SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-Q**





(Mark
      One)





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





**For
      the quarterly period ended September 30, 2008**





OR





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




**For
      the transition period from __________________**    **to __________________**





Commission
      file number 001-16043





**SYNVISTA
      THERAPEUTICS, INC.**


(Exact
      name of registrant as specified in its charter)


**Delaware**
              **13-3304550**(State
                  or other jurisdiction of
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)


**221
      West Grand Avenue, Suite 200, Montvale, New Jersey
      07645**


(Address
      of principal executive offices)


(Zip
      Code)





(201)
      934-5000


(Registrant's
      telephone number, including area code)





Not
      Applicable


(Former
      name, former address and former fiscal year,


if
      changed since last report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes
x No o





Indicate
      by check mark whether the registrant is a
      large
      accelerated filer, an
      accelerated filer , a
      non-accelerated filer, or a smaller reporting company. See definitions of “large
      accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
      12b-2 of the Exchange Act. (Check one):




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





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





On
      November 1, 2008, 2,586,326 shares of the registrant’s Common Stock were
      outstanding.




Page
      1 of
      28 pages


The
      Exhibit Index is on page 28





**SYNVISTA
      THERAPEUTICS, INC.**





**INDEX**


PagePART
                  I - FINANCIAL INFORMATIONItem
                  1. Condensed Consolidated Financial Statements (Unaudited)Condensed
                  Consolidated Balance Sheets as of September 30, 2008 and
                  December 31, 2007
              
              
              5Condensed
                  Consolidated Statements of Operations for the three and nine months
ended
                  September 30, 2008 and 2007
              
              
              6Condensed
                  Consolidated Statement of Changes in Stockholders’ Equity  for
                  the nine months ended September 30, 2008
              
              
              7Condensed
                  Consolidated Statements of Cash Flows for the nine months ended
                  September 30, 2008 and 2007
              
              
              8Notes
                  to Condensed Consolidated Financial Statements
              
              
              9Item
                  2. Management’s Discussion and Analysis of Financial
                  Condition and Results of Operations
              
              
              15Item
                  3. Quantitative and Qualitative Disclosures About Market
                  Risk
              
              
              22Item
                  4T. Controls and Procedures
              
              
              22PART
                  II - OTHER INFORMATIONItem
                  1A. Risk Factors
              
              
              23Item
                  4. Submission of Matters to a Vote of Security-holders
              
              
              26Item
                  6. Exhibits
              
              
              26SIGNATURES
              
              
              27INDEX
                  TO EXHIBITS
              
              
              28
 2





***Forward-Looking
      Statements and Cautionary Statements***





Statements
      in this Form 10-Q that are not statements or descriptions of historical facts
      are "forward-looking" statements under Section 21E of the Securities Exchange
      Act of 1934, as amended, and the Private Securities Litigation Reform Act of
      1995, and are subject to numerous risks and uncertainties. These forward-looking
      statements and other forward-looking statements made by us or our
      representatives are based on a number of assumptions. The words "believe,"
      "expect," "anticipate," "intend," "estimate" or other expressions, which are
      predictions of or indicate future events and trends and which do not relate
      to
      historical matters, identify forward-looking statements. Readers are cautioned
      not to place undue reliance on these forward-looking statements, as they involve
      risks and uncertainties, and actual results could differ materially from those
      currently anticipated due to a number of factors, including those set forth
      in
      this section and elsewhere in this Form 10-Q.





The
      forward-looking statements represent our judgments and expectations as of the
      date of this Report. We assume no obligation to update any such forward-looking
      statements.





***Basis
      of Presentation***





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and the instructions to Form 10-Q and Article
      8 of Regulation S-X. Accordingly, they do not include all of the information
      and
      footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statements. In the opinion of
      management, all adjustments (consisting of only normal recurring adjustments)
      considered necessary for a fair presentation have been included. Operating
      results for the nine months ended September 30, 2008 are not necessarily
      indicative of the results that may be expected for the year ending December
      31,
      2008. For further information, refer to the financial statements and footnotes
      thereto included in the Company's Annual Report on Form 10-K for the year ended
      December 31, 2007, as filed with the Securities and Exchange Commission (the
      “Form 10-K”). The December 31, 2007 balance sheet is derived from the audited
      balance sheet included in the Form 10-K.





Our
      condensed consolidated financial statements have been prepared on the basis
      of a
      going concern, which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. We have not made any
      adjustments to the condensed consolidated financial statements as a result
      of
      the outcome of the uncertainty described above. Accordingly, the value of the
      Company in liquidation may be different from the amounts set forth in our
      condensed consolidated financial statements.




Our
      ability to continue operations will depend on our ability to continue to raise
      capital immediately in order to fund the operation of our business and the
      development and commercialization of our products. Failure to raise additional
      capital may result in substantial adverse circumstances, including delisting
      of
      our common stock from the American Stock Exchange, which could substantially
      decrease the liquidity and value of such shares, or ultimately result in our
      liquidation.





***Note
      regarding Rights of Holders of Series B Preferred
      Stock***





The
      holders of our Series B preferred stock are entitled to a number of rights
      and
      preferences which holders of shares of our outstanding common stock do not
      and
      will not have. Among these rights and preferences is a preferential payment
      in
      the event of a liquidation of the Company, which means that holders of the
      Series B preferred stock would be entitled to receive the proceeds out of any
      sale or liquidation of the Company before any such proceeds are paid to holders
      of our common stock. In general, if the proceeds received upon any sale or
      liquidation do not exceed the total liquidation proceeds payable to the holders
      of the Series B preferred stock, holders of common stock would receive no value
      for their shares upon such a sale or liquidation. Given these rights of the
      Preferred Stock, we cannot assure you that the proceeds from any sale or
      liquidation would be sufficient to provide for any value whatsoever to be paid
      to our common stockholders.





In
      addition, shares of the Series B preferred stock accrue dividends at a rate
      of
      8% per year for a period of five years from the date on which the shares of
      Series B preferred stock were issued. As of September 30, 2008, the amount
      of
      the accrued dividend on our outstanding shares of Series B preferred stock
      was
      $2,375,000. If the holders of Series B preferred stock were to elect to require
      the payment of these accrued dividends in cash, this would severely reduce
      the
      Company’s liquidity, and could force the Company to promptly cease its
      operations or to curtail them drastically in order to make the required
      payments. We cannot assure you as to when, if ever, the holders of Preferred
      Stock will demand the payment of these dividends in cash, nor can we assure
      you
      that we will have adequate cash to make such payments if and when the demand
      is
      made.




3





Holders
      of the Series B Preferred Stock also have significant rights with respect to
      specific actions that we may wish to take from time to time. At any time when
      any shares of Series B Preferred Stock remain outstanding, we may not, without
      the consent of the holders of a majority of the shares held by holders of at
      least $4,000,000 (measured as of the original issue date) worth of Series B
      preferred stock take the following actions, among others:




·
            incur
                debt in excess of $2,000,000;




·
            authorize
                the sale of securities at a price per share less than the price per
                share
                that the Series B preferred stock was sold under the Series B Purchase
                Agreement;




·
            create
                any new classes or series of stock with rights senior to the common
                stock;





·
            amend
                any provision of our Certificate of Incorporation or Bylaws that
                changes
                the rights of the Series B preferred stock;




·
            pay
                or declare any dividend on any capital stock of the Company other
                than the
                Series B preferred stock;




·
            purchase
                or redeem any securities;




·
            liquidate,
                dissolve or wind-up;




·
            merge
                with another entity;




·
            sell
                or dispose of any of our assets, including the sale or license of
                intellectual property;




·
            amend
                any portion of our Certificate of Incorporation or Bylaws;




·
            intentionally
                take any action that may result in our stock no longer being approved
                for
                quotation on the AMEX or NASDAQ, or that would cause our common stock
                to
                no longer be registered pursuant to Section 12 of the Securities
                Exchange
                Act of 1934, as amended; or




·
            amend
                any material agreement that has been filed with the Securities and
                Exchange Commission.




As
      a
      result, we will not be able to take any of these actions without first seeking
      and obtaining the approval of the holders of the Series B Preferred Stock.
      We
      may not be able to obtain such approval in a timely manner or at all, even
      if we
      think that taking the action for which we seek approval is in the best interests
      of the Company. Our failure to obtain approval for such actions could result
      in
      a material adverse effect on our business and results of operations.


