**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-QSB**





x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934For
                the quarterly period ended June 30,
                2006ORo
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934For
                the transition period from _______ to
                _______





Commission
      file number 000-51473





**Cougar
      Biotechnology, Inc.**


(Exact
      Name of Registrant as Specified in Its Charter)





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





10990
      Wilshire Boulevard, Suite 1200, Los Angeles, CA 90024


(Address
      of principal executive offices)





(310)
      943-8040


(Issuer’s
      telephone number)








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





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





As
      of
      August 8, 2006 there were 4,607,105 shares of the issuer’s common stock, $.0001
      par value, outstanding.





Traditional
      Small Business Disclosure Format (check one): Yes o No x




1




**INDEX**




Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Balance Sheets
            3Unaudited
                Condensed Consolidated Statements of Operations
            4Unaudited
                Condensed Consolidated Statement of Stockholders’ Equity
                (Deficiency)
            5Unaudited
                Condensed Consolidated Statements of Cash Flows
            7Notes
                to Unaudited Condensed Consolidated Financial Statements
            9Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            17Item
                3.
            Controls
                and Procedures
            26**PART
                II**
            **OTHER
                INFORMATION**Item
                6.
            Exhibits
            26Signatures
            28





**Note
      Regarding Forward-Looking Statements**





The
      following discussion of our financial condition and results of operations should
      be read in conjunction with the financial statements and the notes to those
      statements included elsewhere in the Quarterly Report. This Quarterly Report
      contains statements that are not historical, but are forward-looking in nature,
      including statements regarding the expectations, beliefs, intentions or
      strategies regarding the future. In particular, the “Management’s Discussion and
      Analysis or Plan of Operation” section in Part I, Item 2 of this quarterly
      report includes forward-looking statements that reflect our current views with
      respect to future events and financial performance. We use words such as we
      “expect,” “anticipate,” “believe,” and “intend” and similar expressions to
      identify forward-looking statements. A number of important factors could,
      individually or in the aggregate, cause actual results to differ materially
      from
      those expressed or implied in any forward-looking statements. Such factors
      include, but are not limited to, our ability to obtain additional financing,
      our
      ability to develop and maintain customer relationships, regulatory developments
      relating to and the general success of our product and product candidates,
      and
      our ability to protect our proprietary technology. Other risks are described
      under the section entitled “Risk Factors” in our Current Report on Form 8-K
      filed on April 7, 2006.





Further,
      any forward-looking statement speaks only as of the date on which it is made,
      and we undertake no obligation to update any forward-looking statement or
      statements to reflect events or circumstances after the date on which such
      statement is made or to reflect the occurrence of unanticipated events. New
      factors emerge from time to time, and it is not possible for us to predict
      which
      factors will arise. In addition, we cannot assess the impact of each factor
      on
      our business or the extent to which any factor, or combination of factors,
      may
      cause actual results to differ materially from those contained in any
      forward-looking statements .


2


**PART
      I - FINANCIAL INFORMATION:**





**Item
      1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**





**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(Unaudited)**


**ASSETS**
              
              June
                  30,
                2006
              
              December
                  31,
                2005Current
                  assets:Cash
                  and cash equivalents
              
              **$**
              35,992,239
              
              $
              1,040,864Debt
                  issuance costs, net
              
              
              
              
              
              500,776Prepaid
                  expenses and other
              
              
              479,387
              
              
              164,061Total
                  current assets
              
              
              36,471,626
              
              
              1,705,701Property
                  and equipment, net
              
              
              149,658
              
              
              8,581Deposits
              
              
              160,000
              
              
              160,000Totals
              
              $
              36,781,284
              
              $
              1,874,282**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIENCY**Current
                  liabilities:Accounts
                  payable
              
              $
              469,088
              
              $
              1,251,586Accrued
                  expenses
              
              
              536,307
              
              
              875,728Borrowings
                  under line of credit
              
              
              
              
              
              600,000Convertible
                  notes payable, net of discount
              
              
              
              
              
              3,113,324Notes
                  payable, net of discount
              
              
              
              
              
              934,887Warrant
                  liability
              
              
              
              
              
              856,398Option
                  compensation liability for non-employees
              
              
              
              
              
              459,833Total
                  current liabilities
              
              
              1,005,395
              
              
              8,091,756Deferred
                  rent
              
              
              35,793Total
                  liabilities
              
              
              1,041,188
              
              
              8,091,756Series
                  A Redeemable Convertible Preferred Stock; $.0001 par value; 10,000,000
                  shares authorized; 9,486,752 shares issued and outstanding;
                  liquidation value of $43,106,761 at June 30, 2006
              
              
              38,404,331Commitments
                  and contingenciesStockholders’
                  deficiency:Common
                  stock - $.0001 par value; 100,000,000 and 50,000,000 shares
                  authorized; 4,607,105 and 3,553,021 shares issued and
                  outstanding
              
              
              460
              
              
              355Additional
                  paid-in capital
              
              
              14,318,082
              
              
              5,132,020Deficit
                  accumulated during the development stage
              
              
              (16,982,777
              )
              
              (11,349,849
              )Total
                  stockholders’ deficiency
              
              
              (2,664,235
              )
              
              (6,217,474
              )Totals
              
              $
              36,781,284
              
              $
              1,874,282




SEE
        ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS
 3




**COUGAR
                BIOTECHNOLOGY, INC.****(A
                DEVELOPMENT STAGE COMPANY)****CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS****(Unaudited)**




Period
                fromMay
                14, 2003Three
                Months Ended
            
            Six
                Months Ended
            
            (date
                ofJune
                30,
            
            June
                30,
            
            inception)
                to2006
            
            2005
            
            2006
            
            2005
            
            June
                30, 2006Operating
                expenses:General
                and administrative
            
            $
            606,158
            
            $
            383,868
            
            $
            2,390,753
            
            $
            620,967
            
            $
            6,200,206Research
                and development
            
            
            561,840
            
            
            988,403
            
            
            1,754,403
            
            
            1,719,731
            
            
            9,029,274Depreciation
            
            
            7,836
            
            
            490
            
            
            8,602
            
            
            980
            
            
            12,399Totals
            
            
            1,175,834
            
            
            1,372,761
            
            
            4,153,758
            
            
            2,341,678
            
            
            15,241,879Loss
                from operations
            
            
            (1,175,834
            )
            
            (1,372,761
            )
            
            (4,153,758
            )
            
            (2,341,678
            )
            
            (15,241,879
            )Other
                income (expense):Interest
                income
            
            
            261,410
            
            
            3,421
            
            
            269,065
            
            
            11,228
            
            
            306,571Interest
                expense
            
            
            (781,057
            )
            
            
            
            
            (1,012,637
            )
            
            
            
            
            (1,311,871
            )Other
                expense
            
            
            (200,000
            )
            
            
            
            
            (200,000
            )
            
            
            
            
            (200,000
            )Totals
            
            
            (719,647
            )
            
            3,421
            
            
            (943,572
            )
            
            11,228
            
            
            (1,205,300
            )Net
                loss
            
            
            (1,895,481
            )
            
            (1,369,340
            )
            
            (5,097,330
            )
            
            (2,330,450
            )
            
            (16,447,179
            )Accretion
                of dividends on preferred stock
            
            
            (416,377
            )
            
            
            
            
            (416,377
            )
            
            
            
            
            (416,377
            )Accretion
                of issuance cost on preferred stock
            
            
            (119,221
            )
            
            
            
            
            (119,221
            )
            
            
            
            
            (119,221
            )Net
                loss applicable to common stock
            
            $
            (2,431,079
            )
            $
            (1,369,340
            )
            $
            (5,632,928
            )
            $
            (2,330,450
            )
            $
            (16,982,777
            )Net
                loss per common share - basic and diluted
            
            $
            (0.53
            )
            $
            (0.39
            )
            $
            (1.38
            )
            $
            (0.66
            )Weighted-average
                common shares outstanding - basic and diluted
            
            
            4,607,105
            
            
            3,553,021
            
            
            4,080,063
            
            
            3,553,020





4


**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**





**CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
      (DEFICIENCY)**


**(Unaudited)**





Period
      from May 14, 2003 (date of inception) through June 30, 2006





Common
              Stock
              Shares
            
            Amount
            
            Additional
              Paid-in
              Capital
            
            Deficit
              Accumulated
              During
                the
              Development
              Stage
            
            TotalIssuance
                of shares of common stock through private placement at $.4595 per
                share
            
            
            1,632,468
            
            $
            163
            
            $
            749,837
            
            
            
            
            $
            750,000Effect
                of issuance of shares of common stock to an officer at $.0001 per
                share
            
            
            288,083
            
            
            29
            
            
            132,346
            
            
            
            
            
            132,375Option
                compensation for non-employees
            
            
            
            
            
            
            
            
            207
            
            
            
            
            
            207Net
                loss
            
            
            
            
            
            
            
            
            
            
            $
            (378,375
            )
            
            (378,375
            )Balance
                at December 31, 2003
            
            
            1,920,551
            
            
            192
            
            
            882,390
            
            
            (378,375
            )
            
            504,207Issuance
                of shares of common stock through private placement at $2.60 per
                share
            
            
            1,632,470
            
            
            163
            
            
            4,249,837
            
            
            
            
            
            4,250,000Option
                compensation for non-employees
            
            
            
            
            
            
            
            
            14,476
            
            
            
            
            
            14,476Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (3,160,136
            )
            
            (3,160,136
            )Balance
                at December 31, 2004
            
            
            3,553,021
            
            
            355
            
            
            5,146,703
            
            
            (3,538,511
            )
            
            1,608,547Issuance
                of warrants with notes payable
            
            
            
            
            
            
            
            
            130,954
            
            
            
            
            
            130,954Issuance
                of warrants for debt costs
            
            
            
            
            
            
            
            
            91,041
            
            
            
            
            
            91,041Option
                compensation for non-employees
            
            
            
            
            
            
            
            
            403,331
            
            
            
            
            
            403,331Reclassification
                of fair value non-employees options and warrants to liabilities due
                to issuance of convertible notes
            
