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| Georgia                       | 58-2108232                                   |
|-------------------------------|----------------------------------------------|
| (State      of incorporation) | (I.R.S.      Employer Identification Number) |

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| PART      I.  FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Page No. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| Item      1.  Condensed Financial Statements (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
|      Condensed      Balance Sheets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |     |
|           March      31, 2008 and December 31,      2007                                                                                                                        | 1        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
|      Condensed      Statements of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     |
|           Three      months ended March 31, 2008 and      2007                                                                                                                  | 2        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
|      Condensed      Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     |
|           Three      months ended March 31, 2008 and      2007                                                                                                                  | 3        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
|      Notes      to Condensed Financial      Statements                                                                                                                                                   | 4        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| Item      2.  Management’s Discussion and Analysis of Financial      Condition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
|              and      Results of      Operations                                                                                                                 | 8        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| Item      3.  Quantitative and Qualitative Disclosures About Market      Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 14       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| Item      4.  Controls and      Procedures                                                                                                                                                                              | 14       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| PART      II.  OTHER INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| Item      6.  Exhibits                                                                                                                                                                                                  | 14       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| SIGNATURES                                                                                                                                                                                                                        | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | March      31, |         |   | December      31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 2008           |         |   | 2007              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |           |         |   |              |   |
| Current      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |
| Cash      and cash      equivalents                                                                                                                                | $              | 73,944,616   |   |              | $      | 74,795,388 |   |
| Short-term      investments                                                                                                                                        |           | 2,012,415    |   |              |   | 18,080,032 |   |
| Accounts      receivable                                                                                                                                           |           | 58,065       |   |              |   | 2,634,422 |   |
| Prepaid      expenses and other current      assets                                                                                                                |           | 728,869      |   |              |   | 1,290,260 |   |
| Total      current      assets                                                                                                                                                                        |           | 76,743,965   |   |              |   | 96,800,102 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |   |   |
| Equipment      and leasehold improvements, net of accumulateddepreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |           |         |   |              |   |   |   |
| and      amortization                                                                                                                                              |           | 2,163,744    |   |              |   | 2,361,053 |   |
| Debt      issuance costs and other      assets                                                                                                      |           | 3,631,167    |   |              |   | 3,977,873 |   |
| Total      assets                                                                                                                                                                                     | $              | 82,538,876   |   |              | $      | 103,139,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |   |   |
| Liabilities      and Shareholders' Deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |           |         |   |              |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |           |         |   |              |   |   |   |
| Accounts      payable                                                                                                                                              | $              | 1,504,671    |   |              | $      | 781,119 |   |
| Accrued      research and      development                                                                                                                         |           | 2,973,390    |   |              |   | 3,765,745 |   |
| Accrued      interest                                                                                                                                              |           | 883,992      |   |              |   | 2,876,150 |   |
| Accrued      compensation                                                                                                                                          |           | 1,728,576    |   |              |   | 2,258,051 |   |
| Accrued      and other      liabilities                                                                                                                            |           | 772,736      |   |              |   | 920,736 |   |
| Current      portion of convertible notes      payable                                                                                                             |           | 30,500,000   |   |              |   | 35,968,750 |   |
| Total      current      liabilities                                                                                                                                                                   |           | 38,363,365   |   |              |   | 46,570,551 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |   |   |
| Convertible      notes payable, net of current      portion                                                                                         |           | 253,330,804  |   |              |   | 252,163,102 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |   |   |
| Shareholders'      deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |           |         |   |              |   |   |   |
| Preferred      stock, no par value:  Authorized—5,000,000shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |           | —      |   |              |   | — |   |
| Common      stock, no par value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |           |         |   |              |   |   |   |
| Authorized—100,000,000      shares; issued and outstanding —                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |           |         |   |              |   |   |   |
| 39,518,492      shares at March 31, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |           |         |   |              |   |   |   |
| and      December 31,      2007                                                                                                                                                                                                     |           | 216,575,019  |   |              |   | 215,243,310 |   |
| Warrants                                                                                                                                                           |           | 613,021      |   |              |   | 613,021 |   |
| Accumulated      deficit                                                                                                                                           |           | (426,357,709 | )      |              |   | (411,465,815 |  ) |
| Accumulated      other comprehensive      gain                                                                                                                     |           | 14,376       |   |              |   | 14,859 |   |
| Total      shareholders'      deficit                                                                                                                                                                 |           | (209,155,293 | )      |              |   | (195,594,625 |  ) |
| Total      liabilities and shareholders'      deficit                                                                                                                                                 | $              | 82,538,876   |   |              | $      | 103,139,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |           |         |   |              |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Three      months ended |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | March      31,          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2008                    |        |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                    |        |   |   |   |