4


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      l.**   **Condensed
      Consolidated Financial Statements (Unaudited).**





**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(Unaudited)**




**September
                30,**
            
            **December
                31,****2008**
            
            **2007****(Note
                1)****ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            7,957,321
            
            $
            15,646,225Other
                current assets
            
            
            438,883
            
            
            234,338Total
                current assets
            
            
            8,396,204
            
            
            15,880,563Property
                and equipment, net
            
            
            25,132
            
            
            17,096Other
                assets
            
            
            325,520
            
            
            807,646Total
                assets
            
            $
            8,746,856
            
            $
            16,705,305**LIABILITIES
                **AND
                STOCKHOLDERS' EQUITY******Current
                Liabilities:**Accounts
                payable
            
            $
            761,052
            
            $
            1,503,355Accrued
                expenses
            
            
            1,033,265
            
            
            458,731Preferred
                stock dividends payable
            
            
            2,375,000
            
            
            875,000Total
                current liabilities
            
            
            4,169,317
            
            
            2,837,086**Stockholders'
                Equity:**Preferred
                stock, $.01 par value; 15,000,000 shares authorized,400,000
                shares designated as Series A, none issued and
                outstanding,12,500,000
                shares designated as Series B convertible preferred stock,10,000,000
                shares issued and outstanding (aggregate liquidationpreference
                of $25,000,000) at September 30, 2008 and December 31,
                2007
            
            
            100,000
            
            
            100,000Common
                stock, $.01 par value; 150,000,000 sharesauthorized
                at September 30, 2008 and 300,000,000 shares authorizedat
                December 31, 2007; 2,586,326 shares issued and outstandingat
                September 30, 2008 and
                2,586,377 issued and outstandingat
                December 31, 2007
            
            
            25,863
            
            
            25,864Additional
                paid-in capital
            
            
            282,551,470
            
            
            276,834,875Accumulated
                deficit
            
            
            (278,099,794
            )
            
            (263,092,520
            )Total
                stockholders' equity
            
            
            4,577,539
            
            
            13,868,219Total
                liabilities and stockholders' equity
            
            $
            8,746,856
            
            $
            16,705,305





The
      accompanying notes are an integral part of these unaudited financial
      statements.


5


**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(Unaudited)**




**Three
                  Months Ended September 30,**
              
              
              **Nine
                  Months Ended September 30,****2008**
              
              
              **2007**
              
              
              **2008**
              
              
              **2007**License
                  and other revenue
              
              $
              772
              
              $
              1,066
              
              $
              54,729
              
              $
              51,066Operating
                  expenses:Research
                  and development
              
              
              1,717,984
              
              
              2,264,503
              
              
              5,107,974
              
              
              4,665,580General
                  and administrative
              
              
              990,082
              
              
              894,469
              
              
              2,847,444
              
              
              2,534,847Selling
                  and marketing
              
              
              220,995
              
              
              -
              
              
              362,853
              
              
              -Total
                  operating expenses
              
              
              2,929,061
              
              
              3,158,972
              
              
              8,318,271
              
              
              7,200,427Loss
                  from operations
              
              
              (2,928,289
              )
              
              (3,157,906
              )
              
              (8,263,542
              )
              
              (7,149,361
              )Investment
                  income
              
              
              52,969
              
              
              194,692
              
              
              262,734
              
              
              257,738Interest
                  expense
              
              
              (2,224
              )
              
              (1,402,515
              )
              
              (5,232
              )
              
              (6,637,831
              )Other
                  income/(expense)
              
              
              5,000
              
              
              -
              
              
              (395,000
              )
              
              -Net
                  loss
              
              
              (2,872,544
              )
              
              (4,365,729
              )
              
              (8,401,040
              )
              
              (13,529,454
              )Preferred
                  stock dividends - Series B
              
              
              500,000
              
              
              375,000
              
              
              1,500,000
              
              
              375,000Deemed
                  dividends to Series B preferredstockholders
                  on beneficial conversion feature
              
              
              1,702,078
              
              
              1,244,993
              
              
              5,106,234
              
              
              1,244,993Net
                  loss applicable to common shares
              
              $
              (5,074,622
              )
              $
              (5,985,722
              )
              $
              (15,007,274
              )
              $
              (15,149,447
              )Net
                  loss per common share:Basic
                  and diluted
              
              $
              (1.96
              )
              $
              (2.31
              )
              $
              (5.80
              )
              $
              (5.86
              )Weighted
                  average common shares outstanding:Basic
                  and diluted
              
              
              2,586,326
              
              
              2,586,377
              
              
              2,586,326
              
              
              2,586,377


The
      accompanying notes are an integral part of these unaudited financial
      statements.


6


**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN**


**STOCKHOLDERS’
      EQUITY**


**(Unaudited)**




Nine
                  months ended September 30, 2008Additional
              
              
              
              
              
              TotalPreferred
                  Stock
              
              
              Common
                  Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              EquityBalances,
                  December 31, 2007
              
              
              10,000,000
              
              $
              100,000
              
              
              2,586,377
              
              $
              25,864
              
              $
              276,834,875
              
              $
              (263,092,520
              )
              $
              13,868,219Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              (8,401,040
              )
              
              (8,401,040
              )—Fractional
                  shares
              
              
              —
              
              
              —
              
              
              (51
              )
              
              (1
              )
              
              1
              
              
              —
              
              
              —Deemed
                  dividends to Series B preferred stockholders onbeneficial
                  conversion feature
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              5,106,234
              
              
              (5,106,234
              )
              
              —Series
                  B preferred stock dividend payable
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              (1,500,000
              )
              
              (1,500,000
              )—Stock-based
                  compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              594,002
              
              
              —
              
              
              594,002Options
                  issued for consulting services
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              4,014
              
              
              —
              
              
              4,014Compensation
                  costs related to restricted stock
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              12,344
              
              
              —
              
              
              12,344Balances,
                  September 30, 2008
              
              
              10,000,000
              
              $
              100,000
              
              
              2,586,326
              
              $
              25,863
              
              $
              282,551,470
              
              $
              (278,099,794
              )
              $
              4,577,539




The
      accompanying notes are an integral part of these unaudited financial
      statements.





7


**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**




**Nine
                  Months Ended September 30,****2008**
              
              **2007**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (8,401,040
              )
              $
              $(13,529,454
              )Adjustments
                  to reconcile net loss to cashused
                  in operating activities:Stock-based
                  compensation
              
              
              594,002
              
              
              169,180Options
                  issued for consulting services
              
              
              4,014
              
              
              2,732Compensation
                  costs related to restricted stock
              
              
              12,344
              
              
              58,741Non-cash
                  interest expense
              
              
              —
              
              
              164,384Amortization
                  of debt discount
              
              
              —
              
              
              6,000,000Amortization
                  of deferred financing costs
              
              
              —
              
              
              466,413Depreciation
                  and amortization
              
              
              9,758
              
              
              7,567Write-off
                  of investment in Oxis stock
              
              
              400,000
              
              
              —Changes
                  in operating assets and liabilities:Other
                  current assets
              
              
              (204,545
              )
              
              (36,386
              )Other
                  assets
              
              
              82,126
              
              
              66,867Accounts
                  payable and accrued expenses
              
              
              (167,769
              )
              
              331,391Net
                  cash used in operating activities
              
              
              (7,671,110
              )
              
              (6,298,565
              )Cash
                  flows from investing activities:Capital
                  expenditures
              
              
              (17,794
              )
              
              (13,548
              )Payments
                  for securities purchased under the Oxis agreement
              
              
              —
              
              
              (400,000
              )Net
                  cash used in investing activities
              
              
              (17,794
              )
              
              (413,548
              )Cash
                  flows from financing activities:Proceeds
                  from debt financing
              
              
              —
              
              
              6,000,000Proceeds
                  from issuance of preferred stock
              
              
              —
              
              
              18,835,616Payments
                  for private placement costs
              
              
              —
              
              
              (1,837,954
              )Payments
                  for debt financing costs
              
              
              —
              
              
              (466,413
              )Net
                  cash provided by financing activities
              
              
              —
              
              
              22,531,249Net
                  increase/(decrease) in cash and cash equivalents
              
              
              (7,688,904
              )
              
              15,819,136Cash
                  and cash equivalents, beginning of period
              
              
              15,646,225
              
              
              1,478,780Cash
                  and cash equivalents, end of period
              
              $
              7,957,321
              
              $
              17,297,916Supplemental
                  disclosures of non-cash investing and financing
                  activities:Deemed
                  dividends to Series B preferred stockholders on beneficial
                  conversion
              
              $
              5,106,234
              
              $
              1,244,993Series
                  B stock dividends payable
              
              $
              1,500,000
              
              $
              375,000Warrants
                  issued and embedded conversion feature associatedwith
                  debt financing
              
              $
              —
              
              $
              6,000,000Beneficial
                  conversion feature on convertible Series B preferred stock
              
              $
              —
              
              $
              13,616,625Preferred
                  stock issued pursuant to conversion of debt and accrued
                  interest
              
              $
              —
              
              $
              6,164,384Fair
                  value of warrants issued to placement agents for private placement
                  allocableto
                  private placement
              
              $
              —
              
              $
              1,619,256





The
      accompanying notes are an integral part of these unaudited financial
      statements.


