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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    000-51745
  SGX Pharmaceuticals,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

06-1523147(I.R.S. Employer
    Identification No.)   10505 Roselle Street
 San Diego, CA 92121
 (Address of principal executive
    offices, including zip code)
  (858) 558-4850
 (Registrants telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value per share

NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
    Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company  þ(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





SGX
    PHARMACEUTICALS, INC.
    ANNUAL REPORT ON
    FORM 10-K
    FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
    TABLE OF CONTENTS
   
 PART I


2Item 1.


Business


2Item 1A.


Risk Factors


14Item 1B.


Unresolved Staff Comments


33Item 2.


Properties


33Item 3.


Legal Proceedings


33Item 4.


Submission of Matters to a Vote of Security
    Holders


33PART II


33Item 5.


Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


33Item 6.


Selected Financial Data


36Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


37Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


48Item 8.


Financial Statements and Supplementary Data


49Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


76Item 9A.


Controls and Procedures


76Item 9B.


Other Information


76PART III


76Item 10.


Directors, Executive Officers and Corporate
    Governance


76Item 11.


Executive Compensation


77Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


77Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


77Item 14.


Principal Accounting Fees and Services


77PART IV


77Item 15.


Exhibits and Financial Statement Schedules


77SIGNATURES


82EXHIBIT 10.53EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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Cautionary
    Note Regarding Forward-Looking Statements
  Form 10-K Form 10-K Form 10-K.
 1




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PART I  Item 1.
    Business  Overview
       2




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Program/Target/Compound/Indications

Status

Marketing RightsMET SGX523  Solid tumors

Clinical Development (Phase I)

SGX (Worldwide) SGX126  Solid tumors

Preclinical Development

SGX (Worldwide)BCR-ABL SGX393  Second-line  CML

Preclinical Development

SGX (Worldwide)*Oncology Drug Discovery Portfolio Various  Front-Line CML

Lead Optimization

Novartis (Worldwide, except those rights available to SGX)SGX (U.S. and Canada Commercialization rights) Various  including JAK2 and RAS

Lead Identification and Lead Optimization

SGX (Worldwide)     *
    
    Subject to a reacquisition right of Novartis which may be
    exercisable at a later date.  MET
    Development Program
    in vitro ® ®
 3




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anti-tumor in vivo
  SGX523
  28-day
    and/or
  SGX126
  in vitro in vivo
  BCR-ABL
    Development Program
    Chronic
    Myelogenous Leukemia (CML)
    ®
   4




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® ®
  SGX393 
    Relapsed/Refractory CML
        Oncology
    Drug Discovery Portfolio
    BCR-ABL
    JAK2
   5




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in vivo
  RAS
  20-30%
  Additional
    Drug Discovery Targets
    Our Drug
    Discovery Platform
      
    a high-throughput capability to generate many different crystals
    of a target protein in parallel;
    the crystallographic screening of our library of scaffolds and
    elaborated scaffolds bound to the target protein of interest by
    direct visualization of bound compounds utilizing X-ray
    crystallography;
    the use of additional screening methods to characterize the
    scaffolds and elaborated scaffolds in terms of potency,
    selectivity, pharmacokinetics, and physicochemical properties;
    the use of novel computational design methods and iterative
    synthetic chemistry to optimize these scaffolds into drug-like
    lead compounds; and
    the use of protein structure guided drug design to enable the
    rapid optimization of lead compounds into drug candidates with
    low molecular weight, high ligand efficiency, and good drug-like
    properties   6




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Collaborations,
    Commercial Agreements and Grants
    Collaborations
    and Grants:
  Party

Scope

Start Date

Payments to SGXNovartis Institutes for Biomedical Research, Inc.

Drug discovery, development and commercialization

Mar. 2006

Upfront payment, research funding, milestones and royaltiesCystic Fibrosis Foundation Therapeutics, Inc.

Drug discovery

Jul. 2005

Upfront payment; technology access fees; research funding;
    milestones; royaltiesNational Institutes of Health

Protein Structure Initiative

Jul. 2005

Research fundingEli Lilly & Company

Structural data on Eli Lilly targets and compounds

Apr. 2003

Upfront payment; research funding; technology access fees   License
    and Collaboration Agreement
  Novartis
    Institutes for Biomedical Research, Inc.
       7




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Cystic
    Fibrosis Foundation Therapeutics, Inc.
    NIH
    Cooperative Agreement Award
    Eli
    Lilly & Company
     8




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Our
    Strategy
    
    Focus on oncology.  Despite recent advances in
    the treatment of cancer, there continue to be areas of
    significant unmet medical need. New approaches to cancer
    treatment, such as targeted therapies, to which we believe our
    technology is ideally suited, provide companies such as ours an
    opportunity to advance our pipeline through preclinical and
    clinical development to provide patients with life saving
    therapies. Furthermore, we consider drug development for the
    cancer markets attractive because relatively small clinical
    trials of short duration can provide meaningful data on patient
    outcomes.
    Utilize our drug discovery platform to generate lead
    candidates.  Our structure-guided drug discovery
    platform, centered on FAST, provides us with the capability to
    support a sustainable pipeline of oncology drug discovery
    programs. The SGX platform builds on our considerable expertise
    and experience in structural biology, with particular emphasis
    on protein kinases, nuclear hormone receptors, proteases, and
    nucleotide binding proteins. We have assembled an extensive
    portfolio of drug discovery targets, which we believe are
    implicated in various solid tumor and blood cancers. For these
    targets, we will seek to provide high-resolution X-ray
    structures and continuing support of structure-guided drug
    discovery using our FAST technology platform. In so doing, will
    seek to advance a sustainable portfolio of high value targeted
    anti-cancer agents towards development candidate nomination and
    subsequent IND submission.
    Advance development candidates and commercialize product
    candidates.  Our goal is to progress our product
    candidates through preclinical and clinical development, and
    ultimately to commercialization, while utilizing strategic
    partnering as appropriate.
    Continue to access capabilities and generate revenue through
    strategic partnering.  Revenue generation from
    strategic partnering will continue to be important to us in the
    near term by providing funds for reinvestment in internal drug
    discovery and development. Our business development activities
    will involve strategic partnering of certain of our oncology
    programs. Oncology partnerships will be sought with
    organizations that provide complementary capabilities to allow
    rapid progression of our product candidates to the market. We
    will remain open to opportunities to apply FAST to targets
    outside the oncology area, particularly where there are
    attractive financial or strategic opportunities.  Intellectual
    Property
   9




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Third
    Party Intellectual Property
    and/or
    
    infringement and other intellectual property claims which, with
    or without merit, may be expensive and time-consuming to
    litigate and may divert our managements attention from our
    core business;
    substantial damages for infringement, including treble damages
    and attorneys fees, which we may have to pay if a court
    decides that the product or proprietary technology at issue
    infringes on or violates the third partys rights;
    a court prohibiting us from selling or licensing the product or
    using the proprietary technology unless the third party licenses
    its technology to us, which it is not required to do;
    if a license is available from the third party, we may have to
    pay substantial royalties, fees
    and/or grant
    cross licenses to our technology; and
    redesigning our products or processes so they do not infringe,
    which may not be possible or may require substantial funds and
    time.   10




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Sales and
    Marketing
    Competition
          ® ® ®
     11




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Government
    Regulation and Product Approvals
      any
     12




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orphan drug
  
    The disease affects no more than 50 in 100,000 persons in
    the E.U.;
    The drug is intended for a life-threatening, seriously
    debilitating, or serious and chronic condition;
    The medical plausibility of the proposed orphan indication;
    Without incentives it is unlikely that the drug would generate
    sufficient return to justify the necessary investment; and
    No satisfactory method of treatment for the condition exists or,
    if it does, the new drug will provide a significant benefit to
    those affected by the condition.  orphan drug
     13




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Employees
  and/or
  Item 1A.
    Risk
    Factors  You should carefully consider the following information about
    these risks, together with the other information appearing
    elsewhere in this report. If any of the following risks actually
    occur, our business, financial condition, results of operations
    and future growth prospects would likely be materially and
    adversely affected. In these circumstances, the market price of
    our common stock could decline, and you may lose all or part of
    your investment in our common stock.
  Risks
    Relating to Our Business
  Our
    drug discovery approach and technologies are unproven and may
    not allow us to establish or maintain a clinical development
    pipeline or result in the discovery or development of
    commercially viable products.
      Because
    the results of preclinical studies are not necessarily
    predictive of results in humans, any product candidate we
    advance into clinical trials may not have favorable results or
    receive regulatory approval.
   14




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Delays
    in the commencement or completion of clinical testing could
    result in increased costs to us and delay our ability to
    generate significant revenues.
    
    identifying and selecting a suitable development candidate;
    successful completion of toxicology, formulation or other
    preclinical studies;
    obtaining any required approvals from our collaborators, such as
    Novartis for any BCR-ABL product candidates that may be selected
    under our license and collaboration agreement with Novartis;
    obtaining regulatory approval to commence a clinical trial;
    reaching agreement on acceptable terms with prospective contract
    research organizations and trial sites;
    manufacturing sufficient quantities of a product candidate;
    obtaining institutional review board approval to conduct a
    clinical trial at a prospective site; and
    identifying, recruiting and enrolling patients to participate in
    a clinical trial.    
    failure to conduct the clinical trial in accordance with
    regulatory requirements or our clinical protocols; 15