|    License      fees                                                                                                                         |   | $                       | —     |   |   | $ | 6,250,000 |   |
|    Research      and      development                                                                                                        |   |                    | —     |   |   |   | 5,211,252 |   |
|       Total      revenues                                                                                                     |   |                    | —     |   |   |   | 11,461,252 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |   |   |
| Operating      expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                    |        |   |   |   |   |   |
|    Research      and      development                                                                                                        |   |                    | 9,250,062   |   |   |   | 19,964,275 |   |
|    Marketing,      general and      administrative                                                                                           |   |                    | 3,135,159   |   |   |   | 3,945,503 |   |
|       Total      operating      expenses                                                                                      |   |                    | 12,385,221  |   |   |   | 23,909,778 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |   |   |
| Operating      loss                                                                                                                                         |   |                    | (12,385,221 | ) |   |   | (12,448,526 | ) |
| Interest      and other      income                                                                                                                         |   |                    | 893,637     |   |   |   | 1,883,683 |   |
| Interest      expense                                                                                                                                       |   |                    | (3,400,310  | ) |   |   | (2,087,781 | ) |
| Net      loss                                                                                                                                               |   | $                       | (14,891,894 | ) |   | $ | (12,652,624 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |   |   |
| Net      loss per share –                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                    |        |   |   |   |   |   |
|    basic      and      diluted                                                                                                               |   | $                       | (0.38       | ) |   | $ | (0.32 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |   |   |
| Weighted      average shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                    |        |   |   |   |   |   |
|    outstanding      – basic and      diluted                                                                                           |   |                    | 39,518,492  |   |   |   | 39,468,054 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Three      months ended |        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | March      31,          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2008                    |        |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |   |   |
| Operating      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |   |   |
| Net      loss                                                                                                                                                                                                  | $                       | (14,891,894 | ) |   | $ | (12,652,624 | ) |
| Adjustments      to reconcile net loss to net cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                    |        |   |   |   |   |   |
|    used      in operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |   |   |   |   |
|        Stock-based      compensation                                                                                                                                        |                    | 1,331,709   |   |   |   | 2,597,004 |   |
|        Amortization      on 4.5% convertible notes due 2011                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                    | 1,167,702   |   |   |   | — |   |
|        Amortization      of debt issuance      costs                                                                                                                        |                    | 325,371     |   |   |   | 370,281 |   |
|        Depreciation      and      amortization                                                                                                                              |                    | 197,309     |   |   |   | 265,233 |   |
|        Amortization      of deferred      revenue                                                                                                                           |                    | —     |   |   |   | (6,225,583 | ) |
|        Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                    |        |   |   |   |   |   |
|          Accounts      receivable                                                                                                                                 |                    | 2,576,357   |   |   |   | (44,976 | ) |
|          Prepaid      expenses and other      assets                                                                                                              |                    | 582,726     |   |   |   | 91,405 |   |
|          Accounts      payable                                                                                                                                    |                    | 723,552     |   |   |   | (1,301,973 | ) |
|          Accrued      research and      development                                                                                                               |                    | (792,355    | ) |   |   | (2,256,073 | ) |
|          Accrued      interest                                                                                                                                    |                    | (1,992,158  | ) |   |   | (1,717,500 | ) |
|          Accrued      compensation                                                                                                                                |                    | (529,475    | ) |   |   | (606,237 | ) |
|          Accrued      and other      liabilities                                                                                                                  |                    | (148,000    | ) |   |   | 140,869 |   |
|             Net      cash used in operating      activities                                                                                        |                    | (11,449,156 | ) |   |   | (21,340,174 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |   |   |   |   |
| Investing      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |   |   |   |   |
| Sales      and maturities of short-term      investments                                                                                                                                                       |                    | 16,067,134  |   |   |   | 34,408,824 |   |
| Purchases      of short-term      investments                                                                                                                                                                  |                    | —     |   |   |   | (18,812,481 | ) |
| Purchases      of equipment and leasehold improvements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | —     |   |   |   | (164,014 | ) |
|             Net      cash provided by investing      activities                                                                                    |                    | 16,067,134  |   |   |   | 15,432,329 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |   |   |   |   |
| Financing      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |   |   |   |   |
| Retirement      of 4.5% convertible notes due      2008                                                                                                                                                        |                    | (5,468,750  | ) |   |   | — |   |
| Proceeds      from the exercise of common stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                    | —     |   |   |   | 15,555 |   |
|             Net      cash (used in) provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                    | (5,468,750  | ) |   |   | 15,555 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |   |   |   |   |
| Decrease      in cash and cash      equivalents                                                                                                                                                                |                    | (850,772    | ) |   |   | (5,892,290 | ) |
| Cash      and cash equivalents at beginning of      period                                                                                                                                                     |                    | 74,795,388  |   |   |   | 87,846,079 |   |
| Cash      and cash equivalents at end of      period                                                                                                                                                           | $                       | 73,944,616  |   |   | $ | 81,953,789 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |   |   |   |   |
| Supplemental      disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                    |        |   |   |   |   |   |
| Interest      paid                                                                                                                                                                                             | $                       | 3,899,396   |   |   | $ | 3,435,000 |   |