            
            
            
            
            
            
            
            (640,009
            )
            
            
            
            
            (640,009
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (7,811,338
            )
            
            (7,811,338
            )Balance
                at December 31, 2005
            
            
            3,553,021
            
            
            355
            
            
            5,132,020
            
            
            (11,349,849
            )
            
            (6,217,474
            )Issuance
                of shares of common stock from private placement at $4.50 per
                share
            
            
            893,656
            
            
            89
            
            
            3,725,063
            
            
            
            
            
            3,725,152Issuance
                of shares of common stock through debt conversion at $4.50 per
                share
            
            
            160,428
            
            
            16
            
            
            722,544
            
            
            
            
            
            722,560Issuance
                of warrants with Series A Preferred
            
            
            
            
            
            
            
            
            2,160,672
            
            
            
            
            
            2,160,672




SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS


5




Option
                compensation for employees
            
            
            
            
            
            
            
            
            710,271
            
            
            
            
            
            710,271Reclassification
                of fair value of non-employee options from liabilities due to debt
                conversion
            
            
            
            
            
            
            
            
            1,195,927
            
            
            
            
            
            1,195,927Option
                compensation for non-employees
            
            
            
            
            
            
            
            
            (8,419
            )
            
            
            
            
            (8,419
            )Reclassification
                of fair value of warrants from liability due to debt
                conversion
            
            
            
            
            
            
            
            
            680,004
            
            
            
            
            
            680,004Accretion
                of dividends on preferred stock
            
            
            
            
            
            
            
            
            
            
            
            (416,377
            )
            
            (416,377
            )Accretion
                of issuance costs on preferred stock
            
            
            
            
            
            
            
            
            
            
            
            (119,221
            )
            
            (119,221
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (5,097,330
            )
            
            (5,097,330
            )Balance
                at June 30, 2006
            
            
            4,607,105
            
            $
            460
            
            $
            14,318,082
            
            $
            (16,982,777
            )
            $
            (2,664,235
            )

















SEE
      ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS


6




**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**





**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


Period
                fromMay
                14, 2003(date
                ofSix
                Months Ended
            
            inception)
                toJune
                30,
            
            June
                30,2006
            
            2005
            
            2006Operating
                activities:Net
                loss
            
            $
            (5,097,330
            )
            $
            (2,330,450
            )
            $
            (16,447,179
            )Adjustments
                to reconcile net loss tonet
                cash used in operating activities:Depreciation
            
            
            8,602
            
            
            980
            
            
            12,399Option
                compensation for non-employees
            
            
            727,675
            
            
            55,686
            
            
            1,187,508Option
                compensation for employees
            
            
            710,271
            
            
            
            
            
            710,271Stock
                issued for compensation
            
            
            
            
            
            
            
            
            131,625Other
              non-cash compensation
            
            
            
            
            
            
            
            
            48,000Amortization
                of discount on notes payable
            
            
            376,712
            
            
            
            
            
            486,785Amortization
                of convertible debt andnote
                issuance costs
            
            
            662,993
            
            
            
            
            
            752,591Charge
                to interest expense for change in warrant value
            
            
            (68,634
            )
            
            
            
            
            (48,634
            )Deferred
                rent
            
            
            2,041
            
            
            
            
            
            2,041Stock
                issued for accrued interest on convertible notes
            
            
            130,477
            
            
            
            
            
            130,477Changes
                in operating assets and liabilities:Employee
                advance
            
            
            
            
            
            
            
            
            (96,000
            )Prepaid
                expenses and other assets
            
            
            (315,326
            )
            
            (28,591
            )
            
            (591,387
            )Accounts
                payable and accrued expenses
            
            
            (1,121,920
            )
            
            688,904
            
            
            1,005,394Net
                cash used in operating activities
            
            
            (3,984,439
            )
            
            (1,613,471
            )
            
            (12,716,109
            )Investing
                activities - purchase of furniture and fixtures
            
            
            (115,928
            )
            
            (4,665
            )
            
            (128,306
            )Financing
                activities:Net
                proceeds from issuance of common and preferred stock
            
            
            37,251,520
            
            
            
            
            
            42,252,270Payment
                of debt issuance costs
            
            
            (134,778
            )
            
            
            
            
            (510,736
            )Proceeds
                from issuance of notes payable
            
            
            
            
            
            
            
            
            1,000,000Payment
                of notes payable
            
            
            (50,000
            )
            
            
            
            
            (50,000
            )Proceeds
                from issuance of convertible notes payable
            
            
            2,585,000
            
            
            
            
            
            6,145,120Payment
                on borrowings under line of credit
            
            
            (600,000
            )Net
                cash provided by financing activities
            
            
            39,051,742
            
            
            -
            
            
            48,836,654




SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS


7




Net
                increase (decrease) in cash and cash equivalents
            
            $
            34,951,375
            
            $
            (1,618,136
            )
            $
            35,992,239Cash
                and cash equivalents, beginning of period
            
            
            1,040,864
            
            
            1,838,594Cash
                and cash equivalents, end of period
            
            $
            35,992,239
            
            $
            220,458
            
            $
            35,992,239Supplemental
                disclosures of non-cash investing and financing
                activities:Carrying
                value of convertible notes converted to equity
            
            $
            6,145,120
            
            $
            -
            
            $
            6,145,120Carrying
                value of promissory notes converted to equity
            
            $
            950,000
            
            $
            -
            
            $
            950,000Fair
                value of warrants issued with notes payable
            
            $
            47,497
            
            $
            -
            
            $
            574,485Acquisition
                of leasehold improvements paid by lessor under lease
                obligation
            
            $
            33,751
            
            $
            -
            
            $
            33,751Fair
                value of warrants issued to placement agents
            
            $
            2,400,000
            
            $
            -
            
            $
            2,400,000Supplemental
                disclosures of cash flow information:Interest
                paid
            
            $
            12,588
            
            $
            -
            
            $
            27,390











SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS


8





**COUGAR
      BIOTECHNOLOGY, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
      1. BUSINESS DESCRIPTION**





Cougar
      Biotechnology, Inc. (the “Company”) is a development stage biopharmaceutical
      company based in Los Angeles, California that in-licenses novel therapeutics
      and
      develops such therapeutics for the treatment of cancer. The Company’s strategy
      is to license technologies that have previously been tested in clinical trials,
      enabling it to obtain an initial indication of the drug’s safety and biological
      activity in humans before committing capital to the drug’s development.




**NOTE
      2. BASIS OF PRESENTATION**





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America, pursuant to the rules and regulations of the Security
      and Exchange Commission for interim financial information. Accordingly, the
      financial statements do not include all information and footnotes required
      by
      accounting principles generally accepted in the United States for complete
      annual financial statements. In the opinion of management, the accompanying
      unaudited condensed consolidated financial statements reflect all adjustments,
      consisting of only normal recurring adjustments, considered necessary for a
      fair
      presentation. Interim operating results are not necessarily indicative of
      results that may be expected for the year ending December 31, 2006 or for any
      subsequent period. These statements should be read in conjunction with the
      audited financial statements for Cougar Biotechnology, Inc. and notes thereto
      for the year ended December 31, 2005 included in the Company’s Current Report on
      Form 8-K filed April 7, 2006.





**NOTE
      3. MERGER WITH PUBLIC COMPANY**





On
      April
      3, 2006, pursuant to an Agreement and Plan of Merger dated February 27, 2006
      (the “Merger Agreement”) by and among the Company, SRKP 4, Inc., a Delaware
      corporation (“SRKP”), and SRKP Acquisition Corp., a Delaware corporation and
      wholly owned subsidiary of SRKP, the Company entered into a “reverse merger”
transaction whereby SRKP Acquisition Corp. merged with and into the Company,
      with the Company remaining as the surviving corporation and a wholly owned
      subsidiary of SRKP (the “Merger”). Pursuant to the Merger Agreement, each share
      of outstanding common stock and preferred stock of the Company automatically
      converted into shares of SRKP common stock and preferred stock, respectively,
      at
      a conversion ratio of .38411. All share and per share information in these
      unaudited condensed consolidated financial statements have been restated to
      retroactively reflect the conversion ratio of .38411. In consideration for
      their
      shares of the Company’s pre-merger capital stock and, in accordance with the
      Merger Agreement, the Company’s stockholders received an aggregate of 4,607,105
      shares of SRKP common stock and 9,486,752 shares of SRKP’s newly designated
      Series A Preferred Stock. Upon completion of the Merger and the Redemption
      (as
      defined below), the Company’s stockholders held 100% of SRKP capital stock. In
      addition, the Company assumed all of the rights and obligations relating to
      all
      other securities convertible into and exercisable for shares of the Company
      capital stock outstanding immediately prior to the Merger, which constitute,
      on
      a fully-diluted basis, the rights to acquire an aggregate of 2,327,299 shares
      of
      SRKP common stock. Subsequent to the Merger, the holders of the Company’s
      capital stock held the same percentage of the Company’s capital stock after
      effectiveness of the Merger as they held immediately prior to the Merger.





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


9


**NOTE
      3. MERGER WITH PUBLIC COMPANY (CONCLUDED)**




As
      a
      condition to the Merger, the Company entered into an Indemnity Agreement dated
      April 3, 2006 with Richard A. Rappaport and Anthony C. Pintsopoulos, SRKP’s
      former officers and directors, pursuant to which it agreed to indemnify such
      persons for actions taken in their official capacities as officers and directors
      relating to the consideration, approval and consummation of the Merger.




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





The
      merger of a private operating company into a non-operating public shell
      corporation with nominal net assets is considered to be a capital transaction
      in
      substance, rather than a business combination, for accounting purposes.
      Accordingly, the Company treated this transaction as a capital transaction
      without recording goodwill or adjusting any of it other assets or liabilities.
      The consideration in the amount of $200,000 paid to the former stockholders
      of
      SRKP was recorded as an Other Expense item and included in the Company’s net
      loss from operations for the three and six months ended June 30,
      2006.




