Exhibit
      99.1





**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**





**CONDENSED
      BALANCE SHEETS**


**(Unaudited)**


March
                  31,
              
              December
                  31,**ASSETS**
              
              2006
              
              2005Current
                  assets:Cash
                  and cash equivalents
              
              $
              1,336,899
              
              $
              1,040,864Debt
                  issuance costs, net
              
              
              497,285
              
              
              500,776Prepaid
                  expenses and other
              
              
              224,366
              
              
              164,061Total
                  current assets
              
              
              2,058,550
              
              
              1,705,701Property
                  and equipment, net
              
              
              82,537
              
              
              8,581Deposits
              
              
              160,000
              
              
              160,000**Totals**
              
              $
              2,301,087
              
              $
              1,874,282**LIABILITIES
                  AND STOCKHOLDERS' DEFICIENCY**Current
                  liabilities:Borrowings
                  under line of credit
              
              $
              600,000
              
              $
              600,000Convertible
                  notes payable, net of discount
              
              
              5,841,413
              
              
              3,113,324Notes
                  payable, net of discount
              
              
              971,170
              
              
              934,887Warrant
                  liability
              
              
              680,004
              
              
              856,398Option
                  compensation liability for non-employees
              
              
              1,195,927
              
              
              459,833Accounts
                  payable
              
              
              746,243
              
              
              1,251,586Accrued
                  expenses
              
              
              943,697
              
              
              875,728Total
                  current liabilities
              
              
              10,978,454
              
              
              8,091,756Deferred rent
              
              
              34,029
              
              
              --**Total
                  liabilities**
              
              
              11,012,483
              
              
              8,091,756Commitments
                  and contingenciesStockholders'
                  deficiency:Preferred
                  stock - $.001 par value; 25,000,000 sharesauthorized;
                  none issued or outstanding
              
              
              --
              
              
              --Common
                  stock - $.001 par value; 50,000,000 sharesauthorized;
                  9,250,005 shares issued and outstanding
              
              
              9,250
              
              
              9,250Additional
                  paid-in capital
              
              
              5,831,052
              
              
              5,123,125Deficit
                  accumulated during the development stage
              
              
              (14,551,698
              )
              
              (11,349,849
              )**Total
                  stockholders' deficiency**
              
              
              (8,711,396
              )
              
              (6,217,474
              )**Totals**
              
              $
              2,301,087
              
              $
              1,874,282
 
  SEE ACCOMPANYING NOTES TO THE
      CONDENSED FINANCIAL STATEMENTS





1




**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**





**CONDENSED
      STATEMENTS OF OPERATIONS**


(Unaudited)


Period
                  fromMay
                  14, 2003Three
                  Months Ended
              
              (date
                  of inception) toMarch
                  31,
              
              March
                  31,2006
              
              2005
              
              2006Operating
                  expenses:General
                  and administrative
              
              $
              1,784,596
              
              $
              237,099
              
              $
              5,594,049Research
                  and development
              
              
              1,192,563
              
              
              731,328
              
              
              8,467,434Depreciation
              
              
              766
              
              
              490
              
              
              4,563Totals
              
              
              2,977,925
              
              
              968,917
              
              
              14,066,046Loss
                  from operations
              
              
              (2,977,925
              )
              
              (968,917
              )
              
              (14,066,046
              )Other
                  income (expense):Interest
                  income
              
              
              7,655
              
              
              7,807
              
              
              45,162Interest
                  expense
              
              
              (231,579
              )
              
              
              
              
              (530,814
              )Totals
              
              
              (223,924
              )
              
              7,807
              
              
              (485,652
              )Net
                  loss
              
              $
              (3,201,849
              )
              $
              (961,110
              )
              $
              (14,551,698
              )Net
                  loss per share -basic
                  and diluted
              
              $
              (.35
              )
              $
              (.10
              )Weighted-average
                  common sharesoutstanding
                  - basic and diluted
              
