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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K





(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2008

or



| ̈ | 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: 001-33871





COUGAR BIOTECHNOLOGY, INC.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-2903204                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

10990 Wilshire Blvd., Suite 1200

Los Angeles, CA 90024

(310) 943-8040

(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)





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



|                                          |  |                                          
|----------------------------------------- |  | -----------------------------------------
|Title of each class                       |  | Name of each exchange on which registered
|Common Stock, par value $0.0001 per share |  | The NASDAQ Stock Market LLC              

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                           |  |                      |  |                                               |  |                             
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated filer  x |  | Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|                           |  |                      |  | (Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of June 30, 2008, based upon the last sale price reported for such date on the NASDAQ Global Market, was
$319,133,815. The calculation of the aggregate market value of voting and non-voting stock excludes 7,248,568 shares of the registrants common stock held by executive officers, directors, and persons who beneficially own 10% or more of the
registrants common stock. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such
person is controlled by or under common control with the registrant.

As of March 1, 2009, a total of 20,773,134 shares of the
registrants Common Stock, $0.0001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive Proxy Statement for the 2009 Annual Meeting of Stockholders (the 2009 Proxy Statement) to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K are incorporated by reference in Part III, Items 10-14 of this Form 10-K.









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TABLE OF CONTENTS



|                              |  |                                                                                                 |  |     
|----------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                 |  | Page
|Part I                        |  | 4                                                                                              
|                              |  |                                                                                                
|Item 1.                       |  | Description of Business                                                                         |  | 4   
|Item 1A.                      |  | Risk Factors                                                                                    |  | 22  
|Item 2.                       |  | Description of Properties                                                                       |  | 31  
|Item 3.                       |  | Legal Proceedings                                                                               |  | 32  
|Item 4.                       |  | Submission of Matters To A Vote of Security Holders                                             |  | 32  
|                              | 
|Part II                       |  | 33                                                                                             
|                              |  |                                                                                                
|Item 5.                       |  | Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 33  
|Item 6.                       |  | Selected Financial Data                                                                         |  | 35  
|Item 7.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations           |  | 36  
|Item 7A.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                      |  | 49  
|Item 8.                       |  | Financial Statements and Supplementary Data                                                     |  | 49  
|Item 9.                       |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure            |  | 49  
|Item 9A.                      |  | Controls and Procedures                                                                         |  | 49  
|Item 9B.                      |  | Other Information                                                                               |  | 51  
|                              | 
|Part III                      |  | 52                                                                                             
|                              |  |                                                                                                
|Item 10.                      |  | Directors, Executive Officers and Corporate Governance                                          |  | 52  
|Item 11.                      |  | Executive Compensation                                                                          |  | 52  
|Item 12.                      |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  |  | 52  
|Item 13.                      |  | Certain Relationships and Related Transactions, and Director Independence                       |  | 52  
|Item 14.                      |  | Principal Accounting Fees and Services                                                          |  | 52  
|                              | 
|Part IV                       |  | 53                                                                                             
|                              |  |                                                                                                
|Item 15.                      |  | Exhibits, Financial Statement Schedules                                                         |  | 53  
|                              | 
|Signatures                    |  | 56                                                                                             
|                              | 
|Index to Financial Statements |  | F-1                                                                                            



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References to the Company, the Registrant, we, us or
our in this Annual Report on Form 10-K refer to Cougar Biotechnology, Inc., a Delaware corporation, unless the context indicates otherwise.

Forward-Looking Statements

This Annual Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans,
objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These forward-looking statements include, but are not limited to, statements about:



| |  |  | the development of our drug candidates, including when we expect to undertake, initiate and complete clinical trials of our product candidates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the regulatory approval of our drug candidates;
| | - |  | -----------------------------------------------



| |  |  | our use of clinical research centers and other contractors;
| | - |  | -----------------------------------------------------------



| |  |  | our ability to find collaborative partners for research, development and commercialization of potential products;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | our ability to market any of our products;
| | - |  | ------------------------------------------



| |  |  | our history of operating losses;
| | - |  | --------------------------------



| |  |  | our ability to compete against other companies and research institutions;
| | - |  | -------------------------------------------------------------------------



| |  |  | our ability to secure adequate protection for our intellectual property;
| | - |  | ------------------------------------------------------------------------



| |  |  | our ability to attract and retain key personnel;
| | - |  | ------------------------------------------------



| |  |  | our ability to obtain adequate financing; and
| | - |  | ---------------------------------------------



| |  |  | the volatility of our stock price.
| | - |  | ----------------------------------

These statements are often, but not always, made through the use of words or phrases such as anticipate, estimate, plan, project, continuing, ongoing,
expect, believe, intend and similar words or phrases. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in
them. Discussions containing these forward-looking statements may be found throughout this Annual Report, including Part II, the section entitled Item 7: Managements Discussion and Analysis of Financial Condition and Results of
Operations. These forward-looking statements involve risks and uncertainties, including the risks discussed in Item 1A of this Annual Report, that could cause our actual results to differ materially from those in the forward-looking
statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document. The risks discussed in this Annual Report should be considered in
evaluating our prospects and future financial performance.



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Part I



|ITEM 1. | DESCRIPTION OF BUSINESS
|------- | -----------------------

Company Overview

Cougar Biotechnology, Inc. is a development-stage biopharmaceutical company that acquires and develops innovative products for the treatment of cancer. We
focus on in-licensing drug candidates that are undergoing or have already completed initial clinical testing for the treatment of cancer, and then developing those drug candidates for commercial use.

We currently have rights to three clinical stage drug candidates:



| |  |  | CB7630 (abiraterone acetate), which we are developing for the treatment of advanced prostate cancer and breast cancer;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | CB3304 (noscapine and related analogs), which we are developing for the treatment of hematological malignancies (non-Hodgkins lymphoma and multiple myeloma);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | CB1089 (seocalcitol), an analog of Vitamin D, which we are developing for the treatment of cancer.
| | - |  | --------------------------------------------------------------------------------------------------

We were originally incorporated under Delaware law in May 2003 under the name Cougar Biotechnology, Inc. Over the course of the next year, we retained
our executive officers and the initial members of our board of directors and began searching for product candidates. In March 2004, April 2004, and June 2005, respectively, we in-licensed our three product candidates, CB7630, CB3304, and
CB1089. We continue to search for additional product candidates.

On April 3, 2006, we were acquired by SRKP 4, Inc., a shell
corporation formed under Delaware law, in a reverse merger whereby a wholly-owned subsidiary of SRKP 4 merged with and into Cougar Biotechnology, with Cougar Biotechnology remaining as the surviving corporation and a wholly-owned
subsidiary of SRKP 4. In accordance with the terms of this merger, stockholders of Cougar Biotechnology exchanged all of their shares of Cougar Biotechnology for shares of SRKP 4 capital stock. Immediately following the merger, SRKP 4 redeemed
all of the shares of SRKP 4 capital stock that were outstanding immediately prior to the merger for aggregate consideration of $200,000. As a result of the issuance of the shares of SRKP 4 capital stock to the former Cougar Biotechnology
stockholders and the redemption of shares held by the former SRKP 4 stockholders, following the merger and redemption the former stockholders of Cougar Biotechnology held all of the outstanding shares of SRKP 4 capital stock. Upon completion of the
merger, all of the former officers and directors of SRKP 4 resigned and were replaced by the officers and directors of Cougar Biotechnology. Additionally, following the merger SRKP 4 changed its name to Cougar Biotechnology, Inc.

Our executive offices are located at 10990 Wilshire Boulevard, Suite 1200, Los Angeles, California 90024. Our telephone number is (310) 943-8040 and
our internet address is www.cougarbiotechnology.com.

Our Strategy

Our strategy is to become a leading oncology-focused biopharmaceutical company. The key elements of our strategy are as follows:



| |  |  | Advance CB7630, our lead product candidate, toward regulatory approval and commercialization. We are primarily focused on advancing CB7630 through late stage
Phase III clinical trials to regulatory approval and commercialization. During the last two years, we have significantly expanded our clinical research and development and regulatory affairs groups in order to support our aggressive advancement of
CB7630 into late stage clinical trials. These efforts enabled us to initiate two separate Phase III clinical trials of CB7630, the first of which commenced in April 2008 and the second of which is expected to commence in the first half of 2009. Both
of these Phase III trials are the subject of a Special Protocol Assessment (SPA) with the U.S. Food and Drug Administration.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Focus on developing innovative cancer therapies. We focus on oncology product candidates in order to capture efficiencies and economies of scale. We believe
that drug development for cancer markets is particularly attractive because relatively small clinical trials can provide meaningful information regarding patient response and safety. Furthermore, we believe that our capabilities are well suited to
the oncology market and represent distinct competitive advantages.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Build a sustainable pipeline by employing multiple therapeutic approaches and disciplined decision criteria based on clearly defined proof of principal
goals. We seek to build a sustainable product pipeline by employing multiple therapeutic approaches and by acquiring product candidates belonging to known drug classes. In addition, we employ disciplined decision criteria to assess product
candidates, favoring product candidates that have undergone at least some clinical study. However, the cost for acquiring drug candidates for which initial clinical testing has been completed is generally higher than a product candidate in the
pre-clinical testing stage. Our decision to license a drug candidate will also depend on the scientific merits of the technology; the costs of the transaction and other economic terms of the proposed license; the amount of capital required to
develop the technology; and the economic potential of the drug candidate, should it be commercialized. We believe this strategy minimizes our clinical development risk and allows us to accelerate the development and potential commercialization of
current and future product candidates. We intend to pursue regulatory approval for a majority of our product candidates in multiple indications.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Evaluate the commercialization strategies on a product-by-product basis in order to maximize the value of each. As we move our product candidates through
development toward regulatory approval, we will evaluate several options for each product candidates commercialization strategy. These options include building our own internal sales force; entering into a joint marketing partnership with
another pharmaceutical company or biotechnology company, whereby we jointly sell and market the product; and out-licensing our product, whereby another pharmaceutical company or biotechnology company sells and markets our product and pays us a
royalty on sales. Our decision will be made separately for each product and will be based on a number of factors including capital necessary to execute on each option, size of the market that needs to be addressed and terms of potential offers from
other pharmaceutical and biotechnology companies. It is too early for us to know which of these options we will pursue for our product candidates, assuming their successful development.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Product Development Pipeline

The following table summarizes our product development pipeline:



|                             |  |                               |  |                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---------------------------- |  | ----------------------------- |  | ---------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product                      |  | Indications                   |  | CommercialRights |  | Ongoing Studies / Status                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                             |  |                               | 
|CB7630 (abiraterone acetate) |  | Prostate cancer Breast cancer |  | Cougar           |  | Phase III randomized, double-blind, placebo-controlled trial of CB7630 plus prednisone in patients with metastatic castration-resistant prostate
cancer who have failed docetaxel-based chemotherapy is ongoing.  Phase III randomized,
double-blind, placebo-controlled trial of CB7630 plus prednisone in patients with metastatic castration-resistant prostate cancer who have not yet received treatment with chemotherapy is expected to commence in the first half of 2009.  Phase I/II trial sponsored by Cancer Research UK in patients with estrogen receptor positive or
androgen receptor positive, metastatic breast cancer is ongoing.
|                             |  |                               | 
|CB3304 (noscapine)           |  | Hematological cancers         |  | Cougar           |  | Phase I/II clinical trial in multiple myeloma is ongoing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                             |  |                               | 
|CB1089 (seocalcitol)         |  | Solid tumors                  |  | Cougar           |  | Preclinical.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

CB7630 (Abiraterone Acetate)

CB7630, our lead product candidate, is an orally available, targeted inhibitor of the steroidal enzyme known as 17a-hydroxylase/C17,20 lyase. This enzyme is expressed in both testicular and adrenal tissues and is involved in the production of testosterone in these organs. Scientists believe that testosterone levels in the testes and
adrenals stimulate the growth of prostate cancer cells. We believe that by inhibiting this enzyme, CB7630 may reduce testosterone levels in both the testes and adrenals, thereby reducing the growth of prostate cancer cells.

Background on Prostate Cancer

According to the American Cancer Society, prostate cancer is the most frequently diagnosed cancer in men, with approximately 186,320 new cases and approximately 28,660 deaths expected in the United States in 2008. At present, men in the
United States have a one in five lifetime risk of being diagnosed with prostate cancer and approximately 10-15% will have metastatic, or advanced, disease at the time of diagnosis.

The prostate is a walnut-shaped gland in men located just below the bladder and in front of the rectum. When cells in the prostate begin to grow out of
control, a cancerous tumor can form. As the tumor grows, it can spread to the interior of the prostate, to tissues near the prostate, to the sac-like structures attached to the prostate known as the seminal vesicles, and to distant parts of the
body, such as the bones, liver or lungs.

For patients with advanced, metastatic prostate cancer, the standard of care is treatment with
hormonal ablation therapy, or hormone therapy. Hormonal therapies are used to suppress or block male steroid hormones, called androgens. Androgens, particularly testosterone and dihydrotestosterone, have been shown to stimulate prostate cancer cell
growth. Hormonal therapies may include surgery to remove the testicles (also known as orchiectomy) or the use of two classes of hormonal agents: luteinizing hormone-releasing hormone agonists, or LHRH agonists, and anti-androgens. LHRH agonists work
by shutting off the production of luteinizing hormone by the pituitary gland, which stops testosterone production by the testes. In contrast, anti-androgens block the



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androgen receptors on prostate cancer cells, thereby preventing androgens from stimulating the growth of such prostate cancer cells.

Initially, these hormonal ablation therapies relieve prostate cancer symptoms and decrease levels of prostate-specific antigen, or PSA. However, the
median duration of response to these hormonal ablation therapies is less than two years. All patients with advanced prostate cancer who are treated with androgen deprivation eventually develop progressive castration-resistant prostate cancer, as
evidenced by increasing PSA levels, progressive disease on imaging studies, or progressive symptoms such as pain. Because the molecular basis for this progression to the castration resistant state is poorly understood, treatment of patients with
castration resistant prostate cancer remains a clinical challenge.

One important strategy for treatment of castration-resistant prostate
cancer involves secondary hormonal manipulations after the failure of primary hormonal ablation therapy. This approach is based on the observation that most castration-resistant tumors continue to maintain a functional androgen-receptor signaling
pathway despite castrated levels of testosterone resulting from first-line hormonal therapies. In addition, studies published in Nature Medicine in 2004 have shown that there is an increase in expression of the androgen receptor when the
tumor has become castration resistant. In this way, androgen receptor over-expression may allow for the continued growth of prostate cancer cells in the environment of minute levels of androgens (such as testosterone) that are present during the
combined use of LHRH agonists and anti-androgens.

Strategies for second-line hormonal therapies are based on two factors. First,
extra-testicular sources of testosterone represent an important secondary source of androgen stimulation in patients with prostate cancer. More specifically, as much as 10% of circulating testosterone is produced by the adrenal glands, thus making
adrenal production of testosterone an important target for secondary hormonal manipulations. Consequently, it has been shown that drugs that inhibit adrenal testosterone production can induce clinical responses in prostate cancer patients who have
failed first-line hormonal therapy. Second, the development of castration-resistant prostate cancer is caused in part by changes in androgen receptor regulation as sensitivity of the androgen receptor is increased by over-expression of the androgen
receptor in the environment of lower testosterone concentrations.

Prostate cancer patients are commonly treated with one or more types of
hormone therapy, including LHRH agonists and anti-androgens. LHRH agonists are designed to suppress testosterone and anti-androgens are designed to block testosterone from stimulating prostate cancer cells. Based on clinical trials performed to
date, we believe that CB7630 has potential applications in the treatment of prostate cancer, including (i) serving as a second-line hormonal therapy for patients with castration resistant prostate cancer who have failed traditional first-line
LHRH agonist and/or anti-androgen therapy; (ii) serving as a first-line hormonal therapy for patients with advanced prostate cancer who have yet to receive traditional first-line LHRH agonist and/or anti-androgen therapy; and (iii) serving
as a second-line chemotherapy for patients with advanced prostate cancer who have failed treatment with first-line chemotherapy.

Current
treatments such as orchiectomy and LHRH agonists result in reduced androgen production by the testes but do not interfere with androgen production by the adrenals, which may contribute to an increase in androgen precursors to the prostate and
thereby to castration-resistant prostate cancer. More specifically, since these first-line hormonal treatments leave testosterone derived from adrenal sources intact, PSA levels begin to rise over the two to three years following initial treatment,
and prostate tumors eventually progress to become castration resistant. Unfortunately, currently about half of all patients with hormone-refractory prostate cancer die within 12 months of becoming castration resistant because, at present, there is
no successful treatment for castration-resistant prostate cancer.

Advantages of CB7630

Based on pre-clinical and clinical studies to date, we believe that CB7630 may offer an advantage over existing treatments that are used as second-line
hormonal therapies in prostate cancer patients who have failed first-line hormone therapy. Currently, there is no drug specifically approved as a second-line hormonal agent for



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the treatment of prostate cancer. Rather, the standard of care for second-line hormonal therapies includes using existing drugs, such as steroids
(hydrocortisone, dexamethasone), hormones (estrogen, aminoglutethimide) and antifungal agents (ketoconazole) in off-label settings. Each of these drugs has characteristics limiting its usefulness as a treatment for prostate cancer. We
believe that CB7630 may have potential advantages over such existing treatments, most notably due to its increased selectivity and stronger inhibition of the target enzyme (17a-hydroxylase/C17,20 lyase), resulting in
more selective inhibition of adrenal androgens. A variety of serious side effects have been associated with the use of existing second-line hormonal treatments, limiting their use. To date, however, no serious side effects appear to be triggered by
the use of CB7630. Should CB7630 continue to demonstrate a lack of serious side effects, we believe it would be favorably positioned against other therapeutic agents. Finally, agents used as second-line hormonal agents for castration resistant
prostate cancer must be taken multiple times during the day. In its clinical testing to date, CB7630 has shown the potential to be administered once per day. Such a convenient dosing schedule may result in better patient compliance compared to the
other agents that are used as second-line hormonal treatments.

Results of Clinical Trials for CB7630 in
Castration-Resistant Chemotherapy-Naïve Prostate Cancer

In December 2006, we initiated the Phase II portion of a Phase I/II trial
of CB7630 for the treatment of advanced prostate cancer (COU-AA-001). The Phase II trial was conducted at The Institute of Cancer Research, in the Cancer Research UK Centre for Cancer Therapeutics, and at The Royal Marsden Hospital in the United
Kingdom. The Phase II study was an open label, dose escalating study to evaluate the safety and efficacy of CB7630 administered daily as a second-line hormonal agent to patients with chemotherapy-naïve castration resistant prostate cancer who
have progressive disease despite treatment with hormonal therapy. At the time of progression on treatment with CB7630 alone, the corticosteroid dexamethasone was added to CB7630 to see if the addition of dexamethasone could potentially overcome the
resistance to CB7630.

In June 2008, we announced the updated results of the study. Of the 54 evaluable patients from the Phase I and Phase
II portions of the trial, 38 patients (70%) experienced a decline in PSA levels of greater than 50% while receiving CB7630 as a monotherapy. For the 54 evaluable patients in the trial, the median time to PSA progression while the patients were
receiving CB7630 alone was estimated to be 231 days (33 weeks).

At the time of the presentation, 30 of the 54 patients had been treated
with dexamethasone, in addition to CB7630, at the time of progression. Nine (30%) of these 30 patients had experienced a decline in PSA levels of greater than 50% when treated with the combination of CB7630 and dexamethasone after progression
on CB7630 alone. For the 54 patients in the trial, including both the patients who had not yet progressed on CB7630 alone and those patients receiving the combination of CB7630 and dexamethasone after progression on CB7630 alone, the median time to
PSA progression was estimated to be 399 days (57 weeks).

Of the 29 evaluable patients with measurable tumor lesions, treatment with CB7630
resulted in partial radiological responses (as measured by the RECIST criteria) in 15 patients (52%), with 8 patients (28%) demonstrating ongoing stable disease as assessed by an independent radiological review blinded to outcome data.
Individual patients treated with CB7630 also experienced improvement in pain and a reduction in opioid use.

In June 2008, we initiated an
additional Phase II trial of CB7630, which we refer to as COU-AA-002, at a number of centers including the University of California, San Francisco Comprehensive Cancer Center. In this trial, CB7630 in combination with prednisone was administered
once daily to chemotherapy-naïve, ketoconazole-naïve patients with castration-resistant prostate cancer, who have progressive disease despite treatment with LHRH analogues and multiple other hormonal therapies. In February 2009, we
announced the interim results of this Phase II trial. Of the 31 evaluable patients treated in the trial, 24 (77%) experienced a decline in PSA levels of greater than 30%, 22 (71%) experienced a PSA decline of greater than 50% and 8
(26%) experienced PSA declines of greater than 90%. At the time of the presentation, for the 31 evaluable patients the median time to PSA progression had not yet been reached, with patients continuing to be treated for 10 months or longer.



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Of the 33 evaluable patients with tumor lesions that were measurable by the RECIST criteria, treatment
with CB7630 resulted in partial radiological responses in 8 patients (24%), stable disease in 13 patients (39%) and progressive disease in 4 patients (12%); 8 patients (24%) are awaiting radiographic assessment.

Results of Clinical Trials for CB7630 in Castration Resistant Chemotherapy Refractory Prostate Cancer

In December 2006, we initiated a multi-center Phase II trial (COU-AA-003) of CB7630 to evaluate the
efficacy of the drug in patients with advanced prostate cancer who have failed treatment with first line chemotherapy (e.g., Taxotere®). The trial is being conducted at numerous sites in
the United States and in the United Kingdom. In June 2008, we announced interim results of this Phase II trial. More specifically, we announced that in the 34 patients in this Phase II trial who have been treated in the United Kingdom, CB7630 was
well tolerated with only minimal toxicity in this post-docetaxel population. Of the 34 patients treated, 24 patients (71%) experienced a decline in PSA, with 16 patients (47%) demonstrating a decline in PSA levels of greater than 50%. Of
the 19 evaluable patients with measurable tumor lesions, 5 patients (26%) experienced confirmed partial radiological responses (as measured by the RECIST criteria) and 10 patients (53%) experienced ongoing stable disease. The median time
to disease progression for the 34 patients in the trial was estimated to be 161 days (23 weeks).

In June 2007, we initiated an additional multi-center Phase II trial (COU-AA-004) of CB7630 to evaluate its efficacy when given in combination with the drug prednisone in patients with advanced prostate cancer who
have failed treatment with first line chemotherapy (e.g., Taxotere®). The trial is being conducted at numerous sites in the United States and United Kingdom.

In June 2008, we announced interim results from the 38 patients in this Phase II trial who had been treated at Memorial Sloan-Kettering Cancer Center. In
these 38 patients, CB7630 was seen to be well tolerated with only minimal toxicity in this post-docetaxel population. No patients developed hypertension of any grade related to treatment with CB7630 while enrolled in the trial.

Of the 38 patients, 17 patients (45%) experienced a confirmed decline in PSA levels of greater than 50%. Of the 21 patients who had not received
prior treatment with ketoconazole, 12 patients (57%) experienced a decline in PSA levels of greater than 50%. Furthermore, of the 17 patients who had been previously treated with ketoconazole, 5 patients (29%) experienced a decline in PSA
levels of greater than 50%.

After 12 weeks of treatment, of the 24 patients with lesions that were evaluable by bone scan, 14 patients had
lesions that were stable. Of the 18 patients in the trial with evidence of lymph node metastases that were evaluable by CT scan, 1 patient was shown to have lesions that decreased in size and 12 patients had lesions that were stable. Of the 8
patients in the trial with evidence of visceral metastases that were evaluable by CT scan, 1 patient was shown to have lesions that decreased in size and 4 patients had lesions that were stable. At the time of the presentation, 8 patients in
the Phase II trial were continuing to receive treatment with CB7630 in combination with prednisone. This included 6 patients who had not received prior treatment with ketoconazole and 2 patients who had previously been treated with ketoconazole. All
of these patients had been on study for over 25 weeks.

Phase III Clinical Development

In March 2008, we reached agreement with the U.S. Food and Drug Administration, or FDA, under a Special Protocol Assessment, or SPA, for our Phase III
clinical trial of CB7630 in patients with metastatic castration-resistant prostate cancer who have failed docetaxel-based chemotherapy. We refer to this clinical trial as COU-AA-301, or the 301 Study. A SPA is a written agreement between the
trials sponsor and the FDA regarding the design, endpoints, and planned statistical analysis approach of the Phase III trial to be used in support of a new drug application, or NDA. The European Medicines Agency, or EMEA, also provided
protocol advice consistent with that of the FDA regarding the design of the 301 study.



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In April 2008, we commenced patient enrollment in the 301 Study. The 301 Study is a randomized,
double-blind, placebo-controlled Phase III clinical trial of CB7630 plus prednisone in patients with metastatic castration- resistant prostate cancer who have failed docetaxel-based chemotherapy. Patients in the study are allowed to have received up
to two prior chemotherapy regimens before entering the trial. We expect the trial will enroll approximately 1,160 subjects at up to 150 sites in North America, Europe and Australia. The patients participating in the study will be randomized 2:1 to
receive either CB7630 plus prednisone or placebo plus prednisone. The primary endpoint of the 301 Study is overall survival. We expect the 301 Study to be completed during 2010.

We also plan to conduct a second Phase III trial of CB7630 in advanced prostate cancer patients. In February 2009, we reached agreement with the FDA
under a SPA for a Phase III clinical trial of CB7630 in patients with chemotherapy naïve castration-resistant prostate cancer. We refer to this Phase III clinical trials as COU-AA-302, or the 302 Study. The EMEA has also provided protocol
advice consistent with that of the FDA regarding the trial design of the 302 Study and ability to support the submission of an EU Market Authorization Application (MAA).

Pursuant to the SPA, the 302 Study will be a randomized, double-blind, placebo-controlled trial of CB7630 plus prednisone in patients with metastatic castration-resistant prostate cancer who have not yet received
treatment with chemotherapy. The trial is expected to enroll approximately 1,000 patients who will be randomized (1:1) to receive either CB7630 plus prednisone or placebo plus prednisone. The trial will be conducted at approximately 150 sites
in North America, Europe and Australia. The agreed upon co-primary endpoints of the trial are progression free survival and overall survival. We plan to use the progression free survival data from the trial as the basis for submission of an NDA/MAA
for Accelerated or Conditional Approval from the regulatory agencies. We anticipate that we will begin patient enrollment of the 302 Study in the first half of 2009 and that the progression free survival data from this trial will be available in
2010.

Breast Cancer Trial Development

Because of its mechanism of action, CB7630 is also being evaluated for use in the treatment of advanced breast cancer. Researchers believe that the mechanism of action of CB7630 may result in the inhibition of many
androgenic steroids that may be contributing to disease progression in breast cancer patients. Accordingly, in November 2008, The Institute of Cancer Research in London commenced a Phase I/II clinical trial of CB7630 in advanced breast cancer. This
clinical trial, which is being managed and funded by the Drug Development Office of Cancer Research UK, is an open label, dose escalating study to evaluate the safety and efficacy of CB7630 administered daily to patients with estrogen-receptor
positive or androgen-receptor positive, metastatic breast cancer. The patients enrolled in this study have disease that has progressed after two lines of hormonal therapies, such as aromatase inhibitors and tamoxifen.

CB3304 (Noscapine)

In March
2004, we licensed from Emory University the exclusive, worldwide rights to noscapine, or CB3304, which is an orally available alkaloid derived from opium. We believe that pre-clinical studies published in the Proceedings of the National Academy
of Science demonstrate that CB3304 acts as an inhibitor of microtubules and tubulin (which make up the structural components of cells) and has anticancer activity in pre-clinical tumor models. More specifically, the drug alters microtubule
dynamics, blocks cell division, or mitosis, and causes programmed cell death, or apoptosis. Therefore, we believe that CB3304 may have potential applications in the treatment of a number of tumor types in which tubulin inhibitors have already been
shown to be effective, including non-Hodgkins lymphoma, multiple myeloma, breast cancer, lung cancer, ovarian cancer and prostate cancer. CB3304 was derived by Emory University with some assistance from the National Institutes of Health, and
our license is thus subject to certain rights of the U.S. Government as provided under the Bayh-Dole Act, 35 USCA §200-212. See - License Agreements.



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Background on Multiple Myeloma and Tubulin Inhibitors

Multiple myeloma is a proliferative disease of immunoglobulin-secreting B-lymphocytes. It is progressive and usually fatal. Multiple myeloma currently
represents approximately 1% of all cancers and 2% of all cancer deaths. The National Cancer Institute reports that over 53,000 men and women in the United States are living with multiple myeloma and an estimated 19,920 new cases were diagnosed in
2008. The median age at diagnosis is 71 years. Common clinical manifestations include hypercalcemia, anemia, renal impairment, increased risk for bacterial infection, bone pain, osteoporosis and skeletal fracture. Although the majority of patients
are elderly, recent statistics suggests an increasing incidence in younger patients and earlier age of disease onset.

Initial therapy for
symptomatic multiple myeloma typically is systemic chemotherapy. Dependent upon age, performance status and co-morbid conditions, patients are offered either high dose chemotherapy with stem cell rescue or chemotherapy based on either melphalan or
dexamethasone. Although results reported by Intergroupe Francophone du Myelome, or IFM, showed that a higher response rate was achieved with melphalan/dexamethasone combination than with melphalan/prednisone, toxicity was also higher. Because the
increased response rate did not translate into survival benefit, melphalan and prednisone combination remains to be the standard of care and a basis for developing new combinations. Combination chemotherapy consisting of other alkylating agents such
as cyclophosphamide, nitrosoureas and anthracyclines has not improved survival thus far.

More recently, several novel agents, including Thalomid®, Revlimid® and Velcade® have been found to have significant activity in multiple myeloma. In fact, based on the superior response rate of Thalomid®/dexamethasone combination over
dexamethasone alone, Thalomid® received FDA approval as treatment for newly diagnosed multiple myeloma in May 2006. Similarly, Revlimid® was approved in June 2006 to be used in combination with dexamethasone in patients with one prior therapy. For patients with disease relapse after at least two prior therapies who demonstrated disease progression on the last therapy, the
proteasome inhibitor, bortezomib (Velcade®) was approved as a treatment in 2003. Subsequently, it was also approved as a second-line treatment of multiple myeloma in 2005. In spite of the
new drugs, disease cure remains rare. The need for new agents to manage this disease remains.

Microtubules, composed of the protein
tubulin, are cellular components that play a key role in cell division, or cellular mitosis. Microtubules participate in the exact organization and function of the mitotic spindle, and are critical for assuring the integrity of the segregated DNA.
Because of their critical function, microtubules represent one of the key targets for cancer treatments.

Antimicrotubule agents, or
tubulin inhibitors, are a well accepted class of drugs in the treatment of cancer and include taxanes (such as paclitaxel and docetaxel) and vinca alkaloids (such as vincristine, vinorelbine, and vinblastine) that are used either alone or in
combination with other anti-cancer drugs. These tubulin inhibitors act by promoting apoptosis, which results in the destruction of cancer cells. However, the cytotoxic effects of tubulin inhibitors are nonselective; therefore, they affect normal
cells as well as cancerous cells. Thus tubulin inhibitors adversely affect rapidly dividing blood cells (leading to anemia, neutropenia and thrombocytopenia) and cells of the nervous system (leading to neural toxicity, such as peripheral
neuropathy). In addition to these toxicities, repeated dosing with tubulin inhibitors can lead to the tumor developing resistance to treatment, which eventually renders these drugs ineffective.

Advantages of CB3304

As discussed above, CB3304 is an orally active alkaloid derived from opium. Pre-clinical studies have shown that CB3304 is a microtubule targeting agent that alters microtubule dynamics, blocks mitosis, and causes apoptosis. More
specifically, CB3304 has been shown to: (i) bind to tubulin and alter its ability to form microtubules; (ii) interfere with microtubule dynamics both in vitro and in living cells; (iii) arrest a number of cancerous cells in mitosis and target
them for apoptosis; and (iv) inhibit the growth of solid murine lymphoid



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tumors, human breast, bladder and melanoma tumors implanted in mice by inducing a condition known as polyploidy (where the cell has more than two sets of
chromosomes per nucleus) and apoptosis. CB3304 has also shown the ability to inhibit the proliferation of both paclitaxel-sensitive and paclitaxel-resistant human ovarian carcinoma cell lines.

We believe CB3304 may have advantages over existing tubulin inhibitors for the treatment of cancer. Specifically, the mechanism of action of the majority
of tubulin inhibitors is that of either promoting or inhibiting microtubule assembly. CB3304 has a unique mechanism of action whereby the drug does not significantly promote or inhibit microtubule assembly but instead alters microtubule dynamics and
increases the amount of time that microtubules spend in an attenuated (or paused) state, which leads to apoptosis. CB3304 has also been shown to bind to a different site on tubulin than other tubulin inhibitors. We believe that this unique mechanism
of action and binding site may translate into CB3304 demonstrating efficacy in patients who have failed treatment with other microtubule inhibitors. Moreover, because most tubulin inhibitors affect all rapidly dividing cells (both normal and
cancerous), tubulin inhibitors are generally associated with a variety of serious side effects, including neuropathy, anemia and neutropenia. In contrast, we believe pre-clinical studies have shown that CB3304 does not damage normal cells. We
believe the results of these pre-clinical studies also suggest that CB3304 does not cause any of the same deleterious side effects as other tubulin inhibitors. If this benign side effect profile is also seen during clinical testing with CB3304, it
could represent an important advantage for CB3304 over other microtubule inhibitors. Finally, since the majority of tubulin inhibitors are administered intravenously, we believe that CB3304, which is administered orally, may have significant dosing
advantages over existing tubulin inhibitors. We believe that CB3304 may be utilized in the treatment of multiple myeloma. Pre-clinical studies have shown that CB3304 suppresses human lymphoid tumor cells growth in-vitroand human tumors
implanted in athymic mice. Similar results have been reported for multiple myeloma cell lines in cultures and in murine models.

