





| |                             
| | ----------------------------
| | Employee Stock Purchase Plan

provided


F-28



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |             
|--- | ------------
|12. | Income Taxes



|                         |  |              |             |   |      |   |             |      |  |   |             |  
|------------------------ |  | ------------ | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                         |  | December 31, |            
|                         |  |              |            
|                         |  | 2004         |             |   | 2003 |   |             | 2002 | 
|                         |  |              |             |   |      |   |             |      | 
|Domestic                 |  | $            | (57,743,551 | ) |      | $ | (43,201,630 | )    |  | $ | (28,084,751 | )
|Foreign                  |  |              | 81,110      |   |      |   | 93,143      |      |  |   | 55,476      |  
|                         |  |              |             |   |      |   |             |      | 
|Loss before income taxes |  | $            | (57,662,441 | ) |      | $ | (43,108,487 | )    |  | $ | (28,029,275 | )
|                         |  |              |             |   |      |   |             |      | 





|                                                    |                                                               |                                |             |            |            |   |             |            |            |  
|--------------------------------------------------- | ------------------------------------------------------------- | ------------------------------ | ----------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                                    |                                                               | December 31,                   |            
|                                                    |                                                               |                                |            
|                                                    |                                                               | 2004                           |             |            | 2003       |  
|                                                    |                                                               |                                |             |            |            |  
|Deferred tax assets:                                |                                                               |                                |             |            |            |   |             |           
|                                                    | Net operating loss carryforwards                              |                                | $           | 51,516,600 |            |   | $           | 31,485,487 |           
|                                                    | Amortization of intangibles                                   |                                |             | 5,317,095  |            |   |             | 4,894,938  |           
|                                                    | Orphan drug and research and development credit carryforwards |                                |             | 4,601,321  |            |   |             | 1,423,790  |           
|                                                    | Deferred revenue                                              |                                |             | 1,351,930  |            |   |             | 1,283,655  |           
|                                                    | Other                                                         |                                |             | 714,938    |            |   |             | 491,055    |           
|                                                    |                                                               |                                |             |            |            |  
|                                                    |                                                               | Total deferred tax assets      |             |            | 63,501,884 |   |             |            | 39,578,925 |  
|Deferred tax liabilities:                           |                                                               |                                |             |            |            |   |             |           
|                                                    | Depreciable assets                                            |                                |             | (6,149     | )          |   |             | (88,216    | )         
|                                                    |                                                               |                                |             |            |            |  
|                                                    |                                                               | Total deferred tax liabilities |             |            | (6,149     | ) |             |            | (88,216    | )
|                                                    |                                                               |                                |             |            |            |  
|Net deferred tax assets, before valuation allowance |                                                               |                                | 63,495,735  |            |            |   | 39,490,709  |           
|Valuation allowance                                 |                                                               |                                | (63,495,735 | )          |            |   | (39,490,709 | )         
|                                                    |                                                               |                                |             |            |            |  
|Net deferred tax assets                             |                                                               | $                              |            |            |            | $ |            |           
|                                                    |                                                               |                                |             |            |            |  



F-29



---



##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                              |  |              |             |   |      |   |             |      |  |   |            |  
|------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | ---- |  | - | ---------- | -
|                                                              |  | December 31, |            
|                                                              |  |              |            
|                                                              |  | 2004         |             |   | 2003 |   |             | 2002 | 
|                                                              |  |              |             |   |      |   |             |      | 
|U.S. federal income tax benefit at statutory rates            |  | $            | (20,181,855 | ) |      | $ | (15,087,971 | )    |  | $ | (9,810,246 | )
|Permanent differences                                         |  |              | 1,152,405   |   |      |   | 1,063,470   |      |  |   | 123,481    |  
|Orphan drug and research and development credit carryforwards |  |              | (3,177,531  | ) |      |   | (1,223,790  | )    |  |   | (200,000   | )
|Foreign income taxes (less than) greater than 35%             |  |              | (6,003      | ) |      |   | 6,748       |      |  |   | (1,110     | )
|State income tax benefit, net of federal benefit              |  |              | (1,769,657  | ) |      |   | (1,233,257  | )    |  |   | (891,375   | )
|Change in valuation allowance                                 |  |              | 24,005,026  |   |      |   | 16,514,146  |      |  |   | 10,797,554 |  
|                                                              |  |              |             |   |      |   |             |      | 
|                                                              |  | $            | 22,385      |   |      | $ | 39,346      |      |  | $ | 18,304     |  
|                                                              |  |              |             |   |      |   |             |      | 









|    |                                
|--- | -------------------------------
|13. | Royalty and License Commitments







