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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, 2006oro

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

06-1523147(State or other jurisdiction
    of
    incorporation or organization)

(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
  Rule 12b-2
 o o þ
  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, 2006
    TABLE OF CONTENTS
  
  PART I


2Item 1.

Business


2Item 1A.

Risk
    Factors


13Item 1B.

Unresolved Staff
    Comments


31Item 2.

Properties


31Item 3.

Legal
    Proceedings


31Item 4.

Submission of
    Matters to a Vote of Security Holders


31PART II


31Item 5.

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


31Item 6.

Selected Financial
    Data


34Item 7.

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


36Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


46Item 8.

Financial
    Statements and Supplementary Data


47Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


75Item 9A.

Controls and
    Procedures


75Item 9B.

Other
    Information


75PART III


75Item 10.

Directors,
    Executive Officers and Corporate Governance


75Item 11.

Executive
    Compensation


75Item 12.

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


76Item 13.

Certain
    Relationships and Related Transactions, and Director
    Independence


76Item 14.

Principal
    Accounting Fees and Services


76PART IV


76Item 15.

Exhibits and
    Financial Statement Schedules


76SIGNATURES


80EXHIBIT 3.2EXHIBIT 10.38EXHIBIT 10.39EXHIBIT 10.40EXHIBIT 10.41EXHIBIT 10.42EXHIBIT 10.43EXHIBIT 10.44EXHIBIT 10.45EXHIBIT 10.46EXHIBIT 10.47EXHIBIT 10.48EXHIBIT 10.49EXHIBIT 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
    in vivo
  ® back-up
  in-vitro in-vivo
     2




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Program/Indication

Status

Marketing RightsBCR-ABL CML

Preclinical development

Novartis (Worldwide)SGX (U.S. and Canada
    Commercialization rights)MET Solid tumors

Preclinical development

SGX (Worldwide)JAK2 Myeloproliferative
    disorders

Lead optimization

SGX (Worldwide)RAS Solid tumors

Lead identification

SGX (Worldwide)   BCR-ABL
    Kinase Inhibitor Program
    Chronic
    Myelogenous Leukemia
  It is currently recommended that
    Imatinib be continued indefinitely
  SGX
    BCR-ABL Inhibitors
   3




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back-up
  Competition
  ® ® and/or
  MET
    Tyrosine Kinase Receptor Inhibitor Program
  and/or
    Other
    Oncology Programs
      20-30%
 4




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FAST 
    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 fragments and
    direct visualization of bound fragments utilizing X-ray
    crystallography;
    the use of novel computational design methods and iterative
    synthetic chemistry to optimize these fragments into drug-like
    lead compounds; and
    the use of 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.     5




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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.
       6




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Cystic
    Fibrosis Foundation Therapeutics, Inc.
    NIH
    Cooperative Agreement Award
    Eli
    Lilly & Company
  target-to-structure
   7




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Shire
    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 uniquely 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 FAST drug discovery platform to generate lead
    candidates.  Our FAST drug discovery platform
    provides us with the capability to pursue many different targets
    to the early lead stage and beyond. Internally, we have
    identified a portfolio of approximately 20 oncology targets that
    we believe are clearly implicated in cancers. We will seek to
    apply FAST to high-value cancer targets with the objective of
    building and advancing a sustainable oncology pipeline.
    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 8




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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
          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; 9




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
    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.    Sales and
    Marketing
    Competition
        ® ® ®
 10




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Government
    Regulation and Product Approvals
      any
   11




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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
   12




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Employees
    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 successful collaborations or result in the discovery
    or development of commercially viable products.
   13




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back-up
  The
    results of early preclinical studies are not necessarily
    predictive of the results of future preclinical studies, and
    there is no guarantee that any of our drug candidates in
    preclinical development will progress through to clinical
    development.
    Because
    the results of preclinical studies are not necessarily
    predictive of future results, any product candidate we advance
    into clinical trials may not have favorable results or receive
    regulatory approval.
      Delays
    in the commencement or completion of clinical testing could
    result in increased costs to us and delay our ability to
    generate significant revenues.
   14




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
    identifying and selecting a suitable development candidate.
    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;
    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.    We
    currently depend on one collaboration partner, Novartis, for a
    portion of our revenues and for the future development and
    potential commercialization of one of our significant research
    programs. If our license and collaboration agreement with
    Novartis terminates, our business and, in particular, our
    BCR-ABL
    program, will be seriously harmed.
   15




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The
    success of our BCR-ABL inhibitor program depends heavily on our
    collaboration with Novartis, which was established only
    recently. If Novartis is unwilling to further develop or
    commercialize development candidates we may identify under the
    collaboration, or experiences significant delays in doing so,
    our business may be harmed.
  ®
  Any
    product candidates we advance into clinical trials are subject
    to extensive regulation, 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.     16




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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
    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; 17




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
    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.  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.
       18




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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
    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. 19




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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.
    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
    current primary source of revenue.
    If our
    competitors develop drug discovery technologies that are more
    advanced than ours, our ability to generate revenue from
    collaborations, commercial arrangements or grants may be reduced
    or eliminated.
   20