              
              9,250,005
              
              
              9,250,005




SEE ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL
      STATEMENTS





2


**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**





**CONDENSED
      STATEMENTS OF STOCKHOLDERS' DEFICIENCY**


(Unaudited)





Period
      from May 14, 2003 (date of inception) through March 31, 2006





DeficitAccumulatedCommon
              
              
              
              Additional
              
              During
                  theStock
              
              
              
              Paid-in
              
              DevelopmentShares
              
              Amount
              
              Capital
              
              Stage
              
              TotalIssuance
                  of shares of common stock at$.1765
                  per share
              
              
              4,250,002
              
              $
              4,250
              
              $
              745,750
              
              
              
              
              $
              750,000Effect
                  of issuance of shares of common stock toan
                  officer at $.001 per share
              
              
              750,000
              
              
              750
              
              
              131,625
              
              
              
              
              
              132,375Option
                  compensation for non-employees
              
              
              
              
              
              
              
              
              207
              
              
              
              
              
              207Net
                  loss
              
              
              
              
              
              
              
              
              
              
              $
              (378,375
              )
              
              (378,375
              )Balance
                  at December 31, 2003
              
              
              5,000,002
              
              
              5,000
              
              
              877,582
              
              
              (378,375
              )
              
              504,207Issuance
                  of shares of common stock at$1.00
                  per share
              
              
              4,250,003
              
              
              4,250
              
              
              4,245,750
              
              
              
              
              
              4,250,000Option
                  compensation for non-employees
              
              
              
              
              
              
              
              
              14,476
              
              
              
              
              
              14,476Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              (3,160,136
              )
              
              (3,160,136
              )Balance
                  at December 31, 2004
              
              
              9,250,005
              
              
              9,250
              
              
              5,137,808
              
              
              (3,538,511
              )
              
              1,608,547Issuance
                  of warrants with notes
              
              
              
              
              
              
              
              
              130,954
              
              
              
              
              
              130,954Issuance
                  of warrants for debt costs
              
              
              
              
              
              
              
              
              91,041
              
              
              
              
              
              91,041Option
                  compensation for non-employees
              
              
              
              
              
              
              
              
              403,331
              
              
              
              
              
              403,331Reclassification
                  of non-employees optionsand
                  warrants due to issuance ofconvertible
                  notes to liabilities
              
              
              
              
              
              
              
              
              (640,009
              )
              
              
              
              
              (640,009
              )Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              (7,811,338
              )
              
              (7,811,338
              )Balance
                  at December 31, 2005
              
              
              9,250,005
              
              $
              9,250
              
              $
              5,123,125
              
              $
              (11,349,849
              )
              $
              (6,217,474
              )Option
                  compensation for employees
              
              
              
              
              
              
              
              
              707,927
              
              
              
              
              
              707,927Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              (3,201,849
              )
              
              (3,201,849
              )Balance
                  at March 31, 2006
              
              
              9,250,005
              
              $
              9,250
              
              $
              5,831,052
              
              $
              (14,551,698
              )
              $
              (8,711,396
              )




SEE
      ACCOMPANYING NOTES TO THE CONDENSED FINANCIAL STATEMENTS




3





**COUGAR
      BIOTECHNOLOGY, INC.**





**(A
      DEVELOPMENT STAGE COMPANY)**




**CONDENSED
      STATEMENTS OF CASH FLOWS**


(Unaudited)


Period
                  fromMay
                  14, 2003(date
                  ofThree
                  Months Ended
              
              inception)
                  toMarch
                  31,
              
              March
                  31,2006
              
              2005
              
              2006Operating
                  activities:Net
                  loss
              
              $
              (3,201,849
              )
              $
              (961,110
              )
              $
              (14,551,698
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
              
              
              766
              
              
              490
              
              
              4,563Non-cash
                  compensation
              
              
              
              
              
              
              
              
              48,000Option
                  compensation for non-employees
              
              
              736,094
              
              
              27,677
              
              
              1,195,927Option
                  compensation for employees
              
              
              707,927
              
              
              