Several
known mechanisms of CB3304 also suggest that it may be clinically active in multiple myeloma. First, CB3304 stabilizes microtubule and arrests tumor cell proliferation at G2/M phase of the cell cycle leading to apoptosis. Antimicrotubule compounds
have long been established as active agents in cancer treatment. Secondly, it has become increasingly apparent that tumor interaction with microenvironment plays an important role in disease progression. It has been hypothesized that angiogenic
switch, accompanied by vascular endothelial growth factor, or VEGF, in myeloma cells triggers aggressive growth behavior. Recent data reported by Newcomb and colleagues suggest that CB3304 inhibits HIF-1a expression,
reduces its accumulation in the nucleus, and enhances its degradation via proteasome, leading to decreased VEGF secretion. Thus, the dual action of pro-apoptotic and anti-angiogenic properties of CB3304 makes it a promising therapeutic agent in
multiple myeloma.

Clinical Plan of Development

In December 2007, we initiated a Phase I trial of CB3304 in patients with multiple myeloma. This Phase I trial is an open label, dose escalating study to
evaluate the safety and efficacy of CB3304 administered daily to patients with relapsed or refractory multiple myeloma. The trial is being conducted at Weill Cornell Medical College and Columbia Presbyterian Medical Center.

CB6604 (Extended Release of CB3304)

We are also conducting pre-clinical development of CB6604, an extended release version of CB3304. We believe in vitro studies in breast cancer cells have demonstrated that increasing the amount of time such cells are exposed to
CB3304 results in a significant increase in the apoptotic effects of the drug. We plan to proceed with pre-clinical testing of CB6604 in in vivo tumor models, at the optimal dose determined in the in vitro studies, in order to further
investigate the safety and antitumor activity of CB6604.

CB1089 (Seocalcitol)

In June 2005, we licensed from LEO Pharma A/S the exclusive, worldwide rights to seocalcitol, or CB1089, which is an analog of vitamin D. We believe that
a number of pre-clinical studies have shown that vitamin D, or



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more specifically its biologically active metabolite calcitriol, demonstrates anticancer activity in a number of different tumors including
prostate, breast, pancreas, colon, skin and brain cancer. CB1089 has been tested as a single agent in a number of clinical trials including hepatocellular carcinoma, colorectal cancer, breast cancer and pancreatic cancer. Evidence of antitumor
activity has been seen in hepatocellular carcinoma and colorectal cancer. More specifically, in a Phase II trial of CB1089 in 33 patients with inoperable hepatocellular carcinoma, two patients demonstrated a complete response and 12 patients showed
stable disease. However, in subsequent trials CB1089, at the dose and regimen tested, did not demonstrate the ability to increase survival in patients with inoperable hepatocellular carcinoma. Due to the heterogeneous nature of hepatocellular
carcinoma, we plan to perform pre-clinical investigations to identify subtypes of hepatocellular carcinoma that are more likely to respond to CB1089. We also plan to perform pre-clinical studies to look at the potential additive or potential
synergistic effects of CB1089 when it is given in combination with other drugs that are used to treat hepatocellular carcinoma (e.g., sorafenib).

Clinical Testing of Our Products in Development

Each of our products in development, and likely all future product
candidates we in-license, will require extensive pre-clinical and clinical testing to determine the safety and efficacy of the product applications prior to seeking and obtaining regulatory approval. This process is expensive and time consuming. In
completing these trials, we are dependent upon third-party consultants, consisting mainly of investigators and collaborators, who will conduct such trials.

We and our third-party consultants conduct pre-clinical testing in accordance with Good Laboratory Practices and clinical testing in accordance with Good Clinical Practice standards, or GCP, which are international
ethical and scientific quality standards utilized for pre-clinical and clinical testing, respectively. GCP is the standard for the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of clinical trials, and is
required by the FDA to be followed in conducting clinical trials. Additionally, our pre-clinical and clinical testing completed in the European Union is conducted in accordance with applicable EU standards.

Competition

The development and commercialization of
new products to treat cancer is highly competitive, and there will be considerable competition from major pharmaceutical, biotechnology, and specialty cancer companies. Many of our competitors have substantially more resources than we do, including
both financial and technical. In addition, many of these companies have more experience than we do in pre-clinical and clinical development, manufacturing, regulatory, and global commercialization. We are also competing with academic institutions,
governmental agencies and private organizations that are conducting research in the field of cancer. Competition for highly qualified employees is intense.

In the prostate cancer market, we are aware of several companies, including Abbott Laboratories, AstraZeneca and Sanofi-Aventis, that have products on the market for the treatment of prostate cancer. Additionally, we
are aware of several companies, including Abbott Laboratories, AstraZeneca, Bristol-Myers Squibb, Cell Genesys, Dendreon, GPC Biotech, Medivation, Transcept Pharmaceuticals, Poniard Pharmaceuticals, Takeda and Tokai Pharmaceuticals, that have
products in development for the treatment of hormone-refractory prostate cancer.

In hematological malignancies, several companies,
including Biogen Idec, Celgene, Cephalon and Takeda, are currently marketing products for the treatment of that condition. These companies, and others such as Allos Therapeutics, Cell Therapeutics, Merck and Seattle Genetics, are also developing
products for the treatment of hematological malignancies. These marketed products and products in development could compete with our proposed products for the treatment of hematological malignancies.



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Intellectual Property and License Agreements

Our goal is to obtain, maintain and enforce patent protection for our products, formulations, processes, methods and other proprietary technologies,
preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property
protection possible for our current product candidates (CB7630, CB3304, CB1089, CB6604 and the noscapine analogs) and any future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements
and patents, both in the United States and abroad. Currently, we have obtained license rights to each of our product candidates, and the entities from which we have licensed the respective drugs have either obtained or applied for patent protection
for such products. With respect to these products, we do not anticipate significant expenses in obtaining and maintaining patent protection on our and our licensees behalf, unless and until a claim or assertion of infringement arises. However, even
patent protection may not always afford us with complete protection against competitors who seek to circumvent our patents. See Risk FactorsRisks Relating to Our BusinessIf we fail to adequately protect or enforce our intellectual
property rights or secure rights to patents of others, the value of our intellectual property rights would diminish, below.

We will
continue to depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors, none of which are patentable. To help protect our proprietary know-how, which
is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our
employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments,
discoveries and inventions important to our business.

License Agreements

In April 2004, we entered into an exclusive, worldwide license agreement for CB7630 (abiraterone acetate) with BTG plc. Specifically, we licensed U.S.
Patent No. 5,604,213, dated February 18, 1997, entitled 17-Substituted Steroids Useful in Cancer Treatment, U.S. Patent No. 5,618,807, dated April 8, 1997, entitled Method for Preparing 17-Substituted Steroids
Useful in Cancer Treatment, the corresponding foreign patents and two additional U.S. patent applications. As consideration for the rights to abiraterone acetate, we paid BTG an initial license fee of $923,100 and agreed to pay BTG an annual
license maintenance fee of 150,000 pounds sterling (currently, approximately $300,000) until the first commercial sale of the licensed product. In addition, the license agreement requires us to make substantial payments upon the achievement of
certain clinical and regulatory milestones. Should abiraterone acetate become commercialized, we will be obligated to pay to BTG an annual royalty based on net sales of the product. In the event that we sublicense abiraterone acetate to a third
party, we are obligated to pay royalties to BTG based on a fixed rate of fees or royalties received from the sublicense. The license agreement contains other customary clauses and terms as are common in similar agreements in the industry.

In March 2004, we entered into an exclusive, worldwide license agreement with Emory University for CB3304 (noscapine), CB6604 and the
noscapine analogs. Specifically, we licensed U.S. Patent No. 6,376,516, dated April 23, 2002, entitled Noscapine Derivatives, Useful as Anticancer Agents, U.S. Patent No. 7,090,853, dated August 15, 2006, entitled
Noscapine Derivatives,as Adjuvant Compositions and Methods of Use Thereof, U.S. Patent No. 6,673,814, dated January 6, 2004, entitled Delivery Systems and Methods for Noscapine and Noscapine Derivatives, Useful as
Anticancer Agents, the corresponding foreign patent applications and additional U.S. patent applications. As consideration for the rights to noscapine and the analogs of noscapine, we paid Emory University an initial license fee of $72,435 and
agreed to sponsor a research project involving the licensed technology in the amount of $114,000. In connection with the license agreement, the Company has agreed to future milestone payments to Emory for the first technology from the intellectual



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property portfolio in the aggregate of up to $3,500,000, payable upon the achievement of certain clinical and regulatory milestones. Should a product
incorporating the licensed technology be commercialized, we will be obligated to pay to Emory University an annual royalty based on net sales of the product. In the event that we sublicense the licensed technology to a third party, we will be
obligated to pay royalties to Emory University based on a fixed rate of fees or royalties received from the sublicense. The license agreement contains other customary clauses and terms as are common in similar agreements in the industry.

Pursuant to our license agreement with Emory University, Emory retained for itself and its research collaborators a right and license to use any
product, patent or technology created pursuant to the agreement for research and educational purposes. Additionally, our rights under the license agreement are subject to certain rights of the U.S. government as provided under the Bayh-Dole Act, 35
USCA §200-212, and may be amended from time to time.

CB3304 was derived by Emory University with some assistance from the National
Institutes of Health, an agency of the U.S. government. Accordingly, pursuant to the Bayh-Dole Act, the U.S. government retains a non-exclusive, paid-up, worldwide license for certain uses relating to CB3304 and the related technology as it was
created pursuant to the partial use of U.S. government funds. The U.S. government also has the right to require us to grant a nonexclusive, partially exclusive or exclusive license of CB3304 or the related technology, as it determines appropriate,
to a third party in the event the U.S. government determines, in its discretion, that (i) we have not taken adequate steps to achieve practical application of CB3304 or the related technology within a reasonable time (or would not be expected
under the circumstances to achieve such practical application within a reasonable time), (ii) action is necessary to alleviate health or safety needs that we are not reasonably satisfying, or (iii) action is necessary to meet requirements
for public use under federal regulations that we are not reasonably satisfying. In the event the U.S. government intends to exercise these rights, referred to as march-in rights, it is required to issue such determination, and we would
be provided an opportunity to file a petition challenging such determination with the U.S. Claims Court within 60 days of receipt of the determination.

In the event we commercialize CB3304 or any other product resulting from our agreement with Emory University, we will be required under the Bayh-Dole Act, absent a waiver from the U.S. government, to substantially
manufacture the product in the United States.

In June 2005, we entered into an exclusive, worldwide license agreement with LEO Pharma A/S
for CB1089 (seocalcitol). Specifically, we licensed U.S. Patent No. 5,190,935, dated April 7, 1990, U.S. Patent No. 6,310,226, dated October 30, 2001, the corresponding foreign patents and certain additional foreign patent
applications. As consideration for the rights to seocalcitol, we paid LEO Pharma A/S an initial license fee of $250,000. In addition, the license agreement requires the Company to make aggregate milestone payments of up to $13,000,000, payable upon
the achievement of certain clinical and regulatory milestones. Should seocalcitol become commercialized, we will be obligated to pay LEO Pharma A/S an annual royalty based on net sales of the product. In the event that we sublicense seocalcitol to a
third party, we are obligated to pay royalties to LEO Pharma A/S based on a fixed rate of fees or royalties received from the sublicense. The license agreement contains other customary clauses and terms as are common in similar agreements in the
industry.

Government Regulation and Product Approval

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the testing (pre-clinical and clinical), manufacturing, labeling, storage,
recordkeeping, advertising, promotion, import, export, marketing and distribution, among other things, of drugs and drug product candidates. If we do not comply with applicable requirements, we may be fined, the government may refuse to approve our
marketing applications or allow us to manufacture or market our products, and we may be criminally prosecuted. We and our manufacturers may also be subject to regulations under other U.S. federal, state, and local laws.



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United States Government Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The process required
by the FDA before our drug candidates may be marketed in the United States generally involves the following (although the FDA is given wide discretion to impose different or more stringent requirements on a case-by-case basis):



| |  |  | completion of extensive pre-clinical laboratory tests, pre-clinical animal studies and formulation studies, all performed in accordance with the FDAs good
laboratory practice regulations and other regulations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | submission to the FDA of an investigational new drug, or IND, application which must become effective before clinical trials may begin;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | performance of multiple adequate and well-controlled clinical trials meeting FDA requirements to establish the safety and efficacy of the product candidate for each
proposed indication;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | submission of a New Drug Application, or NDA, to the FDA;
| | - |  | ---------------------------------------------------------



| |  |  | satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the product candidate is produced, and potentially other involved
facilities as well, to assess compliance with current good manufacturing practice, or cGMP, regulations and other applicable regulations; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
| | - |  | ---------------------------------------------------------------------------------------------------

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals of our drug
candidates will be granted on a timely basis, if at all. Risks related to these regulations are described on pages 23-24 of this Annual Report.

Pre-clinical tests may include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate toxicity and other effects in animals. The results of pre-clinical tests, together with manufacturing
information and analytical data, among other information, are submitted to the FDA as part of an IND application. Subject to certain exceptions, an IND application becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day
time period, issues a clinical hold to delay a proposed clinical investigation due to concerns or questions about the conduct of the clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In
such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Our submission of an IND application, or those of our collaboration partners, may not result in the FDA authorization to commence a
clinical trial. A separate submission to an existing IND application must also be made for each successive clinical trial conducted during product development. The FDA must also approve changes to an existing IND application. Further, an independent
institutional review board, or IRB, for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center and it must monitor the study until completed. The FDA,
the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive GCP requirements and
regulations for informed consent.

Clinical Trials

For purposes of NDA submission and approval, clinical trials are typically conducted in the following three sequential phases, which may overlap (although
additional or different trials may be required by the FDA as well):



| |  |  | Phase I clinical trialsare initially conducted in a limited population to test the drug candidate for safety, dose tolerance, absorption, metabolism,
distribution and excretion in healthy humans or, on occasion, in patients such as cancer patients. In some cases, particularly in cancer trials, a sponsor may decide to conduct what is referred to as a Phase Ib evaluation, which is a
second safety-focused Phase I clinical trial typically designed to evaluate the impact of the drug candidate in combination with FDA-approved drugs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Phase II clinical trialsare generally conducted in a limited patient population to identify possible adverse effects and safety risks, to determine the
efficacy of the drug candidate for specific targeted indications, and to determine dose 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 conduct what is referred to as a Phase IIb evaluation, which is a second, confirmatory Phase II clinical trial that could, if positive and accepted by the FDA,
serve as a pivotal clinical trial in the approval of a drug candidate.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Phase III clinical trialsare commonly referred to as pivotal trials. When Phase II clinical trials demonstrate that a dose range of the drug candidate is
effective and has an acceptable safety profile, Phase III clinical trials are undertaken in large patient populations to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and
diverse patient population at multiple, geographically dispersed clinical trial sites.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In some cases, the FDA may
condition continued approval of an NDA on the sponsors agreement to conduct additional clinical trials with due diligence. In other cases, the sponsor and the FDA may agree that additional safety and/or efficacy data should be provided;
however, continued approval of the NDA may not always depend on timely submission of such information. Such post-approval studies are typically referred to as Phase IV studies.

New Drug Application

The
results of drug candidate development, pre-clinical testing and clinical trials, together with, among other things, detailed information on the manufacture and composition of the product and proposed labeling, and the payment of a user fee, are
submitted to the FDA as part of an NDA. The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. Once an NDA is accepted for filing, the FDA begins an
in-depth review of the application.

During its review of an NDA, the FDA may refer the application to an advisory committee for review,
evaluation and recommendation as to whether the application should be approved. The FDA may refuse to approve an NDA and issue a not approvable letter if the applicable regulatory criteria are not satisfied, or it may require additional clinical or
other data, including one or more additional pivotal Phase III clinical trials. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are not always
conclusive and the FDA may interpret data differently than we or our collaboration partners interpret data. If the FDA evaluations of the NDA and the clinical and manufacturing procedures and facilities are favorable, the FDA may issue either an
approval letter or an approvable letter, which contains the conditions that must be met in order to secure final approval of the NDA. If and when those conditions have been met to the FDAs satisfaction, the FDA will issue an approval letter,
authorizing commercial marketing of the drug for certain indications. The FDA may withdraw drug approval if ongoing regulatory requirements are not met or if safety problems occur after the drug reaches the market. In addition, the FDA may require
testing, including Phase IV clinical trials, and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a drug based on the results of these
post-marketing programs. Drugs may be marketed only for the FDA-approved indications and in accordance with the FDA-approved label. Further, if there are any modifications to the drug, including changes in indications, other labeling changes, or
manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new NDA or NDA supplement, which may require us to develop additional data or conduct additional pre-clinical studies and clinical trials.

Orphan Drug Designation and Exclusivity

The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which generally is a disease or condition that affects fewer than 200,000 individuals in the United States.
Orphan drug designation must be requested before submitting an NDA. If the FDA grants orphan drug designation, which it



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may not, the identity of the therapeutic agent and its potential orphan use are publicly disclosed by the FDA. Orphan drug designation does not convey an
advantage in, or shorten the duration of, the review and approval process. If a product with an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to
seven years of orphan drug exclusivity, meaning that the FDA may not approve any other applications to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan exclusivity (superior efficacy, safety, or a major contribution to patient care). Orphan drug designation does not prevent competitors from developing or marketing different drugs for that indication. We intend
to seek orphan drug designation for our products at the appropriate time, if applicable.

Under EU medicine laws, the criteria for
designating a product as an orphan medicine are similar but somewhat different from those in the United States. A drug is designated as an orphan drug if the sponsor can establish that the drug is intended for a life-threatening or
chronically debilitating condition affecting no more than five in 10,000 persons in the European Union or is unlikely to be profitable, and if there is no approved satisfactory treatment or if the drug would be a significant benefit to those persons
with the condition. Orphan medicines are entitled to 10 years of marketing exclusivity, except under certain limited circumstances comparable to U.S. law. During this period of marketing exclusivity, no similar product, whether or not
supported by full safety and efficacy data, will be approved unless a second applicant can establish that its product is safer, more effective or otherwise clinically superior. This period may be reduced to six years if the conditions that
originally justified orphan designation change or the sponsor makes excessive profits.

Fast Track Designation

The FDAs fast track program is intended to facilitate the development and expedite the review of drugs that are intended for the treatment of
serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs. Under the fast track program, applicants may seek traditional approval for a product based on data demonstrating an effect on a clinically
meaningful endpoint, or approval based on a well-established surrogate endpoint. The sponsor of a new drug candidate may request fast track designation by the FDA for a specific indication at the time of original submission of its IND application,
or at any time thereafter prior to receiving approval of a marketing application. The FDA will determine if the drug candidate qualifies for fast track designation within 60 days of receipt of the sponsors request.

If the FDA grants fast track designation, it may initiate review of sections of an NDA before the application is complete. This so-called rolling
review is available if the applicant provides and the FDA approves a schedule for submission of the remaining information and the applicant has paid applicable user fees. The FDAs review clock under the Prescription Drug User Fee Act, or
PDUFA, for both a standard and priority NDA for a fast track product does not begin until the complete application is submitted. Additionally, fast track designation may be withdrawn by the FDA if it believes that the designation is no longer
supported by emerging data, or if the designated drug development program is no longer being pursued.

In some cases, a fast track
designated drug candidate may also qualify for one or more of the following programs:



| |  |  | Priority Review. As explained above, a drug candidate may be eligible for a six-month priority review. The FDA assigns priority review status to an
application if the drug candidate provides a significant improvement compared to marketed drugs in the treatment, diagnosis or prevention of a disease. A fast track drug would ordinarily meet the FDAs criteria for priority review, but may also
be assigned a standard review. We do not know whether any of our drug candidates will be assigned priority review status or, if priority review status is assigned, whether that review or approval will be faster than conventional FDA procedures, or
that the FDA will ultimately approve the drug.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Accelerated Approval. Under the FDAs accelerated approval regulations, the FDA is authorized to approve drug candidates that have been studied for
their safety and efficacy in treating serious or life- threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | based upon either a surrogate endpoint that is reasonably likely to predict clinical benefit or on the basis of an effect on a clinical endpoint other than
patient survival or irreversible morbidity. In clinical trials, surrogate endpoints are alternative measurements of the symptoms of a disease or condition that are substituted for measurements of observable clinical symptoms. A drug candidate
approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase IV or post-approval clinical trials, to validate the surrogate endpoint or confirm the effect on the clinical endpoint. Failure
to conduct required post-approval studies with due diligence, or to validate a surrogate endpoint or confirm a clinical benefit during post-marketing studies, may cause the FDA to seek to withdraw the drug from the market on an expedited basis. All
promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

When appropriate, we and our collaboration partners intend to seek fast track designation, accelerated approval or priority review for our drug candidates, including CB7630. We cannot predict whether any of our drug candidates will obtain
fast track, accelerated approval, or priority review designation, or the ultimate impact, if any, of these expedited review mechanisms on the timing or likelihood of the FDA approval of any of our drug candidates.

Satisfaction of the FDA regulations and approval requirements or similar requirements of foreign regulatory agencies typically takes several years, and
the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. Typically, if a drug candidate is intended to treat a chronic disease, as is the case with some of the drug candidates we are
developing, safety and efficacy data must be gathered over an extended period of time. Government regulation may delay or prevent marketing of drug candidates for a considerable period of time and impose costly procedures upon our activities. The
FDA or any other regulatory agency may not grant approvals for changes in dosage form or new indications for our drug candidates on a timely basis, or at all. Even if a drug candidate receives regulatory approval, the approval may be significantly
limited by specific disease states, patient populations and dosages. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a drug may result in restrictions on the drug or even complete withdrawal
of the drug from the market. Delays in obtaining, or failures to obtain, regulatory approvals for any of our drug candidates would harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future U. S. or
foreign governmental action.

Other Regulatory Requirements

Any drugs manufactured or distributed by us or our collaboration partners pursuant to future FDA approvals are subject to continuing regulation by the
FDA, including recordkeeping requirements and reporting of adverse experiences associated with the drug. Drug manufacturers and their subcontractors are required to register with the FDA and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Failure to
comply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, sales or use, seizure of product, injunctive action or possible civil
penalties. We cannot be certain that we or our present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations and other ongoing FDA regulatory requirements. If our present or future third-party
manufacturers or suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug.

The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising,
off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply
with these requirements can result in adverse publicity, warning and/or untitled letters, corrective advertising, and potential civil and criminal penalties.



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Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and
distribution of our future products. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the
product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from country to country.

Under EU regulatory systems, marketing authorizations may be submitted either under a
centralized or mutual recognition procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all EU member states. The mutual recognition procedure provides for mutual recognition of national
approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide
whether to recognize approval.

In addition to regulations in Europe and the United States, we will be subject to a variety of foreign
regulations governing clinical trials and commercial distribution of our future products.

Manufacturing

We do not currently have our own manufacturing facilities. We intend to continue to use our financial resources to accelerate development of our product
candidates rather than diverting resources to establish our own manufacturing facilities. We meet our pre-clinical and clinical trial manufacturing requirements by establishing relationships with third-party manufacturers and other service providers
to perform these services for us. We rely on individual proposals and purchase orders to meet our needs and typically rely on terms and conditions proposed by the third party or us to govern our rights and obligations under each order (including
provisions with respect to intellectual property, if any). We do not have any long-term agreements or commitments for these services. Likewise, we do not have any long-term agreements or commitments with vendors to supply the underlying component
materials of our product candidates, some of which are available from only a single supplier.

Should any of our product candidates obtain
marketing approval, we anticipate establishing relationships with third-party manufacturers and other service providers in connection with the commercial production of our products. We have some flexibility in securing other manufacturers to produce
our product candidates; however, our alternatives may be limited due to proprietary technologies or methods used in the manufacture of some of our product candidates.

Research and Development Expenses

Research and development activities, which include personnel
costs, research supplies, clinical and preclinical study costs, are the primary source of our overall expenses. Such expenses related to the research and development of our product candidates totaled $52.9 million for the year ended
December 31, 2008, $27.3 million for the year ended December 31, 2007, $6.7 million for the year ended December 31, 2006, and $95.1 million from May 14, 2003, the date of inception, through December 31, 2008.

Employees

As of December 31, 2008, we had 54
full-time employees and 4 part-time employees. None of our employees are covered by a collective bargaining unit. We believe our relations with our employees are satisfactory.



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Over the course of the next year, we anticipate hiring up to 8 additional full-time employees devoted to
research and development activities, 6 additional full-time employees for the regulatory and quality assurance function, and 2 additional full-time employees for general and administrative activities. We expect that the hiring of such additional
personnel will increase our annual expenditures by approximately $1.0  $1.8 million. In addition, we intend to continue to use clinical research organizations and third parties to perform our clinical studies and manufacturing.

Available Information

Our Annual Reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, are available free of
charge via our website (www.cougarbiotechnology.com) as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission, or SEC.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

An investment in our securities
is speculative in nature, involves a high degree of risk, and should not be made by an investor who cannot bear the economic risk of its investment for an indefinite period of time and who cannot afford the loss of its entire investment. You should
carefully consider the following risk factors and the other information contained elsewhere in this Annual Report before investing in our securities.

Risks Relating to our Business

We currently have no product revenues and will need to raise additional
capital to operate our business.

To date, we have generated no product revenues. Until, and unless, we receive approval from
the FDA and other regulatory authorities for our product candidates, we cannot sell our drugs and will not have product revenues. Currently, our only product candidates are CB7630, CB3304, CB6604, the noscapine analogs and CB1089, and none of these
products are approved for sale by the FDA. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from cash on hand and, potentially, future offerings. Currently, we believe we have cash on hand to
fund our operations into 2010. However, changes may occur that would consume our available capital before that time, including changes in and progress of our development activities, acquisitions of additional product candidates and changes in
regulation. Accordingly, we will need additional capital to fund our continuing operations. Since we do not generate any recurring revenue, the most likely sources of such additional capital include private placements of our equity securities,
including our common stock, debt financing or funds from a potential strategic licensing or collaboration transaction involving the rights to one or more of our product candidates. To the extent that we raise additional capital by issuing equity
securities, our stockholders will likely experience dilution, which may be significant depending on the number of shares we may issue and the price per share. If we raise additional funds through collaborations and licensing arrangements, it may be
necessary to relinquish some rights to our technologies, product candidates or products, or grant licenses on terms that are not favorable to us. If we raise additional funds by incurring debt, we could incur significant interest expense and become
subject to covenants in the related transaction documentation that could affect the manner in which we conduct our business.

However, we have no committed sources of additional capital and our access to capital funding is always uncertain. This uncertainty is exacerbated due to the current global economic turmoil, which has severely restricted
access to the U.S. and international capital markets, particularly for biopharmaceutical and biotechnology companies. Accordingly, despite our ability to secure adequate capital in the past, there is no assurance that additional equity or debt
financing will be available to us when needed, on acceptable terms or even at all. If we fail to obtain the necessary additional capital when needed, we may be forced to significantly curtail our planned research and development activities, which
will cause a delay in our drug development programs.

We are not currently profitable and may never become profitable.

We have a history of losses and expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve
or maintain profitability. For the year ended December 31, 2008, we had a net loss of approximately $59.8 million and from our inception in May 2003 through December 31, 2008 we have incurred a net loss of approximately $114.9 million.
Even if we succeed in developing and commercializing one or more product candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and
capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:



| |  |  | continue to undertake pre-clinical development and clinical trials for our product candidates;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | seek regulatory approvals for our product candidates;
| | - |  | -----------------------------------------------------



| |  |  | implement additional internal systems and infrastructure; and
| | - |  | -------------------------------------------------------------



| |  |  | hire additional personnel.
| | - |  | --------------------------



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We also expect to experience negative cash flow for the foreseeable future as we fund our operating
losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve
or maintain profitability could negatively impact the value of our securities.

We have a limited operating history upon which to base an investment
decision.

We are a development-stage company and have not demonstrated an ability to perform the functions necessary for the
successful commercialization of any product candidates. The successful commercialization of any product candidates will require us to perform a variety of functions, including:



| |  |  | continuing to undertake pre-clinical and clinical development of our product candidates;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | participating in regulatory approval processes;
| | - |  | -----------------------------------------------



| |  |  | formulating and manufacturing products; and
| | - |  | -------------------------------------------



| |  |  | conducting sales and marketing activities.
| | - |  | ------------------------------------------

Our operations have been limited to organizing and staffing our company, acquiring, developing and securing our proprietary technology, undertaking pre-clinical studies of our product candidates and undertaking clinical trials of our
product candidates. These operations provide a limited basis for you to assess our ability to commercialize our product candidates and the advisability of investing in our common stock.

If we do not obtain the necessary U.S. or worldwide regulatory approvals to commercialize CB7630 or any of our other product candidates, we will not be able to sell our product candidates, and our business and
future prospects will be severely harmed.

We cannot assure you that we will receive the approvals necessary to commercialize CB7630
or any of our other product candidates (CB3304, the noscapine analogs and CB1089), or any product candidate we acquire or develop in the future. We will need FDA approval to commercialize our product candidates in the U.S. and approvals from the
FDA-equivalent regulatory authorities in foreign jurisdictions to commercialize our product candidates in those jurisdictions. In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the product
candidate is safe for humans and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as pre-clinical studies, as well as human tests, which are referred to as clinical trials.
Satisfaction of the FDAs regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict
whether our research and clinical approaches will result in drugs the FDA considers safe for humans and effective for indicated uses. The FDA has substantial discretion in the drug approval process and may require us to conduct additional
pre-clinical and clinical testing or to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during
our regulatory review. Delays in obtaining regulatory approvals may:



| |  |  | delay commercialization of, and our ability to derive product revenues from, any product candidate;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | impose costly procedures on us; and
| | - |  | -----------------------------------



| |  |  | diminish any competitive advantages that we may otherwise enjoy.
| | - |  | ----------------------------------------------------------------

Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our NDAs. We may never obtain regulatory clearance for CB7630 or our other product candidates (CB7630, CB3304, CB6604, the
noscapine analogs and CB1089). Failure to obtain FDA approval of any of our product candidates will severely undermine our business by leaving us without a saleable product, and therefore without any source of revenue, until another product
candidate can be developed. There is no guarantee that we will ever be able to develop or acquire another product candidate.



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In foreign jurisdictions, we must receive approval from the appropriate regulatory authorities before we
can commercialize any drugs. Foreign regulatory approval processes generally include all of the risks associated with the FDA approval procedures described above. We cannot assure you that we will receive the approvals necessary to commercialize our
product candidates for sale outside the United States.

Our near-term success is especially dependent on our ability to complete the
development of CB7630, our lead product candidate. In April 2008, we initiated the first of two planned Phase III clinical trials of CB7630 in patients with advanced prostate cancer. We plan to initiate a second Phase III trial of CB7630 in the
first half of 2009. Most of our time and financial resources have been devoted to the development of our CB7630 program. However, the results of our prior clinical trials of CB7630 to date do not provide assurance that the results of our ongoing and
planned Phase III clinical trials will show acceptable safety or efficacy. If the results of these studies do not meet their endpoints or if we are otherwise unable to complete the development of or obtain regulatory approval to market CB7630, our
business and our prospects to generate future revenues will be severely harmed.

Our success depends on our ability to enhance our existing pipeline
of product candidates through the in-license or other acquisition of products in clinical development. If our business development efforts are not successful, our ability to achieve profitability will be negatively impacted.

Our current product portfolio consists of three drug candidates that are in clinical stages of development. We intend to continue to expand our current
portfolio and in-license or acquire additional products that are currently in clinical development. If we are not successful in acquiring products that are currently in clinical development, then we will be dependent upon our ability to raise
financing for, and the successful development and commercialization of, our current product candidates.

Many other large and small
companies within the pharmaceutical and biotechnology industries seek to establish collaborative arrangements for product research and development, or otherwise acquire products in later-stage clinical development, in competition with us. We face
additional competition from public and private research organizations, academic institutions and governmental agencies in establishing collaborative arrangements for products in later-stage clinical development. Many of the companies and
institutions that compete against us have substantially greater capital resources, research and development staffs and facilities than we have, and substantially greater experience in conducting business development activities. These entities
represent significant competition to us as we seek to expand our pipeline through the in-license or acquisition of compounds.

While it is
not feasible to predict the actual cost of acquiring additional product candidates, the cost of licensing drugs that are in clinical stages of development is generally significantly higher than the costs of licensing drugs that have not yet entered
clinical development (pre-clinical drugs). Moreover, we expect that any product candidates we acquire will require significant additional development and other efforts prior to obtaining commercialization, if we ever commercialize any such product.
The cost of licensing additional clinical stage drugs and completing the development necessary could be substantial and we may need to raise additional financing or issue additional equity securities, either of which may dilute the investment of
existing stockholders, in order to acquire and further develop such new products.

