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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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |     |
|           June      30, 2008 and December 31,      2007                                                                                                                                                                                               | 1        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
|      Condensed      Statements of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     |
|           Three      and six months ended June 30, 2008 and      2007                                                                                                                                                                                 | 2        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
|      Condensed      Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     |
|           Six      months ended June 30, 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      4.  Submission of Matters to a Vote of Security      Holders                                                                                                                                                  | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| Item      6.  Exhibits                                                                                                                                                                                                  | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |
| SIGNATURES                                                                                                                                                                                                                        | 16       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | June      30, |         |   | December      31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 2008          |         |   | 2007              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |          |         |   |              |   |
| Current      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |
| Cash      and cash      equivalents                                                                                                                                | $             | 64,213,034   |   |              | $      | 74,795,388 |   |
| Short-term      investments                                                                                                                                        |          | 2,001,490    |   |              |   | 18,080,032 |   |
| Accounts      receivable                                                                                                                                           |          | 200,315      |   |              |   | 2,634,422 |   |
| Prepaid      expenses and other current      assets                                                                                                                |          | 655,934      |   |              |   | 1,290,260 |   |
| Total      current      assets                                                                                                                                                                        |          | 67,070,773   |   |              |   | 96,800,102 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |   |   |
| Equipment      and leasehold improvements, net of accumulateddepreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |         |   |              |   |   |   |
| and      amortization                                                                                                                                              |          | 2,004,571    |   |              |   | 2,361,053 |   |
| Debt      issuance costs and other      assets                                                                                                      |          | 3,333,154    |   |              |   | 3,977,873 |   |
| Total      assets                                                                                                                                                                                     | $             | 72,408,498   |   |              | $      | 103,139,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |   |   |
| Liabilities      and Shareholders' Deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |          |         |   |              |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |         |   |              |   |   |   |
| Accounts      payable                                                                                                                                              | $             | 1,648,117    |   |              | $      | 781,119 |   |
| Accrued      research and      development                                                                                                                         |          | 3,131,771    |   |              |   | 3,765,745 |   |
| Accrued      interest                                                                                                                                              |          | 2,785,970    |   |              |   | 2,876,150 |   |
| Accrued      compensation                                                                                                                                          |          | 1,293,065    |   |              |   | 2,258,051 |   |
| Accrued      and other      liabilities                                                                                                                            |          | 664,218      |   |              |   | 920,736 |   |
| Current      portion of convertible notes      payable                                                                                                             |          | 30,500,000   |   |              |   | 35,968,750 |   |
| Total      current      liabilities                                                                                                                                                                   |          | 40,023,141   |   |              |   | 46,570,551 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |   |   |
| Convertible      notes payable, net of current      portion                                                                                         |          | 254,551,972  |   |              |   | 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 June 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |          |         |   |              |   |   |   |
| and      December 31,      2007                                                                                                                                                                                                     |          | 217,906,498  |   |              |   | 215,243,310 |   |
| Warrants                                                                                                                                                           |          | 613,021      |   |              |   | 613,021 |   |
| Accumulated      deficit                                                                                                                                           |          | (440,688,351 | )      |              |   | (411,465,815 | ) |
| Accumulated      other comprehensive      gain                                                                                                                     |          | 2,217        |   |              |   | 14,859 |   |
| Total      shareholders'      deficit                                                                                                                                                                 |          | (222,166,615 | )      |              |   | (195,594,625 | ) |
| Total      liabilities and shareholders'      deficit                                                                                                                                                 | $             | 72,408,498   |   |              | $      | 103,139,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |         |   |              |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                     |   | Three      months ended |        |   | Six      months ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                     |   | June      30,           |        |   | June      30,         |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |   | 2008                    |        |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                |   |                    |        |   |                  |   |   |   |   |   |   |   |
|    License      fees                                                                                       |   | $                       | —     |   |                  | $      | 20,833,333 |   |   | $ | — |   |   | $ | 27,083,333 |   |
|    Research      and      development                                                                      |   |                    | —     |   |                  |   | 9,425,371 |   |   |   | — |   |   |   | 14,636,623 |   |
|       Total      revenues                                                                   |   |                    | —     |   |                  |   | 30,258,704 |   |   |   | — |   |   |   | 41,719,956 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                                                                                                                                                                                                                                                                                                                                                                 |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|    Research      and      development                                                                      |   |                    | 8,463,710   |   |                  |   | 22,330,198 |   |   |   | 17,713,772 |   |   |   | 42,294,473 |   |
|    Marketing,      general and administrative                                                                                                                                                                                                                                                                                                                             |   |                    | 2,926,498   |   |                  |   | 3,587,195 |   |   |   | 6,061,657 |   |   |   | 7,532,698 |   |