**NOTE
      4. LIQUIDITY AND CAPITAL RESOURCES**





The
      Company reported a net loss of $5,097,330 and negative cash flows from operating
      activities of $3,984,439 for the six months ended June 30, 2006. The net loss
      from date of inception, May 14, 2003, to June 30, 2006 amounted to
      $16,447,179 **.** As
      of
      June 30, 2006s the Company had approximately $36 million in cash and cash
      equivalents; however, it is still a
      development stage company that has not generated any revenues from operations. Management believes that the Company will continue to
      incur
      losses for the foreseeable future and will need additional equity or debt
      financing or will need to generate revenue from licensing of its products or
      by
      entering into strategic alliances to sustain its operations until it can achieve
      profitability and positive cash flows, if ever. The
      Company’s continued operations will depend on whether it is able to raise
      additional funds through various potential sources, such as equity and debt
      financing. Such additional funds may not become available on acceptable terms
      and there can be no assurance that any additional funding that the Company
      does
      obtain will be sufficient to meet its needs in the long term. Through June
      30,
      2006, a significant portion of the Company’s financings have been through
      private placements of common and preferred stock and debt financing.





The
      Company will continue to fund operations from cash on hand and through the
      similar sources of capital previously described. The Company can give no
      assurances that any additional capital that it is able to obtain will be
      sufficient to meet its needs. There can be no assurance that such capital will
      be available to the Company on favorable terms or at all. Should the Company
      be
      unable to raise additional funds in the future on acceptable terms, or at all,
      it may be forced to curtail its desired development. In addition, the Company
      could be forced to delay or discontinue product development, and forego
      attractive business opportunities. Any additional sources of financing will
      likely involve the sale of the Company’s equity securities, which will have a
      dilutive effect on the Company’s stockholders.





**NOTE
      5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**USE
      OF ESTIMATES**





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


10


**NET
      LOSS PER SHARE**





Basic
      net
      loss per share is computed by dividing net loss applicable to common stock
      by
      the weighted-average number of common shares outstanding during the periods
      presented as required by SFAS No. 128, “Earnings Per Share”. For the purpose of
      determining basic net loss per share, dividends accreted on preferred stock
      and
      accreted issuance costs have been added to the net loss to arrive at net loss
      applicable to common stock. Diluted earnings per share have not been presented
      because the assumed conversion of series A convertible preferred stock and
      the
      exercise of the Company’s outstanding options and warrants would have been
      anti-dilutive. Potentially dilutive securities excluded from the calculations
      amounted to 11,933,844 shares for the three and six months ended June 30, 2006,
      comprised of 9,486,752 shares of Series A Convertible Preferred Stock, 1,259,447
      shares issuable upon exercise of options and 1,187,645 shares issuable upon
      exercise of warrants. Potentially dilutive securities excluded from the
      calculations amounted to 688,590 shares for the three and six months ended
      June
      30, 2005, comprised of 635,703 shares issuable upon exercise of options and
      52,887 shares issuable upon exercise of warrants.




**STOCK-
      BASED COMPENSATION**




The
        Company's 2003 Stock Option Plan (the "Plan") was adopted by the Board of
        Directors on May 15, 2003.  Pursuant
        to the Plan, the Company may grant incentive
        stock options and nonqualified stock options, as well as other forms of
        equity-based compensation . Incentive
        stock options may be granted only to employees, while consultants, employees,
        officers and directors are eligble for the grant of nonqualified options
        under
        the Plan. The maximum term of stock options granted
        under the Plan is 10 years. The exercise price
        of
        incentive stock options granted under the Plan must be at
        least
        equal to the fair market value
        of such
        shares on
        the date
        of
        grant. During the three months ended March 31, 2006, the Board of Directors and
        stockholders approved an increase in the number of shares
        reserved from 768,220 to 1,344,385.
 As
        required, the Company adopted Statement of Financial Accounting Standards
        ("SFAS") No. 123, "Share-Based Payment" ("SFAS 123R")
        on
        January 1, 2006. SFAS 123R requires the fair value of all share-based
        payments of employees, including grants of stock options,
        to be recognized in the statement of operations over the requisite service
        period. The Company will continue to account for the
        fair
        value of all share-based payments to non-employees, including stock
        options, in a similar manner as required by SFAS No. 123,
        "Accounting for Stock-Based Compensation" ("SFAS 123").
        SFAS 123R eliminated the option provided by SFAS 123
        that
        was used
        by
        the Company prior to January 1, 2006 to account for stock options granted
        to
        employees using the intrinsic value method under
        Account Principles Board ("APB") Opinion
        25, "Accounting for Stock Issued to Employees." Under APB 25, the
        Company only
        recorded compensation expense for stock options granted to employees for
        the
        excess, if any, of the fair value over the exercise price
        of
        an option as of the date of grant. By electing the intrinsic value method,
        the Company was required to present pro forma disclosures
        as if it had
        used
        the provisions of SFAS 123 and had recorded the fair value of employee stock
        options over the vesting period.
  The
        Company has adopted SFAS
        123R using the
        modified-prospective method
        and accordingly financial statement amounts for
        periods prior to January 1, 2006 have not been restated to reflect the fair
        value method of recognizing compensation cost relating to
        employee stock options. The adoption of SFAS 123R's fair value method had
        and
        will continue to have a material impact on our results
        of operations, although it will have no impact on our cash flows
        or
        overall financial position. Under SFAS 123R, employee option
        grants are generally valued at the grant date and those valuations do
        not
        change once they have been established. As a result, the
        stock-based compensation expense we expect to record in 2006 will
        be
        based largely upon the amortization of costs for awards granted
        in 2006 and amounts related to unvested options granted in
        prior
        periods. As SFAS 123R includes further guidance on the assumptions
        to be used in
        the
        stock option pricing models, we expect to have differences between the
        expenses the Company would have
        recognized under the pro forma disclosures required by SFAS 123
        and
        the expense we will recognize under SFAS 123R. Because
        of the variability in the assumptions to be used in the valuation of
        stock
        options we may grant in 2006 and the variability in the
        quantity and other terms of stock-based awards we may issue in 2006, our
        ability
        to predict the aggregate 2006 stock based compensation
        expense is limited.


Consequently,
      for the three and six months ended June 30, 2006, the Company’s results of
      operations reflected compensation expense for new stock options granted to
      employees and vested under its stock incentive plan and the unvested portion
      of
      previous stock option grants to employees which vested during 2006. The amount
      recognized in the financial statements related to stock-based compensation
      was
      $2,344 and $710,271 for the three and six months ended June 30, 2006, which
      was
      included in general and administrative operating expenses.





11


**STOCK-
      BASED COMPENSATION (CONTINUED)**





Had
      compensation cost for stock-based compensation been determined using the fair
      value method consistent with SFAS 123R, the net loss and net loss per share
      for
      the three and six months ended June 30, 2005, would have been adjusted to the
      following pro forma amount:





Three
                Months
              Ended
              June
                30,
              2005
            
            Six
                Months
              Ended
              June
                30,
              2005Net
                loss applicable to common stock:As
                reported
            
            $
            (1,369,340
            )
            $
            (2,330,450
            )Stock-based
                employee compensation determined under the fair value
                method
            
            
            (
                2,354
            )
            
            (4,688
            )Net
                loss applicable to common stock, pro forma
            
            $
            (1,371,694
            )
            $
            (2,335,138
            )Basic
                and diluted net loss per common share:As
                reported
            
            $
            (0.39
            )
            $
            (0.66
            )Pro
                forma
            
            $
            (0.39
            )
            $
            (0.66
            )





In
      accordance with the provisions of SFAS 123, and Emerging Issues Task Force
      (“EITF”) No. 96-18, “Accounting for Equity Instruments That are Issued to Other
      Than Employees for Acquiring or in Conjunction with Selling, Goods or Services,”
all other issuances of common stock, stock options or other equity instruments
      to non-employees (including consultants and all members of the Scientific
      Advisory Board) as the consideration for goods or services received by the
      Company are accounted for based on the fair value of the equity instruments
      issued (unless the fair value of the consideration received can be more reliably
      measured). Any options issued to non-employees are recorded in expense and
      additional paid-in capital in stockholders’ deficiency or current liabilities
      over the applicable service periods using variable accounting through the
      vesting date based on the fair value of the options at the end of each period.
      During the three months ended June 30, 2006 and 2005, the Company recognized
      a
      credit of $8,419 and expense of $28,009, respectively, relating to the granting
      of options to non-employees for services and such credit and expense are
      included in the accompanying statements of operations. During the six months
      ended June 30, 2006 and 2005, the Company recognized $727,675 and $55,686,
      respectively, of expense relating to the granting of options to non-employees
      for services and such expense is included in the accompanying statements of
      operations. Approximately $705,000 of the option expense for the six months
      ended June 30, 2006 represents the effect of options granted during such period,
      which is when the services were provided.





The
      fair
      value of options granted to non-employees was estimated using the Black-Scholes
      option-pricing model with the following weighted average assumptions at June
      30,
      2006 and 2005:


2006
            2005Dividend
                yield
            0%
            0%Expected
                volatility
            73%
            72%Risk-free
                interest rate
            4.8%
            4.0%Expected
                lives
            5
                years
            4
                years


12





**STOCK-
      BASED COMPENSATION (CONTINUED)**





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





The
      fair value of each option award is estimated on the date of grant using the
      Black-Scholes option-pricing model. As allowed by SFAS 123R for companies with
      a
      short period of publicly traded stock history, our estimate of expected
      volatility is based on the average expected volatilities of a sampling of five
      companies with similar attributes to our Company, including **:** industry, stage of life cycle, size and financial leverage. As we have so far
      only awarded “plain vanilla options” as determined by SAB 107, we used the
“simplified method” for determining the expected life of the options granted.
      This method is allowed until December 31, 2007, after which we will be required
      to adopt another method to determine expected life of the option awards. The
      risk-free rate for periods within the contractual life of the option is based
      on
      the U.S. treasury yield curve in effect at the time of grant valuation. SFAS
      123R does not allow companies to account for option forfeitures as they occur,
      instead estimated option forfeitures must be calculated upfront to reduce the
      option expense to be recognized over the life of the award and updated upon
      receipt of further information as to the amount of options expected to be
      forfeited.