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If our
    competitors develop treatments for CML or any other therapeutic
    area that are approved more quickly, marketed more effectively
    or demonstrated to be more effective than our current or future
    product candidates, our ability to generate product revenue will
    be reduced or eliminated.
    ® ® ®
         21




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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.    Because
    we exclusively licensed our product candidate, Troxatyl, from
    Shire and our rights are subject to certain licenses to Shire
    from third parties, any dispute with Shire or between Shire and
    any of these third parties may adversely affect our
    business.
    We do
    not have internal manufacturing capabilities, and if we fail to
    develop and maintain supply relationships with collaborators or
    other third party manufacturers, we may be unable to develop or
    commercialize our products.
   22




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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; 23




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
    the future revenues and profitability of our potential
    customers, suppliers and collaborators; and
    the availability of capital.      In the
    event that we determine that we need to increase the size of our
    organization, we may experience difficulties in managing
    growth.
    
    manage our internal research and development efforts effectively
    while carrying out our contractual obligations to collaborators
    and other third-parties;
    continue to improve our operational, financial and management
    controls, reporting systems and procedures;
    set up marketing, sales, distribution and other commercial
    operations infrastructure if any of our product candidates
    obtain regulatory approval; and
    attract and retain sufficient numbers of talented employees.    If we
    fail to attract and keep key management and scientific
    personnel, we may be unable to successfully develop or
    commercialize our product candidates.
   24




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Risks
    Relating to our Finances and Capital Requirements
  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 sales, manufacturing, distribution and marketing of
    our future products, if any. 25




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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 any collaborative, licensing and other
    arrangements that we may establish, including by partnering our
    internal discovery programs, such as MET and JAK2;
    rate of progress and cost of our preclinical studies and
    clinical trials, if any, 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.  and/or
  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.
   26




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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.    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.
     27




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Risks
    Relating to our Intellectual Property
  Our
    success depends upon our ability to protect our intellectual
    property and our proprietary technologies.
        
    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.     28




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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.
        
    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.
   29




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
    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;
    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;
    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.
   30




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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.
    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
    2006

High


LowFirst Quarter

$
9.71


$
5.75Second Quarter


8.18



4.65Third Quarter


5.50



1.88Fourth Quarter


3.56



2.50  31




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Dividends
    Use of
    Proceeds from the Sale of Registered Securities
  Form S-1 No. 333-128059)
 32




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Performance
    Measurement Comparison(1)
      COMPARISON
    OF 11 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.  2/1/06


3/31/06


6/30/06


9/30/06


12/31/06SGX Pharmaceuticals,
    Inc.



100.00




158.67




85.83




43.00




58.33NASDAQ Composite



100.00




101.69




94.73




98.18




105.45NASDAQ Biotechnology



100.00




101.38




90.35




93.99




96.66   (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. 33




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K.
    Years Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Statement of Operations
    Data:Revenue:Collaborations and commercial
    agreements

$
19,906


$
14,604


$
15,941


$
10,135


$
2,986Grants  subcontractor
    reimbursements


5,120



5,083



4,976



4,599



Grants


2,754



1,949



6,380



3,344



350Total revenue


27,780



21,636



27,297



18,078



3,336Expenses:Research and development


46,942



37,881



31,444



28,587



25,573General and administrative


9,588



11,820



6,719



7,353



10,122In-process technology










4,000







Total operating expenses


56,530



49,701



42,163



35,940



35,695Loss from operations


(28,750
)


(28,065
)


(14,866
)


(17,862
)


(32,359
)Interest income


1,805



284



175



320



622Interest expense


(1,107
)


(422
)


(669
)


(1,219
)


(932
)Interest expense associated with
    debenture






(1,188
)


(3,392
)






Net loss


(28,052
)


(29,391
)


(18,752
)


(18,761
)


(32,669
)Accretion to redemption value of
    redeemable convertible preferred stock


(49
)


(472
)


(329
)


(329
)


(329
)Net loss attributable to common
    stockholders

$
(28,101
)

$
(29,863
)

$
(19,081
)

$
(19,090
)

$
(32,998
)Basic and diluted net loss
    attributable to common stockholders per share

$
(2.03
)

$
(48.32
)

$
(39.84
)

$
(44.92
)

$
(78.94
)Shares used to compute basic and
    diluted net loss attributable to common stockholders per share


13,814



618



479



425



418   34




---



##### Table of Contents



As of December 31,2006


2005


2004


2003


2002(In thousands)Balance Sheet Data:Cash, cash equivalents and
    short-term investments

$
33,877


$
17,718


$
11,512


$
13,635


$
24,255Working capital (deficit)


17,263



618



(8,634
)


1,042



15,656Total assets


48,464



33,112



28,332



35,943



47,721Long-term debt obligations
    (including current portion)


7,552



15,733



23,420



13,487



15,789Redeemable preferred stock






46,837



74,850



88,306



87,977Accumulated deficit


(163,729
)


(135,628
)


(105,765
)


(86,684
)


(67,594
)Total stockholders equity
    (deficit)


13,613



(41,677
)


(78,782
)


(78,044
)


(60,237
)  35




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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
       36




---



##### 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 00-21.
 37




---



##### Table of Contents



00-21.
    out-of-pocket 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.
   38




