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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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     |
|           September      30, 2008 and December 31,      2007                                                                                                                                | 1        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
|      Condensed      Statements of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |
|           Three      and nine months ended September 30, 2008 and      2007                                                                                                                 | 2        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
|      Condensed      Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |
|           Nine      months ended September 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                                                                                                                             | 9        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| Item      3.  Quantitative and Qualitative Disclosures About Market      Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| Item      4.  Controls and      Procedures                                                                                                                                                                                          | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| PART      II.  OTHER INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| Item      1.  Legal Proceedings                                                                                                                                                                                                     | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| Item      1A.  Risk      Factors                                                                                                                                                                                                    | 16       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| Item      3.  Defaults Upon Senior      Securities                                                                                                                                                                                  | 17       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| Item      6.  Exhibits                                                                                                                                                                                                              | 17       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
| SIGNATURES                                                                                                                                                                                                                                    | 18       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | September      30, |         |   | December      31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 2008               |         |   | 2007              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |               |         |   |              |   |
| Current      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |
| Cash      and cash      equivalents                                                                                                                                | $                  | 52,722,834   |   |              | $      | 74,795,388 |   |
| Short-term      investments                                                                                                                                        |               | —      |   |              |   | 18,080,032 |   |
| Accounts      receivable                                                                                                                                           |               | 41,429       |   |              |   | 2,634,422 |   |
| Prepaid      expenses and other current      assets                                                                                                                |               | 1,414,080    |   |              |   | 1,290,260 |   |
| Total      current      assets                                                                                                                                                                        |               | 54,178,343   |   |              |   | 96,800,102 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |   |   |
| Equipment      and leasehold improvements, net of accumulateddepreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |         |   |              |   |   |   |
| and      amortization                                                                                                                                              |               | 1,680,024    |   |              |   | 2,361,053 |   |
| Debt      issuance costs and other      assets                                                                                                      |               | —      |   |              |   | 3,977,873 |   |
| Total      assets                                                                                                                                                                                     | $                  | 55,858,367   |   |              | $      | 103,139,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |   |   |
| Liabilities      and Shareholders' Deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |               |         |   |              |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |               |         |   |              |   |   |   |
| Accounts      payable                                                                                                                                              | $                  | —      |   |              | $      | 781,119 |   |
| Accrued      research and      development                                                                                                                         |               | —      |   |              |   | 3,765,745 |   |
| Accrued      interest                                                                                                                                              |               | —      |   |              |   | 2,876,150 |   |
| Accrued      compensation                                                                                                                                          |               | 259,745      |   |              |   | 2,258,051 |   |
| Accrued      and other      liabilities                                                                                                                            |               | 43,315       |   |              |   | 920,736 |   |
| Current      portion of convertible notes      payable                                                                                                             |               | —      |   |              |   | 35,968,750 |   |
| Total      current liabilities not subject to compromise                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |               | 303,060      |   |              |   | 46,570,551 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |   |   |
| Liabilities      subject to      compromise                                                                                                                        |               | 306,728,421  |   |              |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |   |   |
| Convertible      notes payable, net of current      portion                                                                                         |               | —      |   |              |   | 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 September 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |               |         |   |              |   |   |   |
| and      December 31,      2007                                                                                                                                                                                                     |               | 218,706,283  |   |              |   | 215,243,310 |   |
| Warrants                                                                                                                                                           |               | 598,362      |   |              |   | 613,021 |   |
| Accumulated      deficit                                                                                                                                           |               | (470,477,759 | )      |              |   | (411,465,815 |  ) |
| Accumulated      other comprehensive      gain                                                                                                                     |               | —      |   |              |   | 14,859 |   |
| Total      shareholders'      deficit                                                                                                                                                                 |               | (251,173,114 | )      |              |   | (195,594,625 |  ) |
| Total      liabilities and shareholders'      deficit                                                                                                                                                 | $                  | 55,858,367   |   |              | $      | 103,139,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |               |         |   |              |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                     | Three      months ended |        |   | Nine      months ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|-------------|--------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                     | September      30,      |        |   | September      30,     |   |
|                                                                                                                                                                                                                                                                                                                                                                                     | 2008                    |        |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                |                    |        |   |                   |   |   |   |   |   |   |   |
|    License      fees                                                                                       | $                       | —     |   |                   | $      | — |   |   | $ | — |   |   | $ | 27,083,333 |   |
|    Research      and      development                                                                      |                    | —     |   |                   |   | 7,438,867 |   |   |   | — |   |   |   | 22,075,490 |   |
|       Total      revenues                                                                   |                    | —     |   |                   |   | 7,438,867 |   |   |   | — |   |   |   | 49,158,823 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                                                                                                                                                                                                                                                                                                                                                                 |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|    Research      and      development                                                                      |                    | 5,478,117   |   |                   |   | 16,818,119 |   |   |   | 23,191,889 |   |   |   | 59,112,592 |   |
|    General      and      administrative                                                                    |                    | 2,567,302   |   |                   |   | 3,086,868 |   |   |   | 8,628,959 |   |   |   | 10,619,566 |   |