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
    inspection of the clinical trial operations or trial site by the
    FDA or other regulatory authorities resulting in the imposition
    of a clinical hold;
    unforeseen safety issues or insufficient efficacy; or
    lack of adequate funding to continue the clinical trial.    Any
    product candidate we advance into clinical trials may cause
    undesirable side effects that could delay or prevent its
    regulatory approval or commercialization.
    
    regulatory authorities may withdraw their approval of the
    product;
    we may be required to change the way the product is
    administered, conduct additional clinical trials or change the
    labeling of the product; or
    our reputation may suffer.    We
    have limited manufacturing experience. We primarily rely on
    third parties to provide sufficient quantities of our product
    candidates to conduct preclinical and clinical studies. We have
    no control over our manufacturers and suppliers
    compliance with manufacturing regulations, and their failure to
    comply could result in an interruption in the supply of our
    product candidates.
  scale-up
 16




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Materials
    necessary to manufacture our product candidates currently under
    development may not be available on commercially reasonable
    terms, or at all, which may delay our development and
    commercialization of these drugs.
  and/or
  The
    success of our BCR-ABL inhibitor program depends heavily on the
    activities of Novartis. If Novartis is unable to identify any
    development candidates or is unwilling to further develop or
    commercialize development candidates that may be identified
    under the collaboration, or experiences significant delays in
    doing so, our business may be harmed.
  ®
 17




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Any
    product candidates we advance into clinical trials are subject
    to extensive regulation, compliance with which can be costly and
    time consuming, cause unanticipated delays or prevent the
    receipt of the required approvals to commercialize our product
    candidates.
    
    a product candidate may not be safe and effective;
    regulatory agencies may not find the data from preclinical
    testing and clinical trials to be sufficient;
    regulatory agencies may not approve of our third party
    manufacturers processes or facilities; or
    regulatory agencies may change their approval policies or adopt
    new regulations.      We
    have limited clinical development and commercialization
    experience.
   18




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We
    rely on third parties to conduct our clinical trials. If these
    third parties do not successfully carry out their contractual
    duties or meet expected deadlines, we may not be able to obtain
    regulatory approval for or commercialize our product
    candidates.
  follow-up
  Even
    if any product candidate we advance into clinical trials
    receives regulatory approval, our product candidates may still
    face future development and regulatory
    difficulties.
    
    issue warning letters;
    impose civil or criminal penalties;
    withdraw regulatory approval;
    suspend any ongoing clinical trials;
    refuse to approve pending applications or supplements to
    approved applications filed by us or our collaborators;
    impose restrictions on operations, including costly new
    manufacturing requirements; or
    seize or detain products or require a product recall.   19




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follow-up
  We are
    dependent on our collaborations, and events involving these
    collaborations or any future collaborations could prevent us
    from developing or commercializing product
    candidates.
       20




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
    we do not achieve our objectives under our collaboration
    agreements;
    we or our collaborators are unable to obtain patent protection
    for the product candidates or proprietary technologies we
    discover in our collaborations;
    we are unable to manage multiple simultaneous product discovery
    and development collaborations;
    our potential collaborators are less willing to expend their
    resources on our programs due to their focus on other programs,
    including their internal programs, or as a result of general
    market conditions;
    our collaborators become competitors of ours or enter into
    agreements with our competitors;
    we or our collaborators encounter regulatory hurdles that
    prevent the further development or commercialization of our
    product candidates; or
    we develop products and processes or enter into additional
    collaborations that conflict with the business objectives of our
    other collaborators.    Conflicts
    may arise between us and our collaborators that could delay or
    prevent the development or commercialization of our product
    candidates.
    
    disagreements regarding the payment of research funding,
    milestone payments, royalties or other payments we believe are
    due to us under our collaboration agreements or from us under
    our licensing agreements;
    uncertainty regarding ownership of intellectual property rights
    arising from our collaborative activities, which could prevent
    us from entering into additional collaborations;
    actions taken by a collaborator inside or outside a
    collaboration which could negatively impact our rights under or
    benefits from such collaboration;
    unwillingness on the part of a collaborator to keep us informed
    regarding the progress of its development and commercialization
    activities or to permit public disclosure of the results of
    those activities; or
    slowing or cessation of a collaborators development or
    commercialization efforts with respect to our product candidates.  If we
    fail to establish new collaborations and other commercial
    agreements, we may have to reduce or limit our internal drug
    discovery and development efforts and our business may be
    adversely affected.
   21




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Our
    drug discovery efforts are dependent on continued access to and
    use of our beamline facility, which is subject to various
    governmental regulations and policies and a user agreement with
    the University of Chicago and the U.S. Department of Energy. If
    we are unable to continue the use of our beamline facility, we
    may be required to delay, reduce the scope of or abandon some of
    our drug discovery efforts, and may fail to perform under our
    collaborations, commercial agreements and grants, which would
    result in a material reduction in our revenue.
    If our
    competitors develop treatments for cancer indications we target
    that are approved more quickly, marketed more effectively or
    demonstrated to be more effective or safer than our current or
    future product candidates, our ability to generate product
    revenue will be reduced or eliminated.
     22




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We
    have limited experience in identifying, acquiring or
    in-licensing, and integrating third parties products,
    businesses and technologies into our current infrastructure. If
    we determine that future acquisition, in-licensing or other
    strategic opportunities are desirable and do not successfully
    execute on and integrate such targets, we may incur costs and
    disruptions to our business.
    
    exposure to unknown liabilities;
    disruption of our business and diversion of our
    managements time and attention to the development of
    acquired products or technologies;
    incurrence of substantial debt or dilutive issuances of
    securities to pay for acquisitions;
    dilution to existing stockholders in the event of an acquisition
    by another entity;
    higher than expected acquisition and integration costs;
    increased amortization expenses;
    difficulties in and costs of combining the operations and
    personnel of any businesses with our operations and personnel;
    impairment of relationships with key suppliers or customers of
    any acquired businesses due to changes in management and
    ownership; and
    inability to retain key employees. 23




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If we
    are unable to establish sales and marketing capabilities or
    enter into agreements with third parties to market and sell any
    products we may develop, we may not be able to generate product
    revenue.
    The
    commercial success of any product that we may develop depends
    upon market acceptance among physicians, patients, health care
    payors and the medical community.
    
    our ability to provide acceptable evidence of safety and
    efficacy;
    relative convenience and ease of administration;
    the prevalence and severity of any adverse side effects;
    availability of alternative treatments;
    pricing and cost effectiveness;
    effectiveness of our or our collaborators sales and
    marketing strategies; and
    our ability to obtain sufficient third party coverage or
    reimbursement.    We are
    subject to uncertainty relating to health care reform measures
    and reimbursement policies which, if not favorable to our
    product candidates, could hinder or prevent our product
    candidates commercial success.
    
    our ability to set a price we believe is fair for our products;
    our ability to generate revenues and achieve profitability;
    the future revenues and profitability of our potential
    customers, suppliers and collaborators; and
    the availability of capital. 24




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We may
    need to increase or decrease the size of our organization, and
    we may experience difficulties in managing those organizational
    changes.
      If we
    fail to attract and keep key management and scientific
    personnel, we may be unable to successfully develop or
    commercialize our product candidates.
     25




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Earthquake
    or fire damage to our facilities, systems failures or other
    adverse events affecting our facilities could delay our research
    and development efforts and adversely affect our
    business.
    Risks
    Relating to our Finances and Capital Requirements
  We
    will need substantial additional funding and may be unable to
    raise capital when needed, which would force us to delay, reduce
    or eliminate our research and development programs or
    commercialization efforts.
    
    terms and timing of, and material developments under, any new or
    existing collaborative, licensing and other arrangements,
    including potentially partnering our internal discovery and
    development programs, such as MET, or potentially retaining such
    programs through later stages of preclinical and clinical
    development;
    rate of progress and cost of our preclinical studies and
    clinical trials and other research and development activities;
    scope, prioritization and number of clinical development and
    research programs we pursue;
    costs and timing of preparing regulatory submissions and
    obtaining regulatory approval; 26




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
    costs of establishing or contracting for sales and marketing
    capabilities;
    costs of manufacturing;
    extent to which we acquire or in-license new products,
    technologies or businesses;
    effect of competing technological and market
    developments; and
    costs of filing, prosecuting, defending and enforcing any patent
    claims and other intellectual property rights.      We
    expect our net operating losses to continue for at least several
    years, and we are unable to predict the extent of future losses
    or when we will become profitable, if ever.
    We
    currently lack a significant continuing revenue source and may
    not become profitable.
      
    obtaining new collaborations and commercial agreements;
    performing under current and future collaborations, commercial
    agreements and grants, including achieving milestones;
    successful completion of clinical trials for any product
    candidate we advance into clinical trials;
    achievement of regulatory approval for any product candidate we
    advance into clinical trials; and
    successful selling, manufacturing, distribution and marketing of
    our future products, if any. 27