---



##### 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
     39




---



##### Table of Contents



Accrued
    Expenses
    Deferred
    Tax Asset Valuation Allowance
    Results
    of Operations
  Year
    Ended December 31, 2006 Compared to 2005
  Collaboration, Commercial Agreement and Grant
    Revenue.
 40




---



##### Table of Contents



Research and Development Expense.
  General and Administrative.
  Interest Income.
  Interest Expense.
  Interest Expense Associated with Bridge
    Notes.
  Year
    Ended December 31, 2005 Compared to 2004
  Collaboration, Commercial Agreement and Grant
    Revenue.
 41




---



##### Table of Contents



Research and Development Expense.
  General and Administrative.
  Amortization of Stock-Based Compensation.
  Interest Income.
  Interest Expense.
  Interest Expense Associated with Bridge
    Notes.
    Liquidity
    and Capital Resources
  Sources
    of Liquidity
     42




---



##### Table of Contents



Cash
    Flows
         43




---



##### Table of Contents



Funding
    Requirements
    
    terms and timing of any collaborative, licensing and other
    arrangements that we may establish, including partnering our
    internal discovery programs, such as MET and JAK2;
    rate of progress and cost of our 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.     44




---



##### Table of Contents



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


1 to


4 to


More ThanContractual Obligations

Total


1 Year


3 Years


5 Years


5 Years(In thousands)Long-term debt obligations

$
7,870


$
3,526


$
4,326


$
18



Operating lease obligations


2,176



1,417



740



19



License obligations


















Total

$
10,046


$
4,943


$
5,066


$
37


$
   Related
    Party Transactions
    Income
    Taxes
        Recently
    Issued Accounting Pronouncements
  Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
 45




---



##### Table of Contents



Fair Value Measurements.
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   46




---



##### Table of Contents



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


48Consolidated
    Balance Sheets as of December 31, 2006 and 2005


49Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 and 2004


50Consolidated
    Statements of Stockholders Equity (Deficit) for the years
    ended December 31, 2006, 2005 and 2004


51Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005 and 2004


52Notes to
    Consolidated Financial Statements


53  47




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
          
   48




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated Balance Sheets
  December 31,2006


2005(In thousands, except par value and share data)ASSETSCurrent assets:Cash and cash equivalents

$
27,877


$
17,718Short-term investments


6,000



Accounts receivable


3,532



863Prepaid expenses, deposits and
    other current assets


1,616



1,241Total current assets


39,025



19,822Property and equipment, net


5,435



7,168Goodwill and intangible assets, net


3,412



3,439Other assets


592



2,683Total assets

$
48,464


$
33,112LIABILITIES AND
    STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable

$
2,109


$
2,935Accrued liabilities


4,774



4,190Other current liabilities


330



128Current portion of line of credit


7,552



9,733Deferred revenue


6,997



2,218Total current liabilities


21,762



19,204Deferred rent


66



169Deferred revenue, long-term


13,023



2,579Note payable, net of current
    portion






6,000Commitments and contingencies
    (Note 4)Redeemable convertible preferred
    stock, par value $0.001; Authorized shares  none and
    19,000,000 at December 31, 2006 and 2005, respectively;
    issued and outstanding shares   none and 16,692,654
    at December 31, 2006 and 2005, respectively; aggregate
    liquidation preference and redemption amount  $0 and
    $48,190 at December 31, 2006 and 2005, respectively






46,837Stockholders equity
    (deficit):Preferred stock, par value $0.001;
    Authorized shares  5,000,000 and none at
    December 31, 2006 and 2005, respectively; and no shares
    issued and outstanding at December 31, 2006 and 2005






Common stock, par value $0.001;
    Authorized shares  75,000,000 and 50,000,000 at
    December 31, 2006 and 2005, respectively; issued and
    outstanding shares  15,166,109 and 854,160 at
    December 31, 2006 and 2005, respectively


16



1Notes receivable from stockholders


(21
)


(59
)Additional paid-in capital


177,355



99,110Deferred compensation






(5,101
)Accumulated other comprehensive
    loss


(8
)


Accumulated deficit


(163,729
)


(135,628
)Total stockholders equity
    (deficit)


13,613



(41,677
)Total liabilities and
    stockholders equity (deficit)

$
48,464


$
33,112    49




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated Statements of Operations
  Years Ended December 31,2006


2005


2004(In thousands, except per share data)Revenue:Collaborations and commercial
    agreements

$
19,906


$
14,604


$
15,941Grants  subcontractor
    reimbursements


5,120



5,083



4,976Grants


2,754



1,949



6,380Total revenue


27,780



21,636



27,297Expenses:Research and development


46,942



37,881



31,444General and administrative


9,588



11,820



6,719In-process technology










4,000Total operating expenses


56,530



49,701



42,163Loss from operations


(28,750
)


(28,065
)


(14,866
)Interest income


1,805



284



175Interest expense


(1,107
)


(422
)


(669
)Interest expense associated with
    bridge notes






(1,188
)


(3,392
)Net loss


(28,052
)


(29,391
)


(18,752
)Accretion to redemption value of
    redeemable convertible preferred stock


(49
)


(472
)