|    Restructuring      and impairment costs                                                                                                                                                                                                                                                                                                                                |                    | (572,000    | )      |                   |   | — |   |   |   | (572,000 | ) |   |   | 9,996,332 |   |
|       Total      operating      expenses                                                    |                    | 7,473,419   |   |                   |   | 19,904,987 |   |   |   | 31,248,848 |   |   |   | 79,728,490 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss                                                                                                       |                    | (7,473,419  | )      |                   |   | (12,466,120 | ) |   |   | (31,248,848 | )) |   |   | (30,569,667 | ) |
| Interest      and other      income                                                                                       |                    | 257,918     |   |                   |   | 1,310,322 |   |   |   | 1,632,279 |   |   |   | 4,798,125 |   |
| Interest      expense                                                                                                     |                    | (2,630,572  | )      |                   |   | (3,519,669 | ) |   |   | (9,452,040 | ) |   |   | (7,695,230 | ) |
| Net      loss before reorganization items                                                                                                                                                                                                                                                                                                                                                |                    | (9,846,073  | )      |                   |   | (14,675,467 | ) |   |   | (39,068,609 | ) |   |   | (33,466,772 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Reorganization      items,      net                                                                                       |                    | (19,943,335 | )      |                   |   | — |   |   |   | (19,943,335 | ) |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                             | $                       | (29,789,408 | )      |                   | $      | (14,675,467 | ) |   | $ | (59,011,944 | ) |   | $ | (33,466,772 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss per share –                                                                                                                                                                                                                                                                                                                                                          |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|    basic      and      diluted                                                                             | $                       | (0.75       | )      |                   | $      | (0.37 | ) |   | $ | (1.49 | ) |   | $ | (0.85 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares                                                                                                                                                                                                                                                                                                                                                             |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|    outstanding      – basic and diluted                                                                                                                                                                                                                                                                                                                             |                    | 39,518,492  |   |                   |   | 39,515,014 |   |   |   | 39,518,492 |   |   |   | 39,493,974 |   |
|                                                                                                                                                                                                                                                                                                                                                                                     |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Nine      months ended |        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | September      30,     |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2008                   |        |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |        |   |   |   |
| Operating      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   |        |   |   |   |
| Net      loss                                                                                                                                                                                                  | $                      | (59,011,944 | ) |   | $ | (33,466,772 | ) |
| Adjustments      to reconcile net loss to net cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                   |        |   |   |   |   |   |
|    used      in operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |        |   |   |   |   |   |
|        Stock-based      compensation                                                                                                                                        |                   | 3,448,314   |   |   |   | 6,696,982 |   |
|        Amortization      on 4.5% convertible notes due 2011                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                   | 19,734,898  |   |   |   | 980,424 |   |
|        Amortization      of debt issuance      costs                                                                                                                        |                   | 3,956,538   |   |   |   | 1,338,207 |   |
|        Depreciation      and      amortization                                                                                                                              |                   | 714,629     |   |   |   | 710,357 |   |
|        Amortization      of deferred      revenue                                                                                                                           |                   | —     |   |   |   | (27,083,333 | ) |
|        Asset      impairment      costs                                                                                                                                     |                   | —     |   |   |   | 9,005,153 |   |
|        Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   |        |   |   |   |   |   |
|          Accounts      receivable                                                                                                                                 |                   | 2,592,993   |   |   |   | (945,081 | ) |
|          Prepaid      expenses and other      assets                                                                                                              |                   | (102,485    | ) |   |   | 1,014,733 |   |
|          Accounts      payable                                                                                                                                    |                   | (532,899    | ) |   |   | 1,885,574 |   |
|          Accrued      research and      development                                                                                                               |                   | (2,853,953  | ) |   |   | (7,759,460 | ) |
|          Accrued      interest                                                                                                                                    |                   | (5,199      | ) |   |   | (1,633,462 | ) |
|          Accrued      compensation                                                                                                                                |                   | (1,998,306  | ) |   |   | 59,643 |   |
|          Accrued      and other      liabilities                                                                                                                  |                   | (577,963    | ) |   |   | (184,029 | ) |
|          Deferred      revenue                                                                                                                                    |                   | —     |   |   |   | 1,554,369 |   |
|             Net      cash used in operating      activities                                                                                        |                   | (34,635,377 | ) |   |   | (47,826,695 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |        |   |   |   |   |   |
| Investing      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   |        |   |   |   |   |   |
| Sales      and maturities of short-term      investments                                                                                                                                                       |                   | 18,065,173  |   |   |   | 104,729,736 |   |
| Purchases      of short-term      investments                                                                                                                                                                  |                   | —     |   |   |   | (59,963,664 | ) |
| Purchases      of equipment and leasehold improvements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                   | (33,600     | ) |   |   | (2,594,274 | ) |
|             Net      cash provided by investing      activities                                                                                    |                   | 18,031,573  |   |   |   | 42,171,798 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |        |   |   |   |   |   |
| Financing      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   |        |   |   |   |   |   |
| Retirement      of 4.5% convertible notes due      2008                                                                                                                                                        |                   | (5,468,750  | ) |   |   | — |   |
| Proceeds      from the exercise of common stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                   | —     |   |   |   | 23,074 |   |
|             Net      cash (used in) provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   | (5,468,750  | ) |   |   | 23,074 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |        |   |   |   |   |   |
| Decrease      in cash and cash      equivalents                                                                                                                                                                |                   | (22,072,554 | ) |   |   | (5,631,823 | ) |
| Cash      and cash equivalents at beginning of      period                                                                                                                                                     |                   | 74,795,388  |   |   |   | 87,846,079 |   |
| Cash      and cash equivalents at end of      period                                                                                                                                                           | $                      | 52,722,834  |   |   | $ | 82,214,256 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |        |   |   |   |   |   |
| Supplemental      disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                   |        |   |   |   |   |   |
| Interest      paid                                                                                                                                                                                             | $                      | 5,399,396   |   |   | $ | 7,010,062 |   |
| Reorganization      items      paid                                                                                                                                                                            |                   | 309,744     |   |   |   | — |   |