----

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Three      months ended                                                                                |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | March      31, 2008                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                                   |
| Expected      volatility                                                                                                     | 84.88%                                                                                                 |
| Expected      term                                                                                                           |  5 years                                                                                          |
| Risk      free interest      rate                                                                                            |   2.82%                                                                                      |
| Fair      value of      grants                                                                                               |                     $  0.27 |

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| 2008      Notes                                                                                                                                          |   | $      | 30,500,000  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |        |   |
| 2011      Notes                                                                                                                                          |   |   | 71,898,000  |   |
| 2012      Notes                                                                                                                                          |   |   | 200,000,000 |   |
|    Face      value of convertible      notes                                                                                              |   |   | 271,898,000 |   |
| Discount      on the 2011 Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | (19,072,320 | )      |
| Premium      on the 2011      Notes                                                                                                                      |   |   | 505,124     |   |
|    Total      2011 Notes and 2012      Notes                                                                                              |   | $      | 253,330,804 |   |

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Three      months ended |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | March      31,          |      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2008                    |      |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                    |      |   |   |   |
|    Direct      external AGI-1067      costs                                                                                              |   | $                       | 5,435,987 |   |   | $ | 10,442,900 |   |
|    Unallocated      internal costs and other programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                    | 3,814,075 |   |   |   | 9,521,375 |   |
|       Total      research and      development                                                                            |   | $                       | 9,250,062 |   |   | $ | 19,964,275 |   |

----

----

----

|                                                                                                                                                                                                                                                                                                                                    | Payments      Due by Period |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                                                                                                                                                                                                                                    | Total                       |   | 2008 |   | 2009-2010 |   | 2011-2012 |   | Thereafter |
| Contractual      obligations                                                                                                                                                                                                                                                                                                            |                        |   |   |   |   |   |   |   |   |
|   Convertible      notes                                                                | $      302,398,000          |   | $      30,500,000 |   | $               — |   | $      271,898,000 |   | $       — |
|   Interest      on convertible      notes                                               | 22,392,480                  |   | 3,803,955 |   | 12,470,820 |   | 6,117,705 |   | — |
|   Operating      leases                                                                 | 1,160,148                   |   | 945,497 |   | 214,651 |   | — |   | — |
|     Total      contractual obligations                                                                                                                                                                                                                                                                              | $      325,950,628          |   | $      35,249,452 |   | $      12,685,471 |   | $      278,015,705 |   | $       — |

|   | • | the      cost of commercialization activities, including product marketing, sales      and distribution;  |
|--------|---------|----------------------------------------------------------------------------------------------------------------|