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##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














F-31



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##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












F-32



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MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                           
|--- | --------------------------
|14. | Related Party Transactions





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MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |                  
|--- | -----------------
|15. | Business Segments



|       |                |                          |           |           |      |   |           |         |  |   |           |         | 
|------ | -------------- | ------------------------ | --------- | --------- | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|       |                | Years Ended December 31, |          
|       |                |                          |          
|       |                | 2004                     |           |           | 2003 |   |           | 2002    | 
|       |                |                          |           |           |      |   |           |         | 
|Sales: |                |                          |           |           |      |   |           |         |  |   |           |        
|       | Germany        |                          | $         | 853,046   |      |   | $         | 720,251 |  |   | $         | 691,683 | 
|       | Netherlands    |                          |           | 1,038,699 |      |   |           | 796,414 |  |   |           | 650,524 | 
|       | United Kingdom |                          |           | 681,385   |      |   |           | 541,963 |  |   |           | 512,303 | 
|       | Italy          |                          |           | 395,233   |      |   |           | 405,341 |  |   |           | 190,511 | 
|       | France         |                          |           | 303,782   |      |   |           | 342,192 |  |   |           | 267,274 | 
|       | Other          |                          |           | 45,538    |      |   |           | 39,552  |  |   |           | 30,604  | 
|       |                |                          |           |           |      |   |           |         | 
|       |                | $                        | 3,317,683 |           |      | $ | 2,845,713 |         |  | $ | 2,342,899 |        
|       |                |                          |           |           |      |   |           |         | 

|                   |               |              |           |           |      |   |           |           | 
|------------------ | ------------- | ------------ | --------- | --------- | ---- | - | --------- | --------- | 
|                   |               | December 31, |          
|                   |               |              |          
|                   |               | 2004         |           |           | 2003 |  
|                   |               |              |           |           |      |  
|Long-lived assets: |               |              |           |           |      |   |           |          
|                   | United States |              | $         | 2,451,999 |      |   | $         | 1,234,685 | 
|                   | Europe        |              |           | 51,580    |      |   |           | 69,343    | 
|                   |               |              |           |           |      |  
|                   |               | $            | 2,503,579 |           |      | $ | 1,304,028 |          
|                   |               |              |           |           |      |  



|    |                  
|--- | -----------------
|16. | Subsequent Events



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MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|17. | Quarterly Financial Results (Unaudited) (in thousands, except
    per share data)

|                                            |                                      |           |         |        |          |   |         |               |  |   |              |        |  |   |         |        | 
|------------------------------------------- | ------------------------------------ | --------- | ------- | ------ | -------- | - | ------- | ------------- |  | - | ------------ | ------ |  | - | ------- | ------ | 
|2004                                        |                                      | March 31, |         |        | June 30, |   |         | September 30, |  |   | December 31, |       
|                                            |                                      |           |         |        |          |   |         |               |  |   |              |       
|Revenue:                                    |                                      |           |         |        |          |   |         |               |  |   |              |        |  |   |         |       
|                                            | Product sales                        |           | $       | 852    |          |   | $       | 900           |  |   | $            | 783    |  |   | $       | 783    | 
|                                            | Research and development contracts   |           |         | 1,340  |          |   |         | 1,664         |  |   |              | 1,667  |  |   |         | 1,935  | 
|Costs and expenses:                         |                                      |           |         |        |          |   |         |               |  |   |              |        |  |   |         |       
|                                            | Cost of product sold                 |           |         | 271    |          |   |         | 278           |  |   |              | 240    |  |   |         | 288    | 
|                                            | Research and development*            |           |         | 14,624 |          |   |         | 12,462        |  |   |              | 12,335 |  |   |         | 14,703 | 
|                                            | Selling, general and administrative* |           |         | 2,235  |          |   |         | 2,047         |  |   |              | 2,086  |  |   |         | 2,891  | 
|                                            | Stock-based compensation             |           |         | 1,212  |          |   |         | 1,122         |  |   |              | 943    |  |   |         | 671    | 
|Net loss                                    |                                      |           | (15,986 | )      |          |   | (13,210 | )             |  |   | (13,003      | )      |  |   | (15,486 | )     
|Accretion of dividends                      |                                      |           |        |        |          |   |        |               |  |   |             |        |  |   |        |       
|Deemed dividend                             |                                      |           |        |        |          |   |        |               |  |   |             |        |  |   |        |       
|Net loss attributable to common stock       |                                      | $         | (15,986 | )      |          | $ | (13,210 | )             |  | $ | (13,003      | )      |  | $ | (15,486 | )     
|Basic and diluted earnings per common share |                                      | $         | (0.60   | )      |          | $ | (0.50   | )             |  | $ | (0.50        | )      |  | $ | (0.43   | )     