----

----

| Accounts      payable                                                                                                                                               | $               248,220 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
| Accrued      interest                                                                                                                                               | 2,870,951                                                            |
| Accrued      research and      development                                                                                                                          | 911,792                                                              |
| Accrued      other                                                                                                                                                  | 299,458                                                              |
| 2008      Notes                                                                                                                                                     | 30,500,000                                                           |
| 2011      Notes                                                                                                                                                     | 71,898,000                                                           |
| 2012      Notes                                                                                                                                                     | 200,000,000                                                          |
|    Total      liabilities subject to      compromise                                                                                                 | $        306,728,421                                       |

| Discount      on the 2011      Notes                                                                                                                   | $  (16,934,684 | )      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|--------|
| Premium      on the 2011      Notes                                                                                                                    | 435,572                  |   |
| Debt      issuance costs on the 2012      Notes                                                                                                        | (3,134,479               | )      |
| Professional      fees                                                                                                                                 | (402,361                 | )      |
| Interest      income                                                                                                                                   | 92,617                   |   |
|    Total      reorganization      items                                                                                                 | $      (19,943,335       | )      |

----

----

|                                                                                                                                                                                                                                                                                                                  | Three      months ended |   | Nine      months ended |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|--------|------------------------|
|                                                                                                                                                                                                                                                                                                                  | September      30,      |   | September      30,     |
|                                                                                                                                                                                                                                                                                                                  | 2008                    |   | 2007                   |   | 2008 |   | 2007 |
|                                                                                                                                                                                                                                                                                                                  |                    |   |                   |   |   |   |   |
| Expected      volatility                                                        | —                 |   | 76.45%                 |   | 89.14% |   | 82.86% |
| Expected      term                                                              | —                 |   | 5      years           |   | 5      years |   | 3.5      years |
| Risk      free interest      rate                                               | —                 |   | 4.54%                  |   | 3.21% |   | 4.91% |
| Fair      value of      grants                                                  | —                 |   | $      1.10            |   | $      0.41 |   | $      1.41 |