If we are able to enhance our existing pipeline of product
candidates through the in-license or other acquisition of later-stage clinical development candidates, we may expose ourselves to new risks that were not identified prior to negotiating the in-license or other acquisition agreement that may prevent
us from successfully developing or commercializing our product candidates.

Even if we are able to in-license or acquire potential
products, we may fail to identify risks during our due diligence efforts, or new risks may arise later in the development process of our product candidates, that we may be unable to adequately address. If we are unable to address such previously
unidentified risks in a timely manner, we may be required to discontinue our development of one or more of our product candidates, and our business and results of operations will be harmed.



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Many of our product candidates are in early stages of clinical trials and will require extensive pre-clinical
testing and clinical testing. If we are unsuccessful in obtaining regulatory approval for any of our product candidates, we may be required to delay or abandon development of such product candidate.

Other than CB7630, our other product candidates (CB3304, including the noscapine analogs, CB6604 and CB1089) are in very early stages of development and
will require substantial additional pre-clinical and clinical testing. We cannot predict with any certainty if or when we might submit an NDA for regulatory approval for any of our product candidates or whether any such NDA will be accepted. In the
event we do not receive regulatory approval for any of our product candidates, we will be required to delay or terminate development of such product candidate.

Clinical trials are very expensive, time-consuming and difficult to design and implement. If clinical trials for any of our product candidates do not provide positive results, we may be required to abandon or repeat such clinical
trials.

Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to
rigorous regulatory requirements. The clinical trial process is also time-consuming. We estimate that clinical trials of our product candidates will take at least several years to complete. Furthermore, failure can occur at any stage of the trials,
and we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including:



| |  |  | unforeseen safety issues;
| | - |  | -------------------------



| |  |  | determination of dosing issues;
| | - |  | -------------------------------



| |  |  | lack of effectiveness during clinical trials;
| | - |  | ---------------------------------------------



| |  |  | slower than expected rates of patient recruitment;
| | - |  | --------------------------------------------------



| |  |  | inability to monitor patients adequately during or after treatment; and
| | - |  | -----------------------------------------------------------------------



| |  |  | inability or unwillingness of medical investigators to follow our clinical protocols.
| | - |  | -------------------------------------------------------------------------------------

In addition, we or the FDA may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if
the FDA finds deficiencies in our IND submissions or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for future clinical trials.

If the results of our clinical trials do not support our product candidate claims, the completion of development of such product candidates may be significantly delayed or we may be forced to abandon development
of such product candidates altogether.

Even if our clinical trials are completed as planned, we cannot be certain that their
results will support our product candidate claims. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will
replicate the results of prior clinical trials and pre-clinical testing. For example, although the results of the clinical trials of CB7630 conducted to date have been promising, there is no assurance that those results will continue as we progress
this drug candidate to later stage clinical trials. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. This failure would cause us to abandon a product candidate and
may delay development of other product candidates. Any delay in, or termination of, our clinical trials will delay the filing of our NDAs with the FDA and, ultimately, our ability to commercialize our product candidates and generate product
revenues. In addition, our clinical trials involve a small patient population. Because of the small sample size, the results of these clinical trials may not be indicative of future results.



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If physicians and patients do not accept and use our drugs, our ability to generate revenue from sales of our
products will be materially impaired.

Even if the FDA approves CB7630 or one or more of our other product candidates, physicians
and patients may not accept and use them. Acceptance and use of our products will depend upon a number of factors including:



| |  |  | perceptions by members of the health care community, including physicians, about the safety and effectiveness of our drugs;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | cost-effectiveness of our products relative to competing products;
| | - |  | ------------------------------------------------------------------



| |  |  | availability of reimbursement for our products from government or other healthcare payers; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
| | - |  | -----------------------------------------------------------------------------------------------------

Because we expect sales of our current product candidates, if approved, to generate substantially all of our product revenue for the foreseeable future,
the failure of these drugs to find market acceptance would harm our business and could require us to seek additional financing.

We are dependent
upon third-party researchers and developers in the development of our product candidates, and such parties are, to some extent, outside of our control.

We depend upon independent investigators and collaborators, such as universities and medical institutions, to conduct our pre-clinical and clinical trials under agreements with us. These collaborators are not our
employees and we cannot control the amount or timing of resources that they devote to our programs. These investigators may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs
ourselves. If outside collaborators fail to devote sufficient time and resources to our drug-development programs, or if their performance is substandard, the approval of our FDA applications, if any, and our introduction of new drugs, if any, will
be delayed. These collaborators may also have relationships with other commercial entities, some of whom may compete with us. If our collaborators assist our competitors at our expense, our competitive position would be harmed.

Our intention to rely exclusively on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the testing,
development, regulatory approval and commercialization of our product candidates.

We have no experience in drug formulation or
manufacturing and do not intend to establish our own manufacturing facilities. We lack the resources and expertise to formulate or manufacture our own product candidates. We currently have no agreements for the commercial-scale manufacture of CB7630
or our product candidates. We intend to enter into agreements with one or more manufacturers to manufacture, supply, store and distribute drug supplies for our clinical trials. If CB7630 or any of our other current product candidates or any product
candidates we may develop or acquire in the future receive FDA approval, we will rely on one or more third-party contractors to manufacture our drugs. Our anticipated future reliance on a limited number of third-party manufacturers exposes us to the
following risks:



| |  |  | We may be unable to identify commercial suppliers on acceptable terms or at all because the number of potential suppliers is limited and the FDA must approve any
replacement contractor. This approval would require new testing and compliance inspections. In addition, a new supplier would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA
approval, if any.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our third-party manufacturers might be unable to formulate and manufacture our drugs in the volume and of the quality required to meet our clinical needs and
commercial needs, if any.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical
trials or to successfully produce, store and distribute our products.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration, and corresponding state agencies to
ensure strict compliance with good manufacturing practice and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers compliance with these regulations and standards.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If any third-party manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property
rights to the innovation.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Each of these risks could delay our clinical trials, the approval, if any, of our product
candidates by the FDA or the commercialization of our product candidates, or result in higher costs or deprive us of potential product revenues.

Developments by competitors may render our products or technologies obsolete or non-competitive.

The biotechnology
and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. Some of the drugs that we are attempting to develop, such as CB7630, CB3304, CB6604, the noscapine analogs and CB1089, will have to
compete with existing therapies should we obtain regulatory approval for such drugs,. In addition, a large number of companies are pursuing the development of pharmaceuticals that target the same diseases and conditions we are targeting. We face
competition from pharmaceutical and biotechnology companies in the United States and abroad. In addition, companies pursuing different but related fields represent substantial competition. Many of the organizations competing with us have
substantially greater capital resources, larger research and development staffs and facilities, longer drug development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do. These organizations
also compete with us to attract qualified personnel and parties for acquisitions, joint ventures or other collaborations.

If we fail to adequately
protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish.

Our success, competitive position and future revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes and other
technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

To date, we hold certain exclusive patent rights, including rights under U.S. Patent Nos. 5,604,213; 5,618,807; 6,376,516; 6,673,814; 7,090,853;
5,190,935; 6,310,226; and U.S. patent applications as well as rights under foreign patents and patent applications. We anticipate filing additional patent applications both in the United States and in other countries, as appropriate. However, we
cannot predict:



| |  |  | the degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise
circumvent our patents;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if and when patents will issue;
| | - |  | -------------------------------



| |  |  | whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | whether we will need to initiate litigation or administrative proceedings, which may be costly whether we win or lose.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



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Our success also depends upon the skills, knowledge and experience of our scientific and technical
personnel, our consultants and advisors as well as our licensors and contractors. To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and
confidentiality agreements. To this end, it is our policy to require all of our employees, consultants, advisors and contractors to enter into agreements which prohibit the disclosure of confidential information and, where applicable, require
disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of
any unauthorized use or disclosure, or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights
would be significantly impaired, and our business and competitive position would suffer.

If we infringe the rights of third parties we could be
prevented from selling products, forced to pay damages, and defend against litigation.

If our products, methods, processes and
other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we may have to:



| |  |  | obtain licenses, which may not be available on commercially reasonable terms, if at all;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | abandon an infringing drug candidate;
| | - |  | -------------------------------------



| |  |  | redesign our products or processes to avoid infringement;
| | - |  | ---------------------------------------------------------



| |  |  | stop using the subject matter claimed in the patents held by others;
| | - |  | --------------------------------------------------------------------



| |  |  | pay damages;
| | - |  | ------------



| |  |  | defend litigation or administrative proceedings which may be costly whether we win or lose, and which could result in a substantial diversion of our financial and
management resources.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to generate product revenues will be diminished if our drugs sell for inadequate prices or
patients are unable to obtain adequate levels of reimbursement.

Our ability to commercialize our drugs, alone or with
collaborators, will depend in part on the extent to which reimbursement will be available from:



| |  |  | government and health administration authorities;
| | - |  | -------------------------------------------------



| |  |  | private health maintenance organizations and health insurers; and
| | - |  | -----------------------------------------------------------------



| |  |  | other healthcare payers.
| | - |  | ------------------------

Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, are challenging the prices charged for medical products and services. Government and other
healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs. Even if one of our product candidates is approved by the FDA, insurance coverage may not be available, and
reimbursement levels may be inadequate, to cover such drug. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for one of our products, once approved, market acceptance of such product could be
reduced.

If we are unable to successfully manage our growth, our business may be harmed.

Our success will depend upon the expansion of our operations and the effective management of our growth, which will place a significant strain on our
management and on our administrative, operational and financial resources. To manage this growth, we must expand our facilities, augment our operational, financial and management systems and hire and train additional qualified personnel. If we are
unable to manage our growth effectively, our business would be harmed.



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We face product liability risks and may not be able to obtain adequate insurance to protect us against losses.

We currently have no products that have been approved for commercial sale. However, the current and future use of our product
candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made directly by consumers or healthcare providers or indirectly by pharmaceutical companies, or
others selling such products. We may experience financial losses in the future due to product liability claims. We have obtained limited general commercial liability insurance coverage for our clinical trials. We intend to expand our insurance
coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against all
losses. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be
impaired.

We may be exposed to liability claims associated with the use of hazardous materials and chemicals.

Our research and development activities may involve the controlled use of hazardous materials and chemicals. Although we believe that our safety
procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of
such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and
results of operations.

We rely on key executive officers and scientific and medical advisors, and their knowledge of our business and technical
expertise would be difficult to replace.

We are highly dependent on our principal scientific, regulatory and medical advisors. We
do not have key person life insurance policies for any of our officers. The loss of the technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development, loss of
customers and sales and diversion of management resources, which could adversely affect our operating results.

If we are unable to hire additional
qualified personnel, our ability to grow our business may be harmed.

We will need to hire additional qualified personnel with
expertise in pre-clinical testing, clinical research and testing, government regulation, formulation and manufacturing, and sales and marketing. In particular, over the next 12 months, we expect to hire up to 8 new employees devoted to research and
development and 6 new employees devoted to regulatory and quality assurance. We expect that the hiring of such additional personnel will increase our annual expenditures by approximately $1.0$1.8 million.

We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition for such
individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success.

We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.

The testing and marketing of medical products entail an inherent risk of product liability. If we cannot successfully defend ourselves against product
liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability
claims could prevent or inhibit the commercialization of pharmaceutical products we develop, alone or with collaborators.



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Certain of our license agreements and contract research agreements require payments in foreign currencies and are
subject to exchange rate fluctuations.

Our license agreement with BTG plc for the in-license of CB7630 requires the payment of
license maintenance fees and milestone payments, if any, in British pounds. We have also entered into service agreements with contract research organization that require payment in currencies other than the U.S. dollar. It is possible that we will
enter into license agreements for future product candidates or contract research or other agreements that will require payments in currencies other than the U.S. dollar. Fluctuations in exchange rates, in particular between the U.S. dollar and other
currencies, may affect the actual amounts of these payments and potentially may be in excess of the amounts we have budgeted for payment of these fees and other payments.

A substantial stockholder possesses a significant portion of our voting power and could exert significant control over our management and direction.

Based on a recent filing made with the SEC, as of February 3, 2009, Dr. Lindsay Rosenwald beneficially owned approximately 3.48 million
shares of our common stock, or 16.5% of our common stock, which included 3.18 million shares held by Horizon BioMedical Ventures, LLC, an entity of which Dr. Rosenwald is the managing member. Additionally, Russell H. Ellison, M.D., a
director, serves as Executive Vice President for Paramount BioCapital, Inc., an entity owned by Dr. Rosenwald. As a result of its significant holding and Dr. Ellisons position on our Board, Dr. Rosenwald has the ability to exert
considerable influence over our management direction and affairs through the election and removal of our Board of Directors, and all other matters requiring stockholder approval, including the future merger, consolidation or sale of all or
substantially all of our assets.

We are contractually obligated to one of our directors to pay bonuses in the event of certain in-licensing of
potential products, which may present a conflict of interest.

Pursuant to our scientific advisory agreement with
Dr. Arie S. Belldegrun, a director, we have agreed to pay a cash bonus to Dr. Belldegrun in the event we acquire a new technology and Dr. Belldegrun plays a certain role in such acquisition, which determination would be made by
the disinterested members of our Board of Directors.

We have agreed to pay a bonus if Dr. Belldegrun introduces the technology to us or
actively participates in the evaluation process of a new technology that we subsequently acquire. The payment of a qualifying bonus would likely come within a short period of time after in-licensing, after which time we will likely be required to
expend a significant amount of time and funds toward the testing and development of such technology before determining its scientific or economic viability. It is possible that we will obtain regulatory approval for only a small percentage, if any
at all, of the technologies we acquire through the assistance of Dr. Belldegrun. The payment of a bonus at a time before we can fully determine the potential success of the product candidate creates a financial incentive for Dr. Belldegrun
to assist us in obtaining licenses for product candidates that may not ultimately satisfy our goals, and creates a potential conflict of interest on the part of Dr. Belldegrun.

Risks Relating to Our Stock

Our stock price may be particularly volatile because we are
a drug development company.

The market prices for securities of biotechnology companies in general, and early-stage drug
development companies in particular, have been highly volatile and may continue to be highly volatile in the future. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market
price of our common stock:



| |  |  | the development status of our drug candidates, particularly the results of our clinical trials of CB7630;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | market conditions or trends related to the biotechnology and pharmaceutical industries, or the market in general;
| | - |  | -----------------------------------------------------------------------------------------------------------------



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| |  |  | announcements of technological innovations, new commercial products, or other material events by our competitors or us;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | disputes or other developments concerning our proprietary rights;
| | - |  | -----------------------------------------------------------------



| |  |  | changes in, or failure to meet, securities analysts or investors expectations of our financial performance;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | additions or departures of key personnel;
| | - |  | -----------------------------------------



| |  |  | discussions of our business, products, financial performance, prospects, or stock price by the financial and scientific press and online investor communities such
as chat rooms;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | public concern as to, and legislative action with respect to, testing or other research areas of biopharmaceutical companies, the pricing and availability of
prescription drugs, or the safety of drugs;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory developments in the United States or foreign countries; and
| | - |  | ----------------------------------------------------------------------



| |  |  | economic and political factors.
| | - |  | -------------------------------

In
the past, following periods of volatility in the market price of a particular companys securities, securities class action litigation has often been brought against that company. We may become subject to this type of litigation, which is often
extremely expensive and diverts managements attention.

Trading of our common stock is limited, which may make it difficult for you to sell
your shares at times and prices that you feel are appropriate.

Trading in our common stock, which is currently conducted on The
NASDAQ Global Market, has been limited. This adversely affects the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price. This may result in lower prices for our common stock than might
otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.

We are at risk of securities
class action litigation.

In the past, securities class action litigation has often been brought against a company following a
decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced greater than average stock price volatility in recent years. If we faced such litigation, it could result in
substantial costs and a diversion of managements attention and resources, which could harm our business.

We have never paid dividends on our
common stock and do not intend to do so for the foreseeable future.

We have never paid dividends on our common stock and we do not
anticipate that we will pay any dividends on our common stock for the foreseeable future. Accordingly, any return on an investment in our common stock will be realized, if at all, only when you sell shares of our common stock.



|ITEM 2. | DESCRIPTION OF PROPERTIES
|------- | -------------------------

Our executive offices
are located at 10990 Wilshire Boulevard in Los Angeles, California, where we lease approximately 19,800 square feet of office space pursuant to two separate lease agreements. We lease approximately 7,300 square feet pursuant to a lease expiring in
February 2011. We are currently required to make monthly payments of approximately $20,400 under this lease, with annual increases of 3%. In July 2007 we assumed a second lease at this same location relating to an additional 12,500 square feet
pursuant to lease agreement expiring in May 2010. Our monthly lease payments under this lease are approximately $38,900.



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

We are not involved in any
pending legal proceedings and are not aware of any threatened legal proceedings against us.



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

We held a Special Meeting of Stockholders on October 28, 2008, in Los Angeles, California. At the meeting, stockholders approved a proposed amendment to our 2003 Stock Option Plan increasing the number of shares of our common stock
available for issuance thereunder from 3,344,385 to 4,600,000, and prohibiting the re-pricing of stock options and other incentives granted under the plan without stockholder approval. There were 10,333,238 shares cast in favor of the proposed
amendment; 3,508,695 shares cast against; and 16,621 shares abstained.



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Part II



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

Market for Common Stock

Prior to February 8, 2007, our common stock was not publicly traded.
From February 8, 2007, until December 6, 2007, our common stock traded on the OTC Bulletin Board under the symbol CGRB.OB. Since December 7, 2007, our common stock has traded on The NASDAQ Global Market under the symbol
CGRB. The closing price of our common stock on March 9, 2009, as quoted on The NASDAQ Global Market was $24.01 per share. The following table lists the high and low bid or sale price for our common stock as quoted, in U.S. dollars,
by the OTC Bulletin Board or NASDAQ Global Market, as appropriate, during each quarter since February 8, 2007. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual
transactions.



|                   |  |      |       |     |   |      
|------------------ |  | ---- | ----- | --- | - | -----
|Quarter Ended      |  | High |       | Low
|March 31, 2007     |  | $    | 20.00 |     | $ | 9.75 
|June 30, 2007      |  |      | 27.80 |     |   | 17.25
|September 30, 2007 |  |      | 25.60 |     |   | 21.00
|December 31, 2007  |  |      | 34.00 |     |   | 25.60
|March 31, 2008     |  |      | 33.22 |     |   | 17.00
|June 30, 2008      |  |      | 29.22 |     |   | 19.07
|September 30, 2008 |  |      | 40.00 |     |   | 21.90
|December 31, 2008  |  |      | 34.04 |     |   | 16.35

Record Holders

As of March 6, 2009, we had approximately 61 shareholders of record of our common stock, not including those held in Street Name. We believe approximately 3,097 stockholders hold securities in Street
Name.

Dividends

We have not paid or
declared any dividends on our common stock and we do not anticipate paying dividends on our common stock in the foreseeable future.

Recent Sales of
Unregistered Securities; Repurchases of Securities

Other than the sales of unregistered securities that we reported in Quarterly
Reports on Form 10-Q during fiscal year 2008, we did not make any sales of unregistered securities during 2008. In addition, we did not repurchase any of our equity securities during 2008.



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Stock Performance Graph*

The following line-graph presentation compares the
cumulative return to our stockholders (based on appreciation in the market price of our common stock) on an indexed basis with (i) a broad equity market index and (ii) an appropriate published industry or line-of-business index, or peer
group index constructed by us. The following presentation compares our common stock price from February 8, 2007, the date our common stock began trading on the OTC Bulletin Board, and for each semi-annual period through December 31, 2008,
to the NASDAQ Composite Index and the NASDAQ Biotechnology Index. Prior to February 8, 2007, there was no market for our common stock. The presentation assumes that the value of an investment in each of our common stock, the NASDAQ Composite
Index and the NASDAQ Biotechnology Index was $100 on February 8, 2007, and that any dividends paid were reinvested in the same security. We have not declared or paid any dividends on our common stock in such period.

We recognize that the market price of our common stock is influenced by many factors, only one of which is our performance. The historical stock price
performance shown on the graph below is not necessarily indicative of our future stock price performance.

COMPARISON OF CUMULATIVE TOTAL
RETURN

AMONG COUGAR BIOTECHNOLOGY, INC.,

NASDAQ COMPOSITE INDEX AND NASDAQ BIOTECHNOLOGY INDEX

LOGO



|                           |  |          |  |          |  |          |  |          |  |         
|-------------------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | --------
|                           |  | 02/08/07 |  | 06/30/07 |  | 12/31/07 |  | 06/30/08 |  | 12/31/08
|COUGAR BIOTECHNOLOGY, INC. |  | 100.00   |  | 134.86   |  | 186.86   |  | 136.17   |  | 148.57  
|NASDAQ BIOTECHNOLOGY INDEX |  | 100.00   |  | 96.76    |  | 97.09    |  | 95.31    |  | 90.50   
|NASDAQ COMPOSITE INDEX     |  | 100.00   |  | 105.74   |  | 107.75   |  | 92.94    |  | 63.91   



|* | The material in this section is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the
Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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

You should read the
selected financial data set forth below in conjunction with the information in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, and our audited consolidated financial statements and
related notes thereto appearing elsewhere in this annual report.



|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|------------------------------------------------------------------------------ |  | ------------------------ | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                               |  | Years Ended December 31, |            
|                                                                               |  | 2008                     |             |   | 2007 |   |             | 2006 |  |   | 2005        |   |  | 2004 |           
|Consolidated Statements of Operations Data:                                    |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Revenues                                                                       |  | $                        |            |   |      | $ |            |      |  | $ |            |   |  | $    |           |   |  | $ |           |  
|Operating Expenses:                                                            |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Research and development                                                       |  |                          | 52,892,130  |   |      |   | 27,277,214  |      |  |   | 6,698,515   |   |  |      | 6,256,700  |   |  |   | 1,018,171  |  
|General and administrative                                                     |  |                          | 9,961,197   |   |      |   | 6,786,460   |      |  |   | 3,926,795   |   |  |      | 1,266,620  |   |  |   | 2,162,018  |  
|Depreciation                                                                   |  |                          | 243,276     |   |      |   | 82,852      |      |  |   | 30,593      |   |  |      | 3,064      |   |  |   | 610        |  
|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Loss from operations                                                           |  |                          | (63,096,603 | ) |      |   | (34,146,526 | )    |  |   | (10,655,903 | ) |  |      | (7,526,384 | ) |  |   | (3,180,799 | )
|Other income (expense)                                                         |  |                          | 3,279,802   |   |      |   | 2,288,862   |      |  |   | (1,205,481  | ) |  |      | (284,954   | ) |  |   | 20,663     |  
|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Net loss                                                                       |  |                          | (59,816,801 | ) |      |   | (31,857,664 | )    |  |   | (11,861,384 | ) |  |      | (7,811,338 | ) |  |   | (3,160,136 | )
|Accretion related to preferred stock                                           |  |                          |            |   |      |   | (390,843    | )    |  |   | (1,638,046  | ) |  |      |           |   |  |   |           |  
|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Net loss attributable to common stockholders                                   |  | $                        | (59,816,801 | ) |      | $ | (32,248,507 | )    |  | $ | (13,499,430 | ) |  | $    | (7,811,338 | ) |  | $ | (3,160,136 | )
|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Basic and diluted net loss per share attributable to common stockholders       |  | $                        | (2.90       | ) |      | $ | (2.17       | )    |  | $ | (3.10       | ) |  | $    | (2.20      | ) |  | $ | (0.96      | )
|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Weighted-average shares used in computing basic and diluted net loss per share |  |                          | 20,640,413  |   |      |   | 14,887,723  |      |  |   | 4,357,681   |   |  |      | 3,553,021  |   |  |   | 3,275,723  |  
|                                                                               |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|                                                                               | 
|                                                                               |  | December 31,             |            
|                                                                               |  | 2008                     |             |   | 2007 |   |             | 2006 |  |   | 2005        |   |  | 2004 |           
|Consolidated Balance Sheets Data:                                              |  |                          |             |   |      |   |             |      |  |   |             |   |  |      |            |   |  |   |            |  
|Cash and cash equivalents and investment securities                            |  | $                        | 90,993,198  |   |      | $ | 135,337,544 |      |  | $ | 30,809,713  |   |  | $    | 1,040,864  |   |  | $ | 1,838,594  |  
|Total assets                                                                   |  |                          | 93,823,097  |   |      |   | 138,306,549 |      |  |   | 32,331,128  |   |  |      | 1,874,282  |   |  |   | 1,957,174  |  
|Total current liabilities                                                      |  |                          | 12,632,111  |   |      |   | 3,574,541   |      |  |   | 2,140,616   |   |  |      | 4,978,432  |   |  |   | 348,627    |  
|Stockholders equity (deficiency)                                              |  |                          | 81,135,958  |   |      |   | 134,678,858 |      |  |   | (9,360,666  | ) |  |      | (6,217,474 | ) |  |   | 1,608,547  |  



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##### Table of Contents

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

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and
the notes to those statements included elsewhere in this Annual Report. This discussion includes forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under Risk Factors in
Item 1A of this Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a Los Angeles, California, based development-stage biopharmaceutical company focused on the acquisition, development and
commercialization of innovative products to enhance cancer care. We aim to acquire proprietary rights to these products, by license or otherwise, fund their research and development and bring the products to market. Since our inception in May 2003,
our efforts and resources have been focused primarily on acquiring and developing our pharmaceutical technologies, raising capital and recruiting personnel. As a development stage company, we have had no product sales to date and we will have no
product sales until we receive approval from the FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical candidates. Developing pharmaceutical products, however, is a lengthy and very expensive process. Assuming we do not
encounter any unforeseen safety issues during the course of developing our product candidates, we do not expect to receive approval of a product candidate until approximately 2011.

Currently, a large portion of development expenses have related to our lead product candidate, CB7630. As we proceed with clinical development of CB7630
and as we further develop CB3304 and CB1089, our second and third product candidates, respectively, our research and development expenses will increase. To the extent we are successful in acquiring additional product candidates for our development
pipeline, our need to finance research and development will increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance product development. Our major sources of
working capital have been proceeds from various private financings, primarily private sales of our common stock and other equity securities.

Research and development, or R&D, expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for manufacturing, regulatory consulting and clinical trial monitoring
services, fees paid to acquire licenses to drug compounds, and other expenses relating to the manufacture, development, testing and enhancement of our product candidates. We expense our R&D costs as they are incurred.

General and administrative, or G&A, expenses consist primarily of salaries and related personnel costs, professional fees, business insurance, rent,
general legal activities, and other corporate expenses.

Our results include non-cash compensation expense as a result of the issuance of
stock and stock option grants. Prior to January 1, 2006, we accounted for stock-based employee compensation using the intrinsic method in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25) and complied with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). As the exercise price of our employee stock options
was equal to the fair value of the underlying common stock on the date of grant, the options had no intrinsic value and we did not record any compensation expense. On January 1, 2006, we adopted SFAS No. 123(R), Share-Based
Payment, (SFAS 123(R)) and began to record compensation expense for all employee stock options based on the fair value of the options on the grant date over the related service period. We were not required to adjust our financial
statements for prior periods, although we are recording charges related to options granted prior to January 1, 2006, on a prospective basis. Compensation for options granted to consultants for all periods has been determined in accordance with
SFAS No. 123 and Emerging Issues Task Force (EITF) Issue



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##### Table of Contents

No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or
Services (EITF 96-18) . The expense is based on the fair value of equity instruments issued and is included in the respective categories of expense in the consolidated statements of operations. We expect to record additional future
non-cash compensation expenses, which may be significant.

Summary of Expenses

The following tables summarizes our general and administrative and research and development expenses, respectively, which collectively represent the large
majority of our overall expenses. This information is intended to supplement the more detailed discussion below under Results of Operations.



|                                              |  |      |            |      |   |            |  |   |                         |   |  |           |   |  |         |  
|--------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ----------------------- | - |  | --------- | - |  | ------- | -
|                                              |  |      |            |      |   |            |  |   | Annual percentagechange |  
|General and administrative                    |  |      |            |      |   |            |  |  
|                                              |  | 2008 |            | 2007 |   | 2006       |  |   | 2008/2007               |   |  | 2007/2006 |  
|Payroll and related costs                     |  | $    | 2,243,180  |      | $ | 2,777,658  |  | $ | 788,157                 |   |  | -19       | % |  | 252     | %
|Professional fees and expenses                |  |      | 2,733,267  |      |   | 1,158,222  |  |   | 898,044                 |   |  | 136       | % |  | 29      | %
|Facility and equipment costs                  |  |      | 751,146    |      |   | 498,783    |  |   | 232,678                 |   |  | 51        | % |  | 114     | %
|Employee stock-based compensation expense     |  |      | 2,585,490  |      |   | 1,158,012  |  |   | 860,551                 |   |  | 123       | % |  | 35      | %
|Non-employee stock-based compensation expense |  |      |           |      |   |           |  |   | 705,680                 |   |  | 0         | % |  | -100    | %
|Other                                         |  |      | 1,648,114  |      |   | 1,193,785  |  |   | 441,685                 |   |  | 38        | % |  | 170     | %
|                                              |  |      |            |      |   |            |  |   |                         |   |  |           |   |  |         |  
|                                              |  | $    | 9,961,197  |      | $ | 6,786,460  |  | $ | 3,926,795               |   |  | 47        | % |  | 73      | %
|                                              |  |      |            |      |   |            |  |   |                         |   |  |           |   |  |         |  
|                                              |  |      |            |     
|                                              |  |      |            |      |   |            |  |   | Annual percentagechange |  
|Research and development                      |  |      |            |      |   |            |  |  
|                                              |  | 2008 |            | 2007 |   | 2006       |  |   | 2008/2007               |   |  | 2007/2006 |  
|Clinical development                          |  | $    | 30,028,221 |      | $ | 9,108,475  |  | $ | 3,671,657               |   |  | 230       | % |  | 148     | %
|Contract manufacturing                        |  |      | 10,951,160 |      |   | 10,005,753 |  |   | 2,229,754               |   |  | 9         | % |  | 349     | %
|Licensing fees                                |  |      | 4,065,140  |      |   | 511,595    |  |   | 268,890                 |   |  | 695       | % |  | 90      | %
|Regulatory affairs and quality assurance      |  |      | 3,040,537  |      |   | 1,332,882  |  |   | 288,266                 |   |  | 128       | % |  | 362     | %
|Employee stock-based compensation expense     |  |      | 2,352,684  |      |   | 789,168    |  |   | 10,035                  |   |  | 198       | % |  | 7764    | %
|Non-employee stock-based compensation expense |  |      | 476,316    |      |   | 5,089,198  |  |   | 230,256                 |   |  | -91       | % |  | 2110    | %
|Other                                         |  |      | 1,978,072  |      |   | 440,143    |  |   | (343                    | ) |  | 349       | % |  | -128422 | %
|                                              |  |      |            |      |   |            |  |   |                         |   |  |           |   |  |         |  
|                                              |  | $    | 52,892,130 |      | $ | 27,277,214 |  | $ | 6,698,515               |   |  | 94        | % |  | 307     | %
|                                              |  |      |            |      |   |            |  |   |                         |   |  |           |   |  |         |  

Results of Operations

Years Ended December 31, 2008 and 2007

General and administrative expenses: For the year ended
December 31, 2008, general and administrative expenses were $9,961,197 compared to $6,786,460 for the year ended December 31, 2007, representing an increase of approximately $3,175,000. Payroll and related expenses, including bonuses,
decreased approximately $534,000 compared to 2007. During 2007, we paid our Chief Executive Officer, under the terms of his employment agreement, a performance bonus of $1,350,000 based on our market capitalization exceeding $500,000,000 for a
required length of time. There were no such performance bonus payments during 2008. Partially offsetting this decrease in payroll and related expenses was an increase of approximately $816,000 for salary increases and two additional new hires to
support the increased corporate growth. Professional fees and expenses increased approximately $1,575,000 compared to 2007. Increased legal fees accounted for



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approximately $1,190,000 of the increase in professional fees due to vendor and clinical trial site contract negotiations associated with a Phase III
clinical trial of CB7630 initiated in April 2008. We expect legal costs to remain high in 2009 as we commence a second Phase III clinical trial of CB7630 during the first half of 2009. The remaining increase in professional fees is associated with
an increase in accounting fees of approximately $170,000 and an increase in consulting fees of approximately $215,000, both of which are associated with the additional public company requirements and Sarbanes-Oxley compliance. Facility expense
increased approximately $252,000 due to additional office space leased during the third quarter of 2007 to accommodate personnel additions required to support our expansion of clinical trials. Our office space increased from approximately 7,300
square feet to approximately 19,800 square feet. Employee stock-based compensation expense increased approximately $1,427,000 from 2007, resulting primarily from grants to new employees and additional grants to existing employees and members of our
Board of Directors. We expect stock-based compensation costs to continue to increase as additional employees are hired and additional grants are awarded. All other general and administrative expenses increased by approximately $454,000 to support
our corporate growth in 2008.