(329
)Net loss attributable to common
    stockholders

$
(28,101
)

$
(29,863
)

$
(19,081
)Basic and diluted net loss per
    share attributable to common stockholders

$
(2.03
)

$
(48.32
)

$
(39.84
)Shares used to compute basic and
    diluted net loss per share attributable to common stockholders


13,814



618



479    50




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated Statements of Stockholders
    Equity (Deficit)
  Years Ended December 31, 2004, 2005 and 2006Notes








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, 2003


427,156


$
1


$
(1,997
)

$
11,226


$
(590
)

$



$
(86,684
)

$
(78,044
)Issuance of common stock upon
    exercise of stock options


11,196











62















62Repurchase of unvested restricted
    stock


(744
)










(10
)














(10
)Repurchase of common stock in
    exchange for settlement of notes and accrued interest from
    stockholders


(131,224
)






1,764



(1,764
)














Forgiveness of a portion of
    principal on notes and accrued interest on note settlement










131



651















782Repayment of notes receivable from
    stockholders










42



















42Accrued interest on notes
    receivable from stockholders










(78
)


















(78
)Deferred compensation for issuance
    of equity instruments














6



(6
)










Amortization of stock-based
    compensation














(147
)


596











449Issuance costs incurred in equity
    financing














(166
)














(166
)Conversion of redeemable preferred
    stock into common stock for non-participation in the bridge
    financing


194,052











13,785















13,785Issuance of warrants to bridge note
    lenders














3,477















3,477Deemed dividend and accretion to
    redemption value of redeemable convertible preferred stock


























(329
)


(329
)Net loss and comprehensive loss


























(18,752
)


(18,752
)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
)

$
13,613    51




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Consolidated Statements of Cash Flows
  Years Ended December 31,2006


2005


2004(In thousands)Operating activities:Net loss

$
(28,052
)

$
(29,391
)

$
(18,752
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation and amortization


3,332



3,976



5,002Imputed interest expense on
    convertible debenture










18Stock-based compensation


4,569



10,233



449Issuance of common stock for
    services


56







Amortization of discount on
    warrants


167



72



64Amortization of discount on
    warrants associated with bridge notes






727



2,753Deferred rent


(103
)


(97
)


(27
)Accrual of interest on notes
    receivable from stockholders










(78
)Accrual of interest on bridge
    notes payable






411



467Forgiveness of principal and
    accrued interest on note settlement










782Changes in operating assets and
    liabilities:Accounts receivable


(2,669
)


56



1,162Prepaid expenses and other current
    assets


(452
)


(151
)


(60
)Accounts payable and accrued
    liabilities


(40
)


2,874



(680
)Deferred revenue


15,223



737



(2,643
)Other assets


2,078



(1,289
)


559Net cash used in operating
    activities


(5,891
)


(11,842
)


(10,984
)Investing activities:Purchase of short-term investments


(6,000
)






Purchases of property and
    equipment, net


(1,483
)


(1,303
)


(1,175
)Net cash used in investing
    activities


(7,483
)


(1,303
)


(1,175
)Financing activities:Proceeds from lines of credit and
    notes payable


1,132



8,868



643Principal payments on lines of
    credit and notes payable


(3,474
)


(2,974
)


(3,946
)Proceeds from repayment of notes
    receivable from stockholders


39



79



42Issuance of common stock for cash,
    net of repurchases


25,836



219



52Issuance of preferred stock, net






13,159



(166
)Issuance of bridge notes










13,411Net cash provided by financing
    activities


23,533



19,351



10,036Net increase (decrease) in cash
    and cash equivalents


10,159



6,206



(2,123
)Cash and cash equivalents at
    beginning of year


17,718



11,512



13,635Cash and cash equivalents at end
    of year

$
27,877


$
17,718


$
11,512Supplemental schedule of cash flow
    information:Cash paid for interest

$
1,093


$
363


$
587Supplemental 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


$
498


$
Deferred compensation

$



$
15,334


$
Conversion of bridge notes and
    redeemable convertible preferred stock to equity

$



$
54,530


$
13,785Conversion of bridge notes to
    preferred stock

$



$
14,291


$
    52




---



##### 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
      Principles
    of Consolidation
    Use of
    Estimates
    Reverse
    Stock Split
  0.126453-for-1
  1-for-2 1-for-2
  Initial
    Public Offering
  Form S-1 number 333-128059)
 53




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Reclassification
    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 31,2006


2005


2004Customer A


31
%






Customer B


28
%


33
%


42
%Customer C


22
%


38
%


34
%   Property
    and Equipment
   54




---



##### 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
    Redeemable
    Convertible Preferred Stock
    Adoption
    of SFAS 123(R), Share-Based Payment
  Share-Based Payment Accounting for Stock-Based Compensation
    Share-Based Payment
 55




---



##### 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 Accounting for Stock-Based Compensation
    (SFAS No. 123).
  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
     56




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Accounting for Stock Appreciation Rights and Other Variable
    Stock Option or Award Plans.
      2005


2004Net loss attributable to common
    stockholders, as reported

$
(29,863
)

$
(19,081
)Add: Stock-based employee
    compensation expense included in net loss attributable to common
    stockholders