|   | • | the      costs involved in preparing, filing, prosecuting, maintaining and      enforcing patent claims and other patent-related      costs; and |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | our      inability to successfully develop and commercialize    AGI-1067;                                                                                                                                                                                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      inability to raise additional capital before or after the maturity date of      the 2008 Notes, enter into collaboration arrangements for AGI-1067 or      restructure the 2008 Notes before they become due, we may seek relief      under the Bankruptcy Code;                                      |
|   |                                                                                                                                                                                                                                                                                                           |
| · | the      actual results of clinical studies of AGI-1067 to treat diabetes and      related regulatory judgments concerning AGI-1067 for use in diabetes      management;                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                           |
| · | if      our common stock is no longer traded on a national securities exchange or      system of automated quotations, the holders of our convertible notes have      the right to require us to immediately repay amounts outstanding under      such notes, together with accrued interest up to such  date; |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to generate positive cash flow in light of our history of      operating losses;                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                           |
| · | generally      evolving regulatory requirements for drug product approval and      marketing;                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to successfully develop AGI-1096 or our other product      candidates;                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to commercialize our product candidates if we fail to demonstrate      adequately their safety                                                                                                                                                                                                |
|   | and      efficacy;                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                           |
| · | possible      delays in our clinical trials;                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      inability to predict whether or when we will obtain regulatory approval to      commercialize our                                                                                                                                                                                                     |
|   | product      candidates or the timing of any future revenue from these product      candidates;                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      need to comply with applicable regulatory requirements in the manufacture      and distribution                                                                                                                                                                                                       |
|   | of      our products to avoid incurring penalties that my inhibit our ability to      commercialize our product;                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                           |
| · | regulatory      authorities may require that we conduct additional clinical trials or      modify existing clinical trials;                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to protect adequately or enforce our intellectual property rights      or secure rights to third                                                                                                                                                                                              |
|   | party      patents;                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                           |
| · | the      ability of our competitors to develop and market anti-inflammatory      products that are more                                                                                                                                                                                                        |
|   | effective,      have fewer side effects or are less expensive than our current or future      product candidates;                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                           |
| · | third      parties' failure to synthesize and manufacture our product candidates,      which could delay our                                                                                                                                                                                                   |
|   | clinical      trials or hinder our commercialization prospects;                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to create sales, marketing and distribution capabilities or enter      into agreements with third                                                                                                                                                                                             |
|   | parties      to perform these functions;                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to attract, retain and motivate skilled personnel and cultivate      key academic collaborations;                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      ability to obtain an adequate level of reimbursement or acceptable prices      for our products;                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                           |
| · | we      may face product liability lawsuits which may cause us to incur      substantial financial loss or we may                                                                                                                                                                                              |
|   | be      unable to obtain future product liability insurance at reasonable prices,      if at all, either of which                                                                                                                                                                                              |
|   | could      diminish our ability to commercialize our future  products;                                                                                                                                                                                                                                         |

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| · | our      ability to repay $30.5 million principal amount on the 4.5% convertible      notes due September 1, 2008 and our other notes as they become due;      and |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                               |
| · | the      conversion of our convertible notes would dilute the ownership interest of      existing shareholders                                                     |
|   | and      could adversely affect the market price of our common    stock.                                                                                           |

| Exhibit      10.1* | -      | Manufacturing      and Supply Agreement between AtheroGenics, Inc. and ISP Pharma Systems LLC      dated April 1, 2008. |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                    |
| Exhibit      31.1  | -      | Certifications      of Chief Executive Officer under Rule 13a-14(a).                                                    |
|               |   |                                                                                                                    |
| Exhibit      31.2  | -      | Certifications      of Chief Financial Officer under Rule 13a-14(a).                                                    |
|               |   |                                                                                                                    |
| Exhibit      32    | -      | Certifications      of Chief Executive Officer and Chief Financial Officer under Section      1350.                     |

|   | * | Certain      confidential information contained in this document has been omitted and      filed separately with the Commission pursuant to a request for conditional      treatment. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                              | ATHEROGENICS,      INC.                                  |
|-----------------------------------|----------------------------------------------------------|
|                              |                                                     |
| Date:  May      9, 2008 |        /s/MARK P. COLONNESE                         |
|                              | Mark      P. Colonnese                                   |
|                              | Executive      Vice President, Commercial Operations and |
|                              |    Chief      Financial Officer           |
|                              |                                                     |
|                              |                                                     |

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