8





**SYNVISTA
      THERAPEUTICS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





**Note
      1 - Significant Accounting Policies**





***Basis
      of Presentation***





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and the instructions to Form 10-Q and Article
      8 of Regulation S-X. Accordingly, they do not include all of the information
      and
      footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statements. In the opinion of
      management, all adjustments (consisting of only normal recurring adjustments)
      considered necessary for a fair presentation have been included. Operating
      results for the nine months ended September 30, 2008 are not necessarily
      indicative of the results that may be expected for the year ending December
      31,
      2008. For further information, refer to the financial statements and footnotes
      thereto included in the Company's Annual Report on Form 10-K for the year ended
      December 31, 2007, as filed with the Securities and Exchange Commission (the
      “Form 10-K”). The December 31, 2007 balance sheet is derived from the audited
      balance sheet included in the Form 10-K.





***Principles
      of Consolidation***





The
      accompanying condensed consolidated financial statements include the accounts
      of
      Synvista Therapeutics, Inc. and its wholly owned subsidiary, HaptoGuard, Inc.
      All inter-company accounts and transactions have been eliminated in
      consolidation.





**Note
      2 - Liquidity**





The
      Company has devoted substantially all of its resources to research, drug
      discovery and development programs. To date, it has not generated any revenues
      from the sale of products and does not expect to generate any such revenues
      for
      a number of years, if at all. As a result, the Company has incurred net losses
      since inception, has an accumulated deficit of $278,099,794 as of September
      30,
      2008, and expects to incur net losses, potentially greater than losses in prior
      years, for a number of years, assuming the Company is able to continue as a
      going concern, of which there can be no assurance.





The
      Company has financed its operations through proceeds from the sale of common
      and
      preferred equity securities, debt securities, revenue from former collaborative
      relationships, reimbursement of certain of its research and development expenses
      by collaborative partners, investment income earned on cash and cash equivalent
      balances and short-term investments and the sale of a portion of the Company’s
      New Jersey state net operating loss carryforwards and research and development
      tax credit carryforwards.





As
      of
      September 30, 2008, the Company had working capital of $4,226,887, including
      $7,957,321 of cash and cash equivalents. The Company’s net cash used in
      operating activities for the nine months ended September 30, 2008 was $7,671,110
      and for the year ended December 31, 2007 was $7,946,700.





In
      August
      2007, we entered into a share purchase agreement for the purchase of $500,000
      of
      newly issued shares of Oxis International Limited (“Oxis”) common stock at a
      premium over the then current market price. It is our understanding that Oxis
      held some value as of June 30, 2008, but it is our position that we will not
      recoup our investment in Oxis. On June 19, 2008, Oxis received a Notice of
      Disposition of Collateral from certain debenture holders. Our investment in
      Oxis
      of $400,000 was written off as of June 30, 2008. This security is restricted
      for
      sale until the early part of February 2009.





9


The
      Company expects to continue to utilize cash and cash equivalents to fund its
      operating activities, including continued development of SYI-2074, alagebrium
      and its diagnostic test kits. Based on the projected spending levels for the
      Company, it does not currently have adequate cash and cash equivalents to
      complete its clinical trials and/or the development of its diagnostic test
      kits
      and, therefore, urgently requires additional funding in order to continue
      operations. The Company is actively pursuing fund-raising possibilities through
      the sale of its equity securities. If the Company is unsuccessful in its efforts
      to raise additional funds through the sale of additional equity securities
      or if
      the level of cash and cash equivalents falls below anticipated levels, Synvista
      will not have the ability to continue as a going concern after the first quarter
      of 2009. If we are unsuccessful in our efforts to raise additional funds through
      the sale of additional equity securities, we will be required to significantly
      reduce or curtail our research and product development activities, to sell
      or
      out-license our assets and may be required to curtail our other operations
      significantly or cease operations altogether. We have the intent and ability
      to
      quickly and significantly reduce the cash expenditure rate, if necessary, as
      we
      have limited fixed commitments, which include executed, but cancelable,
      agreements with outside organizations.





At
      the
      request of the holders of its Series B preferred stock, the Company may be
      required to pay accrued dividends on its Series B preferred stock, totaling
      $2,375,000 as of September 30, 2008, in cash rather than in shares of its Series
      B preferred stock.  If the holders of Series B preferred stock were to
      elect to require the payment of these accrued dividends in cash, this would
      severely reduce the Company’s liquidity, and could force the Company to promptly
      cease its operations or to curtail them drastically in order to make the
      required payments. The Company believes that its ability to adjust spending
      levels quickly in a number of its programs will permit its continued operations
      into the first quarter of 2009, regardless of the form of dividend payment
      elected by the holders of its Series B preferred stock.





The
      Company will require substantial new funding in early 2009 in order to continue
      the development and commercialization of its product candidates and to continue
      its operations. The Company believes that satisfying these capital requirements
      over the long term will require successful commercialization of its product
      candidates and/or its diagnostic test kits. However, it is uncertain whether
      any
      of its products or diagnostic test kits will be approved or will be commercially
      successful. The amount and timing of the Company’s future capital requirements
      will depend on numerous factors, including the progress of its research
      and development programs, the number and characteristics of product candidates
      that the Company pursues, the conduct of preclinical tests and clinical studies,
      the status and timelines of regulatory submissions, the costs associated with
      protecting patents and other proprietary rights, the ability to complete
      strategic collaborations and the availability of third-party funding, if any.





Selling
      securities to satisfy its capital requirements may have the effect of materially
      diluting the current holders of the Company’s outstanding stock. The Company may
      also seek additional funding through corporate collaborations and other
      financing vehicles. There can be no assurances that such funding will be
      available at all or on terms acceptable to the Company. If funds are obtained
      through arrangements with collaborative partners or others, the Company may
      be
      required to relinquish rights to its technologies or product candidates and
      alter its plans for the development of its technologies or product candidates.
      If the Company is unable to obtain the necessary funding, it will likely be
      forced to cease operations.




10


**Note
      3 - Stock-Based Compensation**





The
      Company has stockholder-approved stock incentive plans for employees, directors,
      officers and consultants.





The
      Company follows Statement of Financial Accounting Standards No. 123(R) (“SFAS
      123(R)”), “Share-Based Payment,” for employee options and uses the Black-Scholes
      option pricing model in valuing its options granted to employees and Directors.





The
      following table shows the weighted average assumptions the Company used to
      develop the fair value estimates for the determination of compensation charges
      relating to its option grants:


Nine
                  months endedSeptember
                  302008
              
              2007Expected
                  volatility
              
              
              112
              %
              
              148
              %Dividend
                  yield
              
              
              —
              
              
              —Expected
                  term (in years)
              
              
              6.57
              
              
              6.12Risk-free
                  interest rate
              
              
              4.25
              %
              
              4.88
              %




The
      weighted average grant date fair value of options granted during the first
      nine
      months of 2008 was $1.58 as determined by the Black-Scholes option valuation
      model using the assumptions listed in the chart above.





Options
      granted to consultants and other non-employees are accounted for in accordance
      with Emerging Issues Task Force No. 96-18 "Accounting for Equity Instruments
      That Are Issued to Other than Employees for Acquiring, or in Conjunction with
      Selling, Goods or Services."  Accordingly, such options are recorded at
      fair value at the date of grant and subsequently adjusted to fair value at
      the end of each reporting period. For the nine-months ended September 30,
      2008 and September 30, 2007, the Company recognized research and development
      consulting expenses of $4,014 and $2,732, respectively.





For
      the
      three and nine month periods ended September 30, 2008, the Company recognized
      share-based employee compensation cost of $177,037 and $594,002, respectively
      and for the three and nine month periods ended September 30, 2007, the Company
      recognized share-based employee compensation cost of approximately $84,618
      and
      $169,180 respectively, in accordance with SFAS 123(R), “Share-Based Payment,”
which was recorded as general and administrative and research and development
      expense. This expense related to the granting of stock options to employees,
      directors and officers on or after January 1, 2006. None of this expense
      resulted from the grants of stock options prior to January 1, 2006. The Company
      recognized compensation expense related to these stock options, taking into
      consideration a forfeiture rate of approximately 1% based on historical
      experience, on a straight-line basis over the vesting period. The Company did
      not capitalize any share-based compensation cost.





As
      of
      September 30, 2008, the total compensation cost related to non-vested option
      awards not yet recognized is $1,195,898. The weighted-average period over which
      this cost is expected to be recognized is approximately 2.2 years.