8,785



121Deduct: Stock-based employee
    compensation determined under the fair value method


(6,859
)


(262
)Pro forma net loss attributable to
    common stockholders

$
(27,937
)

$
(19,222
)Basic and diluted net loss
    attributable to common stockholders per share, as reported

$
(48.32
)

$
(39.84
)Pro forma basic and diluted net
    loss attributable to common stockholders per share

$
(45.21
)

$
(40.13
)     2005


2004Risk-free interest rate


3
%


3
%Expected volatility


63
%


63
%Expected lives


4 years



4 yearsExpected dividend






    57




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
   Revenue
    Recognition
  Revenue Recognition, 00-21, Revenue Arrangements with Multiple Deliverables 00-21).
    00-21.
    out-of-pocket 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 01-14).
    Research
    and Development
    Income
    Taxes
  Accounting for Income Taxes.
 58




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Net
    Loss Per Share Attributable to Common Stockholders
  Earnings Per Share
  Years Ended December 31,2006


2005


2004Redeemable convertible preferred
    stock






5,686,849



993,761Notes payable






1,000,000



1,000,000Outstanding common stock options


604,869



636,927



183,881Restricted stock


145,727



28,971



Outstanding warrants


195,928



70,645



10,479Total


946,524



7,423,392



2,188,121     Comprehensive
    Income (Loss)
  Reporting Comprehensive Income
  Segment
    Reporting
  Disclosure
    About Segments of an Enterprise and Related Information
 59




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
   Recently
    Issued Accounting Standards
  Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109 (FIN48)
  Considering
    the Effects of Prior Year Misstatements when Quantifying
    Misstatements in Current Year Financial Statement
  Fair Value Measurement (SFAS 157).
  2.
    Balance
    Sheet Details  Short-term
    Investments
    Property
    and Equipment
    Estimated


December 31,Life in Years


2006


2005Lab equipment


5-7


$
14,066


$
12,573Computers and equipment


3-5



7,963



7,676Leasehold improvements


4-15



5,139



4,935Furniture


10



411



411Construction in progress


NA



255



75627,834



26,351Accumulated depreciation and
    amortization






(22,399
)


(19,183
)$
5,435


$
7,168  60




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
      Goodwill
    and Intangible Assets
    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
)   December 31, 2005GrossEstimated


Carrying


AccumulatedLife in Years


Amount


AmortizationGoodwill


Indefinite


$
3,914


$
(522
)Licenses


3 - 5



977



(930
)Total intangible assets





$
4,891


$
(1,452
)       2007

$
102008


12009


12010


12011


1Thereafter


6$
20   3.
    Lines of
    Credit   61




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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
    2007

$
3,5262008


3,6612009


6652010


18Total

$
7,870     4.
    Commitments
    and Collaborative Research and Development Agreements     62




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##### Table of Contents



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

$
1,4172008


7172009


232010


19Total minimum lease payments

$
2,176     Bridge
    Financing
    Series A-2
  Series A-1, one-for-one Series A-1,
    No. 98-5, Accounting for Convertible Securities with Beneficial
    Conversion Features No. 00-27, Application of Issue
    No. 98-5
    to Certain Convertible Instruments
 63




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
   Note Payable
      Sponsored
    Research and Drug Discovery Collaboration Agreements with Cystic
    Fibrosis Foundation Therapeutics, Inc.
    Collaboration
    and License Agreement with Eli Lilly and Company
        In-Licensing
    of
    Troxatyltm
   64




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    License
    and Collaboration Agreement with Novartis
      5.
    Redeemable
    Convertible Preferred Stock  Redeemable
    Convertible Preferred Stock
    Aggregate LiquidationShares Issued and


Preference andOutstanding


Redemption ValueSeries A


541,594


$
7,709Series B


809,299



32,000Series C


673,419



45,000Series D


129,692



5,4052,154,004


$
90,114     Series A


114,159Series B


167,684Series C


69,206Series D


37,055Total


388,104  65




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  Series A-1, one-for-one
  Aggregate LiquidationShares Issued and


Preference andOutstanding


Redemption ValueSeries A-1


427,435


$
6,084Series B-1


641,615



25,370Series C-1


604,213



40,375Series D-1


92,637



3,8611,765,900


$
75,690   Series A-1, one-for-one Series A-1,
  Series A-1,
  Series A-1,
  Series A-2 Series A-1, Series A-1, Series A-2 Series A-1,
 66




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    Aggregate LiquidationShares Issued and


Preference andOutstanding


Redemption ValueSeries A (New)


13,525,400


$
33,272Series B (New)


3,167,254



14,91816,692,654


$
48,190     6.
    Equity
    Incentive Plans and Warrants  2000
    Equity Incentive Plan
    2005
    Equity Incentive Plan
   67




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    2005
    Non-Employee Directors Stock Option Plan
    Stock
    Option Activity:
    Weighted-AverageRemainingWeighted-Average


Contractual Term


AggregateShares


Exercise Price


in Years


Intrinsic ValueOutstanding at December 31,
    2003


164,101


$
11.98Granted


39,905


$
4.80Exercised


(11,196
)

$
5.59Cancelled


(28,335
)