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Raising
    additional funds by issuing securities or through licensing
    arrangements may cause dilution to existing stockholders,
    restrict our operations or require us to relinquish proprietary
    rights.
    Our
    quarterly operating results may fluctuate
    significantly.
    
    our addition or termination of research programs or funding
    support;
    variations in the level of expenses related to our product
    candidates or research programs;
    our execution of collaborative, licensing or other arrangements,
    and the timing of payments we may make or receive under these
    arrangements;
    any intellectual property infringement lawsuit in which we may
    become involved; and
    changes in accounting principles.    We may
    incur substantial liabilities from any product liability claims
    if our insurance coverage for those claims is
    inadequate.
    
    decreased demand for our product candidates;
    injury to our reputation;
    withdrawal of clinical trial participants;
    costs of related litigation;
    substantial monetary awards to patients or other claimants;
    loss of revenues; and
    the inability to commercialize our product candidates.   28




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We use
    biological and hazardous materials, and any claims relating to
    improper handling, storage or disposal of these materials could
    be time consuming or costly.
      Negative
    conditions in the global credit markets may impair the liquidity
    of a portion of our investment portfolio.
    Risks
    Relating to our Intellectual Property
  Our
    success depends upon our ability to protect our intellectual
    property and our proprietary technologies.
   29




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
    we might not have been the first to file patent applications for
    these inventions;
    we might not have been the first to make the inventions covered
    by each of our pending patent applications and issued patents;
    others may independently develop similar or alternative
    technologies or duplicate any of our technologies;
    the patents of others may have an adverse effect on our business;
    it is possible that none of our pending patent applications will
    result in issued patents;
    our issued patents may not encompass commercially viable
    products, may not provide us with any competitive advantages, or
    may be challenged by third parties;
    our issued patents may not be valid or enforceable; or
    we may not develop additional proprietary technologies that are
    patentable.      If we
    are sued for infringing intellectual property rights of third
    parties, it will be costly and time consuming, and an
    unfavorable outcome in that litigation would have a material
    adverse effect on our business.
     30




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
    infringement and other intellectual property claims which, with
    or without merit, may be expensive and time-consuming to
    litigate and may divert our managements attention from our
    core business;
    substantial damages for infringement, including treble damages
    and attorneys fees, which we may have to pay if a court
    decides that the product or proprietary technology at issue
    infringes on or violates the third partys rights;
    a court prohibiting us from selling or licensing the product or
    using the proprietary technology unless the third party licenses
    its technology to us, which it is not required to do;
    if a license is available from the third party, we may have to
    pay substantial royalties, fees
    and/or grant
    cross licenses to our technology; and
    redesigning our products or processes so they do not infringe
    which may not be possible or may require substantial funds and
    time.      Risks
    Relating to the Securities Markets and Ownership of our Common
    Stock
  Market
    volatility may affect our stock price.
    
    changes in the preclinical or clinical development status of or
    clinical trial results for our product candidates;
    announcements of new products or technologies, commercial
    relationships or collaboration arrangements or other events by
    us or our competitors, or investor expectations with respect to
    such arrangements or events;
    events affecting our collaborations, commercial agreements and
    grants;
    variations in our quarterly operating results;
    changes in securities analysts estimates of our financial
    performance;
    regulatory developments in the United States and foreign
    countries; 31




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
    fluctuations in stock market prices and trading volumes of
    similar companies;
    sales of large blocks of our common stock, including sales by
    our executive officers, directors and significant stockholders;
    additions or departures of key personnel;
    discussion of us or our stock price by the financial and
    scientific press and in online investor communities; and
    changes in accounting principles generally accepted in the
    United States.    Anti-takeover
    provisions in our charter documents and under Delaware law could
    make an acquisition of us, which may be beneficial to our
    stockholders, more difficult and may prevent attempts by our
    stockholders to replace or remove our current
    management.
    We may
    incur increased costs as a result of changes in laws and
    regulations relating to corporate governance
    matters.
    If our
    executive officers, directors and largest stockholders choose to
    act together, they may be able to control our operations and act
    in a manner that advances their best interests and not
    necessarily those of other stockholders.
   32




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities  Common
    Stock Market Price
    Year Ended December 31, 2006

High


LowFirst Quarter

$
9.71


$
5.75Second Quarter


8.18



4.65Third Quarter


5.50



1.88Fourth Quarter


3.56



2.50  33




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Year Ended December 31, 2007

High


LowFirst Quarter

$
5.91


$
3.20Second Quarter


5.50



4.61Third Quarter


7.40



5.29Fourth Quarter


6.59



4.71     Dividends
    Recent
    Sales of Unregistered Securities
   34




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Performance
    Measurement Comparison(1)
      COMPARISON
    OF 23 MONTH CUMULATIVE TOTAL RETURN*
    Among SGX Pharmaceuticals, Inc., The NASDAQ Composite Index
    And The NASDAQ Biotechnology Index
  
  *
    
    $100 invested on 2/1/06 in stock or on 1/31/06 in
    index-including reinvestment of dividends. Fiscal year ending
    December 31.(1)
    
    This section is not soliciting material, is not
    deemed filed with the SEC, is not subject to the
    liabilities of Section 18 of the Securities Exchange Act of
    1934, as amended, or the Exchange Act, and is not to be
    incorporated by reference in any filing of the Company under the
    Securities Act of 1933, as amended, or the Exchange Act whether
    made before or after the date hereof and irrespective of any
    general incorporation language in any such filing. 35




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K.
    Years Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share data)Statement of Operations Data:Revenue:Collaborations and commercial agreements

$
22,367


$
19,906


$
14,604


$
15,941


$
10,135Grants  subcontractor reimbursements


8,702



5,120



5,083



4,976



4,599Grants


3,670



2,754



1,949



6,380



3,344Total revenue


34,739



27,780



21,636



27,297



18,078Expenses:Research and development


42,249



46,942



37,881



31,444



28,587General and administrative


8,642



9,588



11,820



6,719



7,353In-process technology














4,000



Total operating expenses


50,891



56,530



49,701



42,163



35,940Loss from operations


(16,152
)


(28,750
)


(28,065
)


(14,866
)


(17,862
)Interest income


961



1,805



284



175



320Interest expense


(816
)


(1,107
)


(422
)


(669
)


(1,219
)Interest expense associated with debenture










(1,188
)


(3,392
)


Net loss


(16,007
)


(28,052
)


(29,391
)


(18,752
)


(18,761
)Accretion to redemption value of redeemable convertible
    preferred stock






(49
)


(472
)


(329
)


(329
)Net loss attributable to common stockholders

$
(16,007
)

$
(28,101
)

$
(29,863
)

$
(19,081
)

$
(19,090
)Basic and diluted net loss attributable to common stockholders
    per share

$
(1.01
)

$
(2.03
)

$
(48.32
)

$
(39.84
)

$
(44.92
)Shares used to compute basic and diluted net loss attributable
    to common stockholders per share


15,915



13,814



618



479



425   As of December 31,2007


2006


2005


2004


2003(In thousands)Balance Sheet Data:Cash, cash equivalents and short-term investments

$
38,990


$
33,877


$
17,718


$
11,512


$
13,635Working capital (deficit)


17,892



17,263



618



(8,634
)


1,042Total assets


51,056



48,464



33,112



28,332



35,943Long-term debt obligations (including current portion)


4,194



7,552



15,733



23,420



13,487Redeemable preferred stock










46,837



74,850



88,306Accumulated deficit


(179,736
)


(163,729
)


(135,628
)


(105,765
)


(86,684
)Total stockholders equity (deficit)


25,023



13,613



(41,677
)


(78,782
)


(78,044
)  36




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis should be read in
    conjunction with our Consolidated financial statements and
    related notes included elsewhere in this report. This discussion
    and other parts of this report may contain forward-looking
    statements based upon current expectations that involve risks
    and uncertainties. Our actual results and the timing of selected
    events could differ materially from those anticipated in these
    forward-looking statements as a result of several factors,
    including those set forth under Risk Factors in
    Item 1A of Part I of this report and elsewhere in this
    report.
  Overview
        Financial
    Operations Overview
  Collaboration,
    Commercial Agreement and Grant Revenue
    Research
    and Development Expense
         37




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##### Table of Contents



General
    and Administrative Expense
    Interest
    Income
    Interest
    Expense
    Critical
    Accounting Policies and Estimates
    Revenue
    Recognition
  Revenue Recognition 00-21, Revenue Arrangements with Multiple Deliverables EITF 00-21.
 38




---



##### Table of Contents



EITF 00-21.
    99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent 01-14, Income Statement Characterization of Reimbursements Received
    for Out-of-Pocket Expenses Incurred.
    Stock-Based
    Compensation Expense
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock Issued to
    Employees Statement of Cash Flows.
   39




---



##### Table of Contents



Share Based Payment
        Accounting for Stock-Based Compensation No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring or in Conjunction with Selling
    Goods and Services
     40




---



##### Table of Contents



Accrued
    Expenses
    Deferred
    Tax Asset Valuation Allowance
    Results
    of Operations
  Year
    Ended December 31, 2007 Compared to 2006
  Collaboration, Commercial Agreement and Grant
    Revenue.
 41