11




A
      summary
      of the status of the Company’s stock options outstanding as of September 30,
      2008 and changes during the nine months then ended is presented below:





**Weighted****Weighted**
              
              **Average****average**
              
              **Remaining**
              
              **Aggregate****exercise**
              
              **Contractual**
              
              **Intrinsic****Shares**
              
              **price**
              
              **Term
                  (years)**
              
              **Value**Outstanding
                  atDecember
                  31, 2007
              
              
              876,706
              
              $
              16.00Granted
              
              
              76,000
              
              
              1.88Exercised
              
              
              -Cancelled
              
              
              (25,265
              )
              
              108.20Outstanding
                  atSeptember
                  30, 2008
              
              
              927,441
              
              
              12.33
              
              
              8.17
              
              $
              —Options
                  exercisable atSeptember
                  30, 2008
              
              
              334,091
              
              
              29.30
              
              
              6.55
              
              $
              —
  *Restricted
        Stock*





The
      Company periodically grants awards of restricted stock to its Board of Directors
      as compensation for service on the Board of Directors. The awards vest during
      various periods ranging from one to three years. There were no shares of
      restricted stock granted during the nine month period ended September 30, 2008,
      and 2,148 shares vested during the period. The total fair value of shares vested
      during the period was $16,110.





There
      were 19,200 shares of restricted stock granted during the year ended December
      31, 2006, of which 6,400 were forfeited and 8,520 vested in prior periods.
      Of
      the 10,668 total shares of restricted stock that vested, the vesting of 4,280
      shares had been accelerated by the Board of Directors. The total fair value
      of
      all shares vested is $80,010.





The
      Company recognized compensation cost of $7,008 and $12,344 for the three and
      nine months ended September 30, 2008, respectively, which was recorded as
      general and administrative expense in the condensed consolidated statement
      of
      operations.





12


A
      summary
      of the status of the Company’s non-vested shares as of September 30, 2008 and
      changes during the nine months ended September 30, 2008, is presented
      below:


**Weighted****average
                  grant****Nonvested
                  Shares**
              
              **Shares**
              
              **date
                  fair value**Nonvested
                  atJanuary
                  1, 2008
              
              
              4,280
              
              $
              7.50Granted
              
              
              —
              
              
              —Vested
              
              
              2,148
              
              
              7.50Forfeited
              
              
              —
              
              
              —Nonvested
                  atSeptember
                  30, 2008
              
              
              2,132
              
              
              7.50





As
      of
      September 30, 2008, there was $4,279 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted. That cost
      is
      expected to be recognized over a weighted-average period of 0.80 years.





**Note
      4 - Net Loss Per Share Applicable to Common Stockholders**





Basic
      net
      loss per share is computed by dividing net loss applicable to common
      stockholders by the weighted average number of shares outstanding during the
      period. Diluted net loss per share is the same as basic net loss per share
      applicable to common stockholders, since the assumed exercise of stock options
      and warrants and the conversion of preferred stock would be antidilutive. The
      amount of potentially dilutive shares excluded from the calculation as of
      September 30, 2008 and 2007, was 14,412,421 and 13,770,766 shares,
      respectively.





**September
                30,****2008**
            
            **2007**Preferred
                Stock
            
            
            10,000,000
            
            
            10,000,000Restricted
                Stock
            
            
            12,800
            
            
            12,800Warrants
            
            
            3,530,716
            
            
            3,551,640Options
            
            
            868,905
            
            
            206,326Potentially
                dilutive shares excluded from calculation
            
            
            14,412,421
            
            
            13,770,766




**Note
      5 - Collaborative Research and Development Agreement**





On
      January 20, 2008, the Company entered into a License Agreement (the “Agreement”)
      with Novel Therapeutic Technology Inc. (“NTT”). The Agreement states that NTT
      will develop a formulation of the Company’s product candidate SYI-2074. The
      Agreement also states that NTT will grant the Company an exclusive worldwide
      license to the product formulation developed as well as to the intellectual
      property rights resulting under the Agreement. An insignificant upfront payment
      was made in January 2008. The Company will also make specified payments to
      NTT
      upon the occurrence of certain milestone events in the clinical development
      of
      the product formulated under the Agreement. In addition, the Company would
      also
      have to pay NTT royalties on any sales of the developed product and a separate
      fee if any of the rights granted under the Agreement are sublicensed by the
      Company.




13


The
      license granted under the Agreement will be terminated upon the earlier to
      occur
      of (i) the date the Company notifies NTT that it does not intend to proceed
      further with development of formulation of SYI-2074 subject to the Agreement,
      (ii) the date the Company notifies NTT that it does not intend to continue
      to
      commercialize the products developed pursuant to the Agreement, and (iii) the
      later of (a) the expiration of the last valid patent covering the formulation
      of
      the Company’s intellectual property pursuant to the Agreement, which, absent the
      Agreement, would infringe an existing patent, or (b) 15 years from the date
      of
      the first commercial sale of a product pursuant to the Agreement.





**Note
      6 - Series B Preferred Stock and Warrant Purchase
      Agreement**





On
      July
      20, 2007, at the Company’s annual meeting of stockholders, the stockholders of
      the Company approved the
      issuance of securities pursuant to the Series B Preferred Stock and Warrant
      Purchase Agreement dated as of January 11, 2007, as amended. At the closing
      of
      the financing on July 25, 2007, the Company issued 10,000,000 shares of its
      Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series
      B
      Preferred Stock to the investors. The Series B Preferred Stock accrues dividends
      at a rate of 8% per year on the original issue price of $2.50 per share for
      a
      period of five years from the date on which the shares of Series B Preferred
      Stock were issued. As of November 1, 2008, the holders of the Series B Preferred
      Stock have not designated their dividends as payable either in cash or preferred
      stock.





14




**ITEM
        2.**  **Management's
        Discussion and Analysis of Financial Condition**
  **Overview**





We
      are a
      product-based biotechnology company developing diagnostic and therapeutic
      products to deliver personalized medicine. Our primary therapeutic interest
      is
      the cardiovascular complications of diabetes. Our diagnostic products under
      development are being designed to identify patients at risk for cardiovascular
      complications of diabetes such as stroke, heart attack and death, and may be
      used to guide medical therapy.





We
      are
      primarily focused on fund-raising activities and exploring strategic
      relationships to support our development programs.  If we are unsuccessful
      in our efforts to raise additional funds through the sale of additional equity
      securities or the out-license of our technology, or if the level of cash and
      cash equivalents falls below anticipated levels, we may be required to
      significantly curtail the research, product development, preclinical testing
      and
      clinical trials of our product candidates or cease our operations altogether.




We
      are
      developing a diagnostic test to identify the subset of patients with diabetes
      who are at increased risk for cardiovascular disease. The technology underlying
      this test relates to a serum protein called haptoglobin, or Hp. A common variant
      of this protein, known as Hp2-2, which is found in 40% of the population, is
      associated with increased cardiovascular risk in diabetic patients. We own
      intellectual property relating to typing haptoglobin, which is a protein found
      in the blood. This diagnostic test may be useful in determining a patient’s risk
      for adverse cardiovascular events. It may also be useful to identify a subset
      of
      diabetic patients in whom daily use of vitamin E could potentially reduce the
      rate of heart attack. We are evaluating arrangements that would allow our
      technology or intellectual property to be used by commercial enterprises for
      the
      aforementioned purposes and would be further developed and validated by a
      clinical laboratory that is certified under the Clinical Laboratory Improvement
      Amendments, or CLIA, and offered as a testing service. Further, we are
      developing a kit for use in determining cardiovascular disease risk in diabetic
      patients that will be submitted to the U.S. Food and Drug Administration for
      premarket clearance under the 510(k) pathway. Any successful commercialization
      of such a kit, if cleared, could generate revenues for us in future years and
      could help focus the development of one of our therapeutic product programs,
      known as glutathione peroxidase mimetics, described below.




We
      also
      own intellectual property relating to CML testing. CML, or
      carboxy-methyl-lysine, is a marker of cardiovascular aging that can predict
      adverse health outcomes in the general population and a subpopulation with
      heart
      failure in particular. A “Research Use Only” kit for quantifying CML levels was
      developed by MicroCoat GmbH of Bernried, Germany, using our proprietary
      reagents, and has been sold in the research community in recent years. Given
      the
      correlation of CML levels and cardiovascular outcomes that has been appearing
      in
      the scientific literature, the Company believes that a CML test may
      strategically complement the haptoglobin test in the clinical diagnostic
      setting.