              
              
              707,927Stock
                  issued for compensation
              
              
              
              
              
              
              
              
              131,625Amortization
                  of note discounts
              
              
              44,175
              
              
              
              
              
              174,248Amortization
                  of debt and note issuance costs
              
              
              165,708
              
              
              
              
              
              235,306Charge
                  to interest expense for change in warrant value
              
              
              (68,634
              )
              
              
              
              
              (48,634
              )Deferred
                  rent
              
              
              277
              
              
              
              
              
              277Changes
                  in operating assets and liabilities:Employee
                  advance
              
              
              
              
              
              
              
              
              (96,000
              )Prepaid
                  expenses and other assets
              
              
              (60,306
              )
              
              (32,886
              )
              
              (336,366
              )Accounts
                  payable and accrued expenses
              
              
              (437,374
              )
              
              (40,918
              )
              
              1,689,939Net
                  cash used in operating activities
              
              
              (2,113,216
              )
              
              (1,006,747
              )
              
              (10,844,886
              )Investing
                  activities - purchaseof
                  furniture and fixtures
              
              
              (40,971
              )
              
              (4,665
              )
              
              (53,349
              )Financing
                  activities:Net
                  proceeds from issuance ofcommon
                  stock
              
              
              
              
              
              
              
              
              5,000,750Payment
                  of debt issuance costs
              
              
              (134,778
              )
              
              
              
              
              (510,736
              )Proceeds
                  from issuance ofnotes
                  payable
              
              
              
              
              
              
              
              
              1,000,000Proceeds
                  from issuance ofconvertible
                  notes payable
              
              
              2,585,000
              
              
              
              
              
              6,145,120Proceeds
                  from borrowings underline
                  of credit
              
              
              
              
              
              
              
              
              600,000Net
                  cash provided by financing activities
              
              
              2,450,222
              
              
              --
              
              
              12,235,134Net
                  increase (decrease) in cashand
                  cash equivalents
              
              $
              296,035
              
              $
              (1,011,412
              )
              $
              1,336,899Cash
                  and cash equivalents,beginning
                  of period
              
              
              1,040,864
              
              
              1,838,594
              
              
              --Cash
                  and cash equivalents,end
                  of period
              
              $
              1,336,899
              
              $
              827,182
              
              $
              1,336,899Supplemental
                  disclosures of non-cash investing and financing
                  activities:Value
                  of warrants charged to debt andnote
                  issuance costs
              
              $
              89,137
              
              $
              --
              
              $
              303,553Value
                  of warrants issued withnotes
                  payable
              
              $
              47,497
              
              $
              --
              
              $
              574,485Acquisition
                  of leasehold improvementsunder
                  lease obligation
              
              $
              33,751
              
              $
              --
              
              $
              33,751Supplemental
                  disclosures of cash flow information:Interest
                  paid
              
              $
              9,917
              
              $
              --
              
              $
              24,719
  4


**COUGAR
      BIOTECHNOLOGY, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**





**NOTES
      TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**





**NOTE
      1. BUSINESS DESCRIPTION**





Cougar
      Biotechnology, Inc. (the “Company”) in-licenses or acquires clinical stage
      products that have previously been tested in clinical trials for the treatment
      of cancer with the goal of developing the drugs for its own proprietary
      portfolio. The Company’s portfolio includes CB7630, which is currently being
      tested in Phase I/II clinical trials in prostate cancer, CB3304, which is
      currently being tested in a Phase I trial in hematological malignancies and
      CB1089, which has previously been tested in a number of clinical trials in
      cancer.





**NOTE
      2. BASIS OF PRESENTATION**





The
      accompanying unaudited condensed 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 notes required by accounting
      principles generally accepted in the United States of America for complete
      annual financial statements. In the opinion of management, the accompanying
      unaudited condensed 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 and filed with the Company’s Current Report on Form 8-K filed
      April 7, 2006.