$
12.04Outstanding 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


$
3.96



8.14


$
2,130Exercisable at December 31,
    2006


591,183


$
2.75



7.17


$
1,205  68




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
    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


836,612



7.91


$
1.00



477,111


$
1.00$1.58 - $7.66


632,696



8.93


$
6.53



43,221


$
4.51$7.69 - $8.18


41,250



9.23


$
7.83






$
$13.44


73,542



5.19


$
13.44



70,851


$
13.44$1.00 - $13.44


1,584,100



8.14


$
3.96



591,183


$
2.75     Twelve MonthsEndedDecember 31,2006Expected volatility


66
%Risk-free interest rate


4.7
%Dividend yield


0
%Expected term


6.25 years   Restricted
    Stock and Restricted Stock Unit Grants
       69




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
     Weighted-AverageRestricted


Grant DateShares


Fair ValueNon-vested restricted stock at
    January 1, 2006


37,188


$
10.37Granted


150,000



7.66Vested


(45,000
)


9.22Non-vested restricted stock at
    December 31, 2006


142,188


$
7.87       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.
    Year EndedDecember 31,2006Research and development

$
2,124General and administrative

$
2,445Stock-based compensation expense

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

$
0.33   2005
    Employee Stock Purchase Plan
   70




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##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
       Twelve MonthsEndedDecember 31,2006Expected volatility

67%Risk-free interest rate

5.0%Dividend yield

0%Expected term

6 months to
    2 years     Warrants
    7.
    Stockholders
    equity (deficit)  Common
    Stock
   71




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
   0.126453-for-1 1-for-2 1-for-2 1-for-2
  Shares Reserved
    for Future Issuance
    December 31,2006Equity Incentive Plans


1,715,350Warrants


201,400Total Shares Reserved for
    Issuance


1,916,750     Notes Receivable
      8.
    Income
    Taxes    72




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
  December 31,2006


2005Deferred tax assets:Net operating loss carryforwards

$
42,030


$
38,538Research and development credits


7,284



5,990Capitalized research and
    development


1,335



1,555Accrued vacation


274



224Deferred revenue


8,157



1,954Other


1,107



141Depreciation and amortization


996



1,030Total deferred tax assets


61,183



49,432Valuation allowance for deferred
    tax assets


(61,183
)


(49,432
)Net deferred tax assets

$



$
       9.
    Employee
    Benefit Plan    10.
    Reductions
    In Force     73




---



##### Table of Contents



SGX
    Pharmaceuticals, Inc.
  Notes to Consolidated Financial
    Statements  (Continued)
   11.
    Quarterly
    Financial Data (unaudited)    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
)   2005First


Second


Third


Fourth


TotalRevenues

$
4,010


$
5,847


$
4,893


$
6,886


$
21,636Net loss

$
(5,806
)

$
(7,166
)

$
(10,552
)

$
(5,867
)

$
(29,391
)Accretion of redeemable
    convertible preferred stock issuance costs


(82
)


(82
)


(55
)


(253
)


(472
)Net loss applicable to common
    stockholders

$
(5,888
)

$
(7,248
)

$
(10,607
)

$
(6,120
)

$
(29,863
)Net loss per share

$
(11.61
)

$
(12.96
)

$
(17.38
)

$
(7.30
)

$
(47.56
)Accretion of redeemable
    convertible preferred stock issuance costs


(0.16
)


(0.15
)


(0.09
)


(0.31
)


(0.76
)Net loss per share applicable to
    common stockholders

$
(11.77
)

$
(13.11
)

$
(17.47
)

$
(7.61
)

$
(48.32
)    74




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures        Item 9B.
    Other
    Information   PART III  Item 10
    Directors,
    Executive Officers and Corporate Governance  www.sgxpharma.com
    Item 11.
    Executive
    Compensation   75




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##### Table of Contents



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

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. Reference is made to
    Exhibit 10.34.4
.8

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.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. 76




---



##### Table of Contents



ExhibitNumber

Description of Document10
.4+(4)

2005 Employee Stock Purchase Plan
    and Form of Offering Document thereunder.10
.5+(4)

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)

Non-Employee Director Compensation
    Letter Agreement dated April 13, 2001 between Registrant
    and Stelios Papadopoulos, Ph.D., as amended.10
.10(1)

Lease Agreement dated
    September 20, 1999 between Registrant and ARE-10505 Roselle
    Street, LLC, as amended.10
.11(1)

Lease Agreement dated May 18,
    2000 between Registrant and ARE-3770 Tansy Street, LLC.10
.12(1)

Lease Agreement dated June 1,
    2001 between Registrant and BRS Torrey I, LLC.10
.13*(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
.14*(3)

Collaboration and License
    Agreement dated April 14, 2003 between Registrant and Eli
    Lilly and Company.10
.15*(3)

Amendment to Agreement dated
    July 1, 2003 between Registrant and Eli Lilly and Company.10
.16*(1)

Amendment to Agreement dated
    January 30, 2004 between Registrant and Eli Lilly and
    Company.10
.17*(3)

Amendment to Agreement dated
    November 11, 2004 between Registrant and Eli Lilly and
    Company.10
.18*(1)