|                                            |                                      |           |         |       |          |   |         |               |  |   |              |       |  |   |         |        | 
|------------------------------------------- | ------------------------------------ | --------- | ------- | ----- | -------- | - | ------- | ------------- |  | - | ------------ | ----- |  | - | ------- | ------ | 
|2003                                        |                                      | March 31, |         |       | June 30, |   |         | September 30, |  |   | December 31, |      
|                                            |                                      |           |         |       |          |   |         |               |  |   |              |      
|Revenue:                                    |                                      |           |         |       |          |   |         |               |  |   |              |       |  |   |         |       
|                                            | Product sales                        |           | $       | 657   |          |   | $       | 708           |  |   | $            | 707   |  |   | $       | 774    | 
|                                            | Research and development contracts   |           |         |      |          |   |         |              |  |   |              |      |  |   |         | 1,010  | 
|Costs and expenses:                         |                                      |           |         |       |          |   |         |               |  |   |              |       |  |   |         |       
|                                            | Cost of product sold                 |           |         | 207   |          |   |         | 227           |  |   |              | 220   |  |   |         | 231    | 
|                                            | Research and development*            |           |         | 6,351 |          |   |         | 11,219        |  |   |              | 7,052 |  |   |         | 12,743 | 
|                                            | Selling, general and administrative* |           |         | 932   |          |   |         | 970           |  |   |              | 663   |  |   |         | 1,822  | 
|                                            | Stock-based compensation             |           |         | 772   |          |   |         | 493           |  |   |              | 841   |  |   |         | 2,086  | 
|Net loss                                    |                                      |           | (7,580  | )     |          |   | (12,244 | )             |  |   | (8,130       | )     |  |   | (15,194 | )     
|Accretion of dividends                      |                                      |           | (3,670  | )     |          |   | (3,670  | )             |  |   | (4,244       | )     |  |   | (1,603  | )     
|Deemed dividend                             |                                      |           |        |       |          |   |        |               |  |   | (39,935      | )     |  |   |        |       
|Net loss attributable to common stock       |                                      | $         | (11,250 | )     |          | $ | (15,915 | )             |  | $ | (52,309      | )     |  | $ | (16,796 | )     
|Basic and diluted earnings per common share |                                      | $         | (10.95  | )     |          | $ | (15.47  | )             |  | $ | (50.29       | )     |  | $ | (0.91   | )     






|  |                                            
|- | -------------------------------------------
|* | Excludes Stock-based compensation expenses.

F-35



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##### Table of Contents



MYOGEN, INC.


(A Development Stage Enterprise)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