**NOTE
      3. LIQUIDITY AND CAPITAL RESOURCES**





The
      Company reported a net loss of $ 3,201,849 for the
      three months ended March 31, 2006. The net loss from date of inception, May
      14,
      2003 to March 31, 2006 amounted to $ 14,551,698,
      and had a working capital deficiency of $8,919,904 as of March 31,
      2006.





We
      are a
      development stage company that has not generated any revenues from operations.
      We have financed our operations since inception primarily through equity and
      debt financing. 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 March
      31,
      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. Given
      the current and desired pace of clinical development of our three product
      candidates over the next nine months, we estimate that we will need to raise
      additional capital in 2006, likely by selling shares of our capital stock or
      other securities, in order to fund our research and development activities.
      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
      activities over the next 12 months. 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. On
      April
      3, 2006, we completed a private placement offering with gross proceeds of
      $39,650,000 (See Note 8).








5


**NOTE
      4. SUMMARY OF SIGNIFICENT 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.





**NET
      LOSS PER SHARE**





Basic
      net
      loss per share is computed by dividing net loss by the weighted-average number
      of common shares outstanding during the periods presented as required by SFAS
      No. 128, “Earnings Per Share”. Diluted earnings per share have not been
      presented because the assumed exercise of the Company’s outstanding options and
      warrants would have been anti-dilutive. Potentially dilutive securities excluded
      from the calculations amounted to 6,058,940 shares at March 31, 2006, comprised
      of 2,967,000 options and 3,091,940 warrants, and 1,655,000 options at March
      31,
      2005.









**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 2,000,000 to 3,500,000.
  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 elected to adopt 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 months ended March 31, 2006, the Company's results of operations
        reflected compensation expense for the amortization over the service period
        of
        the fair value of new employee stock options granted in that period and what
        would have been the remaining fair value under SAS 123 of unvested employee
        options as of the date of adoption. The amount recognized in the financial
        statements related to stock-based employee compensation was $707,927 for
        the
        three months ended March 31, 2006, which was included in general and
        administrative operating expense.
  Had
        compensation cost for stock-based employee compensation been determined using
        the fair value method consistent with SFAS 123R instead of the intrinsic
        value
        under APB 25, the net loss and net loss per share for the three months ended
        March 31, 2005, would have been adjusted to the following pro forma
        amounts:




6


**NOTE
      4. SUMMARY OF SIGNIFICENT ACCOUNTING POLICIES (CONTINUED)**




**STOCK-
      BASED COMPENSATION (CONTINUED)**




Three
                  MonthsEndedMarch
                  31,2005Net
                  loss as reported
              
              $
              (961,110
              )Stock-based
                  employee compensation determined under thefair
                  value method
              
              
              (2,334
              )Net
                  loss, pro forma
              
              $
              (963,444
              )Basic
                  and diluted not loss per common share:As
                  reported
              
              $
              (0.10
              )Pro
                  forma
              
              $
              (0.10
              )





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 March 31, 2006 and 2005, the Company recognized
      $736,094 and $27,677, 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 that expense
      represents the effects of options that were granted in the three months
      ended March 31, 2006 for services that were provided in that
      period.





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 March
      31, 2006 and 2005:





2006
              
              
              2005Dividend
                  yield
              
              
              0%
              
              
              0%Expected
                  volatility
              
              
              72%
              
              
              72%Risk-free
                  interest rate
              
              
              4.7%
              
              
              4.0%Expected
                  lives
              
              
              5year
              
              
              4years
  7


**NOTE
      4. SUMMARY OF SIGNIFICENT ACCOUNTING POLICIES (CONTINUED)**





**STOCK-
      BASED COMPENSATION (CONTINUED)**





The
      price
      volatility for the calculation of value of options 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 occurred,
      instead estimated option forfeitures must be calculated upfront to reduce the
      option expense to be recognized over the life of the award and updated upon
      further information as to the amount of options expected to be
      forfeited.