---



##### Table of Contents



Research and Development Expense.
  General and Administrative.
  Interest Income.
  Interest Expense.
  Year
    Ended December 31, 2006 Compared to 2005
  Collaboration, Commercial Agreement and Grant
    Revenue.
  Research and Development Expense.
 42




---



##### Table of Contents



General and Administrative.
  Interest Income.
  Interest Expense.
  Interest Expense Associated with Bridge
    Notes.
  Liquidity
    and Capital Resources
  Sources
    of Liquidity
         43




---



##### Table of Contents



Cash
    Flows
             44




---



##### Table of Contents



Funding
    Requirements
    
    terms and timing of, and material developments under, any new or
    existing collaborative, licensing and other arrangements,
    including potentially partnering of our internal discovery and
    development programs, such as MET, or potentially retaining such
    programs through later stages of preclinical and clinical
    development;
    rate of progress and cost of our preclinical studies and
    clinical trials and other research and development activities;
    scope, prioritization and number of clinical development and
    research programs we pursue;
    costs and timing of preparing regulatory submissions and
    obtaining regulatory approval;
    costs of establishing or contracting for sales and marketing
    capabilities;
    costs of manufacturing;
    extent to which we acquire or in-license new products,
    technologies or businesses;
    effect of competing technological and market
    developments; and
    costs of filing, prosecuting, defending and enforcing any patent
    claims and other intellectual property rights.   45




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due by PeriodLess Than


1 to


4 to


More ThanTotal


1 Year


3 Years


5 Years


5 YearsLong-term debt obligations

$
4,344


$
3,661


$
683


$



$
Operating lease obligations


10,636



1,817



3,538



3,784



1,497Total

$
14,980


$
5,478


$
4,221


$
3,784


$
1,497   Income
    Taxes
        Recently
    Issued Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109
    (FIN 48)
  and/or
   46




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##### Table of Contents



3-year
  Fair Value Measurements,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities-Including an amendment of FASB Statement
    No. 115 instrument-by-instrument
  No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or
    Services Received for Use in Future Research and Development
    Activities, EITF 07-3. No. 07-3 No. 07-3 No. 07-3
  No. 07-1, Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property, EITF 07-1. No. 07-1
 47




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##### Table of Contents



No. 07-1
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk     48




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  Index to
    Financial Statements
   
 Report of Independent Registered Public
    Accounting Firm


50Consolidated Balance Sheets as of
    December 31, 2007 and 2006


51Consolidated Statements of Operations for the
    years ended December 31, 2007, 2006 and 2005


52Consolidated Statements of Stockholders
    Equity (Deficit) for the years ended December 31, 2007,
    2006 and 2005


53Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, 2006 and 2005


54Notes to Consolidated Financial Statements


55   49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             
    50




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated
    Balance Sheets
  December 31,2007


2006(In thousands, except par value and share data)ASSETSCurrent assets:Cash and cash equivalents

$
38,022


$
27,877Short-term investments


968



6,000Accounts receivable


2,706



3,532Prepaid expenses, deposits and other current assets


1,187



1,616Total current assets


42,883



39,025Property and equipment, net


3,889



5,435Goodwill and intangible assets, net


3,426



3,412Other assets


858



592Total assets

$
51,056


$
48,464LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,964


$
2,109Accrued liabilities


4,543



4,774Other current liabilities


250



330Current portion of line of credit


4,194



7,552Deferred revenue


13,040



6,997Total current liabilities


24,991



21,762Deferred rent






66Deferred revenue, long-term


1,042



13,023Commitments and contingencies (Note 4)Stockholders equity:Preferred stock, par value $0.001; Authorized shares 
    5,000,000 at December 31, 2007 and 2006; and no shares
    issued and outstanding at December 31, 2007 and 2006






Common stock, par value $0.001; Authorized shares
     75,000,000 at December 31, 2007 and 2006;
    issued and outstanding shares  20,480,282 and
    15,166,109 at December 31, 2007 and 2006, respectively


21



16Notes receivable from stockholders






(21
)Additional paid-in capital


204,739



177,355Accumulated other comprehensive loss


(1
)


(8
)Accumulated deficit


(179,736
)


(163,729
)Total stockholders equity


25,023



13,613Total liabilities and stockholders equity

$
51,056


$
48,464    51




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated
    Statements of Operations
  Years Ended December 31,2007


2006


2005(In thousands, except per share data)Revenue:Collaborations and commercial agreements

$
22,367


$
19,906


$
14,604Grants


8,702



2,754



1,949Grants  subcontractor reimbursements


3,670



5,120



5,083Total revenue


34,739



27,780



21,636Expenses:Research and development


42,249



46,942



37,881General and administrative


8,642



9,588



11,820Total operating expenses


50,891



56,530



49,701Loss from operations


(16,152
)


(28,750
)


(28,065
)Interest income


961



1,805



284Interest expense


(816
)


(1,107
)


(422
)Interest expense associated with bridge notes










(1,188
)Net loss


(16,007
)


(28,052
)


(29,391
)Accretion to redemption value of redeemable convertible
    preferred stock






(49
)


(472
)Net loss attributable to common stockholders

$
(16,007
)

$
(28,101
)

$
(29,863
)Basic and diluted net loss per share attributable to common
    stockholders

$
(1.01
)

$
(2.03
)

$
(48.32
)Shares used to compute basic and diluted net loss per share
    attributable to common stockholders


15,915



13,814



618    52




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated
    Statements of Stockholders Equity (Deficit)
  Years Ended December 31, 2005, 2006 and 2007Notes








Accumulated





TotalReceivable


Additional





Other





StockholdersCommon Stock


from


Paid-In


Deferred


Comprehensive


Accumulated


EquityShares


Amount


Stockholders


Capital


Compensation


Loss


Deficit


(Deficit)(In thousands, except share data)Balance at December 31, 2004


500,436


$
1


$
(138
)

$
27,120


$



$



$
(105,765
)

$
(78,782
)Issuance of common stock upon exercise of stock options


213,417











222















222Conversion of preferred stock into common stock for
    non-participation in the Series B financing


70,392











1,410















1,410Repayment of notes receivable from stockholders










81



















81Accrued interest on notes receivable from stockholders










(3
)


















(3
)Deferred compensation for issuance of equity instruments














12,944



(12,944
)










Amortization of stock-based compensation


















10,233











10,233Repurchase of unvested restricted stock


(85
)






1



(4
)














(3
)Issuance of restricted stock


70,000











654



(654
)










Issuance of equity instruments to former employees and
    consultants














1,736



(1,736
)










Issuance of warrants to lenders














498















498Deemed dividend and accretion to redemption value of redeemable
    convertible preferred stock


























(472
)


(472
)Reduction of redemption value on redeemable preferred stock














54,530















54,530Net loss and comprehensive loss


























(29,391
)


(29,391
)Balance at December 31, 2005


854,160



1



(59
)


99,110



(5,101
)






(135,628
)


(41,677
)Net loss


























(28,052
)


(28,052
)Unrealized loss on
    available-for-sale
    securities






















(8
)






(8
)Net comprehensive loss






























(28,060
)Issuance of common stock upon exercise of stock options


115,606



1







158















159Issuance of common stock pursuant to employee stock purchase plan


59,368











132















132Issuance of common stock pursuant to initial public offering,
    net of offering costs


4,152,904



4







20,625















20,629Conversion of redeemable convertible preferred stock into common
    stock pursuant to initial public offering


8,346,316



8







46,878















46,886Conversion of note payable into common stock pursuant to initial
    public offering


1,000,000



1







5,999















6,000Issuance of common stock pursuant to collaboration agreement


637,755



1







5,009















5,010Repayment of notes receivable from stockholders










38



















38Elimination of deferred compensation upon adoption of
    SFAS 123R














(5,101
)


5,101











Compensation expense related to share-based payments














4,539















4,539Issuance of warrants to lenders














6















6Deemed dividend and accretion to redemption value of redeemable
    convertible preferred stock


























(49
)


(49
)Balance at December 31, 2006


15,166,109



16



(21
)


177,355







(8
)


(163,729
)


13,613Net loss


























(16,007
)


(16,007
)Unrealized gain on
    available-for-sale
    securities






















7







7Net comprehensive loss






























(16,000
)Issuance of common stock upon exercise of stock options and
    restricted stock awards


176,414











425















425Issuance of common stock pursuant to employee stock purchase plan


194,605











381















381Issuance of common stock pursuant to private placement offering,
    net of offering costs


4,943,154



5







23,210















23,215Repayment of notes receivable from stockholders










21



















21Compensation expense related to share-based payments














3,368















3,368Balance at December 31, 2007


20,480,282


$
21


$



$
204, 739


$



$
(1
)

$
(179,736
)

$
25,023    53




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated
    Statements of Cash Flows
  Years Ended December 31,2007


2006


2005(In thousands)Operating activities:Net loss

$
(16,007
)

$
(28,052
)

$
(29,391
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization


1,923



3,332



3,976Stock-based compensation


3,368



4,569



10,233Issuance of common stock for services


260



56



Amortization of discount on warrants


168



167



72Amortization of discount on warrants associated with bridge notes










727Realized loss on investment


532







Deferred rent


(66
)