Research and development expenses: R&D costs, which represent the large majority of our overall
expenses, are charged to operations as incurred. R&D expenses consist of clinical development expenses, contract manufacturing cost, licensing fees, regulatory affairs and quality assurance cost, and other internal costs. Also included in our
R&D cost is stock-based compensation expense for employees and non-employees. We account for our clinical trial costs by estimating the total cost to treat a patient in each clinical trial and recognize this cost, based on a variety of factors,
beginning with preparation for the clinical trial and patient accrual into the clinical trials. This estimated cost includes payments for clinical trial sites and patient related costs, including laboratory cost related to the conduct of the trial
and other costs. We accrue for costs incurred as the services are provided for the monitoring of the trial and the invoices are received from external service providers. As actual costs become known, we adjust our accruals in the period when actual
costs become known. Costs related to the acquisition of technology rights and patents for which development work is still in process are charged to operations as incurred and considered a component of R&D costs.

For the year ended December 31, 2008, research and development expenses were $52,892,130 compared to $27,277,214 for the prior year, representing an
increase of approximately $25,615,000. During 2008, we experienced major increases in clinical trial and compensation related expenses. Clinical development expenses increased approximately $20,920,000 as our Phase III clinical trial for drug
candidate CB7630 was initiated in the first half of 2008. We expect clinical trial expenses to continue to increase as we complete enrollment of our Phase III trial for CB7630 in the first half of 2009 and initiate a second Phase III clinical trial
for CB7630, also in the first half of 2009. Our contract manufacturing cost increased approximately $945,000 in support of our existing clinical trials and in support of our Phase III trial for our lead compound. Licensing fees increased $3,554,000
year to year primarily due to a milestone payment to BTG plc, which was triggered by our initiation of a Phase III clinical trial for CB7630 in April 2008. Our regulatory affairs and quality assurance expense increased approximately $1,708,000 as we
built the infrastructure needed to support our Phase III trial and in preparation of filing an NDA for our lead compound. Employee stock-based compensation increased approximately $1,564,000 due to stock options grants to new employees and
additional stock option grants awarded to existing employees. Non-employee stock-based compensation expense decreased approximately $4,613,000. Unvested non-employee stock options are revalued each quarter using the Black-Scholes option pricing
model to reflect the then current fair market value of our common stock. A decrease in the fair market value of our stock from $32.70 at December 31, 2007 to $26.00 at December 31, 2008, is the primary reason for the decrease. All other
expenses increased approximately $1,538,000 compared to the prior year due to overall Company growth.



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The following table summarizes our R&D expenses incurred for preclinical support, contract
manufacturing for clinical supplies and clinical trial services provided by third parties, and milestone payments for in-licensed technology for each of our product candidates for the years ended December 31, 2008, 2007 and 2006, as well as the
cumulative amounts since we began development of each product candidate. The table also summarizes unallocated costs, which consist of personnel, facilities and other costs not directly allocable to development programs:



|                                              |  |      |            |      |   |            |  |                         |           |  |                              |   |  |      |   |  |   |           
|--------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | ----------------------- | --------- |  | ---------------------------- | - |  | ---- | - |  | - | ----------
|                                              |  |      |            |      |   |            |  | Annual percentagechange |           |  | Inception toDecember 31,2008
|Product development                           |  |      |            |      |   |            |  |                        
|                                              |  | 2008 |            | 2007 |   | 2006       |  | 2008/2007               |           |  | 2007/2006                    |   | 
|CB7630                                        |  | $    | 41,863,307 |      | $ | 18,951,474 |  | $                       | 5,545,580 |  | 121                          | % |  | 242  | % |  | $ | 72,445,142
|CB3304                                        |  |      | 486,191    |      |   | 374,709    |  |                         | 136,859   |  | 30                           | % |  | 174  | % |  |   | 1,687,922 
|CB1089                                        |  |      | 5,571      |      |   | 157,696    |  |                         | 305,500   |  | -96                          | % |  | -48  | % |  |   | 843,767   
|                                              |  |      |            |      |   |            |  |                         |           |  |                              |   |  |      |   |  |   |           
|Total product candidate costs                 |  |      | 42,355,069 |      |   | 19,483,879 |  |                         | 5,987,939 |  | 117                          | % |  | 225  | % |  |   | 74,976,831
|Unallocated costs and overhead                |  |      | 7,708,061  |      |   | 1,914,969  |  |                         | 470,285   |  | 303                          | % |  | 307  | % |  |   | 10,698,197
|Employee stock-based compensation expense     |  |      | 2,352,684  |      |   | 789,168    |  |                         | 10,035    |  | 198                          | % |  | 7764 | % |  |   | 3,220,087 
|Non-employee stock-based compensation expense |  |      | 476,316    |      |   | 5,089,198  |  |                         | 230,256   |  | -91                          | % |  | 2110 | % |  |   | 6,170,715 
|                                              |  |      |            |      |   |            |  |                         |           |  |                              |   |  |      |   |  |   |           
|                                              |  | $    | 52,892,130 |      | $ | 27,277,214 |  | $                       | 6,698,515 |  | 94                           | % |  | 307  | % |  | $ | 95,065,830
|                                              |  |      |            |      |   |            |  |                         |           |  |                              |   |  |      |   |  |   |           

CB7630. Currently, we anticipate that we will need to expend approximately an additional
$50-$80 million for external development costs until we receive regulatory approval to market CB7630, of which we expect that approximately $45-$50 million will be incurred in fiscal 2009. During 2007 we initiated five new Phase II trials and
commenced production of our drug compound under cGMP condition in support of our planned Phase II trial. In early 2008, we commenced a Phase III clinical trial and continued manufacturing process development. External development for 2009 will be
focused on our current Phase III trial, the initiation of a second Phase III trial and continued manufacturing process development. Should we choose to continue development, we expect that it will take an additional 1.5 to 3 years before we complete
development and obtain FDA approval of CB7630, if ever.

CB3304. We expect to spend an additional $2.0-$3.0 million in external
development costs in fiscal 2009. Because the development of CB3304 is only in its very early stages, we are unable to currently predict the total costs needed to complete development of this product candidate. In late December 2007, we initiated a
Phase I trial for CB3304, which required us to make a milestone payment of $200,000. Our product development during 2008 was centered on the expansion of the Phase I trial that commenced in December 2007. Manufacturing process development accounted
for the increase in spending in 2008 compared to 2007. Should we choose to continue development, we expect that it will take an additional five to seven years before we complete development and obtain FDA approval of CB3304, if ever.

CB1089. Based on our current development plans for CB1089 (seocalcitol), we anticipate that we will expend approximately $0.5-$1.0 million in
external development costs in fiscal 2009. However, because the development of CB1089 is in very early stage, we are unable currently to predict the total costs needed to complete development of this product candidate. Since acquiring our rights to
CB1089 in June 2005, we have incurred cost of approximately $0.8 million through December 31, 2008. Pre-clinical studies in a number of different cancers have shown that CB1089 is a more potent anti-cancer drug than calcitriol, which may result
in better efficacy when used in combination therapy to treat various tumor types as opposed to calcitriol. Expenditures for development of CB1089 have been held to a minimum as we advanced the development of our other two compounds. Should we choose
to continue development, we expect that it will take an additional six to eight years before we complete development and obtain FDA approval of CB1089, if ever. Given its very early development stage, we are not able to predict the total costs that
would be required to complete development of this product candidate.



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While expenditures on current and future clinical development programs, particularly our CB7630 program,
are expected to be substantial and to increase, they are subject to many uncertainties, including the results of clinical trials and whether we develop any of our drug candidates with a partner or independently. As a result of such uncertainties, we
cannot predict with any significant degree of certainty the duration and completion costs of our research and development projects or whether, when and to what extent we will generate revenues from the commercialization and sale of any of our
product candidates. The duration and cost of clinical trials may vary significantly over the life of a project as a result of unanticipated events arising during clinical development and a variety of factors, including:



| |  |  | the number of trials and studies in a clinical program;
| | - |  | -------------------------------------------------------



| |  |  | the number of patients who participate in the trials;
| | - |  | -----------------------------------------------------



| |  |  | the number of sites included in the trials;
| | - |  | -------------------------------------------



| |  |  | the rates of patient recruitment and enrollment;
| | - |  | ------------------------------------------------



| |  |  | the duration of patient treatment and follow-up;
| | - |  | ------------------------------------------------



| |  |  | the costs of manufacturing our drug candidates; and
| | - |  | ---------------------------------------------------



| |  |  | the costs, requirements, timing of, and ability to secure regulatory approvals.
| | - |  | -------------------------------------------------------------------------------

Interest income: For the year ended December 31, 2008, we recognized approximately $3,097,000 in interest income compared to approximately
$2,775,000 of interest income for 2007. During 2008 we maintained a higher balance of funds invested in short term investments as a result of the December 2007 equity placement. Interest earned on the higher balance more than offset the lower yields
available in 2008.

Other income(expense): For the year ended December 31, 2008, we incurred other income(expense) of
approximately $182,000 compared to approximately ($486,000) in 2007. During 2008, we incurred approximately $182,000 of foreign exchange gains on foreign denominated accounts payable. We incurred approximately $486,000 of liquidated damages during
2007 representing registration rights penalties as the registration statement governing resale of shares of our common stock issued in the April 2006 private placement was not declared effective within 180 days of the completion of the offering. A
majority of the stockholders entitled to receive liquidated damages payments agreed to accept stock in lieu of cash for such liquidated damages. On February 2, 2007, our registration statement was declared effective.

Years Ended December 31, 2007 and 2006

General and administrative expenses: For the year ended December 31, 2007, general and administrative expenses were $6,786,460 compared to $3,926,795 for the year ended December 31, 2006, representing an increase of
approximately $2,860,000. Payroll and related costs increased by approximately $1,990,000, mostly resulting from a $1,350,000 performance bonus paid in 2007 to our Chief Executive Officer under the terms of his employment agreement based on our
market capitalization exceeding $500,000,000 for a required length of time. Additionally, payroll and related costs increased by approximately $639,500 relating to increased staff hired in the second half of 2006 and during 2007. Professional fees
and expenses increased by approximately $260,000, which included an increase in consulting fees of approximately $230,000 associated with the additional public company requirements of Sarbanes-Oxley compliance, an increase in legal fees of
approximately $52,000 due to vendor and clinical trial site contract negotiations associated with a Phase III clinical trial of CB7630 initiated in April 2008, an increase of approximately $34,000 of IT consulting due to our expanded operations
partially offset by a reduction in accounting fees of approximately $56,000. Facility and equipment costs increased by approximately $266,000 as our rentable office space increased from approximately 7,300 square feet to approximately 19,800 square
feet in late 2007. Employee stock-based compensation expense increased approximately $297,000 from 2006, resulting primarily from grants to new employees and additional grants to existing employees and members of our Board of Directors. Non-employee
stock-based compensation



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##### Table of Contents

expense decreased by approximately $706,000 compared to 2006 due to no grants being awarded to non-employees for general and administrative duties. All other
general and administrative expenses increased by approximately $752,000 to support our corporate growth in 2007.

Research and
development expenses: For the year ended December 31, 2007, research and development expenses were $27,277,214 compared to $6,698,515 for the prior year, representing an increase of approximately $20,579,000. During 2007, we experienced
major increases in clinical development, third party manufacturing expenses, Scientific Advisory Board compensation, and payroll related expenses. Clinical development expenses increased approximately $5,437,000 as the number of clinical trial sites
increased from two in 2006 to seven in 2007 and we hired additional staff to manage the clinical trials. Contract manufacturing expense increased $7,776,000 in 2007 in support of the clinical trials initiated in 2006 and 2007. We commenced
production of CB7630 under cGMP requiements in support of our Phase III trial, which we initiated in April 2008. In support of our current clinical trials and our planned Phase III trial for CB7630 we began development of an internal regulatory
affairs and quality assurance group representing an increase of approximately $1,045,000 compared to 2006. Stock-based compensation expense for employees increased approximately $779,000 compared to 2006 as a result of stock option grants to new
employees and the increase in fair market value of our common stock on the various grant dates. The average fair market value of common stock for the options granted in 2007 was $20.44 compared to $4.50 in 2006. Stock-based compensation expense for
Scientific Advisory Board members increased approximately $4,859,000, reflecting changes in valuation assumptions for unvested stock options. The major change to the valuation assumptions was the increase in our common stock price from $4.50 at
December 31, 2006 to $32.70 at December 31, 2007. All other expenses, including licensing fees increased approximately $683,000 due to overall Company growth and the initiation of additional clinical trials.

Interest income: For the year ended December 31, 2007, we recognized approximately $2,775,000 in interest income compared to approximately
$1,244,000 of interest income for 2006. The increase reflects the investment of excess funds from the proceeds of two private placements completed during 2007.

Interest expense: We incurred no interest expense in 2007. For the year ended December 31, 2006, interest expense was approximately $1,013,000, which included a non-cash charge of approximately $376,000
for amortization of note discounts related to promissory notes issued in June 2005, and convertible notes issued in November 2005 and January 2006. During the year ended December 31, 2006, we recorded a favorable charge of approximately $69,000
to interest expense for the revaluation of outstanding warrants classified as liabilities. Interest on the notes of approximately $80,000 was recorded for the year ended December 31, 2006. Interest expense for 2006 also included non-cash
charges for amortization of debt issuance costs of approximately $613,000. Interest of approximately $13,000 on a credit facility opened in October 2005 was recorded for the year ended December 31, 2006.

Other expense: For the year ended December 31, 2007, we incurred other expense of approximately $486,000 compared to approximately $1,437,000
in 2006. Contemporaneously with the closing of the merger with SRKP in April 2006, SRKP redeemed an aggregate of 2,700,000 shares of its common stock from its stockholders in consideration of an aggregate cash payment of $200,000. This transaction
was considered a capital transaction in substance, rather than a business combination, resulting in a charge of $200,000. We incurred approximately $486,000 of liquidated damages during 2007 compared to $1,237,000 of liquidated damages in 2006
representing registration rights penalties as the registration statement governing the resale of our shares of common stock issued in our April 2006 private placement was not declared effective within 180 days of the completion of the offering. A
majority of the stockholders entitled to receive liquidated damages payments agreed to accept stock in lieu of cash for such liquidated damages. On February 2, 2007, our registration statement was declared effective.



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##### Table of Contents

Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of and for each of the last three fiscal years, and is intended to supplement the more detailed discussion that follows. The amounts stated are
expressed in thousands.



|                                                    |  |                         |             |   |      |   |             |      |  |   |             |  
|--------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                    |  | December 31,            |            
|Liquidity and capital resources                     |  | 2008                    |             |   | 2007 |   |             | 2006 | 
|Cash and cash equivalents and investment securities |  | $                       | 90,993,198  |   |      | $ | 135,337,544 |      |  | $ | 30,809,713  |  
|Working capital                                     |  |                         | 79,739,239  |   |      |   | 133,064,105 |      |  |   | 29,864,152  |  
|Stockholders equity (deficiency)                   |  |                         | 81,135,958  |   |      |   | 134,678,858 |      |  |   | (9,360,666  | )
|                                                    | 
|                                                    |  | Year ended December 31, |            
|                                                    |  | 2008                    |             |   | 2007 |   |             | 2006 | 
|Cash provided by (used in):                         |  |                         |             |   |      |   |             |      |  |   |             |  
|Operating activities                                |  | $                       | (44,668,298 | ) |      | $ | (23,098,788 | )    |  | $ | (9,166,052  | )
|Investing activities                                |  |                         | (11,740,451 | ) |      |   | (23,195,741 | )    |  |   | (16,796,643 | )
|Financing activities                                |  |                         | 840,375     |   |      |   | 128,500,511 |      |  |   | 39,051,742  |  
|                                                    |  |                         |             |   |      |   |             |      |  |   |             |  
|Increase (decrease) in cash                         |  | $                       | (55,568,374 | ) |      | $ | 82,205,982  |      |  | $ | 13,089,047  |  
|                                                    |  |                         |             |   |      |   |             |      |  |   |             |  

We reported a net loss of $59.8 million and negative cash flow from operating activities of $44.7
million for the year ended December 31, 2008. The net loss from date of inception, May 14, 2003, to December 31, 2008, amounted to $114.9 million, while negative cash flow from operating activities has amounted to $85.7 million.

We have financed our operations since inception primarily through equity and debt financing. The net cash used in operating activities
includes a net loss of $59.8 million adjusted for non-cash items of approximately $5.7 million, an increase in accounts payable and accrued expenses of approximately $9.1 million, and a decrease in prepaid expenses and other assets of approximately
$0.4 million. The major non-cash items were stock-based compensation expense for non-employees of approximately $0.5 million; employee stock-based compensation expense of approximately $5.0 million and depreciation of approximately $0.2 million. The
increase in accounts payable and accrued expenses is a direct result of our increase in expenditures used to support the expansion of our clinical trials and clinical trial costs. The net cash used in investing activities reflects the net purchases
of securities available-for-sale of approximately $11.3 million.

As of December 31, 2008, we anticipate that our cash on hand,
including our cash equivalents and available-for-sale investments, will be sufficient to enable us to meet our anticipated expenditures for at least the next 12 months. We expect to continue incurring significant losses for the foreseeable
future. Our continued operations will depend on whether we are able to raise additional funds through either strategic alliance with a third party concerning one or more of our product candidates or through additional equity or debt financing.
Through December 31, 2008, a significant portion of our financing has primarily been through private placements of our equity securities, including issuances of common and preferred stock. We will continue to fund operations from cash on hand
and through the similar sources of capital previously described. We can give no assurances that any additional capital raised will be sufficient to meet our needs. Further, in light of current economic conditions, including the lack of access to the
capital markets being experienced by small companies, particularly in our industry, there can be no assurance that such capital will be available to us on favorable terms or at all. If we are unable to raise additional funds in the future, we may be
forced to delay or discontinue the development of one or more of our product candidates and forego attractive business opportunities. Any additional sources of financing will likely involve the sale of our equity securities, which will have a
dilutive effect on our stockholders.



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Financing Activities

2005-2006 Bridge Financing. In related transactions completed in November 2005 and January 2006, we sold an aggregate of $6,145,120 in principal amount of senior convertible notes, or bridge notes, to
certain institutional and individual accredited investors in a private placement transaction. The bridge note investors also received five-year warrants to purchase an aggregate of 148,460 shares of our common stock at a price of $8.28 per share.
These warrants were valued at $669,303 using the Black-Scholes option pricing model and recorded as debt discount. The model assumed a five-year term, risk free rate of 4.3% and stock volatility of 72%. The warrants are exercisable upon written
notice of exercise to the Company together with payment of the exercise price. The warrants are redeemable at our option if our common stock has had an average closing price per share over a period of 30 consecutive calendar days equal to or greater
than twice the exercise price of the warrants, provided that the common shares underlying the warrants must be registered for resale at the time of redemption. The warrants do not provide for cashless exercise. The warrants (but not the common stock
issuable upon exercise of the warrants) were not registered, and include restrictions upon transfer. We have no obligation to settle any exercise of the warrants in cash or registered shares; we intend to settle such exercises only in unregistered
shares. We have, however, provided holders of the warrants piggyback and demand registration rights relating to the resale of common stock issuable upon exercise of the warrant. Additionally, in connection with the issuance of the bridge notes and
warrants, we issued warrants to purchase an aggregate of 74,221 shares of common stock at an exercise price of $8.28 per share to Paramount BioCapital, Inc., our placement agent, and its designees, and paid commissions of approximately $430,000 and
other offering-related expenses aggregating approximately $31,000 to Paramount BioCapital. The warrants issued to our placement agent were valued at approximately $212,500 using the Black-Scholes option pricing model and were recorded as debt
issuance cost. Dr. Lindsay A. Rosenwald, then one of our directors and the managing member of Horizon BioMedical Ventures, LLC, a significant stockholder, is the Chairman and Chief Executive Officer of Paramount BioCapital, Inc. We have no
obligation to settle any exercise of the placement warrants in cash or registered shares; we intend to settle such exercises only in unregistered shares. However, the warrants have a cashless exercise provision. We have provided the holders of the
placement agent warrants piggyback and demand registration rights relating to the resale of common stock issuable upon exercise of the warrants. The principal balance of the bridge notes of $6,145,120, together with accrued and unpaid interest of
approximately $89,000 thereon, automatically converted into units of our equity securities in April 2006 at a price per share of $4.50, pursuant to the terms of a concurrent private placement offering of such equity securities. As a result of
such conversion, we issued to the bridge note holders an aggregate of 138,416 shares of common stock and 1,245,746 shares of our Series A preferred stock. We had no obligation to settle any conversion of the preferred stock in registered shares; we
intended to settle only in unregistered shares. We provided the holders of the bridge securities piggyback registration rights with respect to the shares of common stock issued or issuable upon conversion of preferred stock.

2006 Preferred/Common Stock Offering. On April 3, 2006, immediately prior to the closing of the merger with SRKP, we completed a private
placement offering whereby we raised gross proceeds of approximately $39,650,000 through the sale of 7,922,998 shares of preferred stock and 880,334 shares of common stock. Paramount BioCapital, Inc. and Cowen and Company acted as placement
agents in the offering. Each placement agent received a placement fee of approximately $1,387,750 and was issued a five-year warrant to purchase 440,172 shares of our common stock at an exercise price of $4.95 per share. The value of the warrants,
which was determined using the Black-Scholes option pricing model, was approximately $2,400,000. The model assumed a risk-free interest rate of 4.78%, a five-year term and stock volatility of 72%. The warrants are exercisable upon written notice of
exercise to the Company together with the payment of the exercise price or with a duly executed notice of cashless exercise. The warrants (and the common stock issued upon exercise of the warrants) are not registered and include restrictions upon
transfer. We have no obligation to settle any exercise of the placement agent warrants in cash or registered shares; we intend to settle only in unregistered shares. Reimbursable expenses associated with the placement were approximately $76,000, of
which $26,000 was reimbursed to Paramount. The Chairman and Chief Executive Officer of Paramount BioCapital, Inc. is Lindsay A. Rosenwald, M.D., one of our directors at the time of the placement. Paramount BioCapital is an affiliate of Horizon
BioMedical Ventures, LLC, of which Dr. Rosenwald is the managing member and which is one of our substantial stockholders. Additionally, on terms similar to that in the offering, we sold to



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Dr. Rosenwald 13,322 shares of common stock and 119,895 shares of preferred stock (as adjusted pursuant to the merger) in consideration of cash in the
amount of approximately $600,000. Each share of preferred stock, designated as Series A Convertible Preferred Stock, was convertible, in whole or in part, at the option of the holder at any time into shares of our common stock initially on a
one-for-one basis and at an initial conversion price of $4.50 per share. All outstanding shares of preferred stock were subject to mandatory conversion into shares of our common stock if the price per share of common stock traded at or above 200% of
the conversion price of the preferred stock (initially $4.50) for a period of twenty consecutive trading days on any securities exchange, automated quotation system or any other over-the-counter market. We, however, provided the holders of the
Series A Convertible Preferred Stock with registration rights relating to the resale of the common stock issuable upon conversion of the Series A Convertible Preferred Stock.

As of March 8, 2007, our common stock had traded on the OTC Bulletin Board for twenty consecutive trading days in excess of 200% of the Series A
Convertible Preferred Stock conversion price. Accordingly, effective as of the close of trading on March 8, 2007, the outstanding shares of Series A Convertible Preferred Stock converted into shares of our common stock on a one-for-one share
basis. As of such time, 8,685,522 share of Series A Convertible Preferred Stock converted into 8,685,522 shares of common stock.

May
2007 Common Stock Offering. In May 2007, we sold an aggregate of 2,500,000 shares of our common stock at a price per share of $20, resulting in aggregate gross proceeds of $50 million prior to deducting selling commissions and expenses. The sale
of the shares was made pursuant to a securities purchase agreement among us and certain accredited institutional investors. In addition to the purchase agreement, we concurrently entered into a registration rights agreement with the investors under
which we agreed to file a registration statement under the Securities Act of 1933 covering the resale of the shares purchased in the offering. This registration statement was declared effective in June 2007. In connection with the offering, we
entered into a letter agreement with Leerink Swann LLC to serve as our placement agent, and pursuant to such agreement and in consideration for its services, we paid the placement agent aggregate cash commissions equal to 6% of the gross cash
proceeds from the offering, or approximately $3 million. We also paid the placement agent $50,000 as a non-accountable reimbursement allowance. Additionally, we agreed to pay Paramount BioCapital, Inc. a fee equal to 0.3% of the gross proceeds from
the offering, or $150,000, in consideration of Paramounts agreement to waive its right of first refusal to participate as a placement agent in the offering pursuant to an October 2005 agreement with us. The placement agent agreed to
reduce the placement fee by an amount equal to 50%, or $75,000 of the waiver fee. Dr. Lindsay A. Rosenwald, a director of our Company until July 2007, is the Chairman and Chief Executive Officer of Paramount. Additionally,
Dr. Rosenwald is the managing member of Horizon BioMedical Ventures, LLC, one of our substantial stockholders and an affiliate of Paramount.

December 2007 Common Stock Offering. In December 2007, we sold an aggregate of 3,000,000 shares of our common stock in a private placement at a per share price of $29.00, resulting in aggregate gross proceeds of $87 million
before deducting selling commissions and expenses. The sale of the shares was made pursuant to a securities purchase agreement among us and certain accredited institutional investors. In addition to the purchase agreement, we and the investors also
entered into a registration rights agreement pursuant to which we agreed to file a registration statement under the Securities Act of 1933 covering the resale by the investors of the shares sold in the offering. The registration statement was
declared effective in January 2008. In connection with the offering, we engaged Leerink Swann LLC as our lead placement agent, and Cowen and Company and Lazard Frères & Co. LLC as co-placement agents. In consideration for their
services, we agreed to pay to the placements agents an aggregate cash fee equal to 6% of the total gross proceeds received by us from the sale of the shares, or $5.22 million. We also reimbursed the placement agents in the amount of $45,528 for
expenses they incurred. Additionally, we agreed to pay Paramount BioCapital, Inc. a fee equal to 8% of the aggregate placement fee from the offering, or $417,600, in consideration of Paramounts agreement to waive its right of first refusal to
participate as a placement agent in the offering pursuant to an October 2005 agreement with us. Dr. Lindsay A. Rosenwald, a director of our Company until July 2007, is the Chairman and Chief Executive Officer of Paramount.
Additionally, Dr. Rosenwald is the managing member of Horizon BioMedical Ventures, LLC, one of our substantial stockholders and an affiliate of Paramount.



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Current and Future Financing Needs

We have incurred negative cash flow from operations since we started our business. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including
our planned product development efforts, our clinical trials, and our research and development efforts. Given the current and desired pace of clinical development of our three product candidates, over the next 12 months we estimate that our research
and development spending will be approximately $70-75 million. We will need approximately $10-12 million for general and administrative expenses over the next 12 months.

The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:



| |  |  | the progress of our research activities;
| | - |  | ----------------------------------------



| |  |  | the number and scope of our research programs;
| | - |  | ----------------------------------------------



| |  |  | the progress of our pre-clinical and clinical development activities;
| | - |  | ---------------------------------------------------------------------



| |  |  | the progress of the development efforts of parties with whom we have entered into research and development agreements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to maintain current research and development programs and to establish new research and development and licensing arrangements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost involved in prosecuting and enforcing patent claims and other intellectual property rights; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | the cost and timing of regulatory approvals.
| | - |  | --------------------------------------------

We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner than planned or in greater amounts than we currently anticipate. Potential sources of financing include strategic
relationships, public or private sales of equity or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of
financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities
convertible into common stock, the ownership interests of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit
our operations and our business, financial condition and results of operations would be materially harmed. In such an event, we will be required to undertake a thorough review of our programs and the opportunities presented by such programs and
allocate our resources in the manner most prudent.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2008:



|                                |  |       |            |           |   |            |  |       |           |           |   |   |  |   |  
|------------------------------- |  | ----- | ---------- | --------- | - | ---------- |  | ----- | --------- | --------- | - | - |  | - | -
|                                |  |       |            | Less than |   | 1-3        |  | 3-5   |           | More than
|Contractual obligations         |  | Total |            | 1 year    |   | years      |  | years |           | 5 years  
|Operating leases                |  | $     | 1,239,006  |           | $ | 723,726    |  | $     | 515,280   |           | $ |  |  | $ | 
|Contract research organizations |  |       | 19,652,612 |           |   | 10,469,432 |  |       | 9,183,180 |           |   |  |  |   | 

Our operating lease obligations reflected above do not assume the exercise by us of any
termination or extension options. The minimum payments under our agreements with contract research organizations, or CROs, represent our contractual obligations to the CROs that we have engaged to manage the conduct of our clinical trials. In
determining the amounts of our purchase obligations for contracts, we have included only the minimum obligation that we have under our contracts and did not include any amounts previously paid, accrued, expenses or associated with a contingent
event, such as a change in control or termination.



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Off-Balance Sheet Arrangements

We do not have any off-balance sheet agreements, as defined by SEC regulations.

Critical Accounting
Policies

Research and Development

Research and development expenses are charged to operations as incurred. Research and development expenses consist of salaries, benefits and other headcount-related costs, clinical trial and related clinical manufacturing costs, contract
and outside service fees, contract research organizations that manage our clinical trials, and contract organizations for pre-clinical development. We account for our clinical trial costs by estimating the total cost to treat a patient in each
clinical trial and recognize this cost, based on a variety of factors, beginning with preparation for the clinical trial and patient accrual into the clinical trial. This estimated cost includes payments for clinical trial sites and patient related
costs, including laboratory costs related to the conduct of the trial and other costs. We accrue for costs incurred as services are provided for monitoring of the trial and as invoices are received from external service providers. We adjust our
accruals in the period when actual costs become known. Cost related to the acquisition of technology rights and patents for which development work is still in process are charged to operations as incurred and considered a component of research and
development costs.

Investment Securities

Investment securities consist of high-grade marketable debt securities of financial institutions and other corporations. The Company classifies all investment securities (short-term and long-term) as available-for-sale, as the sale of such
securities may be required prior to maturity to implement managements strategies. These securities are carried at fair value, with the unrealized gains and losses, if material, reported as a component of accumulated other comprehensive income
(loss) in stockholders equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis. A decline in the market value of any available-for-sale security
below cost that is determined to be other than temporary results in a revaluation of its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. No such impairment charges were
recorded for any period presented. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the straight-line method. Interest income is recognized when earned. Unrealized gains on
investment securities of approximately $19,036, made up of unrealized gains of $80,953 and unrealized losses of $61,917, have been recorded as other comprehensive income. The amortization and accretion and interest income are included in interest
income within the consolidated statements of operations.

Several methods are used to determine the fair value of our investment
securities. For securities that generally have market prices from multiple sources, a weighted average price for each security is determined. Market prices are received from a variety of industry standard data providers, security master files from
large financial institutions, and other third-party sources. The prices are input into a distribution curve-based algorithm to determine the daily market value. Securities that have structure that implies a standard expected market price are priced
at the expected market price. For example, an open ended money market fund expected to maintain a Net Asset Value of $1 per share would be priced at the expected market price. Securities with short maturities and infrequent secondary market trades
are priced via mathematical calculations. In the case of a certain issue of commercial paper, in the absence of any observable transactions, we may accrete from purchase price at purchase date to face value at maturity. In the event that a
transaction is observed on the same security in the marketplace, the price on that subsequent transaction would reflect the market price on that day and we would adjust the price to the observed transaction price.

During 2008, as marketable securities in our portfolio matured or paid down, we purchased primarily U.S. government and agency obligations. This shift
toward higher quality securities reduced the risk profile, as well as



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the overall yield, of our portfolio during 2008. In particular, we reduced the percentage of commercial paper and certificates of deposit from 24.0% and
5.2%, respectively, at December, 31, 2007 to 0% at December 31, 2008. In addition, we reduced the portion of corporate obligations in our portfolio from 51.6% at December 31, 2007, to 20.4% at December 31, 2008, and the percentage of
asset-backed securities from 19.2% at December 31, 2007 to 8.9% at December 31, 2008, due to the deterioration of credit quality in these types of securities. At the end of 2008, 70.7% of our total portfolio was U.S. government and agency
obligations. We did not hold such obligations in our portfolio at December 31, 2007.

Stock-based Compensation

As required, we adopted SFAS 123(R) on January 1, 2006. SFAS 123(R) requires the fair value of all stock-based payments to employees, including
grants of stock options, to be recognized in the consolidated statement of operations over the requisite service period. We will continue to account for the fair value of all share-based payments to non-employees, including grants of stock options,
in a similar manner as required by SFAS 123 and EITF 96-18. SFAS 123(R) eliminated the option provided by SFAS 123 that was used prior to January 1, 2006, to account for stock options granted to employees using the intrinsic value method under
APB 25. Under APB 25, we recorded compensation expense only for stock options granted to employees for the excess, if any, of the fair value over the exercise price of an option as of the date of grant.