The
      fair
      value of options granted to employees was estimated using the Black-Scholes
      option-pricing model with the following weighted average assumptions used during
      the three months ended March 31, 2006:


Dividend
                  yield
              
              
              0%Expected
                  volatility
              
              
              72%Risk
                  -free interest rate
              
              
              4.7%Expected
                  lives
              
              
              5yearsExpected
                  forfeiture rate
              
              
              0





Through
      March 31, 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:


WeightedAverageRemainingWeighted-
              
              
              Contractual
              
              
              AggregateAverage
              
              
              Term
              
              
              IntrinsicShares
              
              
              Exercise
                  Price
              
              
              (in
                  years)
              
              
              ValueOutstanding
                  at December 31, 2003
              
              
              100,000
              
              $
              .15Granted
              
              
              1,555,000
              
              
              .43Outstanding
                  at December 31, 2004and
                  December 31, 2005
              
              
              1,655,000
              
              
              .41Granted
              
              
              1,312,000
              
              
              1.79Outstanding
                  at March 31, 2006
              
              
              2,967,000
              
              $
              1.01
              
              
              9.1
              
              $
              2,202,000Exercisable
                  at March 31, 2006
              
              
              2,172,833
              
              $
              1.23
              
              
              9.1
              
              $
              1,154,000


At
      March
      31, 2006, total unrecognized estimated employee compensation cost related to
      non-vested stock options granted prior to that date was $17,648, which is
      expected to be recognized over a weighted average period of 1.75 years. The
      weighted average grant date fair value of options granted during the three
      months ended March 31, 2006, was $1.75 per share.




8




**NOTE
      5. PROMISSORY NOTES**





On
      January 24, 2006, the Company completed the final closing of the issuance and
      sale of 5% convertible promissory notes (the “Bridge Notes”) with an additional
      issuance of Bridge Notes in the aggregate principal amount of $2,585,000. Fees
      of $134,779 were paid in cash to 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. The Bridge Notes and all unpaid
      interest are due on January 24, 2007 (the “Term”) provided, however, that the
      Company may extend the Term of the Bridge Notes for one additional year (the
      “Extended Term”) upon notice from the Company to each holder prior to expiration
      of the Term. Interest will
      accrue at the annual rate of 5% and is payable upon the maturity of the Bridge
      Notes. In addition to the Bridge Notes, the investors received five-year
      warrants exercisable at $3.18 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 $3.18. The Bridge Notes and all unpaid interest shall automatically
      convert into the Company’s equity securities at a price equal to the lowest unit
      price paid upon closing of such equity financing (See Note 8). 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.





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





In
      January 2006, the Company issued convertible notes payable and warrants. Since
      the conversion of the Company’s convertible notes payable 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 unissued shares to net-share
      settle any warrants or options granted to non-employees. Therefore, on the
      date
      convertible notes were issued, the Company recorded the related fair value
      of
      the warrants to liabilities.





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 is allocated to liabilities and to note discount.
      Upon conversion of the convertible notes to stock, warrants and options
      classified as current liabilities may be reclassified 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.





Within
      90
      days of the Bridge Note and warrant finance closing, the Company completed
      a
      qualified equity placement (See Note 8). Accordingly, the warrant coverage
      for
      the November 2005 and the January 2006 warrant issuances were adjusted from
      40%
      coverage to 20% coverage.





**NOTE
      7. AUTHORIZED SHARES**





On
      February 24, 2006, the total number of shares of stock the Company is authorized
      to issue was increased to 75,000,000 capital shares, of which 50,000,000 shares
      are common stock and 25,000,000 shares are preferred stock. Additionally, the
      25,000,000 shares of preferred stock have been designated Series A convertible
      preferred stock (“Series A Preferred”). Each share of the Series A Preferred
      will be convertible into an equal number of common shares at the option of
      the
      holder at any time
      or
      automatically upon the occurrence of a specific event. Series A Preferred
      holders will receive 4% dividends, have certain rights senior to common
      stockholders, and may demand mandatory redemption of their shares after the
      tenth anniversary of issuance.