(103
)


(97
)Accrual of interest on bridge notes payable










411Changes in operating assets and liabilities:Accounts receivable


826



(2,669
)


56Prepaid expenses and other current assets


429



(452
)


(151
)Accounts payable and accrued liabilities


544



(40
)


2,874Deferred revenue


(5,938
)


15,223



737Other assets


(291
)


2,078



(1,289
)Net cash used in operating activities


(14,252
)


(5,891
)


(11,842
)Investing activities:Purchase of short-term investments


(18,300
)


(6,000
)


Sales and maturity of short-term investments


22,800







Purchases of property and equipment, net


(366
)


(1,483
)


(1,303
)Net cash provided by (used in) investing activities


4,134



(7,483
)


(1,303
)Financing activities:Proceeds from lines of credit and notes payable






1,132



8,868Principal payments on lines of credit and notes payable


(3,526
)


(3,474
)


(2,974
)Proceeds from repayment of notes receivable from stockholders


21



39



79Issuance of common stock for cash, net of repurchases and
    offering expenses


23,768



25,836



219Issuance of preferred stock, net










13,159Net cash provided by financing activities


20,263



23,533



19,351Net increase in cash and cash equivalents


10,145



10,159



6,206Cash and cash equivalents at beginning of year


27,877



17,718



11,512Cash and cash equivalents at end of year

$
38,022


$
27,877


$
17,718Supplemental schedule of cash flow information:Cash paid for interest

$
643


$
1,093


$
363Supplemental schedule of non-cash investing and financing
    activities:Conversion of preferred stock to common stock

$



$
46,886


$
Conversion of note payable to common stock

$



$
6,000


$
Reclass of deferred compensation to additional paid in capital

$



$
5,101


$
Issuance of warrant related to line of credit

$



$
6


$
498Deferred compensation

$



$



$
15,334Conversion of bridge notes and redeemable convertible preferred
    stock to equity

$



$



$
54,530Conversion of bridge notes to preferred stock

$



$



$
14,291    54




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes
    to Consolidated Financial Statements
 (In thousands, except share and per share data)
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization
    and Business
      Reverse
    Stock Split
    1-for-2 1-for-2
  Initial
    Public Offering
  Form S-1 333-128059)
  Principles
    of Consolidation
   55




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Use of
    Estimates
    Cash
    and Cash Equivalents and Short-term Investments
    Accounting for Certain
    Investments in Debt and Equity Securities
  Fair
    Value of Financial Statements
    Accounts
    Receivable
      Years Ended December 31,2007


2006


2005Customer A


36%



28%



33%Customer B


30%



31%



%Customer C


16%



22%



38%   Property
    and Equipment
   56




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Long-Lived
    Assets
  Accounting for the
    Impairment or Disposal of Long-Lived Assets
  Deferred
    Rent
    Adoption
    of SFAS 123(R), Share-Based Payment
  Share-Based Payment Accounting for
    Stock-Based Compensation
    Share-Based Payment 5-year 7-year
     57




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Stock-Based
    Compensation prior to SFAS 123R
  Accounting for Stock Issued to Employees
  SFAS No. 123 96-18, Accounting for Equity Instruments That are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling
    Goods and Services
      Accounting for
    Stock Appreciation Rights and Other Variable Stock Option or
    Award Plans.
   58




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005Net loss attributable to common stockholders, as reported

$
(29,863
)Add: Stock-based employee compensation expense included in net
    loss attributable to common stockholders


8,785Deduct: Stock-based employee compensation determined under the
    fair value method


(6,859
)Pro forma net loss attributable to common stockholders

$
(27,937
)Basic and diluted net loss attributable to common stockholders
    per share, as reported

$
(48.32
)Pro forma basic and diluted net loss attributable to common
    stockholders per share

$
(45.21
)     2005Risk-free interest rate


3%Expected volatility


63%Expected lives


4 yearsExpected dividend


     Revenue
    Recognition
  Revenue
    Recognition, Issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21).
     59




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  EITF 00-21.
    99-19, Reporting Revenue Gross as a Principal Versus Net as an
    Agent (EITF 99-19), 01-14, Income Statement Characterization of Reimbursements Received
    for Out-of-Pocket Expenses Incurred (EITF 01-14).
    Research
    and Development
    Income
    Taxes
  Accounting for Income Taxes.
  Net
    Loss Per Share Attributable to Common Stockholders
  Earnings Per Share
 60




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2007


2006


2005Redeemable convertible preferred stock










5,686,849Notes payable










1,000,000Outstanding common stock options


853,725



604,869



636,927Restricted stock


76,563



145,727



28,971Outstanding warrants


361,879



195,928



70,645Total


1,292,167



946,524



7,423,392     Comprehensive
    Income (Loss)
  Reporting Comprehensive Income
  Segment
    Reporting
  Disclosure
    About Segments of an Enterprise and Related Information
  Recently
    Issued Accounting Standards
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109
    (FIN 48)
  and/or
 61




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  3-year
  Fair Value Measurements,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities-Including an amendment of FASB Statement
    No. 115 instrument-by-instrument
  No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or
    Services Received for Use in Future Research and Development
    Activities, EITF 07-3. No. 07-3 No. 07-3 No. 07-3
  No. 07-1, Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property, EITF 07-1.
 62




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  No. 07-1 No. 07-1
  2.
    Balance
    Sheet Details  Short-term
    Investments
      Property
    and Equipment
    Estimated


December 31,Life in Years


2007


2006Lab equipment


5 - 7


$
14,338


$
14,066Computers and equipment


3 - 5



8,154



7,963Leasehold improvements


4 - 15



5,139



5,139Furniture


10



411



411Construction in progress


NA







25528,042



27,834Accumulated depreciation and amortization






(24,153
)


(22,399
)Property and equipment, net





$
3,889


$
5,435    63




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Goodwill
    and Intangible Assets
    December 31, 2007GrossEstimated


Carrying


AccumulatedLife in Years


Amount


AmortizationGoodwill


Indefinite


$
3,914


$
(522
)Licenses


3 - 10



1,014



(980
)Total intangible assets





$
4,928


$
(1,502
)   December 31, 2006GrossEstimated


Carrying


AccumulatedLife in Years


Amount


AmortizationGoodwill


Indefinite


$
3,914


$
(522
)Licenses


3 - 10



989



(969
)Total intangible assets





$
4,903


$
(1,491
)       2008

$
72009


62010


62011


62012


5Thereafter


4$
34   3.
    Lines of
    Credit     64




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    No. 95-22, Balance Sheet Classifications of Borrowings Outstanding under
    Revolving Credit Agreements that include both a Subjective
    Acceleration Clause and a Lock-Box Arrangement, Bulletin No. 79-3, Subjective Acceleration Clauses in Long-Term Debt
    Agreements
    2008

$
3,6612009


6652010


18Total


4,344Less: Amount representing debt discount at December 31, 2007


(150
)Total minimum principal payments, net of debt discount

$
4,194   4.
    Commitments
    and Collaborative Research and Development Agreements      2008

$
1,8172009


1,7372010


1,8012011


1,8552012


1,929Thereafter


1,497Total minimum lease payments

$
10,636    65




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Sponsored
    Research and Drug Discovery Collaboration Agreements with Cystic
    Fibrosis Foundation Therapeutics, Inc.
    Collaboration
    and License Agreement with Eli Lilly and Company
      License
    and Collaboration Agreement with Novartis
       66




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      5.
    Bridge
    Financing and Redeemable Convertible Preferred Stock      6.
    Equity
    Incentive Plans and Warrants  2000
    Equity Incentive Plan
   67




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2005
    Equity Incentive Plan
      2005
    Non-Employee Directors Stock Option Plan
   68




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock
    Option Activity:
    Weighted-AverageRemainingWeighted-Average


Contractual Term


AggregateShares


Exercise Price


in Years


Intrinsic ValueOutstanding at December 31, 2004


164,475


$
10.67Granted


1,396,627


$
1.00Exercised


(213,417
)

$
1.04Cancelled


(200,999
)

$
2.41Outstanding at December 31, 2005


1,146,686


$
2.13Granted


677,750


$
6.77Exercised


(96,856
)

$
1.06Cancelled


(143,480
)

$
4.55Outstanding at December 31, 2006


1,584,100


$
3.96Granted


847,960


$
3.91Exercised


(121,727
)

$
1.36Cancelled


(170,439
)

$
4.89Outstanding at December 31, 2007


2,139,894


$
4.02



8.00


$
3,604Exercisable at December 31, 2007


1,009,923


$
3.66



8.15


$
2,351     Options OutstandingWeighted





Options ExercisableAverage


Weighted





WeightedRemaining


Average





AverageNumber of


Contractual


Exercise


Number of


ExerciseRange of Exercise Price

Shares


Term in Years


Price


Shares


Price$1.00


694,173



7.15


$
1.00



591,194


$
1.00$1.58 - $2.55


24,450



7.37


$
2.02



11,678


$
1.86$3.63 - $3.63


649,627



9.07


$
3.63






$
$3.96 - $13.44


771,644



7.87


$
7.12



407,051


$
7.58$1.00 - $13.44


2,139,894



8.00


$
4.02



1,009,923


$
3.66  69




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2007


2006Research and development

$
1,210


$
1,771General and administrative


1,384



2,013Total share-based compensation expense and impact on net loss
    applicable to common stockholders