Amendment to Agreement dated
    March 31, 2005 between Registrant and Eli Lilly and Company.10
.19*(3)

Collaboration Agreement dated
    August 20, 2004 between Registrant, F.
    Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc.10
.20*(3)

Collaboration Agreement dated
    March 18, 2004 between Registrant and Serono International
    SA.10
.21*(3)

Collaboration Agreement dated
    December 1, 2003 between Registrant and UroGene, S.A.
    (which was acquired by Pierre Fabre Medicament in July 2005).10
.22*(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
.23*(4)

Drug Discovery Agreement dated
    July 1, 2005 between Registrant and Cystic Fibrosis
    Foundation Therapeutics, Inc.10
.24(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
.25(1)

Master Loan and Security Agreement
    No. 2081008 dated August 28, 2002 between Registrant
    and Oxford Finance Corporation, as amended.10
.26(2)

First Amendment to Lease Agreement
    dated August 30, 2005 between Registrant and ARE-3770 Tansy
    Street, LLC.10
.27(2)

Third Amendment to Lease Agreement
    dated August 30, 2005 between Registrant and ARE-10505
    Roselle Street, LLC.10
.28(2)

Loan and Security Agreement dated
    September 16, 2005 among Registrant, Oxford Finance
    Corporation and Silicon Valley Bank.10
.29*(3)

Amendment to Agreement effective
    as of October 1, 2005 between Registrant, F.
    Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc.10
.30*(3)

Amendment to Agreement dated
    October 28, 2005 between Registrant and Serono
    International SA.10
.31+(4)

Offer Letter Agreement dated
    November 16, 2005 between Registrant and William Todd
    Myers. 77




---



##### Table of Contents



ExhibitNumber

Description of Document10
.32+(4)

Offer Letter Agreement dated
    December 13, 2005 between Registrant and Siegfried
    Reich, Ph.D.10
.33**(5)

Termination Agreement effective
    February 15, 2006 between Registrant and Pierre Fabre
    Medicament S.A.10
.34+(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
.35(8)

Stock Purchase Agreement dated
    March 27, 2006, between Registrant and Novartis Pharma AG.10
.36(6)*

License and Collaboration
    Agreement between SGX and Novartis, dated March 27, 2006.10
.37(7)

Form of Change in Control
    Severance Agreement, which was filed as exhibit 10.1 to
    SGXs
    10-Q for the
    period ending September 30, 2006.10
.38+

Change of Control Severance
    Agreement dated December 18, 2006 between Registrant and
    Michael Grey10
.39+

Change of Control Severance
    Agreement dated February 9, 2007 between Registrant and
    Stephen K. Burley10
.40+

Change of Control Severance
    Agreement dated December 15, 2006 between Registrant and
    W. Todd Myers10
.41+

Change of Control Severance
    Agreement dated December 18, 2006 between Registrant and
    Annette North10
.42+

Change of Control Severance
    Agreement dated January 2, 2007 between Registrant and
    Siegfried Reich10
.43+

Change of Control Severance
    Agreement dated December 18, 2006 between Registrant and
    Terence Rugg10
.44+

Summary of 2007 Bonus Award Program10
.45+

Letter Agreement dated
    February 9, 2007 between Registrant and Stephen K. Burley10
.46

Fifth Amendment to Collaboration
    and License Agreement dated March 1, 2007 between
    Registrant and Eli Lilly and Company10
.47

First Amendment to the Drug
    Discovery Agreement dated March 1, 2007 between Registrant
    and Cystic Fibrosis Foundation Therapeutics, Inc.10
.48

Fourth Amendment to Lease
    Agreement dated March 28, 2007 between Registrant and
    ARE-10505 Roselle Street, LLC.10
.49

Second Amendment to Lease
    Agreement dated March 28, 2007 between Registrant and
    ARE-3770 Tansy Street, LLC.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.**
    
    Confidential treatment has been requested with respect to
    certain portions of this exhibit. Omitted portions have been
    filed separately with the Securities and Exchange Commission.(1)
    
    Filed with the Registrants Registration Statement on
    Form S-1
    on September 2, 2005 and incorporated herein by reference. 78




---



##### Table of Contents



(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.  Exhibits
    Financial Statement Schedules
   79




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##### Table of Contents



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

Title

Date/s/  Michael
    GreyMichael
    Grey

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

March 30, 2007/s/  Todd
    MyersTodd
    Myers, C.P.A.

Chief Financial Officer
    (Principal Financial and Accounting Officer)

March 30, 2007/s/  Christopher
    S. HenneyChristopher
    S. Henney, Ph.D., D.Sc.

Chairman of the Board of Directors

March 30, 2007/s/  Louis
    C. BockLouis
    C. Bock

Member of the Board of Directors

March 30, 2007/s/  Karin
    EasthamKarin
    Eastham, C.P.A.

Member of the Board of Directors

March 30, 2007/s/  Jean-Francois
    FormelaJean-Francois
    Formela, M.D.