9




**NOTE
      8. SUBSEQUENT EVENTS**




**PRIVATE
      PLACEMENT OFFERING**





On
      April
      3, 2006, contemporaneously with the closing of the merger with SRKP 4, Inc.
      (“SRKP”), the Company completed a private placement offering of 22,918,780 Units
      (the “Offering”), each Unit constituting of 0.9, shares of Series A
      Preferred and 0.1, shares of common stock for an aggregate of
      20,626,902 of Series A Preferred Stock and 2,291,878 shares of common stock,
      in
      consideration of gross proceeds of $39,650,000. As converted pursuant to the
      merger, SRKP issued 7,922,998 shares of Series A Preferred and 880,334 shares
      of
      common stock to investors under the Offering. The Company paid placement fees
      of
      approximately $2,775,500, accountable expenses of up to an aggregate of $150,000
      and issued warrants to purchase an aggregate of 2,291,878 shares of common
      stock
      at an exercise price of $1.90 per share to placement agents under the Offering.
      Paramount and Cowen & Co. acted as placement agents in the Offering. Fees
      paid to Paramount totaled $1,387,750.





**DEBT
      CONVERSION AND PAY-OFF**




Additionally,
      in conjunction with the Offering, 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 3,603,568 Units under
      the same terms as provided in the Offering. Accordingly, as adjusted pursuant
      to
      the merger with SRKP, 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.




The
      Company also issued 919,898 Units, under the same terms and conditions as
      provided in the Offering, to a director of the Company for 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. As adjusted pursuant
      to
      the merger with SRKP, the Company issued an additional 318,008 shares of Series
      A Preferred and 35,334 shares of common stock to these individuals.





In
      April
      2006, the Company used a portion of the proceeds from the Offering to fully
      pay off the line of credit balance of $600,000 plus interest.





**MERGER**





On
      February 27, 2006, the Company entered into an agreement and plan of merger
      (the
“Merger Agreement”) with SRKP and its wholly-owned subsidiary, SRKP Acquisition
      Corp. (“SRKP Acquisition”). Pursuant to the terms of the Merger Agreement on
      April 3, 2006, the Company completed a reverse merger in which SRKP Acquisition
      merged with the Company and the Company became a wholly-owned subsidiary of
      SRKP
      (the “Merger”).





At
      the
      effective time of the Merger, the Company’s then issued and outstanding shares
      of preferred stock and common stock were exchanged into a number of shares
      of
      preferred stock and common stock of SRKP, so that the Company’s then existing
      stockholders held the same percentage of the issued and outstanding shares
      of
      SRKP preferred and common stock as they held in the Company, on a fully diluted
      basis, immediately prior to the Merger. Further, upon completion of the merger,
      SRKP assumed all obligations of outstanding warrants and stock options of the
      Company. Upon completion of the Merger, all Company equity instruments were
      converted to .38411 shares of SRKP per share of Company common stock, or
      3,553,021 shares of common stock in the aggregate for holders of Company common
      stock at March 31, 2006. Concurrently, SRKP redeemed all of its shares from
      its
      current stockholders in exchange for aggregate consideration of $200,000 paid
      by
      the Company.





10


**NOTE
      8. SUBSEQUENT EVENTS (CONCLUDED)**





**MERGER
      (CONCLUDED)**


Upon
      completion of the Merger, SRKP adopted and continued implementing the Company’s
      business plan and changed its name to “Cougar Biotechnology, Inc.” Upon
      completion of the Merger, the then-current officers and directors of SRKP
      resigned and the then-current officers and directors of the Company were
      appointed officers and directors of SRKP. The Merger will be accounted for
      as a
      reverse acquisition with the Company as the accounting acquirer and SRKP as
      the
      accounting acquiree. Accordingly, the Merger will not have
      any significant effect on the carrying value of the Company's assets and
      liabilities or the reporting of its historical results of operations and cash
      flows.