$
2,594


$
3,784Impact on net loss per share applicable to common stockholders,
    basic and diluted

$
0.16


$
0.27     Years EndedDecember 31,2007


2006Expected volatility


73
%


67
%Risk-free interest rate


4.6
%


4.7
%Dividend yield


0
%


0
%Expected term


6.25 years



6.25 years   Restricted
    Stock and Restricted Stock Unit Grants
          Weighted-AverageRestricted


Grant DateShares


Fair ValueNon-vested restricted stock at January 1, 2007


142,188


$
7.87Granted






Vested


(65,625
)


8.11Non-vested restricted stock at December 31, 2007


76,563


$
7.66  70




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Common
    Stock Options to Consultants
  No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services.
    Years Ended December 31,2007


2006Research and development

$
1,728


$
2,124General and administrative

$
1,640


$
2,445Stock-based compensation expense

$
3,368


$
4,569Stock-based compensation expense per common share, basic and
    diluted:

$
0.21


$
0.33   2005
    Employee Stock Purchase Plan
   71




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Years EndedDecember 31,2007

2006Expected volatility (weighted average)

73%

67%Risk-free interest rate

4.1% to 5.1%

4.9% to 5.1%Dividend yield

0%

0%Expected term

6 months to

6 months to2 years

2 yearsEstimated fair value per share of options granted under the
    Purchase Plan

$0.83 to $3.37

$0.83 to $1.17   Warrants
    7.
    Stockholders
    equity (deficit)  Common
    Stock
  Shares Reserved
    for Future Issuance
    December 31,2007Equity Incentive Plans


2,915,085Restricted Stock Units


76,563Employee Stock Purchase Plan


271,027Warrants


1,682,009Total Shares Reserved for Issuance


4,944,684     PIPE
    Financing
   72




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  EITF 00-19, Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Companys Own Stock
  Notes
    Receivable
      8.
    Income
    Taxes    December 31,2007


2006Deferred tax assets (in thousands):Net operating loss carryforwards

$



$
42,030Research and development credits






7,284Capitalized research and development


1,114



1,335Accrued vacation


288



274Deferred revenue


5,738



8,157Other


1,879



1,107Depreciation and amortization


1,732



996Total deferred tax assets


10,751



61,183Valuation allowance for deferred tax assets


(10,751
)


(61,183
)Net deferred tax assets

$



$
      73




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
            9.
    Employee
    Benefit Plan   74




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  10.
    Quarterly
    Financial Data (unaudited)    2007First


Second


Third


Fourth


TotalRevenues

$
10,968


$
8,506


$
7,586


$
7,679


$
34,739Net loss

$
(1,098
)

$
(4,013
)

$
(4,773
)

$
(6,123
)

$
(16,007
)Net loss per share

$
(0.07
)

$
(0.26
)

$
(0.31
)

$
(0.35
)

$
(1.01
)   2006First


Second


Third


Fourth


TotalRevenues

$
4,729


$
7,848


$
6,767


$
8,436


$
27,780Net loss

$
(10,415
)

$
(9,354
)

$
(3,398
)

$
(4,885
)

$
(28,052
)Accretion of redeemable convertible preferred stock issuance
    costs


(49
)














(49
)Net loss applicable to common stockholders

$
(10,464
)

$
(9,354
)

$
(3,398
)

$
(4,885
)

$
(28,101
)Net loss per share

$
(1.06
)

$
(0.62
)

$
(0.23
)

$
(0.32
)

$
(2.03
)Net loss per share applicable to common stockholders

$
(1.06
)

$
(0.62
)

$
(0.23
)

$
(0.32
)

$
(2.03
)    75




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
      Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
    Item 9B.
    Other
    Information   PART III  Item 10
    Directors,
    Executive Officers and Corporate Governance   76




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##### Table of Contents



www.sgxpharma.com
    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services    PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Financial Statements
  Form 10-K,
  Financial Statement Schedules
    Exhibits
  ExhibitNumber

Description of Document3
.1(1)

Form of Registrants Amended and Restated Certificate of
    Incorporation.3
.2(9)

Form of Registrants Amended and Restated Bylaws. 77




---



##### Table of Contents



ExhibitNumber

Description of Document4
.1(4)

Form of Common Stock Certificate of Registrant.4
.2(1)

Form of Warrant to Purchase Common Stock issued by Registrant in
    July 2005 to Timothy Harris and Linda Grais.4
.3(4)

Form of Warrants issued by Registrant in July 2002 to GATX
    Ventures, Inc.4
.4(3)

Amended and Restated Warrant issued by Registrant in January
    2005 to Oxford Finance Corporation.4
.5(4)

Warrant issued by Registrant in July 2002 to Silicon Valley Bank.4
.6(1)

Amended and Restated Investor Rights Agreement dated
    April 21, 2005 between Registrant and certain of its
    stockholders.4
.7(2)

Form of Warrant issued by Registrant in September and December
    2005 to Oxford Finance Corporation and Silicon Valley Bank.4
.8(9)

First and Second Amendments to Amended and Restated Investor
    Rights Agreement, dated October 31, 2005 and March 27,
    2006, respectively, each between Registrant and certain of its
    stockholders.4
.9(10)

Form of Warrant issued by Registrant to Silicon Valley Bank.4
.10(13)

Form of Warrant issued by Registrant in November 2007.10
.1+(1)

Form of Indemnity Agreement by and between Registrant and its
    directors and executive officers.10
.2+(4)

2000 Equity Incentive Plan and Form of Option Agreement and Form
    of Stock Option Grant Notice thereunder.10
.3+(4)

2005 Equity Incentive Plan and Form of Stock Option Agreement
    and Form of Stock Option Grant Notice thereunder.10
.4+(4)

2005 Employee Stock Purchase Plan and Form of Offering Document
    thereunder.10
.5+(11)

2005 Non-Employee Directors Stock Option Plan and Form of
    Stock Option Agreement and Form of Stock Option Grant Notice
    thereunder.10
.6+(1)

Amended and Restated Executive Employment Agreement dated
    January 1, 2005 between Registrant and Michael Grey.10
.7+(1)

Executive Employment Agreement dated January 1, 2002
    between Registrant and Stephen Burley, M.D., D.Phil. and
    related relocation loan agreement dated July 29, 2002.10
.8+(1)

Chairmanship Letter Agreement dated January 16, 2004
    between Registrant and Christopher Henney, Ph.D., DSc.10
.9(1)

Lease Agreement dated September 20, 1999 between Registrant
    and ARE-10505 Roselle Street, LLC, as amended.10
.10(1)

Lease Agreement dated May 18, 2000 between Registrant and
    ARE-3770 Tansy Street, LLC.10
.11(1)

Lease Agreement dated June 1, 2001 between Registrant and
    BRS Torrey I, LLC.10
.12*(4)

Patent and Know How License dated July 23, 2004 between
    Registrant, Shire Biochem Inc., Tanaud Ireland Inc. and Tanaud
    International B.V., as amended, and related novation agreements.10
.13*(3)

Collaboration and License Agreement dated April 14, 2003
    between Registrant and Eli Lilly and Company.10
.14*(3)

Amendment to Agreement dated July 1, 2003 between
    Registrant and Eli Lilly and Company.10
.15*(1)

Amendment to Agreement dated January 30, 2004 between
    Registrant and Eli Lilly and Company.10
.16*(3)

Amendment to Agreement dated November 11, 2004 between
    Registrant and Eli Lilly and Company.10
.17*(1)

Amendment to Agreement dated March 31, 2005 between
    Registrant and Eli Lilly and Company.10
.18*(3)

Collaboration Agreement dated December 1, 2003 between
    Registrant and UroGene, S.A. (which was acquired by Pierre Fabre
    Medicament in July 2005).10
.19*(1)

Amendment to Agreement dated December 16, 2004 between
    Registrant and UroGene, S.A.
    (predecessor-in-interest
    to Pierre Fabre Medicament) and related assignment agreements.10
.20*(4)

Drug Discovery Agreement dated July 1, 2005 between
    Registrant and Cystic Fibrosis Foundation Therapeutics, Inc. 78




---



##### Table of Contents



ExhibitNumber

Description of Document10
.21(1)

Memorandum of Understanding dated July 26, 2000 between the
    Advanced Photon Source and the Structural GenomiX Collaborative
    Access Team and related Collaborative Access Team User Agreement
    dated May 15, 2001 between Registrant, The University of
    Chicago and United States Department of Energy.10
.22(1)

Master Loan and Security Agreement No. 2081008 dated
    August 28, 2002 between Registrant and Oxford Finance
    Corporation, as amended.10
.23(2)

First Amendment to Lease Agreement dated August 30, 2005
    between Registrant and ARE-3770 Tansy Street, LLC.10
.24(2)

Third Amendment to Lease Agreement dated August 30, 2005
    between Registrant and ARE-10505 Roselle Street, LLC.10
.25(2)

Loan and Security Agreement dated September 16, 2005 among
    Registrant, Oxford Finance Corporation and Silicon Valley Bank.10
.26*(3)