SFAS 123(R) was adopted using the modified-prospective method and accordingly consolidated financial statement amounts for periods prior to
January 1, 2006, have not been restated to reflect the fair value method of recognizing compensation cost relating to employee stock options. Adoption of the SFAS 123(R) fair value method had and will continue to have a material impact on our
consolidated results of operations, although it will have no impact on our cash flows or our overall consolidated financial position. Under SFAS 123(R), employee option grants are generally valued at the grant date and those valuations do not change
once they have been established. Because of the variability in the assumptions to be used in the valuation of stock options we granted in 2007 and the variability in the quantity and other terms of stock-based awards we may issue in the future, our
ability to predict future stock-based compensation expense is limited. The amounts recognized in the consolidated financial statements related to employee stock-based compensation were $4,938,174, $1,947,180 and $870,586 for the years ended
December 31, 2008, 2007 and 2006, respectively, and were included in general and administrative expenses and research and development expenses.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. As allowed by SFAS 123(R) for companies with a short period of publicly traded stock history,
managements estimate of expected volatility is based on average expected volatilities of a sampling of six companies with similar attributes to our Company, including industry, stage of life cycle, size and financial leverage. As we have only
awarded plain vanilla options, as determined by Staff Accounting Bulletin (SAB) No. 107, we used the simplified method for determining the expected life of the options granted. The risk-free interest rate for
periods within the estimated life of the option is based on the U.S. Treasury yield curve in effect at the time of grant valuation. SFAS 123(R) does not allow companies to account for option forfeitures as they occur. Instead, estimated option
forfeitures must be calculated upfront to reduce the option expense to be recognized over the life of the award and updated upon further information as to the amount of options expected to be forfeited.

The fair value of options granted to employees was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions
used during the years ended December 31, 2008, 2007 and 2006:



|                        |  |           |   |  |           |   |  |           |  
|----------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                        |  | 2008      |   |  | 2007      |   |  | 2006      |  
|Dividend yield          |  | 0         | % |  | 0         | % |  | 0         | %
|Expected volatility     |  | 68        | % |  | 78        | % |  | 72        | %
|Risk-free interest rate |  | 3.4       | % |  | 4.7       | % |  | 4.7       | %
|Expected life           |  | 6.2 years |   |  | 6.2 years |   |  | 5.8 years |  



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Income Taxes

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109
(FIN 48). FIN 48 prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its consolidated financial statements all material uncertain tax positions that it has taken or
expects to take on a tax return. FIN 48 applies to income taxes and is not intended to be applied by analogy to other taxes, such as sales taxes, value-add taxes, or property taxes. This interpretation also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. The interpretation is effective for fiscal years beginning after December 15, 2006. Management implemented FIN 48 on January 1, 2007 and it
has had negligible impact on our consolidated results of operations or financial position. Management believes it will continue to have a negligible impact on our consolidated results of operations or financial position until such time as we
generate revenue.

Recently Issued Accounting Standards

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). The fair value option established by SFAS 159 permits a company
to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the
business entity does not report earnings) at each subsequent reporting date. SFAS 159 was effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. In adopting SFAS 159, we did not elect the
fair value option for any of our financial assets or financial liabilities. The impact of SFAS 159 on our consolidated results of operations or financial position was thus negligible.

In June 2007, FASB issued EITF Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future
Research and Development Activities (EITF 07-03). This issue addresses an issuers accounting for the nonrefundable portion of advance payments for future goods or services and specifies that the nonrefundable portion of
advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as related goods are delivered or related
services are performed. Entities should continue to evaluate whether they expect the goods to be delivered or the services to be rendered. If an entity does not expect the goods to be delivered or the services to be rendered, the capitalized advance
payment should be charged to expense. This issue was effective for financial statements issued for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. We experienced negligible impact, if any, from the
implementation of EITF 07-03.

In November 2007, FASB issued EITF Issue No. 07-01, Accounting for Collaborative
Arrangements (EITF 07-01). This Issue addresses an issuers accounting for shared cost and revenues in collaborative arrangements in which a separate legal entity is not created. A collaborative arrangement falls within the
scope of this issue only if the parties are actively involved and are exposed to significant risks and rewards that are tied to the commercial success of the endeavor. Costs incurred and revenue recognize on collaborative arrangements should be
reported by each party based on the guidance in EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent. Payments between parties of a collaborative arrangement should be reported based on the nature of
the arrangement and its contractual terms, the nature of each entitys business, and whether there are any existing generally accepted accounting principles in the United States of America that should be applied. This issue is effective for
financial statements issued for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. We currently are not involved with any collaborative arrangements and experienced no impact from the implementation
of EITF 07-01.

In December 2007, FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)). SFAS
141(R) significantly changed the accounting for and reporting of business combination transactions in consolidated financial statements. SFAS 141(R) is effective for the first annual reporting period beginning on or



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after December 15, 2008. Thus, we are required to adopt this standard on January 1, 2009. Earlier adoption is prohibited. We do not expect the
adoption of SFAS 141(R) to have a material impact on our consolidated results of operations or financial position.

In December 2007,
FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 significantly changed the accounting for and
reporting of noncontrolling (minority) interests in consolidated financial statements. SFAS 160 is effective for the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. We do not expect the
adoption of SFAS 160 will have a material impact on our consolidated results of operations or financial position.

FASB and the SEC have
issued certain other accounting pronouncements as of December 31, 2008, that will become effective in subsequent periods; however, we do not believe that any of those pronouncements would have significantly affected our financial accounting
measurements or disclosures had they been in effect during the years ended December 31, 2008, 2007 and 2006 or that they will have a significant effect at the time they become effective.



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

The primary objective of our investing activities is to preserve principal while maximizing the income we receive from our investments without significantly increasing the risk of loss. Some of the investable securities permitted under our
cash management policy may be subject to market risk for changes in interest rates. To mitigate this risk, we maintain a portfolio of cash equivalents and available-for-sale investments in a variety of securities, which may include investment grade
commercial paper, money market funds, government debt issued by the United States of America, state debt, certificates of deposit and investment grade corporate debt. Presently, we are exposed to minimal market risks associated with interest rate
changes because of the relatively short maturities of our investments and we do not expect interest rate fluctuations to materially affect the aggregate value of our financial instruments. We manage our sensitivity to these risks by maintaining
investment grade short-term investments. Our cash management policy does not allow us to purchase or hold derivative or commodity instruments or other financial instruments for trading purposes. Additionally, our policy stipulates that we
periodically monitor our investments for adverse material holdings related to the underlying financial solvency of the issuer. As of December 31, 2008, our investments consisted primarily of U.S. government and agency obligations and corporate
obligations. Our results of operations and financial condition would not be significantly impacted by either a 10% increase or 10% decrease in interest rates due mainly to the short-term nature of our investment portfolio. We have not used
derivative financial instruments in our investment portfolio. Additionally, we do not invest in foreign currencies or other foreign investments.



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

For a
list of the financial statements filed as part of this report, see the Index to Financial Statements beginning at Page F-1 of this Annual Report.



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

None.



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

Evaluation of Disclosure Controls and
Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is



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recorded, processed, summarized and reported within the timelines specified in the SECs rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Senior Vice President, Finance, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management
necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the
supervision and with the participation of our management, including our Chief Executive Officer and Senior Vice President, Finance, we have evaluated the effectiveness of our disclosure controls and procedures (as defined under Exchange Act
Rule 13a-15(e)), as of December 31, 2008. Based on that evaluation, our chief executive officer and senior vice president, finance have concluded that these disclosure controls and procedures were effective as of December 31, 2008.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2008, that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Senior Vice President, Finance, we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal
ControlIntegrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2008.

Our internal control over financial reporting as of December 31, 2008 has been audited by J.H. Cohn, LLP, our independent registered public accounting firm, as stated in their report, which is set forth below in
this Item 9A.



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Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

To the Board of Directors and Stockholders

Cougar Biotechnology, Inc.

We have audited Cougar Biotechnology, Inc.s (the Company) internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management
is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, Cougar Biotechnology, Inc. maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2008 based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of the Sponsoring Organizations of
the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Cougar Biotechnology, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive loss, stockholders equity and cash
flows for each of the years ended December 31, 2008, 2007, and 2006 and for the period from May 14, 2003 (date of inception) through December 31, 2008 and our report dated March 12, 2009 expressed an unqualified opinion thereon.

/s/ J.H. COHN LLP

San Diego, California

March 12, 2009



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.



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Part III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information required by this Item will be contained in our 2009 Proxy Statement, which will be filed with the Securities and Exchange Commission, and is incorporated by reference herein.



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

The information required by
this Item will be contained in our 2009 Proxy Statement, which will be filed with the Securities and Exchange Commission, and is incorporated by reference herein.



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

The information required by this Item will be contained in our 2009 Proxy Statement, which will be filed with the Securities and Exchange Commission, and
is incorporated by reference herein.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information required by this Item will be contained in our 2009 Proxy Statement, which will be filed with the Securities and Exchange Commission, and is incorporated by reference herein.



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

The
information required by this Item will be contained in our 2009 Proxy Statement, which will be filed with the Securities and Exchange Commission, and is incorporated by reference herein.



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Part IV



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

Reference
is made to the Index to Financial Statements beginning on Page F-1 hereof.

Financial Statement Schedules.

The Financial Statement Schedules have been omitted either because they are not required or because the information has been included in the financial
statements or the notes thereto included in this Annual Report.

Exhibits.

The exhibits listed below are incorporated herein by reference or filed with this report as indicated below.



|           |  |                                                                                                                                                                                                                                                    
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                        
|2.1        |  | Agreement and Plan of Merger dated February 27, 2006, by and among Cougar Biotechnology, Inc., SRKP 4, Inc. and SRKP Acquisition Corp. (incorporated by reference to Exhibit 10.1 to our
Current Report on Form 8-K filed on March 2, 2006).       
|           | 
|3.1        |  | Certificate of Incorporation (incorporated by reference to Exhibit 3.1 our Registration Statement on Form 10SB filed on August 3, 2005).                                                                                                           
|           | 
|3.2        |  | Certificate of Merger relating to the merger of SRKP Acquisition Corp. with and into Cougar Biotechnology, Inc. (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K dated
April 3, 2006, and filed on April 7, 2006).      
|           | 
|3.3        |  | Certificate of Ownership relating to the merger of Cougar Biotechnology, Inc. with and into SRKP 4, Inc. (incorporated by reference to Exhibit 3.2 of our Current Report on Form 8-K dated April
3, 2006, and filed on April 7, 2006).             
|           | 
|3.4        |  | Certificate of Designation of Series A Convertible Preferred Stock of the Company (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated March 31, 2006, and filed on
April 6, 2006).                                   
|           | 
|3.5        |  | Bylaws of the Company (incorporated by reference to Exhibit 3.1 of our Registration Statement on Form 10SB filed on August 3, 2005).                                                                                                               
|           | 
|4.1        |  | Specimen common stock certificate (incorporated by reference to Exhibit 4.1 of our Annual Report on Form 10-KSB for the year ended December 31, 2007).                                                                                             
|           | 
|4.2        |  | Form of Warrant relating to the sale of promissory notes in June 2005 (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form SB-2 (File No.: 333-133779) filed May 3,
2006).                                              
|           | 
|4.3        |  | Schedule identifying holders of warrants issued to certain noteholders in the form of Warrant incorporated by reference to Exhibit 4.1 (incorporated by reference to Exhibit 4.2 of our Quarterly
Report on Form 10-QSB filed on August 16, 2006). 
|           | 
|4.4        |  | Form of Warrant relating to the sale of convertible bridge notes in November 2005 and January 2006 (incorporated by reference to Exhibit 4.4 of our Registration Statement on Form SB-2 (SEC File
No.: 333-133779) filed on May 3, 2006).          
|           | 
|4.5        |  | Form of Warrant issued in relation to guaranty of credit facility (incorporated by reference to Exhibit 4.3 of our Registration Statement on Form SB-2 (SEC File No.: 333-133779) filed on
May 3, 2006).                                           
|           | 
|4.6        |  | Form of Warrant issued to placement agents in connection with offering of convertible bridge notes (incorporated by reference to Exhibit 4.4 of the Companys Registration Statement on Form
SB-2 (SEC File No.: 333-133779) filed on May 3, 2006).



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|           |  |                                                                                                                                                                                                                                               
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                   
|4.7        |  | Form of Warrant issued to placement agents in connection with April 3, 2006 private placement (incorporated by reference to Exhibit 4.3 to our Quarterly Report on Form 10-QSB filed on
August 16, 2006).                                     
|           | 
|10.1       |  | Employment Agreement with Alan H. Auerbach dated September 26, 2008 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 26, 2008).+                                                                                    
|           | 
|10.2       |  | Scientific Advisory Agreement with Dr. Arie Belldegrun dated December 2003 (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form SB-2 (SEC File No.: 333-133779) filed
on May 3, 2006).+                           
|           | 
|10.3       |  | Amendment to Scientific Advisory Agreement with Dr. Belldegrun dated August 24, 2004 (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form SB-2 (SEC File No.:
333-133779) filed on May 3, 2006).+                 
|           | 
|10.4       |  | Letter Agreement with Charles R. Eyler dated August 31, 2007 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 31,
2007).+                                                                         
|           | 
|10.5       |  | License Agreement with BTG International Ltd dated March 23, 2004 (incorporated by reference to Exhibit 10.7 to our Registration Statement on Form SB-2/A (SEC File No.: 333-133779) filed on
January 18, 2007).*                             
|           | 
|10.6       |  | Exclusive License Agreement with Emory University dated February 23, 2004 (incorporated by reference to Exhibit 10.8 to our Registration Statement on Form SB-2/A (SEC File No.: 333-133779) filed
on December 21, 2006).*                    
|           | 
|10.7       |  | First Amendment to License Agreement made and entered into June 2, 2004 with Emory University (incorporated by reference to Exhibit 10.9 to our Registration Statement on Form SB-2/A (SEC File
No.: 333-133779) filed on December 21, 2006).*
|           | 
|10.8       |  | License Agreement with LEO Pharma A/S dated June 27, 2005 (incorporated by reference to Exhibit 10.10 to our Registration Statement on Form SB-2/A (SEC File No.: 333-133779) filed on
December 21, 2006).*                                   
|           | 
|10.9       |  | Summary terms of non-employee director compensation program (as amended through June 11, 2007) (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed June 15, 2007).+                                            
|           | 
|10.10      |  | 2003 Stock Option Plan (as amended through October 28, 2008) (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed November 3, 2008).+                                                                           
|           | 
|10.11      |  | Form of Stock Option Agreement (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed September 12, 2006).+                                                                                                       
|           | 
|10.12      |  | Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 4.3 to our Registration Statement on Form S-8 (SEC File No.: 333-140673) filed on February 13,
2007).+                                                         
|           | 
|10.13      |  | Restricted Stock Agreement dated December 29, 2006 with Dr. Arie Belldegrun (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 8,
2007).+                                                          
|           | 
|10.14      |  | Form of Securities Purchase Agreement dated May 2, 2007 with certain investors in private placement offering (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on
May 3, 2007).                              
|           | 
|10.15      |  | Form of Registration Rights Agreement dated May 2, 2007 with certain investors in private placement offering (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on
May 3, 2007).                              



54



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|           |  |                                                                                                                                                                                                                                                                                                                 
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                     
|10.16      |  | Letter Agreement dated as of March 16, 2007 with Dr. Arturo Molina (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on May 3, 2007).+                                                                                                                                         
|           | 
|10.17      |  | Letter Agreement dated as of September 5, 2007 with Dr. Samuel R. Saks (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 18,
2007).+                                                                                                                              
|           | 
|10.18      |  | Assignment, Assumption and Consent dated July 24, 2007 with LETAT FRANCAIS, as represented by the Consulate General of France (incorporated by reference to Exhibit 10.1 to our Quarterly
Report on Form 10-QSB for the period ended September 30, 2007 filed on November 13, 2007).                           
|           | 
|10.19      |  | Lease between Douglas Emmett 1997, LLC and LETAT FRANCAIS dated September 29, 1989, as amended (assumed by Cougar Biotechnology, Inc. on July 24, 2007) (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-QSB for the period ended September 30, 2007, filed on November 13, 2007).
|           | 
|10.20      |  | Stand-by letter of credit collateralized by a certificate of deposit held by Wells Fargo Bank (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-QSB for the period
ended September 30, 2007, filed on November 13, 2007).                                                           
|           | 
|10.21      |  | Form of Securities Purchase Agreement dated December 14, 2007, with certain investors in private placement offering (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K
filed on December 18, 2007).                                                                                   
|           | 
|10.22      |  | Form of Registration Rights Agreement dated December 14, 2007, with certain investors in private placement offering (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K
filed on December 18, 2007).                                                                                   
|           | 
|10.23      |  | Employment offer letter with Richard B. Phillips dated January 16, 2007, (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008).+                                                                                                                
|           | 
|10.24      |  | Indemnity Agreement dated April 3, 2006 by and among SRKP 4, Inc., Cougar Biotechnology, Inc., Richard A. Rappaport and Anthony C. Pintsopoulos (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed April 7, 2006).                                                 
|           | 
|21.1       |  | Subsidiaries of the Registrant (filed herewith).                                                                                                                                                                                                                                                                
|           | 
|23.1       |  | Consent of J.H. Cohn LLP (filed herewith).                                                                                                                                                                                                                                                                      
|           | 
|24.1       |  | Power of Attorney (included on signature page hereof).                                                                                                                                                                                                                                                          
|           | 
|31.1       |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) (filed herewith).                                                                                                                                                                                                                       
|           | 
|31.2       |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) (filed herewith).                                                                                                                                                                                                                       
|           | 
|32.1       |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).                                                                                                                                                                                                               
|           | 
|32.2       |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).                                                                                                                                                                                                               



|* | Confidential treatment has been granted as to certain portions of this exhibit pursuant to Rule 406 of the Securities Act or Rule 24b-2 of the Exchange Act.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



|+ | Denotes management contract or compensation plan or arrangement.
|- | ----------------------------------------------------------------



55



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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act, Cougar Biotechnology, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 16, 2009.



COUGAR BIOTECHNOLOGY, INC.By:

/S/    ALAN H.
AUERBACHName:

Alan H. AuerbachTitle:

President and Chief Executive Officer


POWER OF ATTORNEY

The undersigned constitutes and appoints Alan H. Auerbach and Charles R. Eyler, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of Cougar Biotechnology, Inc. and in
the capacities and on the dates indicated.



|                                                         |  |                                                                                            |  |               
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | --------------
|Signature                                                |  | Title                                                                                      |  | Date          
|                                                         |  |                                                                                           
|/S/    ALAN H.
AUERBACH Alan H. Auerbach                 |  | President, Chief Executive Officer and Director (Principal Executive Officer)              |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    CHARLES R.
EYLER Charles R. Eyler                 |  | Senior Vice President, Finance, and Treasurer (Principal Accounting and Financial Officer) |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    ARIE S. BELLDEGRUN,
M.D. Arie S. Belldegrun, M.D. |  | Director                                                                                   |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    RUSSELL H. ELLISON,
M.D. Russell H. Ellison, M.D. |  | Director                                                                                   |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    THOMAS R.
MALLEY Thomas R. Malley                 |  | Director                                                                                   |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    HAROLD J.
MEYERS Harold J. Meyers                 |  | Director                                                                                   |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    MICHAEL S.
RICHMAN Michael S. Richman             |  | Director                                                                                   |  | March 16, 2009
|                                                         |  |                                                                                           
|/S/    SAMUEL R. SAKS,
M.D. Samuel R. Saks, M.D.         |  | Director                                                                                   |  | March 16, 2009



56



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COUGAR BIOTECHNOLOGY, INC.

(A Development Stage Enterprise)

Index To Financial Statements



|                                                                                                                                                                                                   |  |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------
|                                                                                                                                                                                                   |  | Page   
|Report of Independent Registered Public Accounting Firm                                                                                                                                            |  | F-2    
|                                                                                                                                                                                                   | 
|Consolidated Balance Sheets December 31, 2008 and 2007                                                                                                                                             |  | F-3    
|                                                                                                                                                                                                   | 
|Consolidated Statements of Operations and Comprehensive Loss For the Years Ended December 
31, 2008, 2007, and 2006 and the period from May 14, 2003 (Date of Inception) through December 31, 2008 |  | F-4    
|                                                                                                                                                                                                   | 
|Consolidated Statements of Stockholders Equity (Deficiency) For the Years Ended December 
31, 2008, 2007 and 2006 and the period from May 14, 2003 (Date of Inception) through December 31, 2008  |  | F-5/8  
|                                                                                                                                                                                                   | 
|Consolidated Statements of Cash Flows For the Years Ended December 
31, 2008, 2007 and 2006 and the period from May 14, 2003 (Date of Inception) through December 31, 2008                         |  | F-9/11 
|                                                                                                                                                                                                   | 
|Notes to Consolidated Financial Statements                                                                                                                                                         |  | F-12/35



F-1



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Cougar Biotechnology, Inc.

We have audited the accompanying consolidated balance sheets of Cougar Biotechnology, Inc. (A Development Stage Company) as of
December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive loss, stockholders equity (deficiency) and cash flows for each of the years in the three-year period ended December 31, 2008 and for
the period from May 14, 2003 (date of inception) through December 31, 2008. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Cougar Biotechnology, Inc. (A Development Stage Enterprise) as of December 31, 2008 and 2007, and its results of operations and cash flows for each of the years in the three-year period ended
December 31, 2008 and for the period from May 14, 2003 (date of inception) through December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cougar Biotechnology,
Inc.s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated March 12, 2009, expressed an unqualified opinion thereon.

/s/ J.H. COHN LLP

San Diego, California

March 12, 2009



F-2



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2008 AND 2007



|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | - | ----------- | -
|                                                                                                                                                                                               |  | 2008 |              |   | 2007 |  
|ASSETS                                                                                                                                                                                         |  |      |              |   |      |   |             |  
|Current assets:                                                                                                                                                                                |  |      |              |   |      |   |             |  
|Cash and cash equivalents                                                                                                                                                                      |  | $    | 40,767,519   |   |      | $ | 96,335,893  |  
|Investment securities available-for-sale, at fair value                                                                                                                                        |  |      | 50,225,679   |   |      |   | 39,001,651  |  
|Prepaid expenses and other assets                                                                                                                                                              |  |      | 811,596      |   |      |   | 1,301,102   |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Total current assets                                                                                                                                                                           |  |      | 91,804,794   |   |      |   | 136,638,646 |  
|                                                                                                                                                                                               |  |     
|Property and equipment, net                                                                                                                                                                    |  |      | 654,475      |   |      |   | 454,265     |  
|Restricted certificate of deposit                                                                                                                                                              |  |      | 1,043,121    |   |      |   | 1,016,317   |  
|Deposits and other assets                                                                                                                                                                      |  |      | 320,707      |   |      |   | 197,321     |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Total assets                                                                                                                                                                                   |  | $    | 93,823,097   |   |      | $ | 138,306,549 |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                           |  |      |              |   |      |   |             |  
|Current liabilities:                                                                                                                                                                           |  |      |              |   |      |   |             |  
|Accounts payable                                                                                                                                                                               |  | $    | 5,048,130    |   |      | $ | 1,204,986   |  
|Accrued expenses                                                                                                                                                                               |  |      | 7,583,981    |   |      |   | 2,369,555   |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Total current liabilities                                                                                                                                                                      |  |      | 12,632,111   |   |      |   | 3,574,541   |  
|Deferred rent                                                                                                                                                                                  |  |      | 55,028       |   |      |   | 53,150      |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Total liabilities                                                                                                                                                                              |  |      | 12,687,139   |   |      |   | 3,627,691   |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Commitments and contingencies                                                                                                                                                                  |  |      |              |   |      |   |             |  
|                                                                                                                                                                                               |  |     
|Stockholders equity:                                                                                                                                                                          |  |      |              |   |      |   |             |  
|Series A Redeemable Convertible Preferred Stock; $.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at
December 31, 2008 and 2007                                |  |      |             |   |      |   |            |  
|Common stock; $.0001 par value; 100,000,000 shares authorized; 20,758,642 shares issued and outstanding at December 31, 2008 and
20,526,571 shares issued and outstanding at December 31, 2007 |  |      | 2,076        |   |      |   | 2,053       |  
|Additional paid-in capital                                                                                                                                                                     |  |      | 196,000,544  |   |      |   | 189,745,702 |  
|Deficit accumulated during the development stage                                                                                                                                               |  |      | (114,885,698 | ) |      |   | (55,068,897 | )
|Accumulated other comprehensive income                                                                                                                                                         |  |      | 19,036       |   |      |   |            |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Total stockholders equity                                                                                                                                                                     |  |      | 81,135,958   |   |      |   | 134,678,858 |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                     |  | $    | 93,823,097   |   |      | $ | 138,306,549 |  
|                                                                                                                                                                                               |  |      |              |   |      |   |             |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND THE PERIOD
FROM

MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008



|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ------------------------------------------------------------- | - |  | - | ------------ | -
|                                                                    |  | 2008 |             |   | 2007 |   |             | 2006 |  |   | Period fromMay 14, 2003(date ofinception)
toDecember 31, 2008 |  
|Operating expenses:                                                 |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|General and administrative                                          |  | $    | 9,961,197   |   |      | $ | 6,786,460   |      |  | $ | 3,926,795                                                     |   |  | $ | 23,560,805   |  
|Research and development                                            |  |      | 52,892,130  |   |      |   | 27,277,214  |      |  |   | 6,698,515                                                     |   |  |   | 95,065,830   |  
|Depreciation and amortization                                       |  |      | 243,276     |   |      |   | 82,852      |      |  |   | 30,593                                                        |   |  |   | 360,518      |  
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Totals                                                              |  |      | 63,096,603  |   |      |   | 34,146,526  |      |  |   | 10,655,903                                                    |   |  |   | 118,987,153  |  
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Loss from operations                                                |  |      | (63,096,603 | ) |      |   | (34,146,526 | )    |  |   | (10,655,903                                                   | ) |  |   | (118,987,153 | )
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Other income (expenses):                                            |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Interest income                                                     |  |      | 3,097,408   |   |      |   | 2,775,204   |      |  |   | 1,244,407                                                     |   |  |   | 7,154,525    |  
|Interest expense                                                    |  |      |            |   |      |   |            |      |  |   | (1,012,661                                                    | ) |  |   | (1,311,895   | )
|Other income (expense)                                              |  |      | 182,394     |   |      |   | (486,342    | )    |  |   | (1,437,227                                                    | ) |  |   | (1,741,175   | )
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Totals                                                              |  |      | 3,279,802   |   |      |   | 2,288,862   |      |  |   | (1,205,481                                                    | ) |  |   | 4,101,455    |  
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Net loss                                                            |  |      | (59,816,801 | ) |      |   | (31,857,664 | )    |  |   | (11,861,384                                                   | ) |  |   | (114,885,698 | )
|Accretion of dividends on preferred stock                           |  |      |            |   |      |   | (309,863    | )    |  |   | (1,273,633                                                    | ) |  |   | (1,583,496   | )
|Accretion of issuance costs on preferred stock                      |  |      |            |   |      |   | (80,980     | )    |  |   | (364,413                                                      | ) |  |   | (445,393     | )
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Net loss applicable to common stock                                 |  | $    | (59,816,801 | ) |      | $ | (32,248,507 | )    |  | $ | (13,499,430                                                   | ) |  | $ | (116,914,587 | )
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Net loss per common sharebasic and diluted                         |  | $    | (2.90       | ) |      | $ | (2.17       | )    |  | $ | (3.10                                                         | ) |  |   |              |  
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Weighted-average common shares outstandingbasic and diluted        |  |      | 20,640,413  |   |      |   | 14,887,723  |      |  |   | 4,357,681                                                     |   |  |   |              |  
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Comprehensive loss, net of tax:                                     |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Net loss                                                            |  | $    | (59,816,801 | ) |      | $ | (31,857,664 | )    |  | $ | (11,861,384                                                   | ) |  | $ | (114,885,698 | )
|Other comprehensive incomeunrealized gain on investment securities |  |      | 19,036      |   |      |   |            |      |  |   |                                                              |   |  |   | 19,036       |  
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  
|Total comprehensive loss                                            |  | $    | (59,797,765 | ) |      | $ | (31,857,664 | )    |  | $ | (11,861,384                                                   | ) |  | $ | (114,866,662 | )
|                                                                    |  |      |             |   |      |   |             |      |  |   |                                                               |   |  |   |              |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



F-4



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

THE PERIOD FROM MAY 14, 2003 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 2008



|                                                                                                                        |        |              |        |                          |     |  |                                              |           |   |                                     |   |             |   |  |   |   |  |   |            |  
|----------------------------------------------------------------------------------------------------------------------- | ------ | ------------ | ------ | ------------------------ | --- |  | -------------------------------------------- | --------- | - | ----------------------------------- | - | ----------- | - |  | - | - |  | - | ---------- | -
|                                                                                                                        |        | Common Stock |        | AdditionalPaid-inCapital |     |  | DeficitAccumulatedDuring theDevelopmentStage |           |   | AccumulatedOtherComprehensiveIncome |   | Total       |  
|                                                                                                                        | Shares |              | Amount |                          |     |  |                                             
|Issuance of shares of common stock through private placement at $0.4595 per share                                       |        | 1,632,468    |        | $                        | 163 |  | $                                            | 749,837   |   |                                     | $ |            |   |  | $ |  |  | $ | 750,000    |  
|Effect of issuance of shares of common stock to an officer at $0.0026 per share                                         |        | 288,083      |        |                          | 29  |  |                                              | 132,346   |   |                                     |   |            |   |  |   |  |  |   | 132,375    |  
|Option compensation for non-employees                                                                                   |        |             |        |                          |    |  |                                              | 207       |   |                                     |   |            |   |  |   |  |  |   | 207        |  
|Net loss                                                                                                                |        |             |        |                          |    |  |                                              |          |   |                                     |   | (378,375    | ) |  |   |  |  |   | (378,375   | )
|                                                                                                                        |        |              |        |                          |     |  |                                              |           |   |                                     |   |             |   |  |   |   |  |   |            |  
|Balance at December 31, 2003                                                                                            |        | 1,920,551    |        |                          | 192 |  |                                              | 882,390   |   |                                     |   | (378,375    | ) |  |   |  |  |   | 504,207    |  
|Issuance of shares of common stock through private placement at $2.60 per share                                         |        | 1,632,470    |        |                          | 163 |  |                                              | 4,249,837 |   |                                     |   |            |   |  |   |  |  |   | 4,250,000  |  
|Option compensation for non-employees                                                                                   |        |             |        |                          |    |  |                                              | 14,476    |   |                                     |   |            |   |  |   |  |  |   | 14,476     |  
|Net loss                                                                                                                |        |             |        |                          |    |  |                                              |          |   |                                     |   | (3,160,136  | ) |  |   |  |  |   | (3,160,136 | )
|                                                                                                                        |        |              |        |                          |     |  |                                              |           |   |                                     |   |             |   |  |   |   |  |   |            |  
|Balance at December 31, 2004                                                                                            |        | 3,553,021    |        |                          | 355 |  |                                              | 5,146,703 |   |                                     |   | (3,538,511  | ) |  |   |  |  |   | 1,608,547  |  
|Issuance of warrants with notes payable                                                                                 |        |             |        |                          |    |  |                                              | 130,954   |   |                                     |   |            |   |  |   |  |  |   | 130,954    |  
|Issuance of warrants for debt costs                                                                                     |        |             |        |                          |    |  |                                              | 91,041    |   |                                     |   |            |   |  |   |  |  |   | 91,041     |  
|Option compensation for non-employees                                                                                   |        |             |        |                          |    |  |                                              | 403,331   |   |                                     |   |            |   |  |   |  |  |   | 403,331    |  
|Reclassification of fair value of non-employee options and warrants to liabilities due to issuance of convertible notes |        |             |        |                          |    |  |                                              | (640,009  | ) |                                     |   |            |   |  |   |  |  |   | (640,009   | )
|Net loss                                                                                                                |        |             |        |                          |    |  |                                              |          |   |                                     |   | (7,811,338  | ) |  |   |  |  |   | (7,811,338 | )
|                                                                                                                        |        |              |        |                          |     |  |                                              |           |   |                                     |   |             |   |  |   |   |  |   |            |  
|Balance at December 31, 2005                                                                                            |        | 3,553,021    |        |                          | 355 |  |                                              | 5,132,020 |   |                                     |   | (11,349,849 | ) |  |   |  |  |   | (6,217,474 | )

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY (DEFICIENCY)(Continued)

