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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number: 0-21863
 EPIX PHARMACEUTICALS,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

04-3030815(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)4 Maguire Road, Lexington,
    Massachusetts

02421(Address of principal executive
    offices)

(Zip Code)   Registrants telephone number, including area code:
 (781) 761-7600
 Securities registered pursuant to Section 12(b) of the
    Exchange Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value
    per share

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Exchange Act:
 NONE
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K: Form 10-K




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##### 



TABLE OF
    CONTENTS
  
  PageSection



No.Explanatory
    Note


3Part IItem 1.


Business


5Item 1A.


Risk
    Factors


24Item 1B.


Unresolved Staff
    Comments


46Item 2.


Properties


46Item 3.


Legal
    Proceedings


47Item 4.


Submission of
    Matters to a Vote of Security Holders


47Part IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


48Item 6.


Selected Financial
    Data


50Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


51Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


73Item 8.


Financial
    Statements and Supplementary Data


74Item 9


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


74Item 9A


Controls and
    Procedures


74Item 9B


Other
    Information


76Part IIIItem 10


Directors,
    Executive Officers and Corporate Governance


79Item 11


Executive
    Compensation


79Item 12


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


79Item 13


Certain
    Relationships and Related Transactions, and Director
    Independence


79Item 14


Principal
    Accounting Fees and Services


79Part IVItem 15


Exhibits, Financial
    Statement Schedules


79Ex-10.52 First Amendment to License Agreement between Amgen Inc. and the CompanyEx-12.1 Ratio of Earnings to Fixed ChargesEx-21.1 Subsidiaries of the CompanyEx-23.1 Consent of Independent Registered Public Accounting FirmEx-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32 Section 906 Certification of CEO & CFO    Form 10-K
 2




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EXPLANATORY
    NOTE  Form 10-K Form 10-K
     3




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Form 10-K, Form 10-K/A Form 10-Q
 4




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  This business section and other parts of this Annual Report
    on
    Form 10-K
    contain forward-looking statements relating to, among other
    things, our expectations concerning our research and development
    efforts, regulatory compliance, commercial strategy, strategic
    alliances and collaborative efforts, sales and reimbursement
    efforts and their likely future success. Our forward-looking
    statements involve risk and uncertainties. Our actual results
    may differ significantly from the results discussed in the
    forward-looking statements. Factors that might cause such a
    difference include, but are not limited to, those set forth in
    Item 1A. Risk Factors and elsewhere in this
    Annual Report on
    Form 10-K.
  Overview
    in silico
  1-for-1.5
 5




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OUR
    PRODUCT CANDIDATES
    
  THERAPEUTICS
  PRX-03140
    for Alzheimers disease
  ®
  14-day mild-to-moderate
 6




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PRX-03140
  PRX-08066
    for Pulmonary Hypertension
    PRX-00023
    for Depression
  PRX-00023
     7




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8




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PRX-07034
    for Obesity, Alzheimers disease and Cognitive Impairment
    associated with Schizophrenia
  2 2
  IMAGING
    AGENTS
  Vasovist
        30-day
 9




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EP-2104R
  14-day,
  EP-2104R.
  Our
    Therapeutic Drug Discovery Technology and Approach
  in silico
  in silico 100-200 in vitro
 10