Research
      and discovery relating to haptoglobin testing has revealed that some patients,
      identified using the haptoglobin test, exhibit dysfunction in their HDL, or
      high
      density lipoprotein. This HDL dysfunction may explain the increased
      atherosclerosis and adverse cardiovascular outcomes observed in this patient
      population. We have developed a family of new chemical entities that work by
      virtue of their ability to reduce oxidized lipids. Some of these compounds
      have
      been shown to reverse the HDL dysfunction seen in some diabetic patients. We
      are
      evaluating these personalized medicines in animal models designed to better
      characterize HDL function.





As
      previously reported, one of our GPx mimetics, SYI-2074, which was under
      development for the treatment of diabetic patients with Haptoglobin subtype
      2-2,
      did not demonstrate a dose-related improvement in all oxidized lipids and all
      markers of oxidative stress after treatment with SYI-2074 for one month in
      Trial
      201. In addition, in Trial 203, SYI-2074 did not provide evidence of protection
      against cardiac injury in diabetic patients who were undergoing angioplasty.
      The
      Company has therefore decided not to advance the development of SYI-2074 as
      a
      treatment for acute coronary syndrome, while it continues to review and analyze
      the results of these studies.




15





SYI-2074
      has been formulated into an ointment that may permit topical application and
      the
      treatment of mild-moderate plaque psoriasis.





We
      are
      developing a compound relevant to the CML marker described above. Alagebrium
      chloride, or alagebrium (formerly ALT-711), is an Advanced Glycation End-product
      Crosslink Breaker being developed for diastolic heart failure and diabetic
      nephropathy. Alagebrium has demonstrated potential efficacy in two clinical
      trials in heart failure, as well as in animal models of heart failure,
      nephropathy, hypertension and erectile dysfunction. These diseases represent
      rapidly growing markets of unmet medical needs, particularly common among
      diabetic patients. The compound has been tested in approximately 1,000 patients,
      which represents a sizeable human safety database, in a number of Phase 2
      clinical studies.





During
      the second quarter of 2008, we announced that we had dosed the first patient
      in
      a 160-patient Phase 2 study of alagebrium in patients with diastolic heart
      failure. BREAK ( B eginning
      a R andomized E valuation
      of the **A.** G.E.
      (Advanced Glycation End Product) Brea **k** er
      Alagebrium in Diastolic Heart Failure) is a randomized, double-blind, placebo
      controlled study to assess the effect of six months of oral treatment with
      400mg
      (200mg twice daily) alagebrium versus placebo in patients diagnosed with
      diastolic heart failure as verified by echocardiography. The trial is ultimately
      expected to enroll 80 patients per cohort and be conducted in as many as 25
      centers in the United States. It had completed more than 50% enrollment at
      the
      end of the third quarter of 2008. Investigators intend that at least half of
      the
      study subjects will have diabetes mellitus. The primary efficacy measure of
      the
      study is improvement of exercise tolerance as assessed by the six-minute walk
      test, an accepted regulatory endpoint. In addition, there will be a number
      of
      secondary and tertiary measurements including the effect of alagebrium on CML
      levels. The Company has also surpassed 75% enrollment in the BENEFICIAL study.
      This trial, being conducted at the University of Gronigen, The Netherlands,
      is
      designed to test the efficacy of alagebrium in heart failure patients with
      low
      ejection fractions, by measuring their improvement in maxVO2 (maximum oxygen
      consumption), a measure of exercise tolerance.





***Future
      Development Plans***





We
      are
      also managing a discovery and development program aiming to produce small
      molecule drugs that mimic the enzyme glutathione peroxidase, or GPx. We believe
      that GPx is one of the only enzymes in the human body that reduces oxidized
      lipids. By recreating the activity of this enzyme in a small molecule we may
      be
      able to treat diseases in which oxidized lipids are thought to play a
      significant role.





In
      January 2008, we announced the signing of an agreement with privately-held
      Novel
      Therapeutic Technologies Inc. to provide us with formulation work for a topical
      cream formulation of one of our GPx mimetics, SYI-2074, for the treatment of
      psoriasis. This work will be performed at a major clinical institution in
      Israel. SYI-2074 may have potential in the treatment of plaque
      psoria sis
      because SYI-2074 can block TNF-α activated expression of cell adhesion
      molecules, I-CAM and V-CAM, which may be essential for cellular migration.
      TNF-α
is an established target for drug development in psoriasis and other autoimmune
      diseases. We have identified
      sites in Israel to perform a planned Phase 2 clinical trial which began in
      the
      third quarter of 2008.





As
      previously reported, we also expect that alagebrium will be studied in a
      clinical trial of patients with Type I diabetes and microalbuminuria (protein
      in
      the urine), funded by the Juvenile Diabetes Research Foundation. This study
      has
      already dosed its first patient, but as observers of the trial without
      responsibility for its performance, we cannot project the date or likelihood
      of
      this trial’s completion.





We
      continue to evaluate potential pre-clinical and clinical studies in other
      therapeutic indications in which alagebrium and SYI-2074 may address significant
      unmet needs. For alagebrium, in addition to our anticipated clinical studies
      in
      heart failure, we have conducted preclinical studies focusing on
      atherosclerosis; Alzheimer's disease; photoaging of the skin; eye diseases,
      including age-related macular degeneration, and glaucoma; and other diabetic
      complications, including renal diseases.





Since
      our
      formation in October 1986, we have devoted substantially all of our resources
      to
      research, drug discovery and development programs. To date, we have not
      generated any revenues from the sale of products and do not expect to generate
      any such revenues for a number of years, if at all. We have incurred an
      accumulated deficit of $278,099,794 as of September 30, 2008, and expect to
      incur net losses, potentially greater than losses in prior years, for a number
      of years.




16





We
      have
      financed our operations through proceeds from public offerings of common stock,
      private placements of common and preferred equity and debt securities, revenue
      from former collaborative relationships, reimbursement of certain of our
      research and development expenses by our collaborative partners, investment
      income earned on cash and cash equivalent balances and short-term investments
      and the sale of a portion of our New Jersey State net operating loss
      carryforwards and research and development tax credit
      carryforwards.





Our
      business is subject to significant risks including, but not limited to, (1)
      our
      ability to obtain and maintain sufficient financial resources to continue as
      a
      going concern and to conduct and continue enrollment in our clinical studies
      of
      SYI-2074 and alagebrium, (2) the risks associated with our development of a
      diagnostic kit, (3) the risks inherent in our research and development efforts,
      including clinical trials and the length, expense and uncertainty of the process
      of seeking regulatory approvals for our product candidates, (4) uncertainties
      associated with obtaining and enforcing our patents and with the patent rights
      of others, (5) uncertainties regarding government healthcare reforms and product
      pricing and reimbursement levels, (6) technological change and competition,
      (7)
      manufacturing uncertainties, and (8) dependence on collaborative partners and
      other third parties. Even if our product candidates appear promising at an
      early
      stage of development, they may not reach the market for numerous reasons. These
      reasons include the possibilities that the products will prove ineffective
      or
      unsafe during preclinical or clinical studies, will fail to receive necessary
      regulatory approvals, will be difficult to manufacture on a large scale, will
      be
      uneconomical to market or will be precluded from commercialization by
      proprietary rights of third parties, or that we will be unable to develop and
      commercialize our proposed diagnostic kit. These risks and others are discussed
      in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007
      that we filed with the Securities and Exchange Commission on March 31, 2008
      under the heading “Item 1A - Risk Factors” and in this report under the heading
      "Part II - Item 1A - Risk Factors."





**Results
      of Operations**





**Three
      Months ended September 30, 2008 and 2007**





*License
      and Other Revenue*





Total
      license and other revenue for the three months ended September 30, 2008 and
      2007, was $1,000 and $1,000, respectively, attributable to royalty revenue
      received from ARUP Laboratories as a result of a royalty agreement entered
      into
      in September 2004.





*Other
      Income/Expense*





Investment
      income for the three months ended September 30, 2008 and 2007, was $53,000
      and
      $195,000, respectively. Income was derived from interest earned on cash and
      cash
      equivalents and short-term investments. The decrease in investment income was
      due to lower cash balances during the current year. In 2007, there was a higher
      cash balance as a result of our preferred stock financing in July 2007.





Our
      interest expense was $2,000 for the three months ended September 30, 2008,
      compared to $1,403,000 for the period ended September 30, 2007. The decrease
      was
      the result of interest expense relating to our private debt financing completed
      in January 2007.





*Operating
      Expenses*





Total
      operating expenses were $2,929,000 for the three months ended September 30,
      2008, compared to $3,159,000 for the three months ended September 30, 2007,
      and
      consisted primarily of research and development expenses and general and
      administrative expenses in 2008 and 2007. Research and development expenses
      normally include third-party expenses associated with pre-clinical, clinical,
      and diagnostic studies, manufacturing costs, including the development and
      preparation of clinical supplies, personnel and personnel-related expenses,
      and
      facility expenses.