The
      fair
      value of options granted to employees was estimated using the Black-Scholes
      option-pricing model with the following weighted average assumptions used during
      the six months ended June 30, 2006:





2006Dividend
                yield
            0%Expected
                volatility
            74.3%Risk
                -free interest rate
            4.9%Expected
                lives
            5.3
                yearsExpected
                forfeiture rate
            0%





Through
      June 30, 2006 only executive level employees have been granted stock
      options. These employees tend to have a long-term commitment to the Company
      with
      negligible turnover, thus a forfeiture rate of 0% was determined.




Activity
      with respect to the Plan is summarized as follows:




Shares
            
            Weighted
              Average
              Exercise
                Price
            
            Weighted
              Average
              Remaining
              Contractual
              Term
                (years)
            
            Aggregate
              Intrinsic
              ValueOutstanding
                at December 31, 2003
            
            
            38,411
            
            $
            0.39Granted
                in the year-ended December 31, 2004
            
            
            597,292
            
            
            1.12Outstanding
                at December 31, 2004 and December 31, 2005
            
            
            635,703
            
            
            1.07Granted
                in six months ended June 30, 2006
            
            
            659,714
            
            
            4.57Outstanding
                at June 30, 2006
            
            
            1,295,417
            
            $
            2.85
            
            
            8.7
            
            $
            2,134,317Exercisable
                at June 30, 2006
            
            
            924,553
            
            $
            2.92
            
            
            8.8
            
            $
            1,458,772





At
      June
      30, 2006, total unrecognized estimated employee compensation cost related to
      non-vested stock options granted prior to that date was $418,289, which is
      expected to be recognized over a weighted average period of 2.9 years. The
      weighted average grant date fair value of options granted during the three
      and
      six months ended June 30, 2006 was $4.50 and $4.57 per share,
      respectively.


13








**NOTE
      6. PRIVATE PLACEMENT OFFERING**





On
      April
      3, 2006, immediately prior to the reverse acquisition of SRKP, the Company
      completed a private placement offering of 8,803,332 units at a price per unit
      of
      $4.50, each unit constituting 0.9 shares of Company preferred stock and 0.1
      shares of Company common stock, in consideration of gross proceeds of
      $39,650,000. Accordingly, the Company issued 7,922,998 shares of newly
      designated Series A Preferred Stock and 880,335 shares of its common stock
      to
      investors in the offering. Cowen & Co. and Paramount BioCapital, Inc.
      (“Paramount”) of which Lindsay A. Rosenwald, M.D., a
      director and stockholder of the Company, serves as Chairman and Chief Executive
      Officer, each of
      whom are registered with the NASD as broker-dealers, acted as placement agents
      in the offering. Each placement agent received a placement fee of $1,387,750
      and
      was issued a five-year warrant to purchase 440,167 shares of Company common
      stock at an exercise price of $4.95 per share. The value of the warrants was
      determined using the Black-Scholes option pricing model was approximately
      $2,400,000. The model assumed a risk-free rate of 4.78%, a five year term and
      stock volatility of 72%. The warrants are exercisable upon written notice of
      exercise to the Company together with the payment of the exercise price. The
      warrants do not provide for cashless exercise. The warrants (and the common
      stock issued upon exercise of the warrants) were not registered, and include
      restrictions upon transfer. The Company also provided the warrantholders demand
      and piggyback registration rights relating to the resale of common stock
      issuable upon exercise of the warrants. Total net proceeds
      of $31,366,696 from the private placement was allocated to the series A
      redeemable convertible preferred stock including an allocation of $2,160,672
      for
      the value of the warrants using the fair value method. Reimbursable
      expenses associated with the placement were approximately $76,000.





**NOTE
      7. SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK**





In
      connection with the private placement closed on April 3, 2006 (see Note 6)
      and
      debt conversion on April 3, 2006 (see Note 10), the Company issued 9,486,752
      shares of Series A Redeemable Convertible Preferred Stock (“Series A”), the
      terms of which are set forth in a Certificate of Designation for the Series
      A
      filed with the Secretary of State of Delaware, for an aggregate amount of
      $42,728,037 in cash and debt conversion. The Series A have a stated value of
      $4.50 per share. Commencing on the date of issue, the holders of the Series
      A
      are entitled to receive cumulative dividends on each share of Series A, payable
      at the election of the Company in kind or in cash, at the rate of 4% per annum
      of the stated value, payable annually in arrears on each anniversary of the
      original issuance date. Among other rights, in the event of a liquidation,
      dissolution or winding up of the Company, holders of Series A are entitled
      to
      receive an amount equal to the greater of the stated value plus an amount equal
      to all accrued and unpaid dividends and the amount such holders would have
      been
      entitled to receive upon such liquidation event had the Series A been converted
      immediately prior to such liquidation event. The Series A can be converted
      at
      the option of the stockholder in whole or in part into shares of common stock
      at
      an initial conversion price per share of common stock of $4.50 at any time.
      Cumulative Series A dividends as of June 30, 2006 were $416,377 or $0.04 per
      share.





Each
      share of Series A automatically converts into shares of common stock in the
      event that the closing price of the Company’s common stock exceeds 200% of the
      conversion price for twenty consecutive trading days. At any time after the
      tenth anniversary of the original issue date, the holders of a majority of
      the
      Series A then outstanding may demand that the Company redeem all of the
      remaining outstanding shares of Series A for a cash amount equal to the stated
      value, plus all accrued and unpaid dividends. Payment shall be made by the
      Company quarterly over the three following such mandatory redemption date.
      The
      Company does not have an option to redeem such outstanding shares.





Pursuant
      to Rule 5-02-28 of Regulation S-X, the mandatory redemption feature of the
      Series A requires that it be presented in the balance sheet outside of
      permanent equity, as redemption is outside the control of the Company.
      Acc ordingly,
      the Company has recorded the Series A Preferred Stock outside of permanent
      equity at its fair value at date of issue and has adjusted its carrying value
      for accreted dividends and issuance cost. The issuance cost is amortized over
      the period between the issuance date and the redemption date, using the interest
      method.





14


**NOTE
      8. CONVERTIBLE NOTES**





On
      January 24, 2006, the Company completed the second and final closing relating
      to
      the issuance and sale of 5% convertible promissory notes (the “Bridge Notes”)
      with issuance of Bridge Notes in the aggregate principal amount of $2,585,000.
      Fees of $134,778 were paid in cash and 31,244 warrants were issued to Paramount
      , of which Lindsay A. Rosenwald, M.D., a director and stockholder of the
      Company, serves as Chairman and Chief Executive Officer. The Bridge Notes and
      all unpaid interest were due on January 24, 2007. Interest was accrued at an
      annual rate of 5% and was originally payable upon the maturity of the Bridge
      Notes. The notes were converted to equity on April 3, 2006 (see Note 10). In
      addition to the Bridge Notes, the investors received five-year warrants
      initially exercisable at $8.28 per share (subject to adjustments for stock
      splits, recapitalizations and similar events), for a number of shares of Company
      common stock equal to 20% of the principal amount of the Bridge Notes purchased
      divided by $8.28 (see Note 9) . The
      number of shares issuable would have been 40% of the principal amount of the
      Bridge Notes purchased divided by $8.28 if the qualified equity placement (see
      Note 6) had not been completed within 90 days of the Bridge Note and warrant
      final closing in January 2006. Within 90 days of the Bridge Note and warrant
      closing in January 2006, the Company completed a qualified equity placement
      (see
      Note 6). Accordingly, the warrant coverage for the November 2005 and the January
      2006 warrant issuances were adjusted from 40% coverage to 20%
      coverage. Warrants
      issued with the Bridge Notes were valued at $178,275, which was recorded as
      debt
      discount. The warrant issued to the placement agent was valued at $89,137 using
      the Black-Scholes option pricing model which was recorded as debt issuance
      cost.
      A risk-free interest rate of 4.3%, a term of five years and stock volatility
      of
      72% were used in the model to determine the fair value. The warrants are
      exercisable upon written notice of exercise to the Company together with the
      payment of the exercise price. The warrants are redeemable at the option of
      the
      Company if the Company’s common stock is traded on the OTCBB, Nasdaq or a
      national securities exchange and the common stock has had an average closing
      price per share over a period of thirty consecutive calendar days equal to
      or
      greater than the exercise price of the warrants, as adjusted, which is initially
      $8.28. The warrants do not provide for cashless exercise. The warrants (and
      the
      common stock issued upon exercise of the warrants) were not registered, and
      include restrictions upon transfer. The Company also provided the warrantholders
      demand and piggyback registration rights relating to the resale of common stock
      issuable upon exercise of the warrants.





**NOTE
      9. WARRANTS ISSUED WITH DEBT INSTRUMENTS**





In
      November 2005 and January 2006, the Company issued Bridge Notes and warrants
      as
      discussed in Note 8 to the audited financial statements in the Form 8-K filed
      April 7, 2006 and Note 8 above. Since the conversion of the Bridge Notes could
      result in a conversion into an indeterminable number of common shares, the
      Company determined that under the guidance in EITF Issue No. 00-19 (“EITF
      00-19”) “Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in a Company’s Own Stock”, the Company was prohibited from
      concluding that the Company had sufficient authorized and un-issued shares
      to
      net-share settle any warrants or options granted to non-employees. Therefore,
      on
      the date the convertible notes were issued, the Company recorded the related
      fair value of the warrants to current liabilities. Further, on that date, the
      fair value of the non-employee options were reclassified from additional paid-in
      capital in equity to current liabilities.





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





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





15





**NOTE
      10. DEBT CONVERSION AND PAY-OFF**





Additionally,
      in conjunction with the offering described in Note 6, the Company converted
      the
      aggregate principal balance totaling $6,145,120, together with accrued and
      unpaid interest of approximately $89,000 thereon, of the Bridge Notes into
      1,384,162 units under the same terms as provided in the offering. Accordingly,
      the Company issued an additional 1,245,746 shares of Series A Preferred and
      138,416 shares of common stock to the holders of the Company’s Bridge Notes.