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
    PREDICT-3D in silico modeling.  We have
    developed novel proprietary algorithms which we use in our
    PREDICT technology to model the 3D structure of targets of
    interest (GPCRs and ion channel proteins) from their primary
    amino acid sequence. PREDICT uses algorithms that explore a
    large number of possible structures of the target and then
    selects the biologically relevant one. It takes into account
    specific interactions between the target protein and the
    membrane, specific interactions within the target protein
    itself, and addresses the limitations that hamper homology-based
    modeling of GPCRs and ion channel proteins. The PREDICT software
    code and many of its algorithms are kept as trade secrets,
    making it difficult to copy or reverse engineer. We filed patent
    applications for PREDICT version 1.0 in 2000. The current
    version of PREDICT has evolved considerably from the original
    version and includes numerous new algorithms and capabilities.
    PREDICT bypasses the need for X-ray crystallography structures
    of the GPCR or ion channel protein target to initiate a
    structure-based (so-called rational) drug discovery
    program.
    Virtual libraries.  Our libraries consist of in
    silico versions of approximately four million drug-like
    compounds which are available for purchase from commercial
    vendors worldwide. These virtual libraries reduce the need for
    us to synthesize or purchase, store and maintain tens or
    hundreds of thousands of actual compounds for the initial
    screening.
    Rapid in silico screening.  The process of in
    silicoscreening requires the computer to perform trillions
    of operations in trying to fit numerous drug-like compounds into
    the binding site of the target protein, matching both shape and
    chemical properties. We perform high-throughput in silico
    screening with a combination of proprietary and commercially
    available public software to identify compounds that may bind to
    a target GPCR or ion channel protein.
    Ranking of screening results.  We have
    developed proprietary algorithms for ranking our in silicoscreening results using internally developed tools, which we
    believe enables us to select the
    100-200 most
    promising compounds for in vitrotesting.
    Integrated structure-based lead
    optimization.  The most promising novel lead
    compounds, identified in silicoand shown to have binding
    affinity and functionality in vitro, are optimized
    into drug candidates using an integrated structure-based
    approach. This process makes use of the PREDICT 3D structures
    (of the drug target and related off-target proteins) as well as
    many other in silicotools that we have created to enable
    efficient structure-based lead optimization, leading to highly
    selective drug candidates. These tools allow us to overcome
    challenges frequently encountered during lead optimization, such
    as selectivity, blood-brain barrier penetration and hERG ion
    channel binding, in a fraction of the time and cost compared to
    traditional lead optimization efforts. Using these in silicotools, our computational and medicinal chemists are able to
    select for actual synthesis the most promising subset of
    suggested compounds for further optimization. In each of our
    clinical-stage programs, this approach has allowed us to
    synthesize fewer than 10% of the compounds that we believe would
    have been synthesized if we were to follow the traditional
    methods of lead optimization.  Strategic
    Alliances and Collaborations
  GlaxoSmithKline
   11




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product-by-product country-by-country
  product-by-product country-by-country
  5-HT4
      Amgen
     12




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
    Amgen is required to obtain third-party rights to develop and
    commercialize a product that incorporates an EPIX
    compound; and
    Amgen develops and commercializes products that are not covered
    by the intellectual property rights we licensed to Amgen, such
    as for example, S1P1-modulating products that may be acquired by
    Amgen from a third party.  product-by-product country-by-country
      Bayer
    Schering Pharma AG, Germany
   13




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region-by-region
    last-to-expire last-to-expire
  Cystic
    Fibrosis Foundation Therapeutics Incorporated
   14




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
    The first program is focused on correcting a malfunction of the
    Cystic Fibrosis Transmembrane conductance Regulator, or CFTR,
    ion channel protein. We are using our proprietary
    structure-based technologies to model the structure of this ion
    channel protein target and identify binding sites in the channel
    for therapeutic intervention. Once these sites are identified,
    we aim to use our drug discovery capabilities to discover a drug
    that restores proper functionality to the channel in patients
    with cystic fibrosis. If the preliminary program is successful,
    we and CFFT have agreed to negotiate towards a follow-on
    agreement under which we will explore a structure-based approach
    for the discovery and commercialization of a drug that will
    target CFTR, with the financial support of CFFT and subject to a
    royalty payable to CFFT.
    The second program is focused on the discovery of a
    small-molecule agonist to the G-Protein Coupled Receptor known
    as P2Y(2), which plays a role in cystic fibrosis, using our
    proprietary structure-based drug design system. We retain the
    right to develop and commercialize any drug candidates
    discovered through this second program, and are obligated to
    make aggregate royalty payments of up to $15.0 million to
    CFFT for the first drug candidate that reaches particular
    regulatory and sales milestones.    Technology
    Agreements
  Tyco
    Bracco
  sub-license
 15