F-36



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##### Table of Contents



INDEX TO EXHIBITS


|            |    |             |  |                                                                                                                                                                                                           
|----------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 3  | .1*         |  | Restated Certificate of Incorporation.                                                                                                                                                                    
|            | 3  | .2*         |  | Amended and Restated Bylaws.                                                                                                                                                                              
|            | 4  | .1*         |  | Specimen Stock Certificate.                                                                                                                                                                               
|            | 10 | .1*(1)      |  | 2003 Equity Incentive Plan of the Company, Form of Grant Notice
    and Form of Stock Option Agreement.                                                                                                   
|            | 10 | .2*(1)      |  | 2003 Employee Stock Purchase Plan of the Company.                                                                                                                                                         
|            | 10 | .3*         |  | Series A Preferred Stock Purchase Agreement, dated
    May 21, 1998 between Myogen and the parties named therein.                                                                                         
|            | 10 | .4*         |  | Series B Preferred Stock Purchase Agreement, dated
    March 16, 2000 between Myogen and the parties named therein.                                                                                       
|            | 10 | .5*         |  | Series C Preferred Stock Purchase Agreement, dated
    November 23, 1999, as amended on December 8, 1999,
    between Myogen and the parties named therein.                                               
|            | 10 | .6*         |  | Series D Preferred Stock Purchase Agreement, dated
    August 21, 2001, as amended on November 2, 2001 and
    December 27, 2001, between Myogen and the parties named
    therein.                       
|            | 10 | .7*         |  | Series D Preferred Stock Purchase Agreement, dated
    August 27, 2003, between Myogen and the parties named
    therein.                                                                                 
|            | 10 | .8*         |  | Third Amended and Restated Investor Rights Agreement, dated
    August 21, 2001, as amended on August 27, 2003,
    between Myogen and certain of our stockholders.                                       
|            | 10 | .9*         |  | Third Amended and Restated Stockholders Agreement, dated
    August 21, 2001, as amended on December 27, 2001,
    between Myogen and certain of our stockholders.                                        
|            | 10 | .10(1)      |  | Form of Employment Agreement entered into between Myogen and
    certain of its executives, including reference schedule.                                                                                 
|            | 10 | .11*        |  | Form of Indemnification Agreement entered into by each of
    Myogens Executive Officers and Directors.                                                                                                  
|            | 10 | .12*        |  | Lease Agreement between the Company and Church Ranch Business
    Center, LLC, dated January 1, 2002.                                                                                                     
|            | 10 | .13*        |  | Warrant to purchase shares of Series C preferred stock
    issued to Silicon Valley Bank, dated January 26, 2000.                                                                                         
|            | 10 | .14*        |  | Venture Loan and Security Agreement by and among GATX Ventures,
    Inc., Silicon Valley Bank and the Company, dated
    December 6, 2002.                                                                
|            | 10 | .15*        |  | Warrant to purchase shares of Series D preferred stock
    issued to GATX Ventures, Inc., dated December 6, 2002.                                                                                         
|            | 10 | .16*        |  | Warrant to purchase shares of Series D preferred stock
    issued to Silicon Valley Bank, dated December 6, 2002.                                                                                         
|            | 10 | .17*=       |  | License Agreement between Aventis Pharmaceuticals, Inc.
    (formerly Hoechst Marion Roussel, Inc.) and the Company, dated
    October 1, 1998, as amended November 23, 1999 and
    June 2, 2003.        
|            | 10 | .18*=       |  | License Agreement between Abbott Deutschland Holding GmbH and
    the Company, dated October 8, 2001.                                                                                                     
|            | 10 | .19*=       |  | Intellectual Property License Agreement between the University
    Technology Corporation and the Company, dated September 1,
    1998, as amended January 26, 2001 and November 12,
    2002.            
|            | 10 | .20*=       |  | Materials Transfer Agreement between the Regents of the
    University of Colorado and the Company, dated September 4,
    1998, as amended January 4, 2001.                                              
|            | 10 | .21*=       |  | Patent and Technology License Agreement between the Board of
    Regents of The University Of Texas System and the Company, dated
    December 1, 1999, as amended July 7, 2000 and
    December 20, 2001.
|            | 10 | .22*=       |  | Exclusive Patent And Technology License Agreement between the
    Board of Regents of The University of Texas System and the
    Company, dated January 1, 2002.                                          
|            | 10 | .23*=       |  | License Agreement between Abbott Laboratories and the Company,
    dated June 30, 2003.                                                                                                                   
|            | 10 | .24*=       |  | Collaboration and Option Agreement between Novartis Institutes
    for BioMedical Research, Inc. and the Company, dated
    October 8, 2003.                                                              
|            | 10 | .25*=       |  | Form of License, Development and Commercialization Agreement
    between Novartis Institutes for BioMedical Research, Inc. and
    the Company.                                                           