17


*Research
      and Development*





Research
      and development expenses were $1,718,000 for the three months ended September
      30, 2008, as compared to $2,265,000 for the same period in 2007, a decrease
      of
      $547,000, or 24%. This decrease was due to lower research study costs resulting
      from the discontinuation of SYI-2074 Trials 201 and 203 in June 2008. In
      addition, research study costs were higher in 2007 due to the increased spending
      on clinical trials after the July 2007 financing. The lower study costs were
      partially offset by higher personnel-related costs.





For
      the
      three months ended September 30, 2008, personnel-related research and
      development costs totaled $226,000, compared to $78,000 for the same period
      in
      2007, an increase of $148,000, or 190%. This increase was primarily driven
      by
      the hiring of additional personnel within the Clinical, Pre-Clinical, and
      Diagnostic departments.





For
      the
      three months ended September 30, 2008, the total amount spent on research study
      costs was $1,467,000, inclusive of $858,000 of clinical trial costs, $195,000
      of
      manufacturing and storage expenses, $119,000 of third party consulting costs,
      $111,000 of patent expenses, $100,000 of license fees, $49,000 of product
      liability insurance, and $11,000 of regulatory costs. For the same period in
      2007, we incurred $1,794,000 of clinical trial expenses, $181,000 of third
      party
      consulting expenses, $157,000 of patent expenses, and $41,000 of product
      liability insurance.





*General
      and Administrative*





General
      and administrative expenses were $990,000 for the three months ended September
      30, 2008, as compared to $894,000 for the same period in 2007, for an increase
      of $96,000 or 11%. The increase in 2008 was related to the following: higher
      Board of Directors expense of $37,000 due to the addition of a new Board member,
      an increase in administrative expenses of $37,000, an increase in investor
      relations costs of $31,000, higher legal costs of $27,000, and an increase
      in
      repairs and maintenance expense of $13,000. These increases were partially
      offset by lower consulting expenses of $24,000 and lower facilities costs of
      $17,000.





*Selling
      and Marketing*





In
      the
      second quarter of 2008, we began commercial planning efforts surrounding our
      haptoglobin diagnostic kits. Selling and marketing expenses for the three months
      ended September 30, 2008, were $221,000, inclusive of $62,000 of medical
      education expenses, $59,000 of personnel-related expenses, $38,000 of market
      research, $20,000 of expenses relating to conferences and tradeshows, and
      $12,000 of advertising and promotion expenses. There were no such expenses
      during the comparable period in 2007.





*Net
      Loss*




We
      had
      net losses of $2,873,000, and $4,366,000 in the three months ended September
      30,
      2008 and 2007, respectively. We had net losses applicable to common stockholders
      for the three months ended September 30, 2008 and 2007, of $5,075,000 and
      $5,986,000, respectively, inclusive of preferred
      stock dividends and deemed dividends to Series B preferred stockholders of
      $2,202,000 and $1,620,000 for the three months ended September 30, 2008 and
      2007, respectively.





**Nine
      Months ended September 30, 2008 and 2007**





*License
      and Other Revenue*





Total
      license and other revenue for the nine months ended September 30, 2008 and
      2007,
      was $55,000 and $51,000, respectively, inclusive of $50,000 received from a
      licensing agreement with Avon Products, Inc., which we entered into in September
      2005. In 2008, we also received $3,000 from a royalty agreement with ARUP
      Laboratories, which was entered into in September 2004. We received $1,000
      in
      royalty payments from ARUP Laboratories in 2007.





18


*Other
      Income/Expense*





Investment
      income for the nine months ended September 30, 2008 and 2007, was $263,000
      and
      $258,000, respectively. Income was derived from interest earned on cash and
      cash
      equivalents and short-term investments. There were slightly higher cash balances
      during the current year as a result of our preferred stock financing in July
      2007.





Our
      interest expense was $5,000 for the nine months ended September 30, 2008,
      compared to $6,638,000 for the period ended September 30, 2007. The decrease
      was
      the result of interest expense relating to our private debt financing completed
      in January 2007.





We
      recognized $400,000 of other expense in June 2008, as a result of the write-off
      of our investment in Oxis International common stock.





*Operating
      Expenses*





Total
      operating expenses were $8,318,000 for the nine months ended September 30,
      2008,
      compared to $7,200,000 for the nine months ended September 30, 2007, and
      consisted primarily of research and development expenses and general and
      administrative expenses in 2008 and 2007. Research and development expenses
      normally include third-party expenses associated with pre-clinical, clinical,
      and diagnostic studies, manufacturing costs, including the development and
      preparation of clinical supplies, personnel and personnel-related expenses,
      and
      facility expenses.





*Research
      and Development*





Research
      and development expenses were $5,108,000 for the nine months ended September
      30,
      2008, as compared to $4,666,000 for the same period in 2007, an increase of
      $442,000 or 9%. This increase was attributed to higher personnel-related costs,
      partially offset by slightly lower research study costs. Research study costs
      were higher in 2007 due to the increased spending on clinical trials after
      the
      July 2007 financing. In addition, we discontinued SYI-2074 Trials 201 and 203
      in
      June 2008, resulting in lower costs for the 2008 period.





For
      the
      nine months ended September 30, 2008, personnel-related research and development
      costs totaled $679,000 compared to $234,000 for the same period in 2007, an
      increase of $445,000, or 190%. This increase was primarily driven by the hiring
      of additional personnel within the Clinical, Pre-Clinical, and Diagnostic
      departments.





For
      the
      nine months ended September 30, 2008, research study costs totaled $4,343,000,
      compared to $4,378,000 for the same period in 2007, a decrease of $35,000,
      or
      1%. In 2008, research study costs included $2,314,000 of clinical trial costs,
      $599,000 of manufacturing and storage expenses, $513,000 of third party
      consulting costs, $326,000 of patent expenses, $140,000 of license fees,
      $124,000 of product liability insurance, $118,000 of research funding costs,
      $95,000 of sponsored research costs, and $63,000 of regulatory costs.
      Comparatively, in 2007, research study costs consisted of $2,604,000 of clinical
      trial costs, $800,000 of license fees, $524,000 of patent expenses, $361,000
      of
      third party consulting costs, and $104,000 of product liability insurance
      expenses.





*General
      and Administrative*





General
      and administrative expenses were $2,847,000 for the nine months ended September
      30, 2008, as compared to $2,535,000 for the same period in 2007, for an increase
      of $312,000, or 12%. The increase in 2008 was related to the following: higher
      personnel-related expenses of $289,000, an increase in investor relations costs
      of $121,000, higher franchise taxes of $64,000, higher repairs and maintenance
      expense of $40,000, and higher Board of Directors expense of $38,000 due to
      the
      addition of a new Board member. These increases were partially offset by lower
      consulting and administrative expenses of $102,000 and $83,000, respectively,
      as
      well as lower facility costs of $41,000 and lower insurance costs of
      $17,000.


19


*Selling
      and Marketing*





In
      the
      second quarter of 2008, we began commercial planning surrounding our haptoglobin
      diagnostic kits. Selling and marketing expenses for the nine months ended
      September 30, 2008, were $363,000, inclusive of $148,000 of personnel-related
      expenses, $90,000 of medical education related expenses, $38,000 of market
      research, $33,000 of conferences and tradeshows, and $12,000 of advertising
      and
      promotion. There were no such expenses during the comparable period in
      2007.





*Net
      Loss*




We
      had
      net losses of $8,401,000 and $13,529,000 in the nine months ended September
      30,
      2008 and 2007, respectively. We had net losses applicable to common stockholders
      for the nine months ended September 30, 2008 and 2007, of $15,007,000 and
      $15,149,000, inclusive of preferred
      stock dividends and deemed dividends to Series B preferred stockholders of
      $6,606,000 and $1,620,000 for the nine months ended September 30, 2008 and
      2007,
      respectively.





**Liquidity
      and Capital Resources** ****




We
      had
      cash and cash equivalents at September 30, 2008, of $7,957,000, compared to
      $15,646,000 at December 31, 2007. The decrease is primarily attributable to
      $7,671,000 of net cash used in operating activities. At September 30, 2008,
      we
      had working capital of $4,227,000.





We
      do not
      have any approved products and currently derive cash from sales of our
      securities and interest on cash and cash equivalents. We are highly susceptible
      to conditions in the global financial markets and in the pharmaceutical
      industry. Positive and negative movement in those markets will continue to
      pose
      opportunities and challenges to us. Previous downturns in the market valuations
      of biotechnology companies and of the equity markets more generally have
      restricted our ability to raise additional capital on favorable
      terms.