|    Restructuring      and impairment costs                                                                                                                                                                                                                                                                                                                                |   |                    | —     |   |                  |   | 9,996,332 |   |   |   | — |   |   |   | 9,996,332 |   |
|       Total      operating      expenses                                                    |   |                    | 11,390,208  |   |                  |   | 35,913,725 |   |   |   | 23,775,429 |   |   |   | 59,823,503 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss                                                                                                       |   |                    | (11,390,208 | )      |                  |   | (5,655,021 | ) |   |   | (23,775,429 | ) |   |   | (18,103,547 | ) |
| Interest      and other      income                                                                                       |   |                    | 480,724     |   |                  |   | 1,604,120 |   |   |   | 1,374,361 |   |   |   | 3,487,803 |   |
| Interest      expense                                                                                                     |   |                    | (3,421,158  | )      |                  |   | (2,087,780 | ) |   |   | (6,821,468 | ) |   |   | (4,175,561 | ) |
| Net      loss                                                                                                             |   | $                       | (14,330,642 | )      |                  | $      | (6,138,681 | ) |   | $ | (29,222,536 | ) |   | $ | (18,791,305 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss per share –                                                                                                                                                                                                                                                                                                                                                          |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|    basic      and      diluted                                                                             |   | $                       | (0.36       | )      |                  | $      | (0.16 | ) |   | $ | (0.74 | ) |   | $ | (0.48 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares                                                                                                                                                                                                                                                                                                                                                             |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|    outstanding      – basic and diluted                                                                                                                                                                                                                                                                                                                             |   |                    | 39,518,492  |   |                  |   | 39,498,338 |   |   |   | 39,518,492 |   |   |   | 39,483,280 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Six      months ended |        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | June      30,         |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2008                  |        |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                  |        |   |   |   |
| Operating      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                  |        |   |   |   |
| Net      loss                                                                                                                                                                                                  | $                     | (29,222,536 | ) |   | $ | (18,791,305 | ) |
| Adjustments      to reconcile net loss to net cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                  |        |   |   |   |   |   |
|    used      in operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                  |        |   |   |   |   |   |
|        Stock-based      compensation                                                                                                                                        |                  | 2,663,188   |   |   |   | 4,842,775 |   |
|        Amortization      on 4.5% convertible notes due 2011                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                  | 2,388,870   |   |   |   | — |   |
|        Amortization      of debt issuance      costs                                                                                                                        |                  | 623,384     |   |   |   | 740,562 |   |
|        Depreciation      and      amortization                                                                                                                              |                  | 390,082     |   |   |   | 495,165 |   |
|        Amortization      of deferred      revenue                                                                                                                           |                  | —     |   |   |   | (27,083,333 | ) |
|        Asset      impairment      costs                                                                                                                                     |                  | —     |   |   |   | 9,005,153 |   |
|        Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                  |        |   |   |   |   |   |
|          Accounts      receivable                                                                                                                                 |                  | 2,434,107   |   |   |   | (10,008,699 | ) |
|          Prepaid      expenses and other      assets                                                                                                              |                  | 655,661     |   |   |   | 1,588,981 |   |
|          Accounts      payable                                                                                                                                    |                  | 866,998     |   |   |   | 7,355,260 |   |
|          Accrued      research and      development                                                                                                               |                  | (633,974    | ) |   |   | (4,804,600 | ) |
|          Accrued      interest                                                                                                                                    |                  | (90,180     | ) |   |   | — |   |
|          Accrued      compensation                                                                                                                                |                  | (964,986    | ) |   |   | 297,712 |   |
|          Accrued      and other      liabilities                                                                                                                  |                  | (256,518    | ) |   |   | (81,927 | ) |
|             Net      cash used in operating      activities                                                                                        |                  | (21,145,904 | ) |   |   | (36,444,256 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                  |        |   |   |   |   |   |
| Investing      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                  |        |   |   |   |   |   |
| Sales      and maturities of short-term      investments                                                                                                                                                       |                  | 16,065,900  |   |   |   | 71,295,574 |   |
| Purchases      of short-term      investments                                                                                                                                                                  |                  | —     |   |   |   | (44,306,574 | ) |
| Purchases      of equipment and leasehold improvements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                  | (33,600     | ) |   |   | (660,693 | ) |
|             Net      cash provided by investing      activities                                                                                    |                  | 16,032,300  |   |   |   | 26,328,307 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                  |        |   |   |   |   |   |
| Financing      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                  |        |   |   |   |   |   |
| Retirement      of 4.5% convertible notes due      2008                                                                                                                                                        |                  | (5,468,750  | ) |   |   | — |   |
| Proceeds      from the exercise of common stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                  | —     |   |   |   | 20,074 |   |
|             Net      cash (used in) provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                  | (5,468,750  | ) |   |   | 20,074 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                  |        |   |   |   |   |   |
| Decrease      in cash and cash      equivalents                                                                                                                                                                |                  | (10,582,354 | ) |   |   | (10,095,875 | ) |
| Cash      and cash equivalents at beginning of      period                                                                                                                                                     |                  | 74,795,388  |   |   |   | 87,846,079 |   |
| Cash      and cash equivalents at end of      period                                                                                                                                                           | $                     | 64,213,034  |   |   | $ | 77,750,204 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                  |        |   |   |   |   |   |
| Supplemental      disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                  |        |   |   |   |   |   |
| Interest      paid                                                                                                                                                                                             | $                     | 3,899,396   |   |   | $ | 3,435,000 |   |