11




**Management’s
      Discussion and Analysis or Plan of Operation**




**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, this “Management’s Discussion
      and Analysis or Plan of Operation” section 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.




The
      following discussion of the financial condition and results of operation of
      Cougar Biotechnology, Inc. should read in conjunction with the financial
      statements and the notes to those statements provided above. This discussion
      includes forward-looking statements that involve risk and uncertainties. As
      a
      result of many factors, such as those set forth under “Risk Factors,” actual
      results may differ materially from those anticipated in these forward-looking
      statements.




**Overview**




Since
      the
      inception of Cougar Biotechnology, Inc. 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 4, Inc. 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, 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.




12


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.” 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
      warrant liability in 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.





**Results
      of Operations**




Three
      Months Ended March 31, 2006 Compared to Three Months Ended March 31,
      2005




*General
      and administrative expenses* :
      For the
      three months ended March 31, 2006, general and administrative expenses was
      $1,784,596 compared to $237,099 for the three months ended March 31, 2005.
      This
      increase of approximately $1,547,000 is primarily attributable to an increase
      in
      compensation of approximately $708,000, increased consulting fees of
      approximately $709,000, increased audit fees of $67,000 and increased legal
      fees
      of $55,000. The increase in compensation resulted from the implementation of
      SFAS 123R. The increase in consulting fees was due to stock-based compensation
      for service rendered in the three months ended March 31, 2006. The increase
      in
      audit fees was a result of expediting the audit for the anticipated closing
      of
      the equity placement and the reverse merger noted above. The increased legal
      fees is associated with preparing the equity placement documents and work on
      the
      reverse merger with SRKP 4, Inc.




*Research
        and Development expenses* :
        For the
        three months ended March 31, 2006, research and development expenses were
        $1,192,563 compared to $731,328 for the three months ended March 31, 2005,
        representing an increase of approximately $461,000. For the three months
        ended
        March 31, 2006, we incurred professional contract services associated with
        the
        development of our three lead compounds of approximately $703,000 compared
        to
        approximately $220,000 in 2005 accounting for the increased cost. Licensing
        fees
        for the three months ended March 31, 2005, were approximately $21,000 less
        then
        the same period last year due a favorable foreign exchange rate.
  *Interest
        expense* :
        For the
        three months ended March 31, 2006, interest expense was $213,579 as compared
        to
        $0 for the three months ended March 31, 2005. The interest expense includes
        a
        non-cash charge for amortization of note discounts of approximately $166,000,
        a
        non-cash charge for amortization of debt and note issuance cost of approximately
        $44,000, and accrued interest on the notes payable of approximately $80,000,
        and
        interest on the credit facility of approximately $10,000. The recalculation
        of
        outstanding warrants at March 31, 2006 to their fair value resulted in
        a reduction to interest expense of approximately $69,000.


13




*Liquidity
      and Capital Resources*




From
      inception to March 31, 2006, we have incurred an aggregate net loss of
      $14,551,698, primarily as a result of expenses incurred through a combination
      of
      research and development activities related to the various technologies under
      our control and expenses supporting those activities.




We
      have
      financed our operations since inception primarily through equity and debt
      financing. Total cash resources as of March 31, 2006 were $1,336,899 compared
      to
      $1,040,864 at December 31, 2005. During the three months ended March 31, 2006,
      we experienced an increase in cash and cash equivalents of $296,035. This
      increase primarily resulted from net proceeds of $2,450,000 from note financing
      being offset by net cash used in operations of $2,113,216 and capital
      expenditures of $40,971. On
      April
      3, 2006, we completed a private placement offering with gross proceeds of
      $39,650,000 (See Note 8 to Cougar's Financial Statements).





Our
      continued operations will depend on whether we are able to raise additional
      funds through various potential sources, such as equity and debt financing.
      Through March 31, 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. Based on our
      resources at April 4, 2006, we believe that we have sufficient capital to fund
      our operations through December 2007, but will need additional financing
      thereafter until we can achieve profitability, if ever.