Under
      the
      same conditions of the offering the Company also issued 133,217 units to a
      director of the Company for a cash payment of approximately $600,000, and
      converted an aggregate of $950,000 of notes payable, together with accrued
      and
      unpaid interest of approximately $41,000 thereon, issued to five individuals,
      one of whom is a director of the Company. Accordingly, the Company issued an
      additional 318,008 shares of Series A Preferred and 35,334 shares of common
      stock to these individuals.





The
      Company also used a portion of the proceeds from the offering to fully pay
      off
      the line of credit balance of $600,000 plus interest.








16


**Item
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**Overview**




Since
      the
      inception of Cougar Biotechnology, Inc. (“Cougar”) in May 2003, our efforts and
      resources have been focused primarily on acquiring and developing our
      pharmaceutical technologies, raising capital and recruiting personnel. We are
      a
      development stage company and have no product sales to date and we will not
      receive any product sales until we receive approval from the FDA or equivalent
      foreign regulatory bodies to begin selling our pharmaceutical candidates.
      Developing pharmaceutical products, however, is a lengthy and very expensive
      process. Assuming we do not encounter any unforeseen safety issues during the
      course of developing our product candidates, we do not expect to complete the
      development of a product candidate until approximately 2011. Currently, a large
      portion of the development expenses have related to our lead product candidate,
      CB-7630. As we proceed with the clinical development of CB-7630 and as we
      further develop CB-3304 and CB-1089, our second and third product candidates,
      respectively, our research and development expenses will further increase.
      To
      the extent we are successful in acquiring additional product candidates for
      our
      development pipeline, our need to finance further research and development
      will
      continue increasing. Accordingly, our success depends not only on the safety
      and
      efficacy of our product candidates, but also on our ability to finance the
      development of the products. Our major sources of working capital have been
      proceeds from various private financings, primarily private sales of our common
      stock and other equity securities.




On
      April
      3, 2006, SRKP Acquisition Corp., a Delaware corporation and a wholly owned
      subsidiary of SRKP 4, Inc., a Delaware corporation (“SRKP”), merged with and
      into Cougar (the “Merger”), with Cougar remaining as the surviving corporation
      and a wholly owned subsidiary of SRKP. Cougar stockholders received, in exchange
      for all of the outstanding shares of capital stock in Cougar, shares of capital
      stock of SRKP representing 100% of the outstanding capital stock of SRKP, on
      a
      fully-diluted basis, after giving effect to the Merger and a redemption,
      completed contemporaneous, with the closing of the Merger, of all shares of
      SRKP
      capital stock held by SRKP’s former stockholders immediately prior to the
      Merger. In addition, at the time of effectiveness of the Merger, the board
      of
      directors of SRKP was reconstituted, such that the directors of SRKP immediately
      prior to the Merger resigned and were replaced by the directors of Cougar
      immediately prior to the Merger. Further, upon the effective time of the Merger,
      the business of SRKP was abandoned and the business plan of Cougar was adopted.
      The transaction was therefore accounted for as a reverse acquisition with Cougar
      as the acquiring party and SRKP as the acquired party. Accordingly, when we
      refer to our business and financial information relating to periods prior to
      the
      Merger, we are referring to the business and financial information of Cougar,
      unless otherwise indicated.


17




Research
      and development expenses consist primarily of salaries and related personnel
      costs, fees paid to consultants and outside service providers for regulatory
      and
      quality assurance support, licensing of drug compounds, and other expenses
      relating to the manufacture, development, testing and enhancement of our product
      candidates. We expense our research and development cost as they are
      incurred.




General
      and administrative expenses consist primarily of salaries and related expense
      for executive, finance and other administrative personnel, professional fees,
      business insurance, rent, general legal activities, and other corporate
      expenses.




Our
      results include non-cash compensation expense as a result of the issuance of
      stock and stock option grants. Compensation expense for options granted to
      employees and directors (excluding directors who are also scientific advisory
      board member or consultants) represents the difference between the fair value
      of
      our common stock and the exercise price of the options at the date of grant.
      We
      account for stock-based employee compensation arrangements in accordance with
      the provisions of and comply with the disclosure provisions of Statement of
      Financial Accounting Standards No. 123(R), “Accounting for Stock-Based
      Compensation” (“SFAS 123(R)”). In accordance with the provisions of SFAS 123 and
      Emerging Issues Task Force (“EITF”) No. 96-18, “Accounting for Equity
      Instruments That are Issued to Other Than Employees for Acquiring or in
      Conjunction with Selling, Goods or Services,” all other issuances of common
      stock, stock options or other equity instruments to non-employees (including
      consultants and all members of the Scientific Advisory Board) as the
      consideration for goods or services received by the Company are accounted for
      based on the fair value of the equity instruments issued (unless the fair value
      of the consideration received can be more reliably measured). Any options issued
      to non-employees are recorded in expense and additional paid-in capital in
      stockholders’ equity (deficiency) or current liabilities over the applicable
      service periods using variable accounting through the vesting date based on
      the
      fair value of the options at the end of each period. We expect to record
      additional non-cash compensation expense in the future, which may be
      significant.




**Critical
      Accounting Policies**





As
      of the
      date of the filing of this quarterly report, we believe there have been no
      material changes to our critical accounting policies and estimates during the
      six months ended June 30, 2006, except for the adoption of SFAS 123(R) as
      discussed below.





On
      January 1, 2006, we adopted the fair value recognition provisions of SFAS
      123(R), which requires the measurement and recognition of compensation expenses
      for all share-based payment awards made to employees and directors including
      stock options based on estimated fair values. SFAS 123(R) supersedes the
      Company’s previous accounting for employee stock options using the
      intrinsic-value method in accordance APB No. 25, FIN No. 44,
“Accounting for Certain Transactions Involving Stock Compensation, an
      interpretation of APB No. 25,” and related to interpretations, and the
      disclosure-only provisions of SFAS 123.





We
      adopted SFAS 123(R) using the modified-prospective-transition method. Under
      this
      method, compensation costs recognized as of June 30, 2006 include: a)
      compensation costs for all share-based payment awards granted prior to, but
      not
      yet vested as of January 1, 2006, based on grant-date fair value estimated
      in accordance with the original provisions of SFAS 123 and b) compensation
      costs
      for all share-based payment awards granted subsequent to January 1, 2006,
      based on the grant-date fair value estimated in accordance with the provisions
      of SFAS 123(R). In accordance with the modified-prospective-transition method,
      our Consolidated Financial Statements for prior periods have not been restated
      to reflect, and do not include, the impact of SFAS 123(R).


18





**Results
      of Operations**




Six
      Months Ended June 30, 2006 Compared to Six Months Ended June 30,
      2005




*General
      and administrative expenses* :
      For the
      six months ended June 30, 2006, general and administrative expenses were
      approximately $2,391,000 compared to $621,000 for the six months ended June
      30,
      2005. This increase of approximately $1,770,000 is primarily attributable to
      increases in; compensation of approximately $613,500, consulting fees of
      approximately $698,200, audit fees of approximately $167,900, legal fees of
      approximately $115,200, rent expense of approximately $58,900, increased
      insurance expense of approximately $28,000, travel expense of approximately
      $21,000 and employer’s contribution to the 401(K) plan. The increase in
      compensation resulted primarily from the implementation of SFAS 123R
      representing $710,000 in increased compensation. Partially offsetting this
      increase was a decrease in management bonus expense of approximately $89,000
      resulting from no product licensing agreement signed in the first six months
      of
      2006 compare to one licensing agreement signed in the same period in 2005 and
      a
      reduction of management performance bonus of $14,000. The increase in consulting
      fees was due to stock-based compensation for service rendered in the six months
      ended June 30, 2006. The increase in audit fees was a result of expediting
      the
      year-end audit, and review of SEC filing related to our equity placement and
      the
      reverse merger noted above. The increased legal fees are associated with work
      on
      the reverse merger with SRKP 4, Inc. and review of SEC filings. In April 2006,
      we moved our corporate offices to our current location and are currently leasing
      approximately 7,300 square feet of office space resulting in additional rent
      expense of $58,900. The increase in insurance cost reflects the increased
      insurance requirements of being a public company. The increase in travel cost
      was associated with investor relations and reverse acquisition of SRKP. The
      Company implemented a 401k savings plan in the fourth quarter of 2005 and thus
      there were no cost during the first six months of 2005.




*Research
      and development expenses* :
      For the
      six months ended June 30, 2006, research and development expenses were
      approximately $1,754,000 compared to $1,720,000 for the six months ended June
      30, 2005, representing an increase of approximately $34,000. Manufacturing
      expenses for this period in 2006 were approximately $462,000 higher than the
      same period in 2005 due to increased drug manufacturing costs necessary to
      support our clinical trials. Costs associated with preclinical studies during
      the first six months of 2006 were approximately $285,000 lower than during
      the
      same period in 2005 due to a decrease in preclinical toxicology and other
      non-clinical programs. Clinical expenses in the first six months of 2006 were
      approximately $324,000 higher than in the first six months of 2005 due to an
      increase in Company sponsored clinical trials in 2006 compared to 2005.
      Licensing fees decreased approximately $250,000 in 2006 as we have not licensed
      any new products compared to the licensing of one product candidate during
      the
      same period last year. We also experienced a decrease in licensing fee
      maintenance cost of approximately $21,000 due to favorable exchange rates.
      Contract regulatory affairs/quality assurance cost were approximately $151,000
      less then we experience in the first six months of 2005 as we required heavy
      contract regulatory affairs/quality assurance assistance in preparing IND
      submissions in early 2005 along with major assistance in writing protocols
      for
      product testing and for our clinical trials. Use of outside consultants
      decreased by approximately $29,000 compared to the same period last
      year.




*Interest
      income:* For
      the
      six months ended June 30, 2006 we recognized approximately $269,000 in interest
      income compared to approximately $11,000 of interest income for the same period
      last year. The increase is attributed to the proceeds of private placement
      being
      placed in an asset management account.