THE PERIOD FROM MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008



|                                                                                                    |  |              |  |                          |     |  |                                              |            |   |                                     |   |             |   |  |   |   |  |   |             |  
|--------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------------ | --- |  | -------------------------------------------- | ---------- | - | ----------------------------------- | - | ----------- | - |  | - | - |  | - | ----------- | -
|                                                                                                    |  | Common Stock |  | AdditionalPaid-inCapital |     |  | DeficitAccumulatedDuring theDevelopmentStage |            |   | AccumulatedOtherComprehensiveIncome |   | Total       |  
|                                                                                                    |  | Shares       |  | Amount                   |     |  |                                              |           
|Issuance of shares of common stock through private placement and other offerings at $4.50 per share |  | 893,656      |  | $                        | 89  |  | $                                            | 3,725,063  |   |                                     | $ |            |   |  | $ |  |  | $ | 3,725,152   |  
|Issuance of shares of common stock through debt conversion at $4.50 per share                       |  | 160,428      |  |                          | 16  |  |                                              | 722,544    |   |                                     |   |            |   |  |   |  |  |   | 722,560     |  
|Issuance of shares of common stock for payment of liquidated damages at $4.50 per share             |  | 178,106      |  |                          | 18  |  |                                              | 801,478    |   |                                     |   |            |   |  |   |  |  |   | 801,496     |  
|Issuance of placement warrants allocable to Series A Preferred Stock                                |  |             |  |                          |    |  |                                              | 2,160,672  |   |                                     |   |            |   |  |   |  |  |   | 2,160,672   |  
|Option compensation for employees                                                                   |  |             |  |                          |    |  |                                              | 870,586    |   |                                     |   |            |   |  |   |  |  |   | 870,586     |  
|Reclassification of fair value of non-employee options from liabilities due to debt conversion      |  |             |  |                          |    |  |                                              | 1,195,927  |   |                                     |   |            |   |  |   |  |  |   | 1,195,927   |  
|Option compensation for non-employees                                                               |  |             |  |                          |    |  |                                              | 114,953    |   |                                     |   |            |   |  |   |  |  |   | 114,953     |  
|Stock compensation for non-employees at $4.50 per share                                             |  | 18,864       |  |                          | 2   |  |                                              | 84,886     |   |                                     |   |            |   |  |   |  |  |   | 84,888      |  
|Reclassification of fair value of warrants from liability due to debt conversion                    |  |             |  |                          |    |  |                                              | 680,004    |   |                                     |   |            |   |  |   |  |  |   | 680,004     |  
|Accretion of dividends on redeemable convertible preferred stock                                    |  |             |  |                          |    |  |                                              | (1,273,633 | ) |                                     |   |            |   |  |   |  |  |   | (1,273,633  | )
|Accretion of issuance costs on redeemable convertible preferred stock                               |  |             |  |                          |    |  |                                              | (364,413   | ) |                                     |   |            |   |  |   |  |  |   | (364,413    | )
|Net loss                                                                                            |  |             |  |                          |    |  |                                              |           |   |                                     |   | (11,861,384 | ) |  |   |  |  |   | (11,861,384 | )
|                                                                                                    |  |              |  |                          |     |  |                                              |            |   |                                     |   |             |   |  |   |   |  |   |             |  
|Balance at December 31, 2006                                                                        |  | 4,804,075    |  |                          | 480 |  |                                              | 13,850,087 |   |                                     |   | (23,211,233 | ) |  |   |  |  |   | (9,360,666  | )

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY (DEFICIENCY)(Continued)

THE PERIOD FROM MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008



|                                                                                        |  |              |  |                          |       |  |                                              |             |   |                                     |   |             |   |  |   |   |  |   |             |  
|--------------------------------------------------------------------------------------- |  | ------------ |  | ------------------------ | ----- |  | -------------------------------------------- | ----------- | - | ----------------------------------- | - | ----------- | - |  | - | - |  | - | ----------- | -
|                                                                                        |  | Common Stock |  | AdditionalPaid-inCapital |       |  | DeficitAccumulatedDuring theDevelopmentStage |             |   | AccumulatedOtherComprehensiveIncome |   | Total       |  
|                                                                                        |  | Shares       |  | Amount                   |       |  |                                              |            
|Option compensation for employees                                                       |  |             |  | $                        |      |  | $                                            | 1,947,180   |   |                                     | $ |            |   |  | $ |  |  | $ | 1,947,180   |  
|Option compensation for non-employees                                                   |  |             |  |                          |      |  |                                              | 5,089,198   |   |                                     |   |            |   |  |   |  |  |   | 5,089,198   |  
|Issuance of shares of common stock for payment of liquidated damages at $4.50 per share |  | 189,671      |  |                          | 19    |  |                                              | 853,501     |   |                                     |   |            |   |  |   |  |  |   | 853,520     |  
|Warrants exercised for cash at $8.28 per warrant                                        |  | 56,248       |  |                          | 6     |  |                                              | 465,728     |   |                                     |   |            |   |  |   |  |  |   | 465,734     |  
|Cashless exercise of warrants                                                           |  | 412,462      |  |                          | 41    |  |                                              | (41         | ) |                                     |   |            |   |  |   |  |  |   |            |  
|Exercise of stock options                                                               |  | 13,588       |  |                          | 2     |  |                                              | 61,144      |   |                                     |   |            |   |  |   |  |  |   | 61,146      |  
|Series A Preferred Stock conversion to common stock                                     |  | 9,486,752    |  |                          | 949   |  |                                              | 38,313,177  |   |                                     |   |            |   |  |   |  |  |   | 38,314,126  |  
|Accretion of dividends on redeemable convertible preferred stock                        |  |             |  |                          |      |  |                                              | (309,863    | ) |                                     |   |            |   |  |   |  |  |   | (309,863    | )
|Accretion of issuance costs on redeemable convertible preferred stock                   |  |             |  |                          |      |  |                                              | (80,980     | ) |                                     |   |            |   |  |   |  |  |   | (80,980     | )
|Issuance of shares of common stock through private placement at $20.00 per share        |  | 2,500,000    |  |                          | 250   |  |                                              | 46,845,941  |   |                                     |   |            |   |  |   |  |  |   | 46,846,191  |  
|Issuance of shares of common stock through private placement at $29.00 per share        |  | 3,000,000    |  |                          | 300   |  |                                              | 81,690,215  |   |                                     |   |            |   |  |   |  |  |   | 81,690,515  |  
|Issuance of common stock for preferred stock dividend payment                           |  | 63,775       |  |                          | 6     |  |                                              | 1,020,415   |   |                                     |   |            |   |  |   |  |  |   | 1,020,421   |  
|Net loss                                                                                |  |             |  |                          |      |  |                                              |            |   |                                     |   | (31,857,664 | ) |  |   |  |  |   | (31,857,664 | )
|                                                                                        |  |              |  |                          |       |  |                                              |             |   |                                     |   |             |   |  |   |   |  |   |             |  
|Balance at December 31, 2007                                                            |  | 20,526,571   |  |                          | 2,053 |  |                                              | 189,745,702 |   |                                     |   | (55,068,897 | ) |  |   |  |  |   | 134,678,858 |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY (DEFICIENCY)(Concluded)

THE PERIOD FROM MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008

|                                                                   |  |              |  |                          |       |  |                                              |             |   |                                     |   |              |   |  |   |        |  |   |             |  
|------------------------------------------------------------------ |  | ------------ |  | ------------------------ | ----- |  | -------------------------------------------- | ----------- | - | ----------------------------------- | - | ------------ | - |  | - | ------ |  | - | ----------- | -
|                                                                   |  | Common Stock |  | AdditionalPaid-inCapital |       |  | DeficitAccumulatedDuring theDevelopmentStage |             |   | AccumulatedOtherComprehensiveIncome |   | Total        |  
|                                                                   |  | Shares       |  | Amount                   |       |  |                                              |            
|Option compensation for employees                                  |  |             |  | $                        |      |  | $                                            | 4,938,174   |   |                                     | $ |             |   |  | $ |       |  | $ | 4,938,174   |  
|Option compensation for non-employees                              |  |             |  |                          |      |  |                                              | 476,316     |   |                                     |   |             |   |  |   |       |  |   | 476,316     |  
|Warrants exercised for cash at $8.28 per warrant                   |  | 26,696       |  |                          | 3     |  |                                              | 221,040     |   |                                     |   |             |   |  |   |       |  |   | 221,043     |  
|Cashless exercise of warrants                                      |  | 78,965       |  |                          | 8     |  |                                              | (8          | ) |                                     |   |             |   |  |   |       |  |   |            |  
|Exercise of stock options                                          |  | 126,410      |  |                          | 12    |  |                                              | 619,320     |   |                                     |   |             |   |  |   |       |  |   | 619,332     |  
|Other comprehnsive incomeunrealized gain on investment securities |  |             |  |                          |      |  |                                              |            |   |                                     |   |             |   |  |   | 19,036 |  |   | 19,036      |  
|Net loss                                                           |  |             |  |                          |      |  |                                              |            |   |                                     |   | (59,816,801  | ) |  |   |       |  |   | (59,816,801 | )
|                                                                   |  |              |  |                          |       |  |                                              |             |   |                                     |   |              |   |  |   |        |  |   |             |  
|Balance at December 31, 2008                                       |  | 20,758,642   |  | $                        | 2,076 |  | $                                            | 196,000,544 |   |                                     | $ | (114,885,698 | ) |  | $ | 19,036 |  | $ | 81,135,958  |  
|                                                                   |  |              |  |                          |       |  |                                              |             |   |                                     |   |              |   |  |   |        |  |   |             |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND THE PERIOD FROM

MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008



|                                                                            |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|--------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ------------------------------------------------------------ | - |  | - | ------------ | -
|                                                                            |  | 2008 |             |   | 2007 |   |             | 2006 |  |   | Period fromMay 14, 2003(date ofinception) toDecember 31,2008 |  
|Operating activities:                                                       |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Net loss                                                                    |  | $    | (59,816,801 | ) |      | $ | (31,857,664 | )    |  | $ | (11,861,384                                                  | ) |  | $ | (114,885,698 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Depreciation and amortization                                               |  |      | 243,276     |   |      |   | 82,852      |      |  |   | 30,593                                                       |   |  |   | 360,518      |  
|Option compensation for non-employees                                       |  |      | 476,316     |   |      |   | 5,089,198   |      |  |   | 851,048                                                      |   |  |   | 6,876,395    |  
|Stock issued for compensationnon-employees                                 |  |      |            |   |      |   |            |      |  |   | 84,888                                                       |   |  |   | 84,888       |  
|Option compensation for employees                                           |  |      | 4,938,174   |   |      |   | 1,947,180   |      |  |   | 870,586                                                      |   |  |   | 7,755,940    |  
|Common stock issued for accrued interest                                    |  |      |            |   |      |   |            |      |  |   | 13,048                                                       |   |  |   | 13,048       |  
|Preferred stock issued for accrued interest                                 |  |      |            |   |      |   |            |      |  |   | 117,429                                                      |   |  |   | 117,429      |  
|Common stock issued for liquidated damages                                  |  |      |            |   |      |   | 453,434     |      |  |   | 801,496                                                      |   |  |   | 1,254,930    |  
|Stock issued for compensationemployees                                     |  |      |            |   |      |   |            |      |  |   |                                                             |   |  |   | 131,625      |  
|Amortization of discount on notes payable                                   |  |      |            |   |      |   |            |      |  |   | 376,709                                                      |   |  |   | 486,782      |  
|Amortization of debt issuance costs                                         |  |      |            |   |      |   |            |      |  |   | 612,993                                                      |   |  |   | 702,591      |  
|Accrual of deferred rent                                                    |  |      | 1,878       |   |      |   | 8,751       |      |  |   | 10,648                                                       |   |  |   | 21,277       |  
|Amortization of discount on investments                                     |  |      | 65,169      |   |      |   | (513,182    | )    |  |   | (37,780                                                      | ) |  |   | (485,793     | )
|Other                                                                       |  |      |            |   |      |   |            |      |  |   | 29,366                                                       |   |  |   | 97,366       |  
|Changes in operating assets and liabilities:                                |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |             |  
|Employee advance                                                            |  |      |            |   |      |   |            |      |  |   |                                                             |   |  |   | (96,000      | )
|Prepaid expenses and other assets                                           |  |      | 366,120     |   |      |   | (143,368    | )    |  |   | (1,078,994                                                   | ) |  |   | (1,132,303   | )
|Accounts payable and accrued expenses                                       |  |      | 9,057,570   |   |      |   | 1,834,011   |      |  |   | 13,302                                                       |   |  |   | 13,032,197   |  
|                                                                            |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Net cash used in operating activities                                       |  |      | (44,668,298 | ) |      |   | (23,098,788 | )    |  |   | (9,166,052                                                   | ) |  |   | (85,664,808  | )
|                                                                            |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Investing activities:                                                       |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Purchase of investment securities available-for-sale                        |  |      | (77,244,161 | ) |      |   | (51,408,667 | )    |  |   | (16,642,022                                                  | ) |  |   | (145,294,850 | )
|Proceeds from maturities of investment securities available-for-sale        |  |      | 65,974,000  |   |      |   | 29,600,000  |      |  |   |                                                             |   |  |   | 95,574,000   |  
|Purchases of property and equipment                                         |  |      | (443,486    | ) |      |   | (370,757    | )    |  |   | (154,621                                                     | ) |  |   | (981,242     | )
|Purchase of restricted certificate of deposit                               |  |      | (26,804     | ) |      |   | (1,016,317  | )    |  |   |                                                             |   |  |   | (1,043,121   | )
|                                                                            |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Net cash used in investing activities                                       |  |      | (11,740,451 | ) |      |   | (23,195,741 | )    |  |   | (16,796,643                                                  | ) |  |   | (51,745,213  | )
|                                                                            |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Financing activities:                                                       |  |      |             |   |      |   |             |      |  |   |                                                              |   |  |   |              |  
|Net proceeds from issuance of preferred stock                               |  |      |            |   |      |   |            |      |  |   | 33,526,368                                                   |   |  |   | 33,526,368   |  
|Net proceeds from issuance of common stock                                  |  |      |            |   |      |   | 128,536,706 |      |  |   | 3,725,152                                                    |   |  |   | 137,262,608  |  
|Net proceeds from exercise of warrants                                      |  |      | 221,043     |   |      |   | 465,734     |      |  |   |                                                             |   |  |   | 686,777      |  
|Net proceeds from exercise of options                                       |  |      | 619,332     |   |      |   | 61,146      |      |  |   |                                                             |   |  |   | 680,478      |  
|Preferred stock dividends paid                                              |  |      |            |   |      |   | (563,075    | )    |  |   |                                                             |   |  |   | (563,075     | )
|Payment of debt issuance costs                                              |  |      |            |   |      |   |            |      |  |   | (134,778                                                     | ) |  |   | (510,736     | )
|Proceeds from issuance of notes payable                                     |  |      |            |   |      |   |            |      |  |   |                                                             |   |  |   | 1,000,000    |  
|Payment of notes payable                                                    |  |      |            |   |      |   |            |      |  |   | (50,000                                                      | ) |  |   | (50,000      | )
|Proceeds from issuance of convertible notes payable                         |  |      |            |   |      |   |            |      |  |   | 2,585,000                                                    |   |  |   | 6,145,120    |  



F-9



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH
FLOWS(Continued)

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND THE PERIOD FROM

MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008



|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|--------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- |  | - | ------------------------------------------------------------ | - |  | - | -----------
|                                                                                                    |  | 2008 |             |   | 2007 |   | 2006        |  |   | Period fromMay 14, 2003(date ofinception) toDecember 31,2008
|Payments for line of credit                                                                         |  | $    |            |   |      | $ |            |  | $ | (600,000                                                     | ) |  | $ |           
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Net cash provided by financing activities                                                           |  |      | 840,375     |   |      |   | 128,500,511 |  |   | 39,051,742                                                   |   |  |   | 178,177,540
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Net increase (decrease) in cash and cash equivalents                                                |  |      | (55,568,374 | ) |      |   | 82,205,982  |  |   | 13,089,047                                                   |   |  |   | 40,767,519 
|Cash and cash equivalents, beginning of period                                                      |  |      | 96,335,893  |   |      |   | 14,129,911  |  |   | 1,040,864                                                    |   |  |   |           
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Cash and cash equivalents, end of period                                                            |  | $    | 40,767,519  |   |      | $ | 96,335,893  |  | $ | 14,129,911                                                   |   |  | $ | 40,767,519 
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Supplemental disclosures of non-cash investing and financing activities:                            |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Carrying value of Series A Preferred Stock converted to common stock and additional paid-in capital |  | $    |            |   |      | $ | 38,314,126  |  | $ |                                                             |   |  | $ | 38,314,126 
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Issuance of common stock for payment of accrued liquidated damages                                  |  | $    |            |   |      | $ | 400,086     |  | $ |                                                             |   |  | $ | 400,086    
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Issuance of common stock for preferred stock dividend payment                                       |  | $    |            |   |      | $ | 1,020,421   |  | $ |                                                             |   |  | $ | 1,020,421  
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Carrying value of convertible notes converted to common stock                                       |  | $    |            |   |      | $ |            |  | $ | 614,512                                                      |   |  | $ | 614,512    
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Carrying value of convertible notes converted to preferred stock                                    |  | $    |            |   |      | $ |            |  | $ | 5,530,608                                                    |   |  | $ | 5,530,608  
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Carrying value of promissory notes converted to common stock                                        |  | $    |            |   |      | $ |            |  | $ | 95,000                                                       |   |  | $ | 95,000     
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Carrying value of promissory notes converted to preferred stock                                     |  | $    |            |   |      | $ |            |  | $ | 855,000                                                      |   |  | $ | 855,000    
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Value of warrants charged to debt and note issuance costs                                           |  | $    |            |   |      | $ |            |  | $ | 89,137                                                       |   |  | $ | 303,553    
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Value of warrants issued with notes payable                                                         |  | $    |            |   |      | $ |            |  | $ | 178,275                                                      |   |  | $ | 800,257    
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Acquisition of leasehold improvements paid by lessor under lease obligation                         |  | $    |            |   |      | $ |            |  | $ | 33,751                                                       |   |  | $ | 33,751     
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Fair value of warrants issued to placement agents for private placement of common stock             |  | $    |            |   |      | $ |            |  | $ | 239,328                                                      |   |  | $ | 239,328    
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            
|Fair value of warrants issued to placement agents for private placement of preferred stock          |  | $    |            |   |      | $ |            |  | $ | 2,160,672                                                    |   |  | $ | 2,160,672  
|                                                                                                    |  |      |             |   |      |   |             |  |   |                                                              |   |  |   |            

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH
FLOWS(Concluded)

YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND THE PERIOD FROM

MAY 14, 2003 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008



|                                                                                        |  |      |        |      |   |      |  |                                                              |           |  |   |          
|--------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ---- |  | ------------------------------------------------------------ | --------- |  | - | ---------
|                                                                                        |  | 2008 |        | 2007 |   | 2006 |  | Period fromMay 14, 2003(date ofinception) toDecember 31,2008
|Change in fair value of available-for-sale securities                                   |  | $    | 19,036 |      | $ |     |  | $                                                            |          |  | $ | 19,036   
|                                                                                        |  |      |        |      |   |      |  |                                                              |           |  |   |          
|Reclassification of non-employee options from liabilities to additional paid-in capital |  | $    |       |      | $ |     |  | $                                                            | 1,195,927 |  | $ | 1,195,927
|                                                                                        |  |      |        |      |   |      |  |                                                              |           |  |   |          
|Reclassification of warrants from liabilities to additional paid-in capital             |  | $    |       |      | $ |     |  | $                                                            | 680,004   |  | $ | 680,004  
|                                                                                        |  |      |        |      |   |      |  |                                                              |           |  |   |          
|Supplemental disclosures of cash flow information:                                      |  |      |        |      |   |      |  |                                                              |           |  |   |          
|Interest paid                                                                           |  | $    |       |      | $ |     |  | $                                                            | 12,588    |  | $ | 27,390   
|                                                                                        |  |      |        |      |   |      |  |                                                              |           |  |   |          

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



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##### Table of Contents

COUGAR BIOTECHNOLOGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Business and Basis of Presentation:

Business:

Cougar Biotechnology, Inc.
(Cougar) is a development stage biopharmaceutical company based in Los Angeles, California, that in-licenses novel therapeutics and develops such therapeutics for the treatment of cancer. Cougars strategy is to license technologies
that have previously been tested in clinical trials, enabling it to obtain an initial indication of the drugs safety and biological activity in humans before committing capital to the drugs development. In October 2008, Cougar
established and incorporated Cougar Biotechnology Limited, a wholly owned subsidiary, for the sole purpose of serving as Cougars legal representative in the United Kingdom and the European Union in connection with Cougars clinical trial
activity in those countries.

Basis of Presentation:

The accompanying consolidated financial statements reflect the accounts of Cougar Biotechnology, Inc. and its wholly-owned subsidiary, Cougar Biotechnology Limited (collectively Cougar Biotechnology or the
Company). The Company is a development stage enterprise since it has not yet generated any revenue from the sale of products and, through December 31, 2008, its efforts have been principally devoted to identifying and acquiring, by
license or otherwise, drug candidates for the treatment of cancer. Accordingly, the accompanying consolidated financial statements have been prepared in accordance with the provisions of Statement of Financial Accounting Standards (SFAS)
No. 7, Accounting and Reporting by Development Stage Enterprises. The Company has reported a net loss of $59,816,801 and negative cash flows from operating activities of $44,668,298 for the year ended December 31, 2008. The net
loss from date of inception, May 14, 2003, to December 31, 2008 amounted to $114,885,698 and our negative cash flow from operating activities from date of inception to December 31, 2008 amounted to $85,664,808. Management believes
that the Company will continue to incur net losses and negative net cash flows from operating activities through at least 2011.

The
Companys continued operations will depend on its ability to raise additional funds through various potential sources such as equity and debt financing. Through December 31, 2008, a significant portion of its financing has been through
private placements of common stock and preferred stock. The Company will continue to fund operations with cash on hand and investments and through the similar sources of capital previously described. The Company can give no assurances that any
additional capital it is able to obtain will be sufficient to meet its needs. Given the current and desired pace of clinical development of its three product candidates, management estimates that the Company has sufficient cash on hand to fund
clinical development into 2010. The Company, however, may choose to raise additional capital before 2010 in order to fund its future development activities, likely by selling shares of capital stock or other securities. If it is unable to raise
additional capital, the Company will likely be forced to curtail desired development activities, which will delay the development of its product candidates. There can be no assurance that such capital will be available on favorable terms or at all.
The Company will need additional financing thereafter until it can achieve profitability, if ever.

Note 2Merger with Public Company:

On April 3, 2006, pursuant to an Agreement and Plan of Merger dated February 27, 2006 (the Merger Agreement) by
and among the Company, SRKP 4, Inc., a Delaware corporation (SRKP), and SRKP Acquisition Corp., a Delaware corporation and wholly owned subsidiary of SRKP, the Company entered into a reverse merger transaction whereby SRKP
Acquisition Corp. merged with and into the Company, with the Company remaining as the surviving corporation and a wholly owned subsidiary of SRKP (the Merger). Pursuant to the Merger Agreement, each share of outstanding common stock and
preferred stock of the Company automatically converted into shares of SRKP common stock and preferred stock, respectively, at a conversion



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##### Table of Contents

ratio of 0.38411. All share and per share information in the consolidated financial statements has been restated to retroactively reflect the conversion
ratio of 0.38411. In consideration for their shares of the Companys pre-merger capital stock and, in accordance with the Merger Agreement, the Companys stockholders received an aggregate of 4,607,105 shares of SRKP common stock and
9,486,752 shares of SRKPs newly designated Series A Convertible Preferred Stock. Upon completion of the Merger and the redemption of all pre-merger shares of SRKPs capital stock, as more fully discussed below, the Companys
stockholders held 100% of SRKP capital stock. In addition, the Company assumed all of the rights and obligations relating to all other securities convertible into and exercisable for shares of the Companys capital stock outstanding immediately
prior to the Merger, which constitute, on a fully-diluted basis, the rights to acquire an aggregate of 2,327,299 shares of SRKP common stock. Subsequent to the Merger, the holders of the Companys capital stock held the same percentage of the
Companys capital stock after effectiveness of the Merger as they held immediately prior to the Merger.

In addition, in accordance
with the terms of the Merger, upon the effective time of the Merger, the board of directors and officers of SRKP were replaced by the directors and officers of the Company. The business of SRKP was abandoned and the business plan of the Company was
adopted. The transaction was therefore recorded as a reverse acquisition with the Company as the acquiring party and SRKP as the acquired party for accounting purposes. On April 6, 2006, the Company completed a short-form merger with SRKP,
whereby the Company merged with and into SRKP, and SRKPs name was changed to Cougar Biotechnology, Inc.

Contemporaneously with the closing of the Merger, and pursuant to the terms of a Redemption Agreement dated February 27, 2006 by and among SRKPs then-current stockholders, SRKP completed a redemption of an aggregate of 2,700,000
shares of common stock from such former stockholders for total consideration of $200,000 less the aggregate amount of fees, costs and expenses of attorneys, accountants and other service providers incurred by SRKP on or prior to the effective time
of the Merger and an aggregate of $12,500 to be paid to such former stockholders on a pro rata basis in satisfaction of loans made by such individuals to SRKP. The 2,700,000 shares constituted all of the issued and outstanding shares of SRKPs
capital stock, on a fully-diluted basis, immediately prior to the Merger.

The merger of a private operating company into a non-operating
public shell corporation with nominal net assets is considered to be a capital transaction, in substance, rather than a business combination, for accounting purposes. Accordingly, the Company treated this transaction as a capital transaction without
recording goodwill or adjusting any of its other assets or liabilities. The consideration in the amount of $200,000 paid to the former stockholders of SRKP was recorded as an other expense item and included in the Companys net loss for the
year ended December 31, 2006.

Note 3Significant Accounting Policies:

Significant accounting policies followed in the preparation of these consolidated financial statements are as follows:

Use of Estimates

The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the
balance sheet and reported amounts of expenses for the periods presented. Accordingly, actual results could differ from those estimates.

Consolidation
Policy

The consolidated financial statements include the accounts of the Company and its subsidiary. All significant inter-company
transactions and accounts have been eliminated.



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##### Table of Contents

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an initial maturity date of three months or less at the date of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates fair
value.

Investment Securities

Investment securities consist of high-grade marketable debt securities of financial institutions and other corporations. The Company classifies all investment securities (short-term and long-term) as available-for-sale, as the sale of such
securities may be required prior to maturity to implement managements strategies. These securities are carried at fair value, with the unrealized gains and losses, if material, reported as a component of accumulated other comprehensive income
(loss) in stockholders equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis. A decline in the market value of any available-for-sale security
below cost that is determined to be other than temporary results in a revaluation of its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. No such impairment charges were
recorded for any period presented. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the straight-line method. Interest income is recognized when earned. At December 31, 2008,
unrealized gains on investment securities of approximately $19,036, made up of unrealized gains of $80,953 and unrealized losses of $61,917, have been recorded as other comprehensive income. The amortization and accretion and interest income are
included in interest income within the consolidated statements of operations.

Assets Measured at Fair Value on a Recurring Basis

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 provides a single
definition of fair value and a common framework for measuring fair value as well as new disclosure requirements for fair value measurements used in financial statements. Under SFAS 157, fair value is determined based upon the exit price that would
be received by a company to sell an asset or paid a company to transfer a liability in an orderly transaction between market participants, exclusive of any transaction costs. Fair value measurements are determined by either the principal market or
the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company has used the most advantageous market, which is
the market from which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transactions costs are
only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. Adoption of SFAS 157 did not have a material effect on the Companys consolidated financial position,
results of operations or cash flows through December 31, 2008.

SFAS 157 creates a three-level hierarchy to prioritize the inputs used
in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority and Level 3 having the lowest.



|         |  |                                                                                                                                                                                                                                                     
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                
|         | 
|Level 2: |  | Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all
significant inputs are observable in active markets.
|         | 
|Level 3: |  | Valuations derived from valuation techniques in which one or more significant inputs are unobservable.                                                                                                                                              



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##### Table of Contents

Following are the major categories of assets measured at fair value on a recurring basis as of
December 31, 2008, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):



|                          |  |         |            |         |   |            |  |       |   |  |   |           
|------------------------- |  | ------- | ---------- | ------- | - | ---------- |  | ----- | - |  | - | ----------
|                          |  | Level 1 |            | Level 2 |   | Level 3    |  | Total
|Cash equivalents          |  | $       | 30,560,082 |         | $ | 10,002,004 |  | $     |  |  | $ | 40,562,086
|Treasury bills            |  |         |           |         |   | 35,498,123 |  |       |  |  |   | 35,498,123
|Corporate debt securities |  |         |           |         |   | 10,248,654 |  |       |  |  |   | 10,248,654
|Asset-backed securities   |  |         |           |         |   | 4,478,902  |  |       |  |  |   | 4,478,902 
|                          |  |         |            |         |   |            |  |       |   |  |   |           
|                          |  | $       | 30,560,082 |         | $ | 60,227,683 |  | $     |  |  | $ | 90,787,765
|                          |  |         |            |         |   |            |  |       |   |  |   |           

The Companys investments in short-term and long-term investment securities are exposed to
price fluctuations. The fair value measurements for short-term and long-term investment securities are based upon the quoted price in active markets multiplied by the number of securities owned, exclusive of any transaction costs and without any
adjustments to reflect discounts that may be applied to selling a large block of securities at one time. The Companys Level 2 investment securities are valued based on a weighted average price for each security. Market prices from a variety of
industry standard data providers, security master files from large financial institutions, and other third-part sources are placed in a distribution-curvebased algorithm to determine the market value on a given date. The Company does not believe
changes in the fair value of these assets will materially differ from the amount that could be realized upon settlement or that the changes in fair value will have a material effect on the Companys consolidated results of operations or
financial position. However, the ultimate amount that could be realized upon sale or settlement is dependent on several factors including external market conditions, the terms and conditions of a sale agreement, the counterparty to a sale agreement,
the investments liquidity in capital markets, and the length of time to liquidate an equity investment.

Property and Equipment

Property and equipment are recorded at cost and depreciated over estimated useful lives ranging from three to five years using the straight-line method.
Leasehold improvements are recorded at cost and amortized over the shorter of their useful lives or the term of the lease by use of the straight-line method. Maintenance and repair costs are charged to operations as incurred.

The Company assesses the impairment of long-lived assets, primarily property and equipment whenever events or changes in business circumstances indicate
that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been an impairment, by comparing the assets carrying value with its fair value, as measured by the anticipated
undiscounted net cash flows of the asset. Should impairment exists, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through December 31, 2008.

Research and Development Expenses

Research and
development costs are charged to operations as incurred. Research and development expenses include costs associated with services provided by consultants who conduct research on behalf of the Company, contract organizations for pre-clinical
development, manufacturing of clinical materials, and clinical trials. In the case of clinical trials, a portion of the estimated cost normally relates to the projected cost to treat a patient in the trials, and this cost is recognized over the
estimated term of the study based on the number of patients enrolled in the trial on an ongoing basis, beginning with patient enrollment. The Company determines the total cost of a given study based on the terms of the related contract. The Company
accrues for costs incurred as services are being provided by monitoring the status of the trial and the invoices received from its external service providers. As actual costs become known, the Company adjusts its accruals in that period. Costs
related to the acquisition of technology rights and patents for which development work is still in process are charged to operations as incurred and considered a component of research and development costs.



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Concentration of Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, principally consist of cash, cash equivalents, and investment securities. The Companys cash and cash equivalents in
excess of the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insured limit at December 31, 2008 were approximately $793,100 due to the Temporary Liquidity Guarantee Program and the fact that the Company
has invested in many Treasury Bills and other government investments. The Company invests its excess cash primarily in marketable debt securities of financial institutions, other corporations, and government agencies with strong credit ratings. The
Company has adopted an investment policy that includes guidelines related to diversification and maturities to maintain safety and liquidity. Accordingly, the Company does not believe it is exposed to any significant credit risk.

Stock-Based Compensation

The Companys 2003
Stock Option Plan (the 2003 Plan) was adopted by the Board of Directors on May 15, 2003. Pursuant to the 2003 Plan, the Company may grant incentive stock options and nonqualified stock options, as well as other forms of equity-based
compensation. Incentive stock options may be granted only to employees, while consultants, employees, officers and directors are eligible for the grant of nonqualified options under the 2003 Plan. The maximum term of stock options granted under the
2003 Plan is 10 years. The exercise price of incentive stock options granted under the 2003 Plan must be at least equal to the fair market value of such shares on the date of grant. Through December 31, 2008, a total of 4,600,000 shares of the
Companys common stock have been reserved for issuance under the 2003 Plan.

As required, the Company adopted SFAS No. 123(R),
Share-Based Payment (SFAS 123(R)) on January 1, 2006. SFAS 123(R) requires the fair value of all share-based payments to employees, including grants of stock options, to be recognized in the consolidated statement of
operations over the requisite service period. The Company will continue to account for the fair value of all share-based payments to non-employees, including grants of stock options, in a similar manner as required by SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS 123) and Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services (EITF 96-18). SFAS 123(R) eliminated the option provided by SFAS 123 that was used by the Company prior to January 1, 2006 to account for stock options granted to employees using the
intrinsic value method under Accounting Principles Board (APB) Opinion 25, Accounting for Stock Issued to Employees (APB 25). Under APB 25, the Company only recorded compensation expense for stock options granted
to employees for the excess, if any, of the fair value over the exercise price of an option as of the date of grant.