----

----

----

|                                                                                                                                                                                                                                                                                                                  | Three      months ended |   | Six      months ended |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|--------|-----------------------|
|                                                                                                                                                                                                                                                                                                                  | June      30,           |   | June      30,         |
|                                                                                                                                                                                                                                                                                                                  | 2008                    |   | 2007                  |   | 2008 |   | 2007 |
|                                                                                                                                                                                                                                                                                                                  |                    |   |                  |   |   |   |   |
| Expected      volatility                                                        | 89.52%                  |   | 83.10%                |   | 89.14% |   | 83.10% |
| Expected      term                                                              | 5      years            |   | 3.5      years        |   | 5      years |   | 3.5      years |
| Risk      free interest      rate                                               | 3.24%                   |   | 4.92%                 |   | 3.21% |   | 4.92% |
| Fair      value of      grants                                                  | $0.42                   |   | $1.42                 |   | $0.41 |   | $1.42 |

----

| 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                                                                                                                     | (17,809,522                               | )      |
| Premium      on the 2011      Notes                                                                                                                      | 463,494                                   |   |
|    Total      2011 Notes and 2012      Notes                                                                                              | $  254,551,972                  |   |

----

----

----

|                                                  | Three      months ended |   | Six      months ended |
|-------------------------------------------------------|-------------------------|--------|-----------------------|
|                                                  | June      30,           |   | June      30,         |
|                                                  | 2008                    |   | 2007                  |   | 2008 |   | 2007 |
|                                                  |                    |   |                  |   |   |   |   |
| Direct      external AGI-1067 costs                   | $4,702,957              |   | $15,168,587           |   | $10,138,944 |   | $25,611,487 |
| Unallocated      internal costs and other programs    | 3,760,753               |   | 7,161,611             |   | 7,574,828 |   | 16,682,986 |
|    Total      research and development | $8,463,710              |   | $22,330,198           |   | $17,713,772 |   | $42,294,473 |

----

----

| · | 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; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                   |
| · | the      scope and results of our research, preclinical and clinical development      activities;                                                                                                                      |

----

|   |                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | the      timing of, and the costs involved in, obtaining regulatory      approvals;                                                                   |
|   |                                                                                                                                                  |
| · | our      ability to maintain and establish collaborations and the financial terms      of any collaborations;                                         |
|   |                                                                                                                                                  |
| · | the      costs involved in preparing, filing, prosecuting, maintaining and      enforcing patent claims and other patent-related      costs; and |
|   |                                                                                                                                                  |
| · | the      extent to which we acquire or invest in businesses, products and      technologies.                                                          |

| · | if      we are unable 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;                                   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      independent auditor may issue a qualified opinion on our December 31, 2008      audited financials if at that time there is substantial doubt about our      ability to continue as a going concern;                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                           |
| · | our      inability to successfully develop and commercialize    AGI-1067;                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                           |
| · | 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 may inhibit our ability to      commercialize our products;          |
|   |                                                                                                                        |
| · | 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;                                                      |
|   |                                                                                                                        |
| · | 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.                                                    |

----

| Name of      Nominee     | No. of Votes      For | No. of Votes      Withheld |
|--------------------------|-----------------------|----------------------------|
|                     |                  |                       |
| R.      Wayne Alexander  | 24,270,306            | 3,017,706                  |
| Samuel      L. Barker    | 24,564,271            | 2,723,741                  |
| Margaret      E. Grayson | 24,732,250            | 2,555,762                  |
| William      A. Scott    | 24,693,468            | 2,594,544                  |

| No. of Votes      For | No. of Votes      Against | Abstention | Broker      Non-Votes |
|-----------------------|---------------------------|------------|-----------------------|
|                  |                      |       |                  |
| 7,780,179             | 2,835,382                 | 87,584     | 16,584,867            |

| No. of Votes      For | No. of Votes      Against | Abstention |
|-----------------------|---------------------------|------------|
|                  |                      |       |
| 26,607,812            | 443,634                   | 236,566    |

| 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. |

----

|                                  | ATHEROGENICS,      INC.                                  |
|---------------------------------------|----------------------------------------------------------|
|                                  |                                                     |
| Date:  August      11, 2008 |  /s/MARK P.COLONNESE                                |
|                                  | Mark      P. Colonnese                                   |
|                                  | Executive      Vice President, Commercial Operations and |
|                                  |    Chief      Financial Officer           |
|                                  |                                                     |
|                                  |                                                     |

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