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##### Table of Contents



|            |    |             |  |                                                                                                                                                                                                                                              
|----------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 10 | .26*=       |  | Materials Transfer Agreement between the Regents of the
    University of Colorado and the Company, dated September 12,
    2003.                                                                                                            
|            | 10 | .27%        |  | Indemnification Agreement between Kirk K. Calhoun and the
    Company, dated as of January 16, 2004.                                                                                                                                         
|            | 10 | .28%        |  | First Amendment to Lease Agreement between Sevo Miller, Inc., as
    receiver on behalf of Church Ranch Business Center, LLC, and the
    Company, dated December 2, 2003.                                                                   
|            | 10 | .29%=       |  | Third Amendment to Intellectual Property License Agreement
    between University License Equity Holdings, Inc. and the
    Company, dated November 24, 2003.                                                                                
|            | 10 | .30%=       |  | Amendment No. 3 to Patent and Technology License Agreement
    between the Board of Regents of the University of Texas System
    and the Company, dated November 6, 2003.                                                                   
|            | 10 | .31%=       |  | Amendment No. 1 to Patent and Technology License Agreement
    between the Board of Regents of the University of Texas System
    and the Company, dated as of February 10, 2004.                                                            
|            | 10 | .32%=       |  | Patent License Agreement between the University of Texas System,
    the University of North Texas Health Science Center at Fort
    Worth and the Company, dated January 13, 2000.                                                          
|            | 10 | .33^(1)     |  | 2003 Employee Stock Purchase Plan  August 1,
    2004 Offering.                                                                                                                                                                             
|            | 10 | .34#        |  | Securities Purchase Agreement, dated September 24, 2004, by
    and among the Company and the investors named therein.                                                                                                                       
|            | 10 | .35@        |  | Second Amendment to Lease Agreement between LaSalle Bank, N.A.
    (formerly known as LaSalle National Bank), as Trustee for the
    Certificateholders Under the Pooling and Servicing Agreement,
    and the Company, dated April 15, 2004.
|            | 10 | .36@        |  | Third Amendment to Lease Agreement between Scott Kaufman and the
    Company, dated September 30, 2004.                                                                                                                                      
|            | 10 | .37+        |  | Third Amendment to the License Agreement by and between Aventis
    Pharmaceuticals, Inc. and Myogen, dated January 27, 2005.                                                                                                                
|            | 10 | .38(1)      |  | 2003 Employee Stock Purchase Plan  February 1,
    2005 Offering.                                                                                                                                                                           
|            | 10 | .39$(1)     |  | 2004 and 2005 Discretionary Bonus Program.                                                                                                                                                                                                   
|            | 21 | .1*         |  | List of Subsidiaries.                                                                                                                                                                                                                        
|            | 23 | .1          |  | Consent of PricewaterhouseCoopers LLP, Independent Registered
    Public Accounting Firm.                                                                                                                                                    
|            | 24 | .1          |  | Powers of Attorney. Reference B made to page 65.                                                                                                                                                                                             
|            | 31 | .1          |  | Certification of principal executive officer required by
    Rule 13a-14(a).                                                                                                                                                                 
|            | 31 | .2          |  | Certification of principal financial officer required by
    Rule 13a-14(a).                                                                                                                                                                 
|            | 32 | .1          |  | Section 1350 Certification.                                                                                                                                                                                                                  




|    |  |                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   |  | Incorporated by reference to our Registration Statement on
    Form S-1 (File No. 333-108301) and amendments thereto,
    declared effective October 29, 2003.                         
|(%) |  | Incorporated by reference to our Annual Report on Form 10-K
    (File No. 000-50438), as filed with the Commission on
    March 1, 2004.                                               
|(^) |  | Incorporated by reference to our Quarterly Report on
    Form 10-Q (File No. 000-50438), as filed with the
    Commission on August 9, 2004.                                           
|(#) |  | Incorporated by reference to our Current Report on Form 8-K
    (File No. 000-50438), as filed with the Commission on
    September 29, 2004.                                          
|(@) |  | Incorporated by reference to our Current Report on Form 8-K
    (File No. 000-50438), as filed with the Commission on
    October 1, 2004.                                             
|($) |  | Incorporated by reference to our Current Report on
    Form 8-K/A (File No. 000-50438), as filed with the
    Commission on March 9, 2005.                                             
|(1) |  | Indicates Management Contract or Compensatory Plan or
    Arrangement.                                                                                                                 
|=   |  | We have been granted confidential treatment with respect to the
    omitted portions of this agreement.                                                                                
|+   |  | We have applied for confidential treatment with respect to
    portions of this agreement. Omitted portions have been filed
    separately with the Securities and Exchange Commission.