----

----

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                         | Three      months ended |   | Nine      months ended |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|--------|------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                         | September      30,      |   | September      30,     |
|                                                                                                                                                                                                                                                                                                                                                                                                                         | 2008                    |   | 2007                   |   | 2008 |   | 2007 |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |                    |   |                   |   |   |   |   |
| Direct      external AGI-1067      costs                                                                              | $      2,038,833        |   | $      12,545,833      |   | $      12,177,777 |   | $      38,157,320 |
| Unallocated      internal costs and other programs                                                                                                                                                                                                                                                                                                                                                                           | 3,439,284               |   | 4,272,286              |   | 11,014,112 |   | 20,955,272 |
|    Total      research and      development                                                            | $      5,478,117        |   | $      16,818,119      |   | $      23,191,889 |   | $      59,112,592 |

----

----

----

|                                                                                                                                                                                                                                                                         | Payment      Due by Period |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------|
|                                                                                                                                                                                                                                                                         | Total                      |   | 2008 |   | 2009-2010 |   | Thereafter |
| Contractual      obligations                                                                                                                                                                                                                                                 |                       |   |   |   |   |   |   |
|    Convertible      notes                                       | $      302,398,000         |   | $      302,398,000 |   | $           — |   | $     — |
|    Interest      on convertible notes                                                                                                                                                                                                                         | 2,870,951                  |   | 2,870,951 |   | — |   | — |
|    Operating      leases                                        | 530,068                    |   | 315,416 |   | 214,652 |   | — |
|       Total      contractual obligations                                                                                                                                                                                                       | $      305,799,019         |   | $      305,584,367 |   | $   214,652 |   | $     — |

| ·   | the      value ascribed to our non-cash assets by any bidder or potential bidder in      the Chapter 11 Proceeding; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | our      ability to continue to operate as a debtor-in-possession during the      Chapter 11 Proceeding; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | the      impact of current financial market conditions on our ability to complete      the sale of our non-cash assets in the Chapter 11    Proceeding; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | the      approval of the terms of any sale of our non-cash assets by the Bankruptcy      Court; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | our      ability to adequately protect or enforce our intellectual property rights      or secure rights to third party patents, which may affect the value      ascribed by a bidder in the Chapter 11 Proceeding to our non-cash      assets; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes      in the Bankruptcy Code; and |
|--------------------|------------------------------------------|

| ·   | our      ability to retain and motivate personnel necessary to complete the Chapter      11 Proceeding. |
|--------------------|---------------------------------------------------------------------------------------------------------|

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  In order to be quoted on the Pink Sheets, market makersmust be willing to enter quotations for our stock. Without a number of marketmakers quoting our common stock, our common stock would be less liquid than itwould otherwise be. In addition, compliance with the rules and regulations ofthe Securities Exchange Act of 1934, as amended, relating to "penny stocks" maymake it more difficult for holders of our common stock to resell their shares tothird parties or to otherwise dispose of them.

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| Description                                                                                                                                                                                                                                                                                                                                                                                                                      | Principal                     |   | Interest                         |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|--------|----------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                             |                          |   |                             |
| 4.5%      convertible notes due September 1, 2008                                                                                                                                                                                                                                                                                                                                                                                | $   30,500,000 |   | $    743,437 |
| 4.5%      convertible notes due March 1, 2011                                                                                                                                                                                                                                                                                                                                                                                    | 71,898,000                    |   | 1,752,514                        |
| 1.5%      convertible notes due February 1, 2012                                                                                                                                                                                                                                                                                                                                                                                 | 200,000,000                   |   | 375,000                          |
|    Total      due                                                                 | $      302,398,000            |   | $      2,870,951                 |

| 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. |

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|                                    | ATHEROGENICS,      INC.                                  |
|-----------------------------------------|----------------------------------------------------------|
|                                    |                                                     |
| Date:  November      13, 2008 |        /s/MARK P. COLONNESE                         |
|                                    | Mark      P. Colonnese                                   |
|                                    | Executive      Vice President, Commercial Operations and |
|                                    |    Chief      Financial Officer           |
|                                    |                                                     |
|                                    |                                                     |

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