Amendment to Agreement effective as of October 1, 2005
    between Registrant, F. Hoffmann-La Roche Ltd. and
    Hoffmann-La Roche Inc.10
.27+(4)

Offer Letter Agreement dated November 16, 2005 between
    Registrant and William Todd Myers.10
.28+(4)

Offer Letter Agreement dated December 13, 2005 between
    Registrant and Siegfried Reich, Ph.D.10
.29*(5)

Termination Agreement effective February 15, 2006 between
    Registrant and Pierre Fabre Medicament S.A.10
.30+(8)

Form of Restricted Stock Unit Grant Notice and Restricted Stock
    Unit Agreement for Executive Officers under the
    Registrants 2005 Equity Incentive Plan.10
.31(8)

Stock Purchase Agreement dated March 27, 2006, between
    Registrant and Novartis Pharma AG.10
.32(6)*

License and Collaboration Agreement between SGX and Novartis,
    dated March 27, 2006.10
.33(7)

Form of Change in Control Severance Agreement.10
.34+(9)

Change of Control Severance Agreement dated December 18,
    2006 between Registrant and Michael Grey10
.35+(9)

Change of Control Severance Agreement dated February 9,
    2007 between Registrant and Stephen K. Burley10
.36+(9)

Change of Control Severance Agreement dated December 15,
    2006 between Registrant and W. Todd Myers10
.37+(9)

Change of Control Severance Agreement dated December 18,
    2006 between Registrant and Annette North10
.38+(9)

Change of Control Severance Agreement dated January 2, 2007
    between Registrant and Siegfried Reich10
.39+(9)

Change of Control Severance Agreement dated December 18,
    2006 between Registrant and Terence Rugg10
.40+(9)

Summary of 2007 Bonus Award Program10
.41+(9)

Letter Agreement dated February 9, 2007 between Registrant
    and Stephen K. Burley10
.42(9)

Fifth Amendment to Collaboration and License Agreement dated
    March 1, 2007 between Registrant and Eli Lilly and Company10
.43(9)

First Amendment to the Drug Discovery Agreement dated
    March 1, 2007 between Registrant and Cystic Fibrosis
    Foundation Therapeutics, Inc.10
.44(9)

Fourth Amendment to Lease Agreement dated March 28, 2007
    between Registrant and ARE-10505 Roselle Street, LLC.10
.45(9)

Second Amendment to Lease Agreement dated March 28, 2007
    between Registrant and ARE-3770 Tansy Street, LLC.10
.46(11)

Non-Employee Director Compensation Arrangement.10
.47(12)*

First Amendment to License and Collaboration Agreement between
    the Registrant and Novartis Pharma AG dated August 22, 2007 79




---



##### Table of Contents



ExhibitNumber

Description of Document10
.48(13)

Securities Purchase Agreement between the Registrant and the
    Investors named therein dated November 19, 2007.10
.49(14)*

Amendment to Agreement dated December 7, 2007 between the
    Registrant and Eli Lilly and Company.10
.50(15)

Fifth Amendment to Lease Agreement dated December 10, 2007
    between the Registrant and ARE-10505 Roselle Street, LLC10
.51(15)

Third Amendment to Lease Agreement dated December 10, 2007
    between the Registrant and ARE-3770 Tansy Street, LLC.10
.52(16)

Third Amendment to Lease dated December 21, 2007 between
    the Registrant and BRS Torrey I, L.L.C.10
.53+

Offer Letter Agreement dated July 11, 2006 between
    Registrant and Terence A. Rugg, M.D.23
.1

Consent of Independent Registered Public Accounting Firm.24
.1

Power of Attorney. Reference is made to the signature page of
    this report.31
.1

Certification of principal executive officer required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a).31
.2

Certification of principal financial officer required by
    Rule 13a-14(a)
    or
    Rule 15d-14(a).32


Certification by the Chief Executive Officer and the Chief
    Financial Officer of the Registrant, as required by
    Rule 13a-14(b)
    or 15d-14(b) and Section 1350 of Chapter 63 of
    Title 18 of the United States Code (18 U.S.C. 1350).     +
    
    Indicates management contract or compensatory plan.*
    
    Confidential treatment has been granted with respect to certain
    portions of this exhibit. Omitted portions have been filed
    separately with the Securities and Exchange Commission.(1)
    
    Filed with the Registrants Registration Statement on
    Form S-1
    on September 2, 2005 and incorporated herein by reference.(2)
    
    Filed with Amendment No. 1 to the Registrants
    Registration Statement on
    Form S-1
    on October 14, 2005 and incorporated herein by reference.(3)
    
    Filed with Amendment No. 3 to the Registrants
    Registration Statement on
    Form S-1
    on November 14, 2005 and incorporated herein by reference.(4)
    
    Filed with Amendment No. 4 to the Registrants
    Registration Statement on
    Form S-1
    on January 4, 2006 and incorporated herein by reference.(5)
    
    Filed with the Registrants Current Report on Form
    8-K on
    March 13, 2006 and incorporated herein by reference.(6)
    
    Filed with the Registrants Current Report on Form
    8-K on
    April 5, 2006 and incorporated herein by reference.(7)
    
    Filed with the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006 filed on
    November 13, 2006 and incorporated herein by reference.(8)
    
    Filed as an Exhibit to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005 filed with the
    Commission on March 31, 2006, and incorporated herein by
    reference.(9)
    
    Filed with the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2007 filed with the
    Commission on March 30, 2007, and incorporated herein by
    reference.(10)
    
    Filed with the Registrants Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2007 filed with the Commission on
    May 15, 2007, and incorporated herein by reference.(11)
    
    Filed with the Registrants Quarterly Report on Form
    10-Q for the
    quarter ended June 30, 2007 filed with the Commission on
    August 14, 2007, and incorporated herein by reference.(12)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on September 10, 2007 and incorporated herein by reference. 80




---



##### Table of Contents



(13)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on November 20, 2007 and incorporated herein by reference.(14)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on December 12, 2007 and incorporated herein by reference.(15)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on December 13, 2007 and incorporated herein by reference.(16)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on December 21, 2007 and incorporated herein by reference.  Exhibits
    Financial Statement Schedules
   81




---



##### Table of Contents



SIGNATURES      By:
    /s/  Michael
    Grey   President and Chief Executive Officer
    POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Michael
    Grey     Michael
    Grey

President, Chief Executive Officer and Member of the Board of
    Directors (Principal Executive Officer)

March 26, 2008/s/  Todd
    Myers     Todd
    Myers, C.P.A.

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 26, 2008/s/  Christopher
    S. Henney     Christopher
    S. Henney, Ph.D., D.Sc.

Chairman of the Board of Directors

March 26, 2008/s/  Louis
    C. Bock     Louis
    C. Bock

Member of the Board of Directors

March 26, 2008/s/  Karin
    Eastham     Karin
    Eastham, C.P.A.

Member of the Board of Directors

March 26, 2008/s/  Jean-Francois
    Formela     Jean-Francois
    Formela, M.D.

Member of the Board of Directors

March 26, 2008/s/  Joseph
    Turner     Joseph
    Turner

Member of the Board of Directors

March 26, 2008  82




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description of Document3
.1(1)

Form of Registrants Amended and Restated Certificate of
    Incorporation.3
.2(9)

Form of Registrants Amended and Restated Bylaws.4
.1(4)

Form of Common Stock Certificate of Registrant.4
.2(1)

Form of Warrant to Purchase Common Stock issued by Registrant in
    July 2005 to Timothy Harris and Linda Grais.4
.3(4)

Form of Warrants issued by Registrant in July 2002 to GATX
    Ventures, Inc.4
.4(3)

Amended and Restated Warrant issued by Registrant in January
    2005 to Oxford Finance Corporation.4
.5(4)

Warrant issued by Registrant in July 2002 to Silicon Valley Bank.4
.6(1)

Amended and Restated Investor Rights Agreement dated April 21,
    2005 between Registrant and certain of its stockholders.4
.7(2)

Form of Warrant issued by Registrant in September and December
    2005 to Oxford Finance Corporation and Silicon Valley Bank.4
.8(9)

First and Second Amendments to Amended and Restated Investor
    Rights Agreement, dated October 31, 2005 and March 27, 2006,
    respectively, each between Registrant and certain of its
    stockholders.4
.9(10)

Form of Warrant issued by Registrant to Silicon Valley Bank.4
.10(13)

Form of Warrant issued by Registrant in November 2007.10
.1+(1)

Form of Indemnity Agreement by and between Registrant and its
    directors and executive officers.10
.2+(4)

2000 Equity Incentive Plan and Form of Option Agreement and Form
    of Stock Option Grant Notice thereunder.10
.3+(4)

2005 Equity Incentive Plan and Form of Stock Option Agreement
    and Form of Stock Option Grant Notice thereunder.10
.4+(4)

2005 Employee Stock Purchase Plan and Form of Offering Document
    thereunder.10
.5+(11)

2005 Non-Employee Directors Stock Option Plan and Form of
    Stock Option Agreement and Form of Stock Option Grant Notice
    thereunder.10
.6+(1)