The Company adopted
SFAS 123(R) using the modified-prospective method and, accordingly, consolidated financial statement amounts for periods prior to January 1, 2006 have not been restated to reflect the fair value method of recognizing compensation cost relating
to employee stock options. The adoption of the SFAS 123(R) fair value method had and will continue to have a material impact on the Companys results of operations, although it will have no impact on the Companys cash flows or overall
consolidated financial position. Under SFAS 123(R), employee option grants are generally valued at the grant date and those valuations do not change once they have been established. As a result, the stock-based compensation expense the Company
recorded in 2008 was based largely upon the amortization of costs for awards granted in 2008 and amounts related to costs of unvested options granted in prior periods. The amounts recognized in the accompanying consolidated statements of operations
related to employee stock-based compensation were $4,938,174, $1,947,180, and $870,586 for the years ended December 31, 2008, 2007, and 2006, respectively, and was included in general and administrative and research and development operating
expenses.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. As allowed
by SFAS 123(R) for companies with a short period of publicly traded stock history, the Companys estimate of expected volatility is based on the average expected volatilities of a sampling of six companies with similar attributes to the
Company, including industry, stage of life cycle, size and financial



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##### Table of Contents

leverage. To date, the Company has only awarded plain vanilla options as determined by Securities and Exchange Commission Staff Accounting
Bulletin (SAB) 107, Share Based Payment. The Company used the simplified method for determining the expected life of the options granted. This method is allowed until December 31, 2008, after which the
Company will be required to adopt another method to determine the expected life of future option awards. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of
grant valuation. SFAS 123(R) does not allow companies to account for option forfeitures as they occur; instead, estimated option forfeitures must be calculated when the option is granted to reduce the option expense to be recognized over the life of
the award and updated upon receipt of further information as to the amount of options expected to be forfeited. The fair value of options granted to employees was estimated using the Black-Scholes option-pricing model, with the following
weighted-average assumptions used during the years ended December 31:



|                        |  |           |   |  |           |   |  |           |  
|----------------------- |  | --------- | - |  | --------- | - |  | --------- | -
|                        |  | 2008      |   |  | 2007      |   |  | 2006      |  
|Dividend yield          |  | 0         | % |  | 0         | % |  | 0         | %
|Expected volatility     |  | 68        | % |  | 78        | % |  | 72        | %
|Risk-free interest rate |  | 3.4       | % |  | 4.7       | % |  | 4.7       | %
|Expected life           |  | 6.2 years |   |  | 6.2 years |   |  | 5.8 years |  

In accordance with the provisions of SFAS 123(R) and EITF Issue No. 96-18, all other
issuances of common stock, stock options or other equity instruments to non-employees (including consultants and all members of the Scientific Advisory Board) as consideration for goods or services received by the Company are accounted for based on
the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). Any options issued to non-employees are recorded in expense and additional paid-in capital in stockholders
equity or current liabilities over the applicable service periods using variable accounting through the vesting date based on the fair value of the options at the end of each period. During the year ended December 31, 2008, the Company
recognized expense (increase in fair value of the stock option grants) of $476,316. For the years ended December 31, 2007 and 2006, the Company recognized expenses of $5,089,198 and $851,048, respectively, for services rendered and such
expenses were included in the accompanying consolidated statements of operations.

The fair value of options granted to non-employees was
estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions at December 31:



|                        |  |         |   |  |           |   |  |         |  
|----------------------- |  | ------- | - |  | --------- | - |  | ------- | -
|                        |  | 2008    |   |  | 2007      |   |  | 2006    |  
|Dividend yield          |  | 0       | % |  | 0         | % |  | 0       | %
|Expected volatility     |  | 75      | % |  | 78        | % |  | 75      | %
|Risk-free interest rate |  | 2.3     | % |  | 4.0       | % |  | 4.7     | %
|Contractual term        |  | 8 years |   |  | 8.5 years |   |  | 4 years |  

The price volatility for the calculation of value of options to non-employees was computed using
an average of historical volatility of six public companies in the same industry.



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##### Table of Contents

Activity with respect to options granted under the 2003 Plan is summarized as follows:



|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|------------------------------------------------------ |  | --------- | - |  | ---------------------------- | ----- | ----------------------------------------------- | ---- | ----------------------- | - | ----------
|                                                       |  | Shares    |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm (years) |      | AggregateIntrinsicValue
|Granted in the period ended December 31, 2003          |  | 38,411    |   |  | $                            | 0.39  |                                                 |      |                         |   |           
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|Outstanding at December 31, 2003                       |  | 38,411    |   |  |                              | 0.39  |                                                 |      |                         |   |           
|Granted in the year ended December 31, 2004            |  | 597,292   |   |  |                              | 1.25  |                                                 |      |                         |   |           
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|Outstanding at December 31, 2004 and December 31, 2005 |  | 635,703   |   |  |                              | 1.20  |                                                 |      |                         |   |           
|Granted in the year ended December 31, 2006            |  | 1,236,853 |   |  |                              | 4.55  |                                                 |      |                         |   |           
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|Outstanding at December 31, 2006                       |  | 1,872,556 |   |  |                              | 3.41  |                                                 |      |                         |   |           
|Granted in the year-ended December 31, 2007            |  | 698,994   |   |  |                              | 20.44 |                                                 |      |                         |   |           
|Exercised                                              |  | (13,588   | ) |  |                              | 4.50  |                                                 |      |                         |   |           
|Forfeitures                                            |  | (30,000   | ) |  |                              | 11.17 |                                                 |      |                         |   |           
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|Outstanding at December 31, 2007                       |  | 2,527,962 |   |  |                              | 8.02  |                                                 |      |                         |   |           
|Granted in the year-ended December 31, 2008            |  | 815,700   |   |  |                              | 28.90 |                                                 |      |                         |   |           
|Exercised                                              |  | (126,410  | ) |  |                              | 4.90  |                                                 |      |                         |   |           
|Forfeitures                                            |  | (30,100   | ) |  |                              | 22.53 |                                                 |      |                         |   |           
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|Outstanding at December 31, 2008                       |  | 3,187,152 |   |  |                              | 13.35 |                                                 | 7.76 |                         | $ | 43,727,876
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           
|Exercisable at December 31, 2008                       |  | 1,573,022 |   |  | $                            | 4.96  |                                                 | 6.66 |                         | $ | 33,109,709
|                                                       |  |           |   |  |                              |       |                                                 |      |                         |   |           

At December 31, 2008, total estimated unrecognized employee compensation cost related to
non-vested stock options granted prior to that date was $19,090,862, which is expected to be recognized over a weighted-average period of 2.5 years. The weighted average grant date fair values of options granted during the years ended
December 31, 2008, 2007 and 2006 were $18.36, $14.66 and $2.97 per share, respectively.

During the year ended December 31, 2008,
employees exercised their right to purchase 126,410 shares of common stock, pursuant to vested stock option grants. The intrinsic values of the shares exercised for the years ended December 31, 2008, 2007 and 2006 were $3,524,504, $267,469 and
$0, respectively.

Income Taxes

The
Company accounts for income taxes and related accounts under the liability method. Deferred tax assets and liabilities are determined based on differences between the consolidated financial statement carrying amounts and the income tax bases of
assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In July 2006, the
Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109 (FIN 48), which clarifies the accounting
for uncertainty in tax positions. FIN 48 provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not of being sustained upon an examination by tax
authorities. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The Company adopted FIN 48 on January 1, 2007. The adoption did not have a material impact on the consolidated results of operations or financial position for 2006 (See Note 17).

From time to time, the Company may be assessed interest or penalties by its tax jurisdictions, although, historically, there have been no such
assessments and the Company believes that any potential future assessments



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would be minimal and immaterial to the Companys consolidated results of operations and financial position. In the event the Company receives an
assessment for interest and/or penalties, it would be classified in the consolidated financial statements as part of the provision for income taxes.

Net Loss per Common Share

Basic net loss per common share is computed by dividing net loss applicable to common
stockholders by the weighted-average number of common shares outstanding during the periods presented, as required by SFAS No. 128, Earnings Per Share. For the purpose of determining basic net loss per common share, dividends
accreted on preferred stock and accreted issuance costs have been added to the net loss to arrive at net loss applicable to common stock. Diluted earnings per common share have not been presented because exercise of the Companys outstanding
options and warrants would have been anti-dilutive due to the Companys net losses. Potentially dilutive securities excluded from the calculations amounted to 3,611,561 shares at December 31, 2008, were comprised of 3,187,152 shares
issuable upon exercise of options and 424,409 shares issuable upon exercise of warrants. Potentially dilutive securities excluded from the calculations amounted to 3,061,297 shares at December 31, 2007, were comprised of 2,527,962 shares
issuable upon exercise of options and 533,335 shares issuable upon exercise of warrants. Potentially dilutive securities excluded from the calculations amounted to 12,546,962 shares at December 31, 2006, were comprised of 9,486,752 shares of
Series A Convertible Preferred Stock, 1,872,556 shares issuable upon exercise of stock options and 1,187,654 shares issuable upon exercise of warrants.

Debt and Note Issuance Costs and Debt Discounts

Debt and note issuance costs related to obtaining a line of credit and the
issuance of notes and debt discounts attributable to the value of warrants issued with the notes were amortized to interest expense over the life of the related debt instruments on a straight-line basis, which approximates the effective interest
method.

Warrants Issued with Debt Instruments

In November 2005 and January 2006, the Company issued convertible notes and warrants pursuant to a bridge financing. Since conversion of the bridge notes could have resulted in a conversion into an indeterminable number of common shares,
the Company determined that under the guidance in EITF Issue No. 00-19 Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Companys Own Stock (EITF 00-19), the Company was prohibited
from concluding that it had sufficient authorized and unissued shares to net-share settle any warrants or options granted to non-employees. Therefore, on the date convertible notes were issued, the Company recorded the related fair value of the
warrants to liabilities. The fair value of outstanding non-employee options were also reclassified from additional paid-in capital in equity to current liabilities upon issuance of the convertible notes. Additionally, the Company retroactively
revalued a series of warrants issued in combination with a June 2005 debt financing, to fair value in accordance with EITF 00-19. The fair value of all warrants was based on the Black-Scholes option-pricing model and marked to market at the end of
each reporting period in which a change in fair value occurred. Changes in the fair value of warrants were recorded as interest expense. As a result of the change in valuation methods for the warrants issued in 2006 and 2005, a credit of $68,634 was
recorded in 2006.

For warrants and convertible notes payable issued in January 2006, the Company accounted for the value of the warrants
arising from the issuance of debt instruments by allocating the proceeds first to the fair value of warrants, and then any residual amounts to the debt instruments, pursuant to EITF 00-19. The fair value of the warrants was allocated to liabilities
and to note discount. Upon conversion of the convertible notes to stock on April 3, 2006, the Company no longer had equity instruments that could result in conversion into an indeterminable number of common shares. Accordingly, on April 3,
2006 the warrants and non-employee options were reclassified from current liabilities to additional paid-in capital on the consolidated balance sheet.



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The Company accounts for the intrinsic value of beneficial conversion rights arising from the issuance of
convertible debt instruments with non-detachable conversion rights that are in-the-money at the commitment date, pursuant to the consensus of EITF Issue No. 98-05, Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios and EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments. Such values are determined by first allocating an appropriate portion of the proceeds
received from the debt instruments to the warrants included in the exchange based on the fair values of the warrants and the debt instruments as explained above. The intrinsic value of the beneficial conversion rights at the commitment date may also
be recorded as additional paid-in capital or liabilities and debt discount as of that date or, if the terms of the debt instrument are contingently adjustable, may only be recorded if a triggering event occurs and the contingency is resolved.

Deferred Rent

The Company has entered
into operating lease agreements for its corporate offices that contain provisions for future rent increases. The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the
lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent, which is reflected as a separate line item in the accompanying consolidated balance sheets. Additionally, the Company recorded as
deferred rent the cost of leasehold improvements to the corporate offices paid by the landlord, which is amortized on a straight-line basis over the term of the lease.

Recently Issued Accounting Standards

In October 2008, the FASB issued Staff Position
(FSP) No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. This FSP applies to financial assets within the scope of accounting pronouncements that require or permit fair
value measurements in accordance with SFAS No. 157 and clarifies the application of SFAS 157 in a market that is not active and provides guidance on key considerations in determining the fair value of a financial asset when the market for that
financial asset is not active. The guidance provided by this FSP, which was effective upon issuance, did not have a material impact on the Companys consolidated results of operations or financial position.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159).
The fair value option established by SFAS 159 permits a company to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has
been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. SFAS 159 was effective for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. In adopting SFAS 159, the Company did not elect the fair value option for any financial assets or financial liabilities. The impact of SFAS 159 on the consolidated results of operations or financial position was thus negligible.

In June 2007, the FASB issued EITF Issue No. 07-03, Accounting for Nonrefundable Advance Payments for Goods or Services
Received for Use in Future Research and Development Activities (EITF 07-03). This Issue addresses an issuers accounting for the nonrefundable portion of advance payments for future goods or services and specifies that the
nonrefundable portion of advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as related goods are
delivered or related services are performed. Entities should continue to evaluate whether they expect the goods to be delivered or the services to be rendered. If an entity does not expect the goods to be delivered or the services to be rendered,
the capitalized advance payment should be charged to expense. This Issue was effective for financial statements issued for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. The Company experienced
negligible impact, if any, from the implementation of EITF 07-03.



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In November 2007, FASB issued EITF Issue No. 07-01, Accounting for Collaborative
Arrangements (EITF 07-01). This Issue addresses an issuers accounting for shared cost and revenues in collaborative arrangements in which a separate legal entity is not created. A collaborative arrangement falls within the
scope of this issue only if the parties are actively involved and are exposed to significant risks and rewards that are tied to the commercial success of the endeavor. Costs incurred and revenue recognize on collaborative arrangements should be
reported by each party based on the guidance in EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent. Payments between parties of a collaborative arrangement should be reported based on the nature of
the arrangement and its contractual terms, the nature of each entitys business, and whether there are any existing generally accepted accounting principles that should be applied. This issue is effective for financial statements issued for
fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. The Company currently is not involved with any collaborative arrangements and experienced no impact from the implementation of EITF 07-01.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)). SFAS 141(R)
significantly changed the accounting for and reporting of business combination transactions in consolidated financial statements. SFAS 141(R) is effective for the first annual reporting period beginning on or after December 15, 2008. Thus, the
Company is required to adopt this standard on January 1, 2009. Earlier adoption is prohibited. The Company does not expect the adoption of SFAS 141(R) will have a material impact on the consolidated results of operations or financial position.

In December 2007, the FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interest in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 significantly changed the accounting for and reporting of noncontrolling (minority) interests in consolidated financial statements. SFAS 160 is effective
for the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company does not expect the adoption of SFAS 160 will have a material impact on the consolidated results of operations or
financial position.

The FASB and the SEC have issued certain other accounting pronouncements as of December 31, 2008, that will
become effective in subsequent periods; however, the Company does not believe that any of those pronouncements would have significantly affected the financial accounting measurements or disclosures had they been in effect during the years ended
December 31, 2008, 2007 and 2006 or that they will have a significant effect at the time they become effective.



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Note 4Cash and Cash Equivalents and Securities Available-for-sale:

Cash, cash equivalents and marketable securities held as available-for-sale consisted of the following:



|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|----------------------------------------- |  | --------------------------------------------------- | ----------- | --------------- | - | --------------- |  | ---------------- | ------ |  | ------------------- | ------- | - |  | - | -----------
|                                          |  | Cash and Cash Equivalents and Marketable Securities
|                                          |  | Amortized Cost                                      |             | AccruedInterest |   | UnrealizedGains |  | UnrealizedLosses |        |  | Estimated FairValue
|December 31, 2008                         |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|Cash and cash equivalents:                |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|U.S. government and agency obligations    |  | $                                                   | 9,979,444   |                 | $ |                |  | $                | 266    |  | $                   |        |   |  | $ | 9,979,710  
|Other money market securities             |  |                                                     | 30,582,376  |                 |   |                |  |                  |       |  |                     |        |   |  |   | 30,582,376 
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|                                          |  |                                                     | 40,561,820  |                 |   |                |  |                  | 266    |  |                     |        |   |  |   | 40,562,086 
|Marketable securities available-for-sale: |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|U.S. government and agency obligations    |  |                                                     | 35,417,436  |                 |   |                |  |                  | 80,687 |  |                     |        |   |  |   | 35,498,123 
|Corporate obligations                     |  |                                                     | 10,114,796  |                 |   | 146,938         |  |                  |       |  |                     | (13,080 | ) |  |   | 10,248,654 
|Asset-backed securities                   |  |                                                     | 4,519,039   |                 |   | 8,700           |  |                  |       |  |                     | (48,837 | ) |  |   | 4,478,902  
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|                                          |  |                                                     | 50,051,271  |                 |   | 155,638         |  |                  | 80,687 |  |                     | (61,917 | ) |  |   | 50,225,679 
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|                                          |  | $                                                   | 90,613,091  |                 | $ | 155,638         |  | $                | 80,953 |  | $                   | (61,917 | ) |  | $ | 90,787,765 
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|December 31, 2007                         |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|Cash and cash equivalents:                |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|Other money market securities             |  | $                                                   | 83,523,276  |                 | $ |                |  | $                |       |  | $                   |        |   |  | $ | 83,523,276 
|Commercial paper                          |  |                                                     | 11,868,728  |                 |   |                |  |                  |       |  |                     |        |   |  |   | 11,868,728 
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|                                          |  |                                                     | 95,392,004  |                 |   |                |  |                  |       |  |                     |        |   |  |   | 95,392,004 
|Marketable securities available-for-sale: |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|Commercial paper                          |  |                                                     | 9,368,546   |                 |   |                |  |                  |       |  |                     |        |   |  |   | 9,368,546  
|Certificates of deposit                   |  |                                                     | 1,999,619   |                 |   | 45,587          |  |                  |       |  |                     |        |   |  |   | 2,045,206  
|Corporate obligations                     |  |                                                     | 19,853,566  |                 |   | 263,481         |  |                  |       |  |                     |        |   |  |   | 20,117,047 
|Asset-backed securities                   |  |                                                     | 7,447,990   |                 |   | 22,862          |  |                  |       |  |                     |        |   |  |   | 7,470,852  
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|                                          |  |                                                     | 38,669,721  |                 |   | 331,930         |  |                  |       |  |                     |        |   |  |   | 39,001,651 
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            
|                                          |  | $                                                   | 134,061,725 |                 | $ | 331,930         |  | $                |       |  | $                   |        |   |  | $ | 134,393,655
|                                          |  |                                                     |             |                 |   |                 |  |                  |        |  |                     |         |   |  |   |            

To date the Company has not recorded any impairment charges on marketable securities related to
other-than-temporary declines in market value. The Company would recognize an impairment charge when the decline in the estimated value of a marketable security below the amortized cost is determined to be other-than-temporary. The Company considers
various factors in determining whether to recognize an impairment charge, including the duration of time and the severity to which the fair value has been less than our amortized cost, any adverse changes in the investees financial condition,
and our intent and ability to hold the marketable security for a period of time sufficient to allow for any anticipated recovery in market value.

Available-for-sale securities are comprised entirely of marketable debt securities of financial institutions and other corporations. The fair value of investment securities by contractual maturity at December 31 was as follows:



|                                       |  |                   |  |      |            |      |   |           
|-------------------------------------- |  | ----------------- |  | ---- | ---------- | ---- | - | ----------
|                                       |  | Maturity in Years |  | 2008 |            | 2007
|U.S. government and agency obligations |  | 1 or less         |  | $    | 35,498,123 |      | $ |          
|Corporate obligations                  |  | 1 or less         |  |      | 10,248,654 |      |   | 20,117,047
|Asset-backed securities                |  | 1 or less         |  |      | 4,478,902  |      |   | 7,470,852 
|Commercial paper                       |  | 1 or less         |  |      |           |      |   | 9,368,546 
|Certificate of deposits                |  | 1 or less         |  |      |           |      |   | 2,045,206 
|                                       |  |                   |  |      |            |      |   |           
|Total available-for-sale securities    |  |                   |  | $    | 50,225,679 |      | $ | 39,001,651
|                                       |  |                   |  |      |            |      |   |           



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Note 5Prepaid Expenses and Other Assets:

Prepaid expenses and other assets at December 31 consisted of the following:



|                                  |  |      |         |      |   |          
|--------------------------------- |  | ---- | ------- | ---- | - | ---------
|                                  |  | 2008 |         | 2007
|Product manufacturing             |  | $    | 336,500 |      | $ | 550,000  
|Insurance                         |  |      | 171,179 |      |   |         
|Prepaid rent                      |  |      | 62,968  |      |   |         
|Clinical investigational services |  |      | 113,430 |      |   | 699,374  
|Other                             |  |      | 127,519 |      |   | 51,728   
|                                  |  |      |         |      |   |          
|Totals                            |  | $    | 811,596 |      | $ | 1,301,102
|                                  |  |      |         |      |   |          

Note 6Property and Equipment:

Property and equipment at December 31 consisted of the following:



|                                                |  |      |           |   |      |   |          |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | -
|                                                |  | 2008 |           |   | 2007 |  
|Furniture and fixtures                          |  | $    | 387,016   |   |      | $ | 154,502  |  
|Computer equipment                              |  |      | 339,966   |   |      |   | 161,588  |  
|Leasehold improvements                          |  |      | 288,011   |   |      |   | 255,417  |  
|                                                |  |      |           |   |      |   |          |  
|                                                |  |      | 1,014,993 |   |      |   | 571,507  |  
|Less: accumulated depreciation and amortization |  |      | (360,518  | ) |      |   | (117,242 | )
|                                                |  |      |           |   |      |   |          |  
|Totals                                          |  | $    | 654,475   |   |      | $ | 454,265  |  
|                                                |  |      |           |   |      |   |          |  

Note 7Accrued Expenses:

Accrued expenses at December 31 consisted of the following:



|                                       |  |      |           |      |   |          
|-------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                       |  | 2008 |           | 2007
|Accrued research and development costs |  | $    | 5,886,935 |      | $ | 1,586,301
|Accrued compensation                   |  |      | 1,094,355 |      |   | 561,985  
|Other                                  |  |      | 602,691   |      |   | 221,269  
|                                       |  |      |           |      |   |          
|Totals                                 |  | $    | 7,583,981 |      | $ | 2,369,555
|                                       |  |      |           |      |   |          

Note 8Private Placement and Other Offering:

On April 3, 2006, immediately prior to the reverse acquisition of SRKP (See Note 2  Merger with Public Company), the Company completed a
private placement of 8,803,332 units of its equity securities each unit constituting 0.9 shares of Company preferred stock and 0.1 shares of Company common stock. The purchase price per unit was $4.50, resulting in total gross proceeds of
approximately $39,650,000. Accordingly, the Company issued 7,922,998 shares of newly designated Series A Redeemable Convertible Preferred Stock (Series A) and 880,334 shares of its common stock to investors in the offering.
Cowen and Company (Cowen) and Paramount BioCapital, Inc. (Paramount), where Lindsay A. Rosenwald, M.D., a director of the Company until July 2007 and stockholder of the Company, serves as Chairman and Chief Executive
Officer, acted as placement agents in the offering. Each placement agent received a placement fee of $1,387,750 and was issued a five-year warrant to purchase 440,172 shares of Company common stock at an exercise price of $4.95 per share. The value
of the warrants was determined using the Black-Scholes option pricing model and was approximately $2,400,000, of which $2,160,672 and $239,328 were applicable to Series A and common stock, respectively. The model assumed a risk-free rate of 4.78%, a
five year term and stock volatility of 72%. The



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warrants are exercisable upon written notice of exercise to the Company, together with payment of the exercise price or with a duly executed notice of
cashless exercise. The warrants (and the common stock to be issued upon exercise of the warrants) were not registered, and include restrictions upon transfer. The Company has no obligation to settle any exercise of the placement agent or other
warrants in cash or registered shares; the Company intends to settle only in unregistered shares. The Company provided the warrantholders demand and piggyback registration rights relating to the resale of common stock issuable upon exercise of the
warrants. Additionally, on terms similar to those in the offering, the Company sold 13,322 shares of common stock and 119,895 shares of Series A in consideration of cash proceeds in the amount of approximately $600,000 to Dr. Rosenwald. In
addition to the placement fees, the gross proceeds from the private placement and the related offering were reduced by reimbursable expenses associated with the placement totaling approximately $76,000, of which $26,000 was paid to Paramount, and
other expenses totaling approximately $147,000. The net proceeds of the offering totaled $37,251,520, of which $33,526,368 was allocated to Series A and $3,725,152 was allocated to common stock. As a result, the Series A was initially recorded at
$31,356,696, which was comprised of the allocated proceeds less the fair value of warrants applicable to the Series A of $2,160,672. The $4,858,834 difference between the par value of the Series A and the amount initially recorded represents
issuance cost that was accreted from the date of sale to the date it was converted to common stock.

On May 2, 2007, the Company
entered into a securities purchase agreement with certain accredited institutional investors pursuant to which the Company agreed to sell a total of 2,500,000 shares of common stock in a private placement at a price of $20.00 per share, for gross
proceeds of $50,000,000 before deducting selling commissions and expenses. This offering closed on May 8, 2007. In connection with this offering, on April 29, 2007, the Company entered into a letter agreement with Leerink Swann LLC
(Leerink) whereby Leerink agreed to act as placement agent in connection with the placement of the common shares. In consideration for its services, the Company agreed to pay Leerink an aggregate cash commission equal to 6% of the
gross cash proceeds from the May Offering, or approximately $3 million. The Company also paid Leerink $50,000 as a non-accountable, reimbursement allowance. Additionally, the Company agreed to pay Paramount a fee equal to 0.3% of the gross proceeds
from this offering $150,000 (the Waiver Fee), in consideration of Paramounts agreement to waive its right of first refusal to participate as a placement agent pursuant to an October 6, 2005 agreement, as amended, between the
Company and Paramount. Leerink agreed to reduce its placement fee by an amount equal to 50% ($75,000) of the Waiver Fee.

Pursuant to
the May 2007 private placement, the Company agreed to file within 30 days following the closing of the offering a registration statement covering resale of the shares sold, and use its reasonable best efforts to cause the registration statement to
be effective within 60 days after the closing date or, in the event the SEC reviewed the registration statement, within 90 days after such closing date. In the event the Company did not file the registration statement within the required timeframe
or, after the registration statement became effective, such registration ceases to be effective and the holders are not permitted to sell such registered securities for 20 consecutive days or more than 40 days during any 12-month period, the Company
would be required to make compensatory payments in the amount equal to 1% of the aggregate purchase price paid by the subscribers for each 30-day period or prorated portion thereof in which the Company is in default of its obligation to register the
shares or have the registration statement declared and remain effective. However, in no event will the Company be required to pay an aggregate amount that exceeds 16% of the aggregate purchase price paid by the investors. The registration statement
was filed with the SEC on May 29, 2007 and was declared effective on June 8, 2007 and has continuously remained effective through December 31, 2008.

On December 14, 2007, the Company entered into a securities purchase agreement with various institutional investors pursuant to which the Company agreed to sell in a private placement an aggregate of 3,000,000
shares of its common stock at a price of $29.00 per share, resulting in aggregate gross proceeds of $87,000,000, before deducting selling commissions and expenses. The offering closed on December 21, 2007. In connection with the offering, the
Company engaged Leerink as its sole lead placement agent. In addition, the Company engaged Cowen and Lazard Frères & Co. LLC as co-placement agents. In consideration for their services, the Company agreed to pay to the placement
agents an aggregate cash fee equal to 6% of the total gross proceeds received by



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the Company from the sale of the common stock. The Company also paid the placement agents $48,528 in reimbursable expenses. The Company agreed to pay
Paramount a fee equal to 8.0% of the aggregate placement fee from the offering, or $417,600, in consideration of Paramounts agreement to waive its right of first refusal to participate as a placement agent in this offering pursuant to an
October 6, 2005 agreement, as amended, between the Company and Paramount.

Pursuant to the December 2007 offering, the Company agreed
to file, within 30 days following the closing of the offering a registration statement covering resale of the shares sold in the offering and use its reasonable best efforts to cause the registration statement to be effective within 60 days after
the closing date or, in the event the SEC reviewed the registration statement, within 90 days after such closing date. In the event the Company did not file the registration statement within the required timeframe or, after the registration
statement became effective, such registration ceases to be effective and the holders are not permitted to sell such registered securities for 20 consecutive days or more than 40 days during any 12-month period, the Company would be required to make
compensatory payments in the amount equal to 1% of the aggregate purchase price paid by the investors for each 30-day period or prorated portion thereof in which the Company is in default of its obligation to register the shares or have the
registration statement declared and remain effective. However, in no event will the Company be required to pay an aggregate amount that exceeds 16% of the aggregate purchase price paid by the investors. The registration statement was filed with the
SEC on January 9, 2008 and was declared effective on January 25, 2008 and has remained continuously effective through December 31, 2008.

Note 9Series A Redeemable Convertible Preferred Stock:

On April 3, 2006, in connection with the private
placement and the sale to Dr. Rosenwald (see Note 8) and debt conversion (see Note 15), the Company issued 9,486,752 shares of Series A Redeemable Convertible Preferred Stock, the terms of which are set forth in a Certificate of Designation
filed with the Secretary of State of Delaware, for an aggregate amount of $42,728,037 in cash and debt conversion. The Series A had a stated value of $4.50 per share. Commencing on the date of issue, holders of the Series A are entitled to receive
cumulative dividends on each share of Series A, payable at the election of the Company in kind or in cash, at a rate of 4% per annum of the stated value, payable annually in arrears on each anniversary of the original issuance date. Among other
rights, in the event of a liquidation, dissolution or winding up of the Company, holders of Series A were entitled to receive an amount equal to the greater of the stated value plus an amount equal to all accrued and unpaid dividends and the amount
such holders would have been entitled to receive upon such liquidation event had the Series A been converted immediately prior to such liquidation event.

Pursuant to Rule 5-02.28 of Regulation S-X, the SEC requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (1) at a fixed or
determinable price on a fixed or determinable date; (2) at the option of the holder; or (3) upon the occurrence of an event that is not solely within the control of the issuer. The SEC staff believes the initial carrying amount of
redeemable preferred stock should be its fair value at date of issue. If currently redeemable, the security should be adjusted to its redemption amount at each balance sheet date. The redemption amount at each balance sheet date should include
amounts representing dividends not currently declared or paid but which will be payable under the redemption features or for which ultimate payment is not solely within the control of the registrant. As noted in EITF Topic D-98: Classification
and Measurement of Redeemable Securities, paragraph 15 (Topic D98), If the security is not redeemable currently (for example, because a contingency has not been met), and it is not probable that the security will become
redeemable, subsequent adjustment is not necessary until it is probable that the security will become redeemable.

Management
determined that the redemption of the Series A was outside the Companys control, thus requiring the Company to record the Series A outside of permanent equity. The Series A was not redeemable and mandatory redemption of the Series A was not
probable at December 31, 2006. Therefore, the Company recorded the Series A outside of permanent equity at its fair value at date of issuance and in accordance with guidance from Topic D98, did not believe an adjustment from the carrying amount
to the redemption amount was required at December 31, 2006.



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During the year ended December 31, 2007, 801,230 shares of Series A were converted by stockholders
prior to the automatic conversion of preferred stock to common stock as described below. Accordingly, the carrying value of the converted Series A totaling $3,228,957 was reclassified from Series A to common stock and additional paid-in capital.

The terms of the Series A provided that each share was required to be automatically converted into fully paid non-assessable shares of
common stock at the then-effective conversion rate in the event that the closing sale price of the Companys common stock exceeded 200% of the conversion price of the Series A for 20 consecutive trading days. As of the close of business on
March 8, 2007, the closing sale price of the Companys common stock had exceeded 200% of the Series A conversion price for 20 consecutive trading days. Accordingly, at the close of trading on March 8, 2007, the remaining 8,685,522
shares of Series A outstanding converted to common stock on a one-for-one basis. In conjunction with the mandatory conversion, the carrying value of the converted Series A totaling $35,085,169 was reclassified from Series A to common stock and
additional paid-in capital.

Note 10Preferred Stock Dividends:

Pursuant to the Certificate of Designation of Series A, commencing on the date issued the holders were entitled to receive cumulative dividends on each share of Series A payable at the election of the Company, in-kind
or in cash at a rate of 4% per annum of the stated value, payable in arrears on each anniversary of the original issuance date, April 3, 2006 (Payment Date). If the Company did not elect on or before any Payment Date to pay the
accrued dividends in cash, the dividends were to be automatically paid in-kind. The Company elected to pay the accrued dividends in cash. However, the Company offered each stockholder the option of receiving the payment in unregistered shares of the
Companys common stock at a price of $16.00 per share, the closing price of the Companys common stock on the OTCBB on March 8, 2007. As a result of the mandatory conversion on March 8, 2007, dividends on Series A ceased accruing
at such time. Cumulative dividends in the amount of $1,583,496, or $0.167 per share, were paid through December 31, 2007, and were comprised of $563,075 in cash and $1,020,421, or 63,775 shares, of the Companys common stock. Prior to the
conversion of Series A Preferred Stock, dividends payable were included in Series A in the accompanying consolidated balance sheets.

Note
11Common Stock:

The Company issued 1,632,468 shares of common stock to investors during May 2003 for $750,000 at $0.4595 per
share. Additionally, in May 2003, 288,083 shares were issued to an officer of the Company at $0.0026 per share for a total of $750 in cash. The Company recorded compensation expense of $131,625 for the difference between the fair value of the shares
($0.4595 per share) and the amount paid.

In March 2004, the Company issued 1,632,470 shares of common stock at $2.60 per share or
$4,250,000.

In April 2006, the Company issued 893,656 shares of common stock at $4.50 per share or $3,725,152 in conjunction with the
private placement offering of units (see Note 8). Additionally in April 2006, 160,428 shares were issued through debt conversion at $4.50 per share or $722,560.

In December 2006, the Company issued to certain investors in its April 2006 private placement an aggregate of 178,106 shares of unregistered common stock valued at $4.50 per share in lieu of an aggregate of $801,496
in compensatory cash payments it would otherwise have been required to make under the liquidating damages provision of the stock subscription agreement (see Note 19).

On December 29, 2006, the Company modified a stock option grant for 38,411 shares, increasing the exercise price of the stock option from $0.39 to $2.60 in order to comply with Section 409A of the Internal
Revenue Code of 1986, as amended. In order to compensate the consultant for the increased exercise price, the Company agreed to issue 18,864 shares of restricted common stock valued at $4.50 per share, all of which vested on January 2, 2007.