*Interest
      expense* :
      For the
      six months ended June 30, 2006 interest expense was approximately $1,013,000.
      No
      such expense was present for the same period last year. The interest expense
      includes a non-cash charge for amortization of note discounts of approximately
      $308,000, a non-cash charge for amortization of debt and note issuance cost
      of
      approximately $612,000 and accrued interest on the notes of approximately
      $80,000, and interest on the credit facility of approximately $13,000.


19




*Other
      expense:* Contemporaneously
      with the closing of the Merger, SRKP redeemed an aggregate of 2,700,000 shares
      of its common stock from its stockholders in consideration of an aggregate
      of
      $200,000. This transaction was recorded as a capital transaction in substance,
      rather than a business combination resulting in an other expense charge of
      $200,000.




Three
      Months Ended June 30, 2006 Compared to Three Months Ended June 30,
      2005




*General
      and administrative expense*: General and administrative expenses for the
      three months ended June 30, 2006, were approximately $606,000 compared to
      $384,000 for the same period in 2005 representing an increase of approximately
      $222,000. Accounting and legal fees increased approximately $101,000 and
      $61,000, respectively, compared to the same quarter in 2005. This increase
      in
      expenses resulted from our reverse acquisition of SRKP and the required SEC
      filings associated with being a public reporting company. We also experienced
      an
      increase in insurance requirements of approximately $29,000, mainly for
      Directors and Officers insurance, this quarter as a result of becoming a public
      reporting company. Rent expense for the quarter increased approximately $53,000
      compared for the same period last year resulting from the move into our new
      location containing approximately 7,300 square feet. Expenses for supplies
      increased by $28,000 from the same period last year to support our continued
      growth. Travel cost increased by approximately $19,200 as a result of increased
      travel associated with investor relations. Our regulatory fees increased by
      approximately $13,100 compared to the same period last year due the required
      filing associated with the merger. Our contribution to the 401k saving plan
      was
      approximately $10,000 for the quarter. We had no such expense for the same
      period last year. We did not execute any licensing agreements this quarter
      compared to one in the second quarter of 2005 representing a decrease in bonus
      expenses of $75,000. Management performance bonus expense was $14,000 less
      than
      during the same period in 2005.





*Research
      and development expenses* :
      For the
      three months ended June 30, 2006, research and development expenses were
      approximately $562,000 compared to $988,000 for the three months ended June
      30,
      2005, representing a decrease of approximately $426,000. Major decreases in
      expenditures for pre-clinical expense of $137,000, manufacturing expenditures
      of
      $119,000, regulatory affairs/quality assurance support of $121,000, licensing
      fees of $250,000, and management bonus expense of $60,000 were noted compared
      to
      the quarter ending June 30, 2005. The decrease in pre-clinical expenses reflects
      the decrease in non-clinical studies during 2006 compared to 2005. The decrease
      in manufacturing and regulatory affairs/quality assurance cost for the three
      months ended June 30, 2006 reflects reduced manufacturing and regulatory
      affairs/quality assurance requirement compared to the same period in 2006.
      Licensing fees decreased $250,000 in 2006 as we have not licensed any new
      products compared to the licensing of one product candidate during the same
      period last year. The decrease in management bonus reflects the actual bonus
      approved and paid in 2006 compared to the amount accrued in the same period
      for
      2005. For the three months ended June 30, 2006 our clinical expense increased
      approximately $225,000 due to the expenses associated with our Company sponsored
      clinical trials. Scientific Advisory Board fees for the quarter ended June
      30,
      2006 were approximately $32,000 greater than during the same period last
      year as no meetings were held during the  second
      quarter of 2005 compared to one meeting held this quarter.




*Interest
      income:* For
      the
      three months ended June 30, 2006 we recognized approximately $261,000 in
      interest income compared to approximately $3,000 of interest income for the
      same
      period last year. The increase is attributed to the proceeds from the private
      placement.




*Interest
      expense* :
      For the
      three months ended June 30, 2006 interest expense was approximately $781,000.
      No
      such expense was present for the same period last year. The interest expense
      includes a non-cash charge for amortization of note discounts of approximately
      $333,000, and a non-cash charge for amortization of debt and note issuance
      cost of approximately $447,000.




*Other
      expense:* Contemporaneously
      with the closing of the Merger, SRKP redeemed an aggregate of 2,700,000 shares
      of its common stock from its stockholders in consideration of an aggregate
      of
      $200,000. This transaction was recorded as a capital transaction in substance,
      rather than a business combination resulting in an other expense charge of
      $200,000.


20


*Liquidity
      and Capital Resources*




We
      reported a net loss of $5,097,330 and negative cash flows from operating
      activities of $3,984,439 for the six months ended June 30, 2006. The net loss
      from date of inception, May 14, 2003, to June 30, 2006 amounted to
      $16,447,179 **.**





We
      have
      financed our operations since inception primarily through equity and debt
      financing. During the six months ended June 30, 2006, we had a net increase
      in
      cash and cash equivalents of $34,951,375. This increase resulted primarily
      from
      net cash provided by financing activities of $39,051,742, substantially all
      of
      which was derived from our private placement which netted us cash of
      $37,251,520. The increase in cash provided by financing activities
      was reduced by net cash used in operating activities of $3,984,439 and
      net cash used in investing activities of $115,928 for the six months ended
      June
      30, 2006. The net cash used in operating activities includes a net loss
      $5,097,330 adjusted for non-cash items of approximately $2,550,000, a reduction
      in accounts payable of approximately $1,122,000, and an increase is prepaid
      expenses of approximately $315,000.  The major non-cash items were; stock
      option compensation for non-employees of $728,000, employee stock option
      compensation of $710,000, write-off of note issuance cost of $663,000, and
      write-off of note discounts of $377,000. Prior to the equity placement our
      vendors had granted us extended terms pending the closing of the equity. Upon
      the closing of the equity placement we reduced our accounts payable to 45 days
      and paid accrued management bonuses payable upon completion of the placement.
      The increase in prepaid expenses is due to the purchase of directors and
      officers insurance and general liability insurance which will be amortized
      over
      12 months. We also recorded prepaid expenses for advance payments related to
      our
      clinical trials and manufacture of product for clinical trials. The net cash
      used in investing activities was due to the move into our new office location
      and the addition of personnel necessitated the purchase of additional furniture,
      a phone system and a computer network for approximately $116,000.





Management
      believes that the Company will continue to incur losses for the foreseeable
      future and will need additional equity or debt financing or will need to
      generate revenue from licensing of its products or by entering into strategic
      alliances to sustain its operations until it can achieve profitability and
      positive cash flows, if ever.




Our
      continued operations will depend on whether we are able to raise additional
      funds through various potential sources, such as equity and debt financing.
      Such
      additional funds may not become available on acceptable terms and there can
      be
      no assurance that any additional funding that we do obtain will be sufficient
      to
      meet our needs in the long term. Through June 30, 2006, a significant portion
      of
      our financing has been through private placements of common stock and debt
      financing.





We
      will
      continue to fund operations from cash on hand and through the similar sources
      of
      capital previously described. We can give no assurances that any additional
      capital that we are able to obtain will be sufficient to meet our needs. There
      can be no assurance that such capital will be available to us on favorable
      terms
      or at all. If we are unable to raise additional funds in the future on
      acceptable terms, or at all, we may be forced to curtail our desired
      development. In addition, we could be forced to delay or discontinue product
      development, and forego attractive business opportunities. Any additional
      sources of financing will likely involve the sale of our equity securities,
      which will have a dilutive effect on our stockholders.




*Financings*




On
      July
      15, 2005, we entered into a credit facility with a commercial bank that allows
      for borrowing under a line of credit of up to $1,000,000. The credit facility
      was guaranteed by Dr. Lindsay A. Rosenwald, a stockholder and member of our
      Board of Directors. In return for such guaranty, we granted Dr. Rosenwald
      warrants to purchase a number of shares of Cougar common stock based on amount
      of the credit facility used by us. Prior to terminating the credit facility
      in
      2006, we utilized up to $600,000 of the credit facility, and issued Dr.
      Rosenwald a five-year warrant to purchase 31,732 shares of the Company’s common
      stock at an exercise price of $8.28 per share in consideration of the guaranty.
      The credit facility was paid in full upon closing of the private equity
      placement on April 3, 2006.




On
      June
      30, 2005, we issued unsecured promissory notes to six individuals, including
      a
      member of our Board of Directors, in the aggregate amount of $1,000,000 in
      consideration for aggregate proceeds to us of $1,000,000. In addition to the
      promissory notes, we issued the six individuals five-year warrants to purchase
      an aggregate of 52,888 shares of Cougar common stock at an exercise price of
      $8.28 per share.


21




In
      two
      closings on November 23, 2005 and January 24, 2006, we sold an aggregate of
      $6,145,120 in aggregate principal amount of 5% senior convertible notes (the
      “Bridge Notes”) to certain institutional and individual accredited investors in
      a private placement transaction (the “Bridge Offering”). The bridge note holders
      received five year warrants to purchase an aggregate of 148,460 shares of theour
      common stock at a price per share of $8.28. These warrants were valued at
      $455,958 using the Black-Scholes option pricing model and recorded as debt
      discount. Additionally, we issued warrants to purchase an aggregate of 74,227
      shares of common stock at an exercise price per share of $8.28 to our placement
      agents, and paid commissions and other offering-related expenses aggregating
      approximately $326,000. The principal balance of $6,145,120, together with
      accrued and unpaid interest of approximately $89,000 thereon, was automatically
      converted into units of the Company’s securities on April 3, 2006 each unit
      consisting of 0.9 shares of Series A Convertible Preferred Stock and 0.1 share
      of our Common Stock, at a price per unit of $4.50, pursuant to the
      terms of the Offering. Accordingly, the holders of the Bridge Notes received
      an
      aggregate of 360,356 shares of the our common stock and 3,243,217 shares of
      the
      our Series A Redeemable Convertible Preferred Stock upon conversion. The holders
      of the Bridge Securities are entitled to piggy-back registration rights with
      respect to the shares of common stock issued or issuable upon conversion of
      such
      securities.