*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
      is
      guaranteed by a stockholder and member of our Board of Directors. In return
      for
      such guaranty, we granted the stockholder warrants to purchase a number of
      shares of Cougar common stock based on amount of the credit facility used by
      the
      Company. Prior to terminating the credit facility in 2006, we utilized up to
      $600,000 of the credit facility, and issued the stockholder a five-year warrant
      to purchase 82,613 shares of the Company’s common stock at an exercise price of
      $3.18 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 the Company of $1,000,000. In addition
      to the promissory notes, we issued the six individuals five-year warrants to
      purchase an aggregate of 137,689 shares of Cougar common stock at an exercise
      price of $3.18 per share.




In
      two
      closings on November 23, 2005 and January 24, 2006, the Company 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”).
      Additionally, the Company issued warrants to purchase an aggregate of 193,243
      shares of common stock at an exercise price per share of $3.18 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 at a price per
      unit of $1.73, pursuant to the terms of the Offering. Accordingly, the holders
      of the Bridge Notes received an aggregate of 360,356 shares of the Company’s
      common stock and 3,243,217 shares of the Company’s Series A 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.




Contemporaneously
      with 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 20,626,902 new shares of Series A Convertible Preferred Stock and 2,291,780
      new shares of common stock (the “Offering”). Additionally, on terms similar to
      that in the Offering, we sold 91,989 shares of common stock and 827,909 shares
      of Series A Preferred Stock in consideration of cash in the amount of $600,000
      and the cancellation of certain note obligations of the Company in the aggregate
      amount of $990,000, including principal and interest. Each share of the Series
      A
      Convertible Preferred Stock will be 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 (as
      adjusted for the Merger). At our election, we may require each holder to convert
      its outstanding shares of the Series A Convertible Preferred Stock into shares
      of our common stock if the price per share of common stock trades at or above
      200% of the purchase price for a period of twenty consecutive trading days
      on
      any securities exchange, automated quotation system or any other
      over-the-counter market.




14


*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




·
            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 year ending December 31, 2006 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 9 months to include:




15


·
            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 3 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
      2006 we expect to spend approximately $12.8 million on clinical development
      and
      research and development activities and expend approximately $2.5 million on
      general and administrative expenses and $242,000 on facilities
      rent.




*Research
      and Development Projects*




CB-7630.
      In April 2004, we exclusively licensed the worldwide rights to CB-7630
      (abiraterone 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
      ability 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.




Through
      March 2006, we have incurred approximately $7,041,500 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.




16


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.




Through
      March 2006, we have incurred approximately $838,800 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. We anticipate beginning clinical trials of CB-1089 in prostate
      cancer in the second half of 2006.




Through
      March 2006, we have incurred approximately $375,000 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.




17


*License
      Agreement Obligations*




CB-3304.
      On February 23, 2004, we entered into a license agreement (the “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. (“BTG”) 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
      (“LEO”) 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.








**CONTROLS
      AND PROCEDURES.**





**Evaluation
      of disclosure controls and procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports filed pursuant to the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
      processed, summarized and reported within the time periods specified in the
      Securities and Exchange Commission’s rules, regulations and related forms, and
      that such information is accumulated and communicated to our principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.




As
        of the
        end of the period covered by this quarterly report, we carried out an
        evaluation, under the supervision and with the participation of our management,
        including our principal executive officer and principal financial officer,
        of
        the effectiveness of the design and operation of our disclosure controls
        and
        procedures. Based on this evaluation, our principal
        executive officer and principal financial officer concluded that our disclosure
        controls and procedures were effective.
 
 **Changes
        in internal controls**
 
 During
        the quarter ended March 31,2006, there has been no change in our internal
        control over financial reporting that has materially affected, or is reasonably
        likely to materially affect, our internal control over financial reporting.


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