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During February 2007, 801,230 shares of Series A were converted by stockholders prior to the automatic
conversion of preferred stock to common stock as described below. Accordingly, the carrying value of the converted Series A totaling $3,228,957 was reclassified from Series A to common stock and additional paid-in capital.

As of the close of business on March 8, 2007, the closing sale price of the Companys common stock had exceeded 200% of the Series A conversion
price for 20 consecutive trading days. Accordingly, at the close of trading on March 8, 2007, the remaining 8,685,522 shares of Series A outstanding were converted to common stock on a one-for-one basis. In conjunction with the mandatory
conversion, the carrying value of the converted Series A totaling $35,085,169 was reclassified from Series A to common stock and additional paid-in capital.

In the first quarter of 2007, the Company issued 189,671 shares of common stock at $4.50 per share for payment of liquidated damages totaling $853,520.

In connection with the May 2007 private placement, the Company issued 2,500,000 shares of common stock at $20.00 per share for net proceeds of
$46,846,191.

In May 2007, the Company issued 63,775 shares of common stock at $16.00 per share for payment of preferred stock dividends in
lieu of cash totaling $1,020,421.

In connection with the December 2007 private placement, the Company issued 3,000,000 shares of common
stock at $29.00 per share for net proceeds of $81,690,515.

During the year ended December 31, 2007, warrant-holders exercised their
right to purchase 56,248 shares of the Companys common stock at an exercise price of $8.28 per share. Proceeds from exercise of the warrants for the year ended December 31, 2007 were $465,734. Additionally, during the year ended
December 31, 2007, the Company issued 412,462 shares of common stock to warrant-holders who executed a cashless exercise.

During the
year ended December 31, 2007, stock option holders exercised their right to purchase 13,588 shares of the Companys common stock at an exercise price of $4.50 per share. Proceeds from the exercise of the stock options for the year ended
December 31, 2007 were $61,146.

During the year ended December 31, 2008, warrant holders exercised their right to purchase
26,696 shares of the Companys common stock at an exercise price of $8.28 per share. Proceeds from exercise of the warrants for the year ended December 31, 2008 were $221,043. Additionally, during the year ended December 31, 2008, the
Company issued 78,965 shares of common stock to warrant holders who executed a cashless exercise.

During the year ended December 31,
2008, stock option holders exercised their right to purchase 126,410 shares of the Companys common stock at an average exercise price of $4.90 per share. Proceeds from the exercise of the stock options for the year ended December 31, 2008
were $619,332.

Note 12Line of Credit:

On July 15, 2005, the Company entered into a credit facility with a commercial bank that allowed for borrowing under a line of credit of up to $1,000,000. Interest was charged monthly at (i) the banks prime rate minus 0.5%
or (ii) LIBOR plus 0.75% per annum. The credit facility balance outstanding and any unpaid interest were due and payable on June 30, 2006. The line of credit was repaid in full and cancelled in April 2006. The credit facility was
guaranteed by Dr. Lindsay A. Rosenwald, a beneficial stockholder who was then a director of the Company. In return for such guaranty, the Company was obligated to grant Dr. Rosenwald a warrant to purchase shares of the Companys
common stock based on the highest amount borrowed against the line of credit. The highest balance borrowed under this credit facility totaled $600,000. In February 2006, the Company issued to Dr. Rosenwald a warrant with a five-year term to
purchase 31,732 shares of Company common stock at an exercise price of $8.28 per share. The warrant issued for guaranteeing the credit facility was valued at $91,041



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using the Black-Scholes option-pricing model and was recorded as debt issuance costs. The option pricing model assumed a risk-free interest rate of 4.33%, a
five-year term and stock volatility of 72%. The warrant may be exercised by the holder in whole or in part by written notice of exercise delivered to the Company, together with the warrant and payment of the warrant exercise price for such warrant.
The warrant does not include any cashless exercise or redemption provisions. The warrant (and common stock issuable upon exercise thereof) is not registered and includes restrictions upon transfer. The Company has no obligation to settle any
exercise of the warrant in cash or registered shares; management intends to settle such exercise only in unregistered shares. The Company provided the warrant holder demand and piggyback registration rights relating to the resale of common stock
issuable upon exercise of the warrant.

Note 13Notes Payable:

On June 30, 2005, the Company issued unsecured promissory notes with attached warrants to six
individuals, including Dr. Arie Belldegrun, a member of the Companys Board of Directors, for aggregate proceeds of $1,000,000. The note issued to Dr. Belldegrun totaled $675,000. The promissory notes bore interest at 5.75%. The
promissory notes and all unpaid interest were required to be repaid by the 10thbusiness day following the earlier of (i) closing of the
private placement equity offering dated July 1, 2005, which never occurred; or (ii) on demand any time after June 30, 2006. On April 3, 2006, a note payable for $50,000 plus accrued interest was paid in full and the remaining
notes payable for $950,000 plus accrued interest were converted to equity (see Note 15). Warrants to purchase an aggregate of 52,887 shares of Company common stock, with a value of $130,954, were issued with the promissory notes. Of these warrants,
warrants to purchase 35,699 shares of common stock were issued to a trust created for the benefit of Dr. Belldegruns children, of which Dr. Belldegrun would be deemed a beneficial owner. The warrants issued with the promissory notes
expire in five years with an exercise price of $8.28 per share and were valued at $130,954 using the Black-Scholes option-pricing model; the warrants were recorded as debt discount. The model assumed a risk-free interest rate of 4.2%, a five-year
term and stock volatility of 72%. The warrants (and common stock issuable upon exercise thereof) are not registered and include restrictions upon transfer. The Company has no obligation to settle any exercise of the warrants in cash or registered
shares; management intends to settle such exercise only in unregistered shares. The Company provided the warrant holders demand and piggyback registration rights relating to the resale of common stock issuable upon exercise of the warrant.

Note 14Convertible Notes:

On
November 23, 2005, the Company sold $3,560,120 in aggregate principal amount of senior convertible notes (the Bridge Notes) to certain institutional and individual accredited investors (the Bridge Offering). As
consideration for placement agent services, the Company paid cash fees of $325,958 and issued warrants to purchase an aggregate of 42,997 shares of common stock valued at $123,375 to Paramount, which served as exclusive placement agent. The Bridge
Notes and all unpaid interest were due on January 24, 2007 (the Term) provided, however, that the Company could have extended the Term of the Bridge Notes for one additional year (the Extended Term) upon notice from the
Company to each holder prior to expiration of the Term. Interest accrued at the annual rate of (i) 5% during the Term and (ii) 8% during the Extended Term, if any, and was payable upon the maturity of the Bridge Notes. In addition to the
Bridge Notes, investors received five-year warrants exercisable at $8.28 per share (subject to adjustments for stock splits, recapitalizations and similar events), for a number of shares of Company common stock equal to (i) 20% of the principal
amount of the Bridge Notes purchased divided by $8.28 if a Qualified Financing was completed within 90 days of the final closing of the Bridge Offering, or (ii) 40% of the amount of Bridge Notes purchased divided by $8.28 if a
Qualified Financing was not completed within 90 days of the final closing of the Bridge Offering. A Qualified Financing was defined as an equity financing or series of related equity financings by the Company resulting in gross cash
proceeds of at least $10,000,000. The Bridge Notes and all unpaid interest were to automatically convert into the Companys equity securities at a price equal to the lowest unit price paid upon closing of such equity financing. Warrants issued
with the Bridge Notes were valued at $491,028 on the date of issuance using the Black-Scholes option-pricing mode, and were recorded as debt discount. A risk-free interest rate of 4.3%, a



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term of five years and stock volatility of 72% were used in the model. The initial valuation of warrants was computed based on 40% of the principal amount of
the Bridge Notes sold divided by $8.28, which resulted in the maximum amount of debt discount. The warrants are exercisable upon written notice of exercise to the Company together with payment of the exercise price. The warrants are redeemable at
the option of the Company if(i) the Companys common stock is traded on the OTCBB, NASDAQ or a national securities exchange and (ii) the common stock has had an average closing price per share over a period of 30 consecutive calendar days
equal to or greater than twice the exercise price of the warrants, as adjusted, such exercise price initially having been $8.28, provided that (iii) the resale of common stock issuable upon exercise of the warrants must be registered at the
time of redemption. The warrants do not include cashless exercise. Under the terms of the warrants, the Company has no obligation to settle the warrants in cash or in registered shares; the Company intends to settle only in unregistered shares of
its common stock. However, the Company provided the warrant holders with demand and piggyback registration rights relating to registration of resale of the shares issuable upon exercise of the warrants.

On January 24, 2006, under the same terms as the Bridge Notes issued on November 23, 2005, the Company completed the second and final closing
relating to the issuance and sale of the Bridge Notes with the issuance of Bridge Notes in the aggregate principal amount of $2,585,000. As consideration for placement agent services, the Company paid cash fees of $134,778 and issued warrants to
purchase an aggregate of 31,224 shares of common stock to Paramount, the exclusive placement agent. The Bridge Notes and all unpaid interest were due on January 24, 2007. The Bridge Notes were converted to equity on April 3, 2006 (see Note
15). In addition to the Bridge Notes, the investors received five-year warrants initially exercisable at $8.28 per share for a number of shares of Company common stock equal to 20% of the principal amount of the Bridge Notes purchased divided by
$8.28. The number of shares would have been 40% of the principal amount of the Bridge Notes purchased divided by $8.28 if the qualified equity placement (see Note 8) had not been completed within 90 days of the Bridge Note and warrant final closing
in January 2006. Within 90 days of the Bridge Note and warrant closing in January 2006, the Company completed a qualified equity placement (see Note 8). Accordingly, warrant coverage for the November 2005 and January 2006 warrant issuances were
adjusted from 40% coverage to 20% coverage. Warrants issued with the Bridge Notes were valued at $178,275, and were recorded as debt discount. The warrants issued to the placement agents were valued at $89,137 using the Black-Scholes option-pricing
model and were recorded as debt issuance cost. A risk-free interest rate of 4.3%, a term of five years and stock volatility of 72% were used in the model to determine the fair value.

Note 15Debt Conversion and Pay-off:

In conjunction with the April 3, 2006 private
placement offering (see Note 8), the Company converted the aggregate principal balance of the Bridge Notes (see Note 14) totaling $6,145,120, together with accrued and unpaid interest of approximately $89,000, into 1,384,162 units at $4.50 per unit
under the same terms as provided in the offering. Accordingly, the Company issued an additional 1,245,746 shares of Series A and 138,416 shares of common stock to holders of the Companys Bridge Notes and allocated $5,530,608 and $614,512 of
the value to the Series A and common stock, respectively.

Under the same conditions as the Companys April 3, 2006 private
placement offering (see Note 8), the Company also converted an aggregate of $950,000 of notes payable (see Note 13), together with accrued and unpaid interest of approximately $41,000, issued to five individuals, one of whom was Dr. Belldegrun,
into 220,125 units at $4.50 per unit. Accordingly, the Company issued an additional 198,113 shares of Series A and 22,012 shares of common stock to these individuals and allocated $855,000 and $95,000 of the carrying values to Series A and common
stock, respectively.

Note 16401(k) Savings Plan:

During 2005, the Company adopted a 401(k) savings plan for the benefit of its employees. The Company is required to make matching contributions to the 401(k) plan equal to 100% of the first 3% of wages deferred by



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each participating employee and 50% on the next 2% of wages deferred by each participating employee. During the years ended December 31, 2008, 2007 and
2006, the Company incurred expenses of approximately $150,300, $60,100 and $28,000, respectively, for employer matching contributions.

Note
17Income Taxes:

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes give rise to the Companys deferred income taxes. Components of the Companys deferred tax assets as of December 31, 2008 and 2007 are as follows:



|                                  |  |         |             |   |       |   |             |       |  |   |             |  
|--------------------------------- |  | ------- | ----------- | - | ----- | - | ----------- | ----- |  | - | ----------- | -
|                                  |  | Federal |             |   | State |   |             | Total | 
|Deferred tax assets2008:         |  |         |             |   |       |   |             |       |  |   |             |  
|Net operating loss carry forwards |  | $       | 28,383,500  |   |       | $ | 8,347,100   |       |  | $ | 36,730,600  |  
|Research and development credits  |  |         | 2,796,800   |   |       |   | 731,600     |       |  |   | 3,528,400   |  
|Stock-based compensation          |  |         | 4,137,100   |   |       |   | 1,180,300   |       |  |   | 5,317,400   |  
|Accrued expenses and other        |  |         | 491,900     |   |       |   | 137,100     |       |  |   | 629,000     |  
|                                  |  |         |             |   |       |   |             |       |  |   |             |  
|Total deferred tax assets         |  |         | 35,809,300  |   |       |   | 10,396,100  |       |  |   | 46,205,400  |  
|Valuation allowance               |  |         | (35,809,300 | ) |       |   | (10,396,100 | )     |  |   | (46,205,400 | )
|                                  |  |         |             |   |       |   |             |       |  |   |             |  
|Net deferred tax assets           |  | $       |            |   |       | $ |            |       |  | $ |            |  
|                                  |  |         |             |   |       |   |             |       |  |   |             |  
|                                  |  |         |            
|                                  |  | Federal |             |   | State |   |             | Total | 
|Deferred tax assets2007:         |  |         |             |   |       |   |             |       |  |   |             |  
|Net operating loss carry forwards |  | $       | 11,976,600  |   |       | $ | 3,663,000   |       |  | $ | 15,639,600  |  
|Research and development credits  |  |         | 1,582,300   |   |       |   | 576,500     |       |  |   | 2,158,800   |  
|Stock-based compensation          |  |         | 3,065,900   |   |       |   | 797,100     |       |  |   | 3,863,000   |  
|Accrued expenses and other        |  |         | 230,600     |   |       |   | 60,000      |       |  |   | 290,600     |  
|                                  |  |         |             |   |       |   |             |       |  |   |             |  
|Total deferred tax assets         |  |         | 16,855,400  |   |       |   | 5,096,600   |       |  |   | 21,952,000  |  
|Valuation allowance               |  |         | (16,855,400 | ) |       |   | (5,096,600  | )     |  |   | (21,952,000 | )
|                                  |  |         |             |   |       |   |             |       |  |   |             |  
|Net deferred tax assets           |  | $       |            |   |       | $ |            |       |  | $ |            |  
|                                  |  |         |             |   |       |   |             |       |  |   |             |  

As ultimate realization of the potential benefits of the Companys net deferred tax assets is
considered to be uncertain by management, the Company has offset the deferred tax assets with valuation allowances in 2008, 2007 and 2006. Accordingly, the Company did not recognize any benefit from income taxes in the accompanying consolidated
statements of operations to offset its pre-tax losses. The valuation allowance increased $24,253,400 in 2008, $13,398,800 in 2007 and $3,762,900 in 2006.

The reasons for the difference between the amount computed by applying the statutory Federal income tax rate to losses before income tax benefit and the actual income tax benefit for the years ended December 31,
2008, 2007 and 2006 are as follows:



|                                     |  |      |             |   |      |   |             |      |  |   |            |  
|------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ---------- | -
|                                     |  | 2008 |             |   | 2007 |   |             | 2006 | 
|Expected income tax benefit          |  | $    | (20,168,300 | ) |      | $ | (10,831,300 | )    |  | $ | (4,032,600 | )
|State income tax, net of Federal tax |  |      | (3,460,900  | ) |      |   | (1,858,700  | )    |  |   | (692,000   | )
|Research and development credit      |  |      | (877,600    | ) |      |   | (1,079,800  | )    |  |   | (167,100   | )
|Stock issuance costs                 |  |      |            |   |      |   | 193,700     |      |  |   | 859,700    |  
|Stock-based compensation             |  |      | 368,400     |   |      |   | 60,855      |      |  |   | 32,209     |  
|Other                                |  |      | (115,000    | ) |      |   | 116,445     |      |  |   | 236,891    |  
|                                     |  |      |             |   |      |   |             |      |  |   |            |  
|Total before valuation allowance     |  |      | (24,253,400 | ) |      |   | (13,398,800 | )    |  |   | (3,762,900 | )
|Change in valuation allowance        |  |      | 24,253,400  |   |      |   | 13,398,800  |      |  |   | 3,762,900  |  
|                                     |  |      |             |   |      |   |             |      |  |   |            |  
|Income tax benefit                   |  | $    |            |   |      | $ |            |      |  | $ |           |  
|                                     |  |      |             |   |      |   |             |      |  |   |            |  



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The Company is subject to taxation in the U.S. and the state of California and beginning in 2008 certain
other states. All tax years are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits. With the implementation of FIN 48, the Company
identified one tax position considered more likely than not that a tax benefit will not be fully realized. The Company expects to realize 90% of its research and development credits and, therefore, as of December 31, 2008, 2007 and
2006 has reduced its deferred tax assets by approximately $420,000, $240,000 and $70,000, respectively. The adoption of FIN 48 did not impact the Companys consolidated financial condition, consolidated results of operations or consolidated
cash flows. The Company had no accrual for interest or penalties on the consolidated balance sheets at December 31, 2008 or 2007, and has not recognized interest and/or penalties in the consolidated statements of operations for the years ended
December 31, 2008, 2007 or 2006.

At December 31, 2008, the Company had net operating loss carryforwards available to reduce
future taxable income, if any, of approximately $95,200,000 and $97,800,000 for Federal and California income tax purposes, respectively. The Federal and California net operating losses, if not utilized, expire from 2023 to 2028 and 2013 to 2028,
respectively. At December 31, 2008, the Company had Federal and State tax credit carryforwards of approximately $3,046,400 and $731,600, respectively, that will begin to expire in 2024. Pursuant to Internal Revenue Code Sections 382 and 383,
use of the Companys net operating loss and credit carry forwards could be limited if a cumulative change in ownership of more than 50% occurs within a three-year period.

To the extent net operating loss carryforwards, when realized, relate to excess tax benefits attributable to non-qualified stock option deductions, the
resulting benefits will be credited to stockholders equity. As of December 31, 2008, the Companys net operating loss attributable to stock option deductions that will result, when realized, in benefits that will be credited to
stockholders equity totaled approximately $2.8 million.

Note 18Commitments and Contingencies:

Leases:

On October 31, 2005, the Company
executed a five-year lease agreement effective February 15, 2006 for new office space that expires in 2011. Lease payments increase 3% annually beginning on March 1, 2007. On July 24, 2007, the Company executed a lease assumption for
a period of 33 months beginning September 1, 2007 with LEtat Francais. This lease expires in 2010. Concurrent with the execution of the lease assumption, the Company provided the landlord an automatically renewable stand-by letter of
credit issued by Wells Fargo Bank in the amount of $1,000,000, which originally expired on July 31, 2008 and was renewed for another 12 months. The balance of the stand-by letter of credit will be reduced to $850,000 on August 1, 2009. The
stand-by letter of credit is collateralized by a certificate of deposit held by Wells Fargo Bank in the amount of $1,000,000, which is classified as a restricted certificate of deposit on the accompanying consolidated balance sheets. Rent expense
for the years ended December 31, 2008, 2007 and 2006 was $703,867, $474,083 and $224,693, respectively.

Future minimum lease payments
for each of the years subsequent to December 31, 2008 are as follows:



|                         |  |        |          
|------------------------ |  | ------ | ---------
|Year Ending December 31, |  | Amount
|2009                     |  | $      | 723,726  
|2010                     |  |        | 459,189  
|2011                     |  |        | 56,091   
|                         |  |        |          
|Total                    |  | $      | 1,239,006
|                         |  |        |          

Consulting Agreements:

Effective January 1, 2004, and as amended on August 24, 2004, the Company entered into a four-year agreement with a consultant to serve as Chairman of its Scientific Advisory Board and Vice Chairman of its



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Board of Directors. Pursuant to the terms of the agreement, the Company pays a monthly fee of $16,667. In addition, for each new technology the Company
in-licenses or otherwise acquires which is first introduced to the Company by the consultant, the Company pays a finders fee equal to: (i) $50,000 for each such newly acquired technology or in-license that is undergoing or has completed
Phase I clinical testing at the time of the introduction; (ii) $100,000 for each newly acquired technology or in-license that is undergoing or has completed Phase II clinical testing at the time of introduction; and (iii) $150,000 for each
newly acquired technology or in-license that is undergoing or has completed Phase III clinical testing at the time of introduction. The consultant may also earn a $100,000 bonus for his assistance in raising a minimum of $5,000,000 in proceeds from
the issuance of Company common stock. The consultant was also granted options to purchase 153,644 shares of Company common stock at an exercise price of $0.39 per share and 38,411 shares of Company common stock at an exercise price of $2.60, as
amended, per share. With the closing of the private equity placement in April 2006, these options became fully vested. However, the Company continues to charge to operations the fair value of the options over the original service period. On
December 29, 2006, the stock option grant for 38,411 shares was amended by increasing the exercise price of the stock option in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended. The original option grant
evidenced by the August 24, 2004 agreement granted the consultant the right to purchase 38,411 shares of common stock (as adjusted for mergers, stock splits, etc.) at an exercise price of $0.39 per share. The fair market value of the
Companys common stock at August 24, 2004 was $2.60 per share. Accordingly, the option, all of which was vested and exercisable, was amended to provide for an exercise price of $2.60 per share and, in order to compensate the consultant for
the increased exercise price, the Company also agreed to issue 18,864 shares of restricted common stock to him, all of which vested on January 2, 2007, with an aggregate fair market value of $84,888. The agreement may be terminated by the
consultant or the Company upon 30 days prior written notice. During 2006, the consultant was paid a finders fee of $50,000.

Effective June 10, 2004, and as amended in May 2006, and May 2007, the Company entered into a three-year consulting agreement with a consultant to serve as a member of its Scientific Advisory Board. Pursuant to the terms of the
agreement, the Company pays a monthly fee of $3,854. The consultant was also granted an option to purchase 1,921 shares of Company common stock at an exercise price of $13.02 per share, vesting over the term of the agreement. The agreement
automatically extends for one-year periods, unless either party terminates upon written notice to the other prior to such extension. The agreement may be terminated by the consultant or the Company upon 30 days prior written notice.

The Company has previously entered into three-year consulting agreements with 12 consultants to serve as members of its Scientific Advisory Board.
Pursuant to the terms of the respective agreements, the Company pays a fee of $3,000 for each meeting attended. The agreements automatically extend for one-year periods, unless either party terminates upon written notice to the other prior to such
extension. The agreement may be terminated by the consultant or the Company upon 30 days prior written notice.

Employment Contracts:

On September 26, 2008, the Company entered into an Amended and Restated Employment Agreement with Alan H. Auerbach, its Chief Executive Officer and
President. The September 2008 agreement amends and restates the Employment Agreement dated September 28, 2006, between the Company and Mr. Auerbach.

The amended and restated agreement provides for a one-year term, subject to annual one-year renewals, unless either party gives the other a 60-day notice prior to the end of a term. The agreement also reflects
Mr. Auerbachs current annualized base salary of $470,000 and his annual bonus eligibility of up to 50% of his base salary. The amount of the base salary is subject to annual review by the Companys Board of Directors. The agreement
continues to provide that Mr. Auerbach is entitled to a one-time bonus of $2 million in the event the Companys total market capitalization exceeds $1 billion, as the September 2006 agreement had provided. Mr. Auerbach is also
eligible to participate in all benefits offered to the Companys senior executives.



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In the event Mr. Auerbach is terminated 60 days prior to, or 12 months following a change of
control, as defined in the Agreement, he will receive the following benefits:



| |  |  | a lump sum payment equal to twice his then-current annualized base salary plus the maximum amount of discretionary bonus to which he was entitled in the year of
termination;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all unvested equity-based incentives will immediately vest and remain exercisable for a period of 12 months from the date of the termination;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | health insurance benefits paid for a period of up to 12 months from the date of termination;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | a gross-up payment if such severance benefits constitute a parachute payment under the Internal Revenue Code.
| | - |  | ---------------------------------------------------------------------------------------------------------------

If Mr. Auerbachs employment is terminated by the Company without cause or not in connection with a change of control, or if Mr. Auerbach
terminates his employment because of the Companys uncured breach of the employment agreement, then Mr. Auerbach is entitled to continue receiving his base salary for one year.

License Agreements:

On February 23, 2004, the Company entered into a license agreement with
Emory University (Emory) for worldwide, exclusive rights to discover, develop, have made, use, sell, have sold, offer for sale and import the products described in Emorys intellectual property portfolio for noscapine and analogs of
noscapine. The license agreement terminates upon the date of the last to expire patent contained in the licensed technology. In consideration for the rights under the license agreement, the Company paid Emory an initial license fee of $72,435 in
2004. The Company sponsored a research project involving the licensed technology in the amount of $114,000 of which $28,688 and $85,312 were paid in 2005 and 2004, respectively. In connection with the license agreement, the Company has agreed to
future milestone payments to Emory for the first technology from the intellectual property portfolio in the aggregate of up to $3,500,000, payable upon the achievement of certain clinical and regulatory milestones. The Company achieved the first
milestone in December 2007 and paid $200,000 to Emory in 2008. Should a product incorporating the licensed technology be commercialized, the Company will be obligated to pay to Emory royalties based on net sales of the product. In the event that the
Company sublicenses the licensed technology to a third party, the Company will be obligated to pay royalties to Emory based on a fixed rate of fees or royalties received from the sub-licensee.

Effective April 20, 2004, the Company entered into a license agreement with BTG, plc. (BTG) for exclusive worldwide rights to make, use,
lease and sell abiraterone acetate. The agreement terminates upon the date of the last to expire patent contained in the licensed technology. In consideration for the rights under the BTG license agreement, the Company paid BTG an initial license
fee of £500,000 ($923,100) in 2004 and agreed to pay BTG an annual license maintenance fee of £150,000 ($301,095 for 2007 and $268,890 for 2006) until the first commercial sale of the licensed product. In addition, the license agreement
requires the Company to make aggregate milestone payments of up to £9,000,000, payable upon the achievement of certain clinical and regulatory milestones of which £2,000,000 ($4,023,985) was paid in 2008. Should abiraterone acetate
become commercialized, the Company will be obligated to pay to BTG royalties based on net sales of the product. In the event that the Company sublicenses abiraterone acetate to a third party, the Company is obligated to pay royalties to BTG based on
a fixed rate of fees or royalties received from the sub-licensee.

Effective June 27, 2005, the Company entered into a license
agreement with LEO Pharma A/S (LEO) for exclusive worldwide right to make, use, and sell seocalcitol. The agreement terminates upon the later of the date of the last patent contained in the licensed technology to expire or 20 years. In
consideration for the rights under the LEO license agreement, the Company paid LEO an initial license fee of $250,000 in 2005. In addition, the license agreement requires the Company to make aggregate milestone payments of up to $13,000,000, payable
upon the achievement of certain clinical and regulatory milestones. Should seocalcitol become commercialized, the Company will be obligated to pay to LEO royalties based on net sales of the product. In the event that the



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Company sublicenses seocalcitol to a third party, the Company is obligated to pay royalties to LEO based on a fixed rate of fees or royalties received from
the sub-licensee.

Research Agreements:

Effective November 2, 2005, and as amended in 2006 and 2007, the Company entered into an agreement with The Royal Marsden NHS Foundation Trust to perform Phase I/II trials of CB7630. Estimated costs for the services to be performed by
The Royal Marsden NHS Foundation Trust are $3,500,000, of which the Company has remitted aggregate payments of approximately $2,531,000 through December 31, 2008.

In December 2007, the Company paid a U.S.-based contract research organization approximately $356,000 to commence preliminary work for a Phase III trial of CB7630. In March 2008, the Company finalized the agreement
with the U.S.-based contract research organization to provide services for initiating, managing and conducting a phase III clinical trial of CB7630 in North America and Australia. The Company shall pay the contract research organization
approximately up to $27 million over the life of the trial. However, the actual cost of the trial will depend on the length of the trial, the number of enrollees, and the number of clinical trial sites. Aggregate payments paid under the terms of the
agreement through December 31, 2008 were approximately $7.6 million. This agreement is currently being revised to include the services required to manage and support the Companys Phase III clinical trial in Europe. The Company anticipates
signing of the agreement in March 2009. It is estimated that the cost associated with this amendment, including investigator fees, will be approximately $12-$15 million.

Manufacturing Agreements:

The Company has contracted with third parties to provide product
manufacturing services for the Companys various clinical trials. As of December 31, 2008, the Company had outstanding commitments with the manufacturers of approximately $1,145,000 for product to be delivered during 2009. As of
December 31, 2008, included in prepaid expenses and other assets, are deposits of approximately $336,500 with the manufactures.

Note
19Liquidated Damages:

In conjunction with its April 2006 private placement (see Note 8), the Company was required to file a
registration statement with the SEC on the appropriate form to allow the resale of the common stock issued in such transaction (including common stock issuable upon conversion of the Series A) under the Securities Act of 1933 within 30 days after
the closing and to use its best efforts to have the registration statement declared effective within 180 days after the closing. The Companys obligation for not meeting the registration requirement is to make compensatory payments in the
amount equal to one percent of the aggregate purchase price paid by the subscribers for each 30-day period or prorated portion thereof in which the Company is in default of its obligation to register the shares or have the registration statement
become effective. However, in no event will the Company be required to pay an aggregate amount that exceeds 12% of the aggregate purchase price paid by the investors. Beginning October 1, 2006 and up to the date the registration statement
became effective, February 2, 2007, the Company was in default of its obligation to have the registration statement become effective within 180 days of the placement closing. The Company was subject to compensatory payments to each placement
subscriber payable within five business days of the end of each 30-day period in which such liquidated damages accrue. For each 30-day period in which the Company was in default, it was required to pay liquidated damages in the amount of
approximately $412,000. The Company paid $801,496 of liquidated damages for October and November 2006 in unregistered common stock. The Company issued, in the aggregate, 178,106 shares of its unregistered common stock for October and November 2006
liquidated damages in December 2006. Additionally, 88,908 shares of unregistered common stock were issued on January 5, 2007 for a portion of the December 2006 liquidated damages of $412,000. The Company was obligated to pay additional
liquidated damages from January 1, 2007, through February 2, 2007, of approximately $481,200. The



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Company issued 100,763 shares of unregistered common stock on February 2, 2007, for a major portion of this obligation and paid cash for the remainder.
Total liquidated damages of approximately $486,000 and $1,237,000 were included in other expense in the accompanying consolidated statements of operations for the years ended December 31, 2007 and 2006, respectively.

Note 20Related Party Transactions:

See
descriptions for related party transactions in Note 8, Note 9, Note 12 through Note 15, and Note 18.

Note 21Condensed Quarterly Financial
Data (unaudited):

The following table contains selected unaudited consolidated statements of operations information for each quarter in
2008 and 2007. The unaudited information should be read in conjunction with the Companys consolidated financial statements and related notes included elsewhere in this report. The Company believes that the following unaudited information
reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results of any future period.

Quarterly Financial Data:



|                                                             |  |                    |            |   |         |   |             |              |  |   |             |   |  |   |             |  
|------------------------------------------------------------ |  | ------------------ | ---------- | - | ------- | - | ----------- | ------------ |  | - | ----------- | - |  | - | ----------- | -
|                                                             |  | Three Months Ended |           
|                                                             |  | March 31           |            |   | June 30 |   |             | September 30 |  |   | December 31 |  
|2008                                                         |  |                    |            |   |         |   |             |              |  |   |             |   |  |   |             |  
|Revenues                                                     |  | $                  |           |   |         | $ |            |              |  | $ |            |   |  | $ |            |  
|Net loss                                                     |  |                    | (6,426,674 | ) |         |   | (15,583,430 | )            |  |   | (16,338,383 | ) |  |   | (21,468,314 | )
|Net loss applicable to common stock                          |  |                    | (6,426,674 | ) |         |   | (15,583,430 | )            |  |   | (16,338,383 | ) |  |   | (21,468,314 | )
|Net loss per sharebasic and diluted                         |  |                    | (0.31      | ) |         |   | (0.76       | )            |  |   | (0.79       | ) |  |   | (1.04       | )
|Weighted-average common shares outstandingbasic and diluted |  |                    | 20,550,882 |   |         |   | 20,572,474  |              |  |   | 20,681,085  |   |  |   | 20,693,593  |  
|                                                             |  |                    |            |  
|2007                                                         |  |                    |            |   |         |   |             |              |  |   |             |   |  |   |             |  
|Revenues                                                     |  | $                  |           |   |         | $ |            |              |  | $ |            |   |  | $ |            |  
|Net loss                                                     |  |                    | (7,343,109 | ) |         |   | (8,887,572  | )            |  |   | (7,930,218  | ) |  |   | (7,696,765  | )
|Net loss applicable to common stock                          |  |                    | (7,733,952 | ) |         |   | (8,887,572  | )            |  |   | (7,930,218  | ) |  |   | (7,696,765  | )
|Net loss per sharebasic and diluted                         |  |                    | (1.01      | ) |         |   | (0.54       | )            |  |   | (0.45       | ) |  |   | (0.43       | )
|Weighted-average common shares outstandingbasic and diluted |  |                    | 7,690,861  |   |         |   | 16,540,064  |              |  |   | 17,486,470  |   |  |   | 17,874,770  |  



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Index of Exhibits Filed with this Report



|            |  |                                                                                 
|----------- |  | --------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                     
|21.1        |  | Subsidiaries of the Registrant.                                                 
|            | 
|23.1        |  | Consent of J.H. Cohn LLP.                                                       
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a).        
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a).        
|            | 
|32.1        |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
|            | 
|32.2        |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.