On
      April
      3, 2006, immediately prior to the closing of the Merger, we completed a private
      placement offering whereby we raised gross proceeds of approximately $39,650,000
      through the sale of 7,922,998 shares of preferred stock and 880,334 shares
      of
      common stock. Additionally, on terms similar to that in the offering, we sold
      35,334 shares of common stock and 318,008 shares of preferred stock in
      consideration of cash in the amount of approximately $600,000 and the
      cancellation of certain of our note obligations in the aggregate amount of
      $990,000, including principal and interest. Each share of preferred stock,
      designated as Series A Redeemable Convertible Preferred Stock, is
      convertible, in whole or in part, at the option of the holder at any into shares
      of our common stock initially on a one-for-one basis and at an initial
      conversion price of $4.50 per share. At our election, we may require each holder
      to convert its outstanding shares of preferred stock into shares of our common
      stock if the price per share of common stock trades at or above 200% of the
      initial purchase price of $4.50 for a period of twenty consecutive trading
      days
      on any securities exchange, automated quotation system or any other
      over-the-counter market.




*Current
      and Future Financing Needs*




We
      have
      incurred negative cash flow from operations since we started our business.
      We
      have spent, and expect to continue to spend, substantial amounts in connection
      with implementing our business strategy, including our planned product
      development efforts, our clinical trials, and our research and discovery
      efforts. Given the current and desired pace of clinical development of our
      three
      product candidates, over the next 12 months we estimate that that our research
      and development expenses will be approximately $12.8 million. We will need
      approximately $2.7 million for general administrative expenses for
      2006.




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




·
            The
                progress of our research
                activities;




·
            the
                number and scope of our research
                programs;




·
            the
                progress of our pre-clinical and clinical development
                activities;




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




·
            our
                ability to maintain current research and development programs and
                to
                establish new research and development and licensing
                arrangements;




·
            the
                cost involved in prosecuting and enforcing patent claims and other
                intellectual property rights; and




22




·
            the
                cost and timing of regulatory
                approvals.




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




**Plan
      of Operation**





Our
      plan
      of operation for the next twelve months is to continue implementing our business
      strategy, including the clinical development of our three product candidates.
      We
      also intend to expand our drug candidate portfolio by acquiring additional
      drugs
      for development. We expect our principal expenditures during the next 12
      months to include:




·
            Operating
                expenses, including expanded research and development and general
                and
                administrative expenses; and




·
            product
                development expenses, including the costs incurred with respect to
                applications to conduct clinical trials in the United States and
                Europe
                for our three products.




As
      part
      of our planned expansion, we anticipate hiring up to 7 additional full-time
      employees devoted to research and development activities and up to 6
      additional full-time employees for general and administrative activities. In
      addition, we intend to use clinical research organizations and third parties
      to
      perform our clinical studies and manufacturing. As indicated above, at our
      current and desired pace of clinical development of our three product
      candidates, during the next twelve months we expect to spend approximately
      $12.8
      million on clinical development and research and development activities and
      expend approximately $3.6 million on general and administrative
      expenses.




*Research
      and Development Projects*




CB-7630.
      In April 2004, we exclusively licensed the worldwide rights to CB-7630
      (abirater one
      acetate) from BTG plc. CB-7630 is an orally active targeted inhibitor of the
      steroidal enzyme 17α-hydroxylase/C17,20 lyase, a cytochrome p450 complex that is
      involved in testosterone production. In preclinical studies, CB-7630 has
      demonstrated the abil ity
      to
      selectively inhibit the target enzyme, reducing levels of testosterone
      production in both the adrenals and the testes that is believed to stimulate
      the
      growth of prostrate cancer cells.




In
      Phase
      I trials performed by the Centre for Cancer Therapeutics, Institute of Cancer
      Research (Sutton, United Kingdom), and Royal Marsden NHS Trust (Sutton, United
      Kingdom), CB-7630 was administered as a single agent to 26 patients with
      prostate cancer. We believe that the data from these clinical studies indicate
      that: 1) CB-7630, at an oral dose of 800mg, can successfully suppress
      testosterone levels to the castrate range; 2) CB-7630 can suppress testosterone
      produced by both the testes and the adrenals; and 3) CB-7630 is well tolerated
      with an acceptable toxicity profile. The results from these Phase I studies
      of
      CB-7630 were published in the British Journal of Cancer in June
      2004.




In
      December 2005, we initiated a Phase I/II trial of CB-7630 for the treatment
      of
      advanced prostate cancer. The Phase I/II trial is being conducted at The
      Institute of Cancer Research, in the Cancer Research UK Centre for Cancer
      Therapeutics, and at The Royal Marsden Hospital in the United Kingdom. The
      Phase
      I/II study is an open label, dose escalating study to evaluate the safety and
      efficacy of CB-7630 administered daily to patients with chemotherapy-naïve
      hormone refractory prostate cancer (HRPC) with a rising PSA (prostate specific
      antigen) despite hormonal therapy.


23




Through
      June 2006, we have incurred approximately $7,500,700 of cost related to the
      development of CB-7630. Currently, we anticipate that we will need to expend
      approximately an additional $3,900,000 to $4,400,000 in development costs in
      fiscal 2006 and at least an aggregate of approximately $50,000,000 to
      $75,000,000 until we receive FDA approval for CB-7630. Should we choose to
      continue development we expect that it will take an additional 6 to 8 years
      before we complete development and obtain FDA approval of CB-7630, if
      ever.




CB-3304.
      In March 2004, we exclusively licensed the worldwide rights to CB-3304
      (noscapine), an orally active alkaloid derived from opium. Preclinical studies
      have demonstrated that CB-3304 has anti-tumor activity and acts as an inhibitor
      of microtubule dynamics. Therefore, we believe that CB-3304 has potential
      applications in the treatment of a number of different tumor types where tubulin
      binding agents are known to have activity. These tumor types include, but are
      not limited to, non-Hodgkin’s lymphoma, multiple myeloma, breast cancer, lung
      cancer, ovarian cancer and prostate cancer.




In
      December 2005, we announced positive interim data from an ongoing investigator
      sponsored Phase I trial of CB-3304 in patients with relapsed or refractory
      non-Hodgkin’s lymphoma. The trial is an open label dose escalating study, being
      conducted at the University of Southern California Norris Comprehensive Cancer
      Center, where cohorts of patients with relapsed/refractory non-Hodgkin’s
      lymphoma (NHL) or chronic lymphocytic leukemia (CLL/SLL) were treated at one
      of
      three different dose levels involving total daily doses of 1 g, 2 g, and 3
      g per
      day. At each dose level, noscapine was administered orally on a three times
      a
      day schedule for 49 days. In the trial, responses for NHL patients were
      evaluated using the International Working Group Response Criteria for NHL and
      responses for CLL patients were evaluated using the NCI Working Group criteria.
      For both NHL and CLL patients, toxicity was graded according to the NCI common
      toxicity criteria (CTC).




At
      this
      interim analysis, 12 patients with a median age of 65 years (range 38-71) have
      been accrued. Four subjects had CLL/SLL, 2 had mantle cell lymphoma, one had
      follicular grade III lymphoma, 4 had diffuse large cell lymphoma (DLC), and
      one
      had lymphoplasmacytic low grade lymphoma. These interim results
      suggest:




·
            Of
                the 10 patients that are evaluable for response, one patient with
                follicular grade III disease has had a partial response. This patient
                initially demonstrated stabilization of their disease for a period
                of
                approximately four years before achieving a partial response. In
                addition,
                two patients, one with mantle cell lymphoma and one with DLC have
                demonstrated stable disease of duration 30 days and 77 days,
                respectively.




·
            CB-3304
                has been well tolerated, with no grade 3 or 4 hematological toxicities.
                One grade 3 neurotoxicity consisting of depressed level of consciousness
                was experienced at the 3 gram dose
                level.




·
            A
                larger study of noscapine is warranted to evaluate the efficacy of
                the
                compound in patients with lymphoma.




In
      December 2005, we also announced results from preclinical experiments that
      we
      believe demonstrate the effectiveness of CB-3304 for the treatment of NHL and
      multiple myeloma and that warrant our continued development of the drug in
      hematological malignancies. The preclinical studies demonstrate that CB-3304
      exhibits potent antitumor activity against NHL and myeloma in vitro, as well
      as
      in vivo in xenograft models. More specifically, the in vitro studies
      demonstrated that following exposure to CB-3304, the OPM2 (multiple myeloma),
      H9
      (T cell lymphoma) and RL (B cell lymphoma) tumor cell lines exhibited an IC50
      of
      approximately 30 nM, 700 nM, and 500 nM for the OPM2, H9 and RL lines,
      respectively. Treatment with noscapine resulted in the induction of apoptosis
      in
      each of the cell lines tested. Additionally, in vivo studies demonstrated that
      in xenograft models, daily administration of noscapine resulted in tumor growth
      delays of between 30-80% of the control tumor volumes.


24




Through
      June 2006, we have incurred approximately $855,600 of cost related to the
      development of CB-3304. Currently, we anticipate that we will need to expend
      approximately an additional $2,000,000 to $2,600,000 in development costs in
      fiscal 2006 and at least an aggregate of approximately $50,000,000 to
      $75,000,000 until we receive FDA approval for CB-3304. Should we choose to
      continue development we expect that it will take an additional 6 to 8 years
      before we complete development and obtain FDA approval of CB-3304, if
      ever.




CB-1089.
      In June 2005, we exclusively licensed the worldwide rights to CB-1089
      (seocalcitol), a synthetic vitamin D analog. In prostate cancer, clinical
      studies of a metabolite of vitamin D (calcitriol) given in combination with
      chemotherapy suggested that patients that received the combination of calcitriol
      plus chemotherapy had an improvement in their survival over the patients that
      received chemotherapy plus placebo without an increase in the toxicity of the
      chemotherapy. Preclinical studies in prostate cancer have shown that CB-1089
      is
      a more potent anti-cancer drug than calcitriol, which may result in better
      efficacy when used in combination therapy to treat prostrate cancer as opposed
      to calcitriol.