We
      expect
      to utilize cash and cash equivalents to fund our operating activities, including
      continued development of SYI-2074, alagebrium and development of our diagnostic
      test kit. Based on the projected spending levels for the Company, we do not
      currently have adequate cash and cash equivalents to complete our clinical
      trials and/or the development of our diagnostic test kits and, therefore, will
      require additional funding urgently in order to continue operations. The Company
      is actively pursuing fund-raising possibilities through the sale of its equity
      securities. If the Company is unsuccessful in its efforts to raise additional
      funds through the sale of additional equity securities or if the level of cash
      and cash equivalents falls below anticipated levels, we will not have the
      ability to continue as a going concern after the first quarter of 2009. As
      a
      result, the Company will continue to monitor its liquidity position and the
      status of its diagnostic development and clinical trials. If we are unsuccessful
      in our efforts to raise additional funds through the sale of additional equity
      securities, we will be required to significantly reduce or curtail our research
      and product development activities, to sell or out-license our assets, and
      may
      be required to curtail our other operations significantly. We have the intent
      and ability to quickly and significantly reduce the cash expenditure rate,
      if
      necessary, as we have limited fixed commitments, which include executed, but
      cancelable, agreements with outside organizations.





We
      may be
      required to pay accrued dividends on our preferred stock, totaling $2,375,000
      as
      of September 30, 2008 in cash, rather than in stock, at the request of the
      Preferred Stock holders.  While this would reduce the Company’s liquidity,
      the Company believes that its ability to adjust spending levels quickly in
      a
      number of programs will permit its continued operations into the first quarter
      of 2009, regardless of the form of dividend payment elected by the holders
      of
      our Series B Preferred stock investors.





We
      will
      require substantial new funding in early 2009 in order to continue the
      development and commercialization of its product candidates and to continue
      our
      operations. The Company believes that satisfying these capital requirements
      over
      the long term will require successful commercialization of our product
      candidates and/or our diagnostic test kits. However, it is uncertain whether
      any
      of our products or diagnostic test kits will be approved or will be commercially
      successful. The amount and timing of the Company’s future capital requirements
      will depend on numerous factors, including the progress of our research
      and development programs, the exercise by the holders of the Series B preferred
      stock of their right to receive accrued dividends in the form of cash, number
      and characteristics of product candidates that the Company pursues, the conduct
      of preclinical tests and clinical studies, the status and timelines of
      regulatory submissions, the costs associated with protecting patents and other
      proprietary rights, the ability to complete strategic collaborations and the
      availability of third-party funding, if any.




20





In
      August
      2007, we entered into a share purchase agreement for the purchase of $500,000
      of
      newly issued shares of Oxis International Limited (“Oxis”) common stock at a
      premium over the then current market price. It is our understanding that Oxis
      held some value as of June 30, 2008, but it is our position that we will not
      recoup our investment in Oxis. On June 19, 2008, Oxis received a Notice of
      Disposition of Collateral from certain debenture holders. Our investment in
      Oxis
      was written off as of June 30, 2008. This security was restricted for sale
      until
      the early part of February 2009.





On
      July
      25, 2007, institutional investors purchased $25,000,000 of newly created Series
      B Preferred Stock and warrants to purchase shares of Series B Preferred Stock.
      At the closing of the financing, we issued 10,000,000 shares of our Series
      B
      Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred
      Stock. The Series B Preferred Stock accrues dividends at a rate of 8% per year
      on the original issue price of $2.50 per share for a period of five years from
      the date on which the shares of Series B Preferred Stock were issued. The
      warrants are exercisable for a period of five years commencing on July 25,
      2007
      at an exercise price of $2.50 per share.








We
      will
      require, in the next few months, substantial additional funding to continue
      our
      operations, including the development and commercialization of SYI-2074,
      alagebrium and our other product candidates. In order to continue funding our
      capital requirements over the longer term, we will require successful
      commercialization of our product candidates. However, it is uncertain whether
      any of our product candidates will be approved or will be commercially
      successful.





Selling
      securities to satisfy our capital requirements may have the effect of materially
      diluting the current holders of our outstanding stock. We may also seek
      additional funding through corporate collaborations and other financing
      vehicles. There can be no assurances that such funding will be available at
      all
      or on terms acceptable to us. If funds are obtained through arrangements with
      collaborative partners or others, we may be required to relinquish rights to
      our
      technologies or product candidates and alter our plans for the development
      of
      our product candidates. If we are unable to obtain the necessary funding, we
      may
      be forced to cease operations. There can be no assurance that the products
      or
      technologies that we are currently developing will result in revenues to us
      or
      any meaningful return on investment to our stockholders.





**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
      nine months ended September 30, 2008.





***Forward-Looking
      Statements and Cautionary Statements***





Statements
      in this Form 10-Q that are not statements or descriptions of historical facts
      are "forward-looking" statements under Section 21E of the Securities Exchange
      Act of 1934, as amended, and the Private Securities Litigation Reform Act of
      1995, and are subject to numerous risks and uncertainties. These forward-looking
      statements and other forward-looking statements made by us or our
      representatives are based on a number of assumptions. The words "believe,"
      "expect," "anticipate," "intend," "estimate" or other expressions, which are
      predictions of or indicate future events and trends and which do not relate
      to
      historical matters, identify forward-looking statements. Readers are cautioned
      not to place undue reliance on these forward-looking statements, as they involve
      risks and uncertainties, and actual results could differ materially from those
      currently anticipated due to a number of factors, including those set forth
      in
      this section and elsewhere in this Form 10-Q.





The
      forward-looking statements represent our judgments and expectations as of the
      date of this Report. We assume no obligation to update any such forward-looking
      statements.


21


**ITEM
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





Our
      exposure to market risk for changes in interest rates relates primarily to
      our
      investment in marketable securities. We do not use derivative financial
      instruments in our investments. All of our investments reside in money market
      accounts. Accordingly, we do not believe that there is any material market
      risk
      exposure with respect to derivative or other financial instruments that would
      require disclosure under this Item.





**ITEM
      4T.**  **Controls
      and Procedures.**





a)  *Evaluation* ****** *of
      Disclosure Controls and Procedures.* Our
      management has evaluated, with the participation of our Chief Executive Officer
      and our Director of Finance and Administration, Principal Financial Officer,
      the
      effectiveness of our disclosure controls and procedures (as defined in Rule
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
      (the "Exchange Act")) as of the end of the fiscal quarter covered by this
      Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive
      Officer and the Director of Finance and Administration, Principal Financial
      Officer have concluded that as of the end of such fiscal quarter, our current
      disclosure controls and procedures as
      of
      that date were effective to ensure that information required to be disclosed
      in
      the reports filed under the Exchange Act was recorded, processed, summarized
      and
      reported on an accurate and timely basis.





b)   *Changes
      in Internal Control Over Financial Reporting.* There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
      September 30, 2008 that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.





22


**PART
      II - OTHER INFORMATION**








**Item
      1A. Risk Factors.**





**Risks
      Related To Our Business**





***If
      we are unable to obtain sufficient additional funding in the next few months,
      we
      may be required to significantly curtail the research, product development,
      preclinical testing and clinical trials of our product candidates or we may
      be
      forced to cease operations altogether.***





The
      Company is urgently continuing to pursue fund-raising possibilities through
      the
      sale of its equity securities. If the Company is unsuccessful in its efforts
      to
      raise additional funds through the sale of additional equity securities or
      if
      the level of cash and cash equivalents falls below anticipated levels, the
      Company will not have the ability to continue as a going concern after the
      first
      quarter of 2009. We may also sell or out-license some of our assets in order
      to
      generate funds to continue to operate our business. We cannot assure you that
      we
      will be able to obtain sufficient financing or to sell sufficient assets in
      a
      timely manner or at all, nor that any financing or sale of assets will be
      available to us on reasonable terms.





The
      amount and timing of our capital requirements depend on numerous factors,
      including the timing of resuming our research and development programs, if
      at
      all, the number and characteristics of product candidates that we pursue, the
      conduct of preclinical tests and clinical studies, the status and timelines
      of
      regulatory submissions, the costs associated with protecting patents and other
      proprietary rights, the ability to complete strategic collaborations and the
      availability of third-party funding, if any.