Amended and Restated Executive Employment Agreement dated
    January 1, 2005 between Registrant and Michael Grey.10
.7+(1)

Executive Employment Agreement dated January 1, 2002 between
    Registrant and Stephen Burley, M.D., D.Phil. and related
    relocation loan agreement dated July 29, 2002.10
.8+(1)

Chairmanship Letter Agreement dated January 16, 2004 between
    Registrant and Christopher Henney, Ph.D., DSc.10
.9(1)

Lease Agreement dated September 20, 1999 between Registrant and
    ARE-10505 Roselle Street, LLC, as amended.10
.10(1)

Lease Agreement dated May 18, 2000 between Registrant and
    ARE-3770 Tansy Street, LLC.10
.11(1)

Lease Agreement dated June 1, 2001 between Registrant and BRS
    Torrey I, LLC.10
.12*(4)

Patent and Know How License dated July 23, 2004 between
    Registrant, Shire Biochem Inc., Tanaud Ireland Inc. and Tanaud
    International B.V., as amended, and related novation agreements.10
.13*(3)

Collaboration and License Agreement dated April 14, 2003 between
    Registrant and Eli Lilly and Company.10
.14*(3)

Amendment to Agreement dated July 1, 2003 between Registrant and
    Eli Lilly and Company.10
.15*(1)

Amendment to Agreement dated January 30, 2004 between Registrant
    and Eli Lilly and Company.10
.16*(3)

Amendment to Agreement dated November 11, 2004 between
    Registrant and Eli Lilly and Company.10
.17*(1)

Amendment to Agreement dated March 31, 2005 between Registrant
    and Eli Lilly and Company.10
.18*(3)

Collaboration Agreement dated December 1, 2003 between
    Registrant and UroGene, S.A. (which was acquired by Pierre Fabre
    Medicament in July 2005). 83




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##### Table of Contents



ExhibitNumber

Description of Document10
.19*(1)

Amendment to Agreement dated December 16, 2004 between
    Registrant and UroGene, S.A. (predecessor-in-interest to Pierre
    Fabre Medicament) and related assignment agreements.10
.20*(4)

Drug Discovery Agreement dated July 1, 2005 between Registrant
    and Cystic Fibrosis Foundation Therapeutics, Inc.10
.21(1)

Memorandum of Understanding dated July 26, 2000 between the
    Advanced Photon Source and the Structural GenomiX Collaborative
    Access Team and related Collaborative Access Team User Agreement
    dated May 15, 2001 between Registrant, The University of Chicago
    and United States Department of Energy.10
.22(1)

Master Loan and Security Agreement No. 2081008 dated August 28,
    2002 between Registrant and Oxford Finance Corporation, as
    amended.10
.23(2)

First Amendment to Lease Agreement dated August 30, 2005 between
    Registrant and ARE-3770 Tansy Street, LLC.10
.24(2)

Third Amendment to Lease Agreement dated August 30, 2005 between
    Registrant and ARE-10505 Roselle Street, LLC.10
.25(2)

Loan and Security Agreement dated September 16, 2005 among
    Registrant, Oxford Finance Corporation and Silicon Valley Bank.10
.26*(3)

Amendment to Agreement effective as of October 1, 2005 between
    Registrant, F. Hoffmann-La Roche Ltd. and
    Hoffmann-La Roche Inc.10
.27+(4)

Offer Letter Agreement dated November 16, 2005 between
    Registrant and William Todd Myers.10
.28+(4)

Offer Letter Agreement dated December 13, 2005 between
    Registrant and Siegfried Reich, Ph.D.10
.29*(5)

Termination Agreement effective February 15, 2006 between
    Registrant and Pierre Fabre Medicament S.A.10
.30+(8)

Form of Restricted Stock Unit Grant Notice and Restricted Stock
    Unit Agreement for Executive Officers under the
    Registrants 2005 Equity Incentive Plan.10
.31(8)

Stock Purchase Agreement dated March 27, 2006, between
    Registrant and Novartis Pharma AG.10
.32(6)*

License and Collaboration Agreement between SGX and Novartis,
    dated March 27, 2006.10
.33(7)

Form of Change in Control Severance Agreement.10
.34+(9)

Change of Control Severance Agreement dated December 18, 2006
    between Registrant and Michael Grey10
.35+(9)

Change of Control Severance Agreement dated February 9, 2007
    between Registrant and Stephen K. Burley10
.36+(9)

Change of Control Severance Agreement dated December 15, 2006
    between Registrant and W. Todd Myers10
.37+(9)

Change of Control Severance Agreement dated December 18, 2006
    between Registrant and Annette North10
.38+(9)

Change of Control Severance Agreement dated January 2, 2007
    between Registrant and Siegfried Reich10
.39+(9)

Change of Control Severance Agreement dated December 18, 2006
    between Registrant and Terence Rugg10
.40+(9)

Summary of 2007 Bonus Award Program10
.41+(9)

Letter Agreement dated February 9, 2007 between Registrant and
    Stephen K. Burley10
.42(9)

Fifth Amendment to Collaboration and License Agreement dated
    March 1, 2007 between Registrant and Eli Lilly and Company10
.43(9)

First Amendment to the Drug Discovery Agreement dated March 1,
    2007 between Registrant and Cystic Fibrosis Foundation
    Therapeutics, Inc.10
.44(9)

Fourth Amendment to Lease Agreement dated March 28, 2007 between
    Registrant and ARE-10505 Roselle Street, LLC. 84




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##### Table of Contents



ExhibitNumber

Description of Document10
.45(9)

Second Amendment to Lease Agreement dated March 28, 2007 between
    Registrant and ARE-3770 Tansy Street, LLC.10
.46(11)

Non-Employee Director Compensation Arrangement.10
.47(12)*

First Amendment to License and Collaboration Agreement between
    the Registrant and Novartis Pharma AG dated August 22, 200710
.48(13)

Securities Purchase Agreement between the Registrant and the
    Investors named therein dated November 19, 2007.10
.49(14)*

Amendment to Agreement dated December 7, 2007 between the
    Registrant and Eli Lilly and Company.10
.50(15)

Fifth Amendment to Lease Agreement dated December 10, 2007
    between the Registrant and ARE-10505 Roselle Street, LLC10
.51(15)

Third Amendment to Lease Agreement dated December 10, 2007
    between the Registrant and ARE-3770 Tansy Street, LLC.10
.52(16)

Third Amendment to Lease dated December 21, 2007 between the
    Registrant and BRS Torrey I, L.L.C.10
.53+

Offer Letter Agreement dated July 11, 2006 between
    Registrant and Terence A. Rugg, M.D.23
.1

Consent of Independent Registered Public Accounting Firm.24
.1

Power of Attorney. Reference is made to the signature page of
    this report.31
.1

Certification of principal executive officer required by Rule
    13a-14(a) or Rule 15d-14(a).31
.2

Certification of principal financial officer required by Rule
    13a-14(a) or Rule 15d-14(a).32


Certification by the Chief Executive Officer and the Chief
    Financial Officer of the Registrant, as required by Rule
    13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title
    18 of the United States Code (18 U.S.C. 1350).     +
    
    Indicates management contract or compensatory plan.*
    
    Confidential treatment has been granted with respect to certain
    portions of this exhibit. Omitted portions have been filed
    separately with the Securities and Exchange Commission.(1)
    
    Filed with the Registrants Registration Statement on
    Form S-1
    on September 2, 2005 and incorporated herein by reference.(2)
    
    Filed with Amendment No. 1 to the Registrants
    Registration Statement on
    Form S-1
    on October 14, 2005 and incorporated herein by reference.(3)
    
    Filed with Amendment No. 3 to the Registrants
    Registration Statement on
    Form S-1
    on November 14, 2005 and incorporated herein by reference.(4)
    
    Filed with Amendment No. 4 to the Registrants
    Registration Statement on
    Form S-1
    on January 4, 2006 and incorporated herein by reference.(5)
    
    Filed with the Registrants Current Report on Form
    8-K on
    March 13, 2006 and incorporated herein by reference.(6)
    
    Filed with the Registrants Current Report on Form
    8-K on
    April 5, 2006 and incorporated herein by reference.(7)
    
    Filed with the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006 filed on
    November 13, 2006 and incorporated herein by reference. 85




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##### Table of Contents



(8)
    
    Filed as an Exhibit to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005 filed with the
    Commission on March 31, 2006, and incorporated herein by
    reference.(9)
    
    Filed with the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2007 filed with the
    Commission on March 30, 2007, and incorporated herein by
    reference.(10)
    
    Filed with the Registrants Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2007 filed with the Commission on
    May 15, 2007, and incorporated herein by reference.(11)
    
    Filed with the Registrants Quarterly Report on Form
    10-Q for the
    quarter ended June 30, 2007 filed with the Commission on
    August 14, 2007, and incorporated herein by reference.(12)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on September 10, 2007 and incorporated herein by reference.(13)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on November 20, 2007 and incorporated herein by reference.(14)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on December 12, 2007 and incorporated herein by reference.(15)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on December 13, 2007 and incorporated herein by reference.(16)
    
    Filed with the Registrants Current Report on
    Form 8-K
    on December 21, 2007 and incorporated herein by reference. 86