Member of the Board of Directors

March 30, 2007/s/  Vijay
    K. LathiVijay
    K. Lathi

Member of the Board of Directors

March 30, 2007  80




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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

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. Reference is made to
    Exhibit 10.34.4
.8

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.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+(4)

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)

Non-Employee Director Compensation
    Letter Agreement dated April 13, 2001 between Registrant
    and Stelios Papadopoulos, Ph.D., as amended.10
.10(1)

Lease Agreement dated
    September 20, 1999 between Registrant and ARE-10505 Roselle
    Street, LLC, as amended.10
.11(1)

Lease Agreement dated May 18,
    2000 between Registrant and ARE-3770 Tansy Street, LLC.10
.12(1)

Lease Agreement dated June 1,
    2001 between Registrant and BRS Torrey I, LLC.10
.13*(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
.14*(3)

Collaboration and License
    Agreement dated April 14, 2003 between Registrant and Eli
    Lilly and Company.10
.15*(3)

Amendment to Agreement dated
    July 1, 2003 between Registrant and Eli Lilly and Company.10
.16*(1)

Amendment to Agreement dated
    January 30, 2004 between Registrant and Eli Lilly and
    Company.10
.17*(3)

Amendment to Agreement dated
    November 11, 2004 between Registrant and Eli Lilly and
    Company.10
.18*(1)

Amendment to Agreement dated
    March 31, 2005 between Registrant and Eli Lilly and Company.10
.19*(3)

Collaboration Agreement dated
    August 20, 2004 between Registrant, F.
    Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc.10
.20*(3)

Collaboration Agreement dated
    March 18, 2004 between Registrant and Serono International
    SA. 81




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##### Table of Contents



ExhibitNumber

Description of Document10
.21*(3)

Collaboration Agreement dated
    December 1, 2003 between Registrant and UroGene, S.A.
    (which was acquired by Pierre Fabre Medicament in July 2005).10
.22*(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
.23*(4)

Drug Discovery Agreement dated
    July 1, 2005 between Registrant and Cystic Fibrosis
    Foundation Therapeutics, Inc.10
.24(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
.25(1)

Master Loan and Security Agreement
    No. 2081008 dated August 28, 2002 between Registrant
    and Oxford Finance Corporation, as amended.10
.26(2)

First Amendment to Lease Agreement
    dated August 30, 2005 between Registrant and ARE-3770 Tansy
    Street, LLC.10
.27(2)

Third Amendment to Lease Agreement
    dated August 30, 2005 between Registrant and ARE-10505
    Roselle Street, LLC.10
.28(2)

Loan and Security Agreement dated
    September 16, 2005 among Registrant, Oxford Finance
    Corporation and Silicon Valley Bank.10
.29*(3)

Amendment to Agreement effective
    as of October 1, 2005 between Registrant, F.
    Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc.10
.30*(3)

Amendment to Agreement dated
    October 28, 2005 between Registrant and Serono
    International SA.10
.31+(4)

Offer Letter Agreement dated
    November 16, 2005 between Registrant and William Todd Myers.10
.32+(4)

Offer Letter Agreement dated
    December 13, 2005 between Registrant and Siegfried
    Reich, Ph.D.10
.33**(5)

Termination Agreement effective
    February 15, 2006 between Registrant and Pierre Fabre
    Medicament S.A.10
.34+(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
.35(8)

Stock Purchase Agreement dated
    March 27, 2006, between Registrant and Novartis Pharma AG.10
.36(6)*

License and Collaboration
    Agreement between SGX and Novartis, dated March 27, 2006.10
.37(7)

Form of Change in Control
    Severance Agreement, which was filed as exhibit 10.1 to
    SGXs
    10-Q for the
    period ending September 30, 2006.10
.38+

Change of Control Severance
    Agreement dated December 18, 2006 between Registrant and
    Michael Grey10
.39+

Change of Control Severance
    Agreement dated February 9, 2007 between Registrant and
    Stephen K. Burley10
.40+

Change of Control Severance
    Agreement dated December 15, 2006 between Registrant and
    W. Todd Myers10
.41+

Change of Control Severance
    Agreement dated December 18, 2006 between Registrant and
    Annette North10
.42+

Change of Control Severance
    Agreement dated January 2, 2007 between Registrant and
    Siegfried Reich10
.43+

Change of Control Severance
    Agreement dated December 18, 2006 between Registrant and
    Terence Rugg10
.44+

Summary of 2007 Bonus Award Program10
.45+

Letter Agreement dated
    February 9, 2007 between Registrant and Stephen K. Burley10
.46

Fifth Amendment to Collaboration
    and License Agreement dated March 1, 2007 between
    Registrant and Eli Lilly and Company 82




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##### Table of Contents



ExhibitNumber

Description of Document10
.47

First Amendment to the Drug
    Discovery Agreement dated March 1, 2007 between Registrant
    and Cystic Fibrosis Foundation Therapeutics, Inc.10
.48

Fourth Amendment to Lease
    Agreement dated March 28, 2007 between Registrant and
    ARE-10505 Roselle Street, LLC.10
.49

Second Amendment to Lease
    Agreement dated March 28, 2007 between Registrant and
    ARE-3770 Tansy Street, LLC.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.**
    
    Confidential treatment has been requested with respect to
    certain portions of this exhibit. Omitted portions have been
    filed separately with the Securities and Exchange Commission.(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. 83