In
      addition, the holders of our Series B preferred stock have the right to receive
      dividends either in the form of cash or additional shares of Series B preferred
      stock, at the holders’ option. As of September 30, 2008, the amount of the
      accrued dividend on our outstanding shares of Series B preferred stock was
      $2,375,000. Accordingly, the amount of funds that we will have available in
      the
      future for the development of our product candidates may be reduced if the
      holders of our Series B preferred stock choose to receive dividends in the
      form
      of cash. We currently do not have committed external sources of funding and
      may
      not be able to secure additional funding on any terms or on terms that are
      favorable to us. If we raise additional funds by issuing additional stock,
      further dilution to our existing stockholders will result, and new investors
      may
      negotiate for rights superior to existing stockholders. If adequate funds are
      not available, we may be required to:




·
            delay,
                reduce the scope of or eliminate one or more of our development
                programs;





·
            obtain
                funds through arrangements with collaboration partners or others
                that may
                require us to relinquish rights to some or all of our technologies,
                product candidates or products that we would otherwise seek to develop
                or
                commercialize ourselves;





·
            license
                rights to technologies, product candidates or products on terms that
                are
                less favorable to us than might otherwise be
                available;





·
            seek
                a buyer for all or a portion of our business;
                or





·
            wind
                down our operations and liquidate our assets on terms that are unfavorable
                to us.





Selling
      securities to satisfy our capital requirements may have the effect of materially
      diluting the current holders of our outstanding stock. We may also seek
      additional funding through corporate collaborations and other financing
      vehicles. If funds are obtained through arrangements with collaborative partners
      or others, we may be required to relinquish rights to our technologies or
      product candidates.




23


***The
      holders of the Series B preferred stock are entitled to rights
      and preferences that are significantly greater than the rights and preferences
      of the holders of our common stock, including preferential payments upon a
      liquidation and an accruing 8% dividend.***





The
      holders of our Series B preferred stock are entitled to a number of rights
      and
      preferences which holders of shares of our outstanding common stock do not
      and
      will not have. Among these rights and preferences is a preferential payment
      in
      the event of a liquidation of the Company, which means that holders of the
      Series B preferred stock would be entitled to receive the proceeds out of any
      sale or liquidation of the Company before any such proceeds are paid to holders
      of our common stock. In general, if the proceeds received upon any sale or
      liquidation do not exceed the total liquidation proceeds payable to the holders
      of the Series B preferred stock, holders of common stock would receive no value
      for their shares upon such a sale or liquidation. Given these rights of the
      Preferred Stock, we cannot assure you that the proceeds from any sale or
      liquidation would be sufficient to provide for any value whatsoever to be paid
      to our common stockholders.





In
      addition, shares of the Series B preferred stock accrue dividends at a rate
      of
      8% per year for a period of five years from the date on which the shares of
      Series B preferred stock were issued. As of September 30, 2008, the amount
      of
      the accrued dividend on our outstanding shares of Series B preferred stock
      was
      $2,375,000. If the holders of Series B preferred stock were to elect to require
      the payment of these accrued dividends in cash, this would severely reduce
      the
      Company’s liquidity, and could force the Company to promptly cease its
      operations or to curtail them drastically in order to make the required
      payments. We cannot assure you as to when, if ever, the holders of Preferred
      Stock will demand the payment of these dividends in cash, nor can we assure
      you
      that we will have adequate cash to make such payments if and when the demand
      is
      made.





Holders
      of the Series B Preferred Stock also have significant rights with respect to
      specific actions that we may wish to take from time to time. At any time when
      any shares of Series B Preferred Stock remain outstanding, we may not, without
      the consent of the holders of a majority of the shares held by holders of at
      least $4,000,000 (measured as of the original issue date) worth of Series B
      preferred stock take the following actions, among others:




·
            incur
                debt in excess of $2,000,000;




·
            authorize
                the sale of securities at a price per share less than the price per
                share
                that the Series B preferred stock was sold under the Series B Purchase
                Agreement;




·
            create
                any new classes or series of stock with rights senior to the common
                stock;





·
            amend
                any provision of our Certificate of Incorporation or Bylaws that
                changes
                the rights of the Series B preferred stock;




·
            pay
                or declare any dividend on any capital stock of the Company other
                than the
                Series B preferred stock;




·
            purchase
                or redeem any securities;




·
            liquidate,
                dissolve or wind-up;




·
            merge
                with another entity;




·
            sell
                or dispose of any of our assets, including the sale or license of
                intellectual property;




·
            amend
                any portion of our Certificate of Incorporation or Bylaws;




24




·
            intentionally
                take any action that may result in our stock no longer being approved
                for
                quotation on the AMEX or NASDAQ, or that would cause our common stock
                to
                no longer be registered pursuant to Section 12 of the Securities
                Exchange
                Act of 1934, as amended; or




·
            amend
                any material agreement that has been filed with the Securities and
                Exchange Commission.




As
      a
      result, we will not be able to take any of these actions without first seeking
      and obtaining the approval of the holders of the Series B Preferred Stock.
      We
      may not be able to obtain such approval in a timely manner or at all, even
      if we
      think that taking the action for which we seek approval is in the best interests
      of the Company. Our failure to obtain approval for such actions could result
      in
      a material adverse effect on our business and results of operations.




***Synvista’s
      ability to continue as a going concern is dependent on future financing.***





Our
      condensed consolidated financial statements have been prepared on the basis
      of a
      going concern, which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. We have not made any
      adjustments to the condensed consolidated financial statements as a result
      of
      the outcome of the uncertainty described above. Accordingly, the value of the
      Company in liquidation may be different from the amounts set forth in our
      condensed consolidated financial statements.




Our
      ability to continue operations will depend on our ability to continue to raise
      capital immediately in order to fund the operation of our business and the
      development and commercialization of our products. Failure to raise additional
      capital may result in substantial adverse circumstances, including delisting
      of
      our common stock from the American Stock Exchange, which could substantially
      decrease the liquidity and value of such shares, or ultimately result in our
      liquidation.




25


**ITEM
      4.**  **Submission
      of Matters to a Vote of Security-Holders**





The
      Annual Meeting of Stockholders of the Company (the “Meeting”) was held on July
      22, 2008. The following matters were voted upon at the Meeting: (i) an amendment
      to the Company’s 2005 Stock Plan to reserve up to an additional 940,000 shares
      of common stock for issuance under the Plan; (ii) an amendment to our Amended
      and Restated Certificate of Incorporation, in order to decrease the authorized
      number of shares of common stock (iii) election of Dr. Berkowitz as a Class
      B
      Director; (iv) and to
      ratify the appointment of J.H. Cohn LLP as the Company’s independent registered
      public accounting firm for the fiscal year ending December 31, 2008. There
      were
      10 million shares of Series B preferred that were eligible to vote at the
      Meeting and they are represented in the count below. Each 2 shares of Series
      B
      preferred stock is equal to the vote of 1 share of Common Stock.





(i)  The
      number of votes cast for, against and abstaining from the proposal to approve
      an
      amendment to our 2005 Stock Plan to reserve up to an additional 940,000 shares
      of common stock for issuance under the 2005 Stock Plan, were as
      follows:





Votes
                For
            
            Votes
                Against
            
            Abstentions
            
            Broker
                Non-Votes10,795,716
            
            128,948
            
            1,291
            
            2,071,090







(ii)  The
      number of votes cast for, against and abstaining from the proposal to amend
      the
      Company’s Amended and Restated Certificate of Incorporation, in order to
      decrease the authorized number of shares of preferred stock of the Company,
      were
      as follows:





Votes
                For
            
            Votes
                Against
            
            Abstentions
            
            Broker
                Non-Votes11,947,599
            
            84,091
            
            39,373
            
            2,071,090





(iii)  The
      number of votes cast for and against the proposal to elect Noah Berkowitz,
      M.D.,
      Ph.D. as a Class B director to hold office until the 2011 annual meeting and
      until his successor has been duly elected and qualified, were as
      follows:





Votes
                For
            
            Votes
                Against11,988,333
            
            82,757





(iv)
      The
      number of votes cast for, against and abstaining from the ratification the
      appointment of J.H. Cohn LLP as the Company’s independent registered public
      accounting firm for the fiscal year ending December 31, 2008, were as
      follows:





Votes
                For
            
            Votes
                Against
            
            Abstentions
            
            Broker
                Non-Votes11,956,935
            
            37,849
            
            76,279
            
            2,071,090




**ITEM
      6.**  **Exhibits.**





Exhibits





See
      the
“Exhibit Index” on page 28 for exhibits required to be filed with this Quarterly
      Report on Form 10-Q.


26




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned thereunto
      duly authorized.


**SYNVISTA
              THERAPEUTICS, INC.**Date:
              November 14, 2008By:
            /s/ Noah
              Berkowitz, M.D., Ph.D.Noah
              Berkowitz, M.D., Ph.D.President and Chief Executive Officer
              (principal executive
                officer)


By:
            /s/ Wendy
              A.
              MiliciWendy
              A. Milici(principal financial
              officer)


By:
            /s/ 
Alex
              D’AmicoAlex
              D’Amico(principal accounting
              officer)




27




**EXHIBIT
      INDEX**





Exhibit No.
            Description of
              Exhibit  31.1
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.





31.2
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.





32.1
            Certification
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




28