Through
      June 2006, we have incurred approximately $393,000 of cost related to the
      development of CB-1089. Currently, we anticipate that we will need to expend
      approximately an additional $1,900,000 to $2,400,000 in development costs in
      fiscal 2006 and at least an aggregate of approximately $50,000,000 to
      $75,000,000 until we receive FDA approval for CB-1089. Should we choose to
      continued development we expect that it will take an additional 6 to 8 years
      before we complete development and obtain FDA approval of CB-1089, if
      ever.




*License
      Agreement Obligations*




CB-3304.
      On February 23, 2004, we entered into a license agreement with Emory University
      (“Emory”) for the worldwide, exclusive rights to discover, develop, have made,
      use, sell, have sold, offer for sale and import the products described in
      Emory’s intellectual property portfolio for noscapine and analogs of noscapine.
      The license agreement terminates upon the date of the last to expire patent
      contained in the licensed technology. In consideration for the rights under
      the
      license agreement, we paid Emory an initial license fee of $72,435 in 2004.
      We
      sponsored a research project involving the licensed technology in the amount
      of
      $114,000 of which $28,688 and $85,312 were paid in 2005 and 2004, respectively.
      In connection with the license agreement, we have agreed to future milestone
      payments to Emory for the first technology from the intellectual property
      portfolio in the aggregate of up to $3,500,000, payable upon the achievement
      of
      certain clinical and regulatory milestones. Should a product incorporating
      the
      licensed technology be commercialized, we will be obligated to pay to Emory
      an
      annual royalty based on net sales of the product. In the event that we
      sublicense the licensed technology to a third party, we will be obligated to
      pay
      royalties to Emory based on a fixed rate of fees or royalties received from
      the
      sublicense.




CB-7630.
      Effective April 20, 2004, we entered into a license agreement with BTG
      International, LTD. for the exclusive worldwide rights to make, use, lease
      and
      sell abiraterone acetate. The agreement terminates upon the date of the last
      to
      expire patent contained in the licensed technology. In consideration for the
      rights under the BTG license agreement, we paid BTG an initial license fee
      of
£500,000 (currently, approximately $923,100) in 2004 and agreed to pay BTG an
      annual license maintenance fee of £150,000 ($288,000) until the first commercial
      sale of the licensed product. In addition, the license agreement requires us
      to
      make aggregate milestone payments of up to £9,000,000 ($16,614,000), payable
      upon the achievement of certain clinical and regulatory milestones. Should
      abiraterone acetate become commercialized, we will be obligated to pay to BTG
      an
      annual royalty based on net sales of the product. In the event that we
      sublicenses abiraterone acetate to a third party, we are obligated to pay
      royalties to BTG based on a fixed rate of fees or royalties received from the
      sublicense.




CB-1089.
      Effective June 27, 2005, we entered into a license agreement with LEO Pharma
      A/S
      for the exclusive worldwide right to make, use, lease and sell seocalcitol.
      The
      agreement terminates upon the later of the date of the last patent contained
      in
      the licensed technology to expire or twenty years. In consideration for the
      rights under the LEO license agreement, we paid LEO an initial license fee
      of
      $250,000 in 2005. In addition, the license agreement requires us to make
      aggregate milestone payments of up to $13,000,000, payable upon the achievement
      of certain clinical and regulatory milestones. Should seocalcitol become
      commercialized, we will be obligated to pay to LEO an annual royalty based
      on
      net sales of the product. In the event that we sublicenses seocalcitol to a
      third party, we are obligated to pay royalties to LEO based on a fixed rate
      of
      fees or royalties received from the sublicense.


25








**Item
      3. CONTROLS AND PROCEDURES.**





**Evaluation
      of disclosure controls and procedures**




As
        of
        June 30, 2006, we carried out an evaluation, under the supervision and with
        the
        participation of our
        Chief
        Executive Officer and vice president, finance, of the effectiveness of the
        design and operation of our disclosure
        controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
        Securities Exchange Act
        of
        1934, as amended). During the second quarter of 2006, there were no changes
        in
        our internal controls over
        financial reporting that have materially affected, or are reasonably likely
        to
        materially affect, our internal controls
        over financial reporting subsequent to such evaluation. Based upon that
        evaluation, however, our C hief
        Executive Officer and Vice President, Finance concluded that our disclosure
        controls and procedures as of that
        date
        were not effective because of the material weakness in internal control over
        financial reporting described
        below. We are taking steps to address such material weakness described below.
        With the exception of such weakness, however, our Chief Executive Officer
        and
        Vice President, Finance believe that our
        current disclosure controls and procedures are adequate to ensure that
        information required to be disclosed in the reports we file under the Securities
        Exchange Act is recorded, processed, summarized and reported on an
        accurate and timely basis.
 
 As
        defined by the Public Company Accounting Oversight Board Auditing Standard
        No.
        2, a material weakness
        is a significant control deficiency or a combination of significant control
        deficiencies, that results in there
        being more than a remote likelihood that a material misstatement of the annual
        or interim financial statements
        will not be prevented or detected. During the preparation of this Form 10-QSB
        for the three and six
        months ended June 30, 2006, as part of its review of this report, our
        independent registered public accounting
        firm identified several significant deficiencies relating to the financial
        statements relating to our quarter
        ended June 30, 2006 and the notes related thereto that, when taken together,
        constitute a material weakness in our ability to account for and report certain
        transactions in accordance with generally accepted accounting
        principles. Our independent registered public accounting firm advised our
        management and our audit
        committee of our board of directors that it believes such matters constitute
        a
        material weakness in our internal controls.
 
 Since
        this material weakness was identified by our independent registered accounting
        firm in connection with its review of this Form 10-QSB, the transactions
        subject
        to these issues are correctly reflected in
        the
        financial statements included in this Form 10-QSB and no restatement of any
        previously filed financial statements
        is required. However, on a going forward basis, management will continue
        to
        evaluate our disclosure
        controls and procedures concerning the selection and application of accounting
        principles in order to prevent the recurrence of the circumstances that resulted
        in the material weaknesses identified in connection with the review of this
        Form
        10-QSB. In addition, we intend to engage a consultant to advise us on various
        accounting matters and to assist us in preparing our financial statements
        on
        Exchange Act reports, increase our emphasis on accounting education for our
        accounting personnel and increase our emphasis on reviewing
        applicable accounting literature. We have also hired another employee with
        an
        accounting background
        to assist our accounting and reporting functions. We believe such enhancements
        to our system of internal controls and our disclosure controls and procedures
        will be adequate to provide reasonable assurance that our internal control
        objectives will be met.





During
      the quarter ended June 30, 2006, there were no changes in our internal controls
      over financial reporting that have materially affected, or are reasonably likely
      to materially affect, our internal controls over financial reporting.








**PART
      II - OTHER INFORMATION**





**Item
      6.**  **EXHIBITS**





Exhibit
                No.
            Description2.1
            Agreement
                and Plan of Merger dated February 27, 2006 by and among Cougar
                Biotechnology, Inc., SRKP 4, Inc. and SRKP Acquisition Corp. (incorporated
                by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
                filed on March 2, 2006).3.1
            Certificate
                of Merger filed on April 3, 2006 relating to merger of SRKP Acquisition
                Corp. with and into Cougar Biotechnology, Inc. (incorporated by reference
                to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April
                7, 2006).3.2
            Certificate
                of Ownership filed on April 6, 2006 relating to merger of Cougar
                Biotechnology, Inc. with and into SRKP 4, Inc. (incorporated by reference
                to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on April
                7, 2006).4.1
            Form
                of Warrant dated June 30, 2005 (incorporated by reference to Exhibit
                4.1
                to the Company’s Registration Statement on Form SB-2 filed on May 3, 2006
                (SEC File No. 333-133779)).




26




4.2
            Schedule
              identifying holders of warrants issued to certain lenders in consideration
              of loans to Cougar Biotechnology, Inc., in the Form or Warrant
              incorporated by reference as Exhibit 4.1 to this Report.4.3
            Form
                of Warrant issued to placement agents in connection with Cougar
                Biotechnology, Inc.’s private placement completed April 3,
                2006.10.1
            Redemption
                Agreement dated February 27, 2006 by and among SRKP 4, Inc. and Richard
                A.
                Rappaport, Anthony C. Pintsopoulos, Debbie Schwartzberg, Thomas Poletti
                and Glenn Krinsky (incorporated by reference to Exhibit 10.2 to the
                Company’s Current Report on Form 8-K filed on March 2,
                2006).10.2
            Indemnity
                Agreement dated April 3, 2006 by and among SRKP 4, Inc., Cougar
                Biotechnology, Inc., Richard A. Rappaport and Anthony C. Pintsopoulos
                (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                on Form 8-K filed on April 7, 2006).31.1
            Certification
                of Principal Executive Officer31.2
            Certification
                of Principal Financial Officer32.1
            Certifications
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.










27


**SIGNATURES**




In
      accordance with the requirements of the Exchange Act of 1934, the registrant
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.




COUGAR
              BIOTECHNOLOGY, INC.Date: August
              16, 2006
            By:
            /s/ Alan
              H.
              AuerbachAlan
              H. AuerbachPresident
              and
              Chief Executive Officer




Date: August
              16, 2006
            By:
            /s/ Charles
              R. EylerCharles
              R. EylerTreasurer






















28


**Index
      to Exhibits Filed with this Report**





Exhibit
                No.
            Description4.2
            Schedule identifying
              holders of warrants issued to certain lenders in consideration of loans
              to
              Cougar Biotechnology, Inc., in the Form or Warrant incorporated by
              reference as Exhibit 4.1 to this Report.4.3
            Form
                  of Warrant issued to placement agents in connection with Cougar
                  Biotechnology, Inc.’s private placement completed April 3,
                  2006.31.1
            Certification
                of Principal Executive Officer31.2
            Certification
                of Principal Financial Officer32.1
            Certifications
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.














29