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Competition
          
    PRX-08066.  If approved, PRX-08066, the drug
    candidate we are developing for the treatment of pulmonary
    arterial hypertension (PAH), will compete with approved products
    from such pharmaceutical companies as Actelion Pharmaceuticals
    Ltd., GlaxoSmithKline plc, Pfizer Inc. and United Therapeutics
    Corporation, and may compete with drug candidates in clinical
    development by other companies, such as Encysive Pharmaceuticals
    Inc. and Gilead Sciences, Inc.
    PRX-00023.  If approved, PRX-00023, the drug
    candidate we are developing for the treatment of depression,
    will compete with approved products from such pharmaceutical
    companies as Forest Laboratories, Inc., GlaxoSmithKline plc,
    Pfizer Inc. and Wyeth, and may compete with drug candidates in
    clinical development from other companies, including
    Sanofi-aventis, Neurocrine and GlaxoSmithKline plc licensed from
    Fabre-Kramer Pharmaceuticals, Inc.
    PRX-03140.  If approved, PRX-03140, the drug
    candidate we are developing for the treatment of
    Alzheimers disease, will compete with approved products
    from such pharmaceutical companies as Forest Laboratories, Inc.,
    Johnson & Johnson, Novartis AG and Pfizer, Inc., and
    may compete with drug candidates in clinical development from
    other companies, including Myriad Genetics, Inc. and Neurochem
    Inc. We are developing PRX-03140 in combination with approved
    products, particularly
    Aricept®
    which is marketed by Pfizer Inc.
    PRX-07034.  If approved for the treatment of
    obesity, Alzheimers disease and cognitive impairment
    associated with schizophrenia, PRX-07034 will compete with
    approved products from such pharmaceutical companies as Abbott
    Laboratories and Roche Holding Ltd., and may compete with
    several therapeutic product candidates in clinical development
    by other companies, such as Sanofi-aventis and Arena
    Pharmaceuticals, Inc. If approved for the treatment of cognitive
    impairment (associated with Alzheimers disease or
    schizophrenia), PRX-07034 will compete with approved products
    from such pharmaceutical companies as Forest Laboratories,
    Johnson & Johnson, Novartis AG and Pfizer, Inc., and
    may compete with several therapeutic product candidates in
    clinical development from other companies, including
    GlaxoSmithKline plc and Saegis Pharmaceuticals, Inc.
    Vasovist and EP-2104R.  There are a number of
    general use MRI agents approved for marketing in the United
    States and in certain foreign markets that, if used or developed
    for MR angiography, are likely to compete with Vasovist. Such
    products include Magnevist and Gadovist by Bayer Schering Pharma 16




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AG, Germany, Dotarem by Guerbet, S.A., Omniscan by GE
    Healthcare, ProHance and MultiHance by Bracco and OptiMARK by
    Tyco International Ltd. We are aware of five agents under
    clinical development that have been or are being evaluated for
    use in MRA: Bayer Schering Pharma AG, Germanys Gadomer and
    SHU555C, Guerbet, S.A.s Vistarem, Braccos B-22956/1,
    Ferropharm GmbHs Code VSOP-C184, and Advanced Magnetics,
    Inc.s Ferumoxytol. We are not currently aware of any MRI
    contrast agent other than EP-2104R being developed for use in
    imaging blood clots. In addition to competition within the MRI
    field, we also face competition from other imaging technologies,
    including CT scans, ultrasounds, and X-ray scans. Our success
    will depend on physician acceptance of MRI as a primary imaging
    modality for certain vascular and other applications.  INTELLECTUAL
    PROPERTY
        Ramot
     17




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country-by-country
      Massachusetts
    General Hospital
  country-by-country
  Prince
   18




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Marketing,
    Sales and Distribution
    Manufacturing
      PRX-00023,
 19




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Government
    Regulation and Product Approval
      
    preclinical laboratory and animal studies;
    submission of an investigational new drug application, or IND,
    which must become effective before human clinical trials may
    begin;
    adequate and well-controlled human clinical trials to establish
    the safety and efficacy of the proposed drug for its intended
    use; and
    FDA approval of a new drug application, or NDA.      30-day
    
    Phase 1:The drug is initially introduced
    into healthy human subjects or patients with the disease and
    tested for safety, dosage tolerance, absorption, metabolism,
    distribution and excretion.
    Phase 2:Involves studies in a limited
    patient population to identify possible adverse effects and
    safety risks, to preliminarily evaluate the efficacy of the
    product for specific targeted diseases and to determine dosage
    tolerance and optimal dosage.
    Phase 3:Clinical trials are undertaken
    to further evaluate dosage, clinical efficacy and safety in an
    expanded patient population at geographically dispersed clinical
    study sites. These studies are intended to establish the overall
    risk-benefit ratio of the product and provide, if appropriate,
    an adequate basis for product labeling. 20




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end-of-Phase 2/ agreed-upon agreed-upon
    and/or
 21




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22




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Reimbursement
          Employees
    Research
    and Development
   23




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Available
    Information
  (781) 761-7600. http://www.epixpharma.com Form 10-K, Form 10-Q Form 8-K Form 10-K.
  ITEM 1A.
    RISK
    FACTORS  We operate in a rapidly changing environment that involves a
    number of risks, some of which are beyond our control. This
    discussion highlights some of the risks which may affect future
    operating results. These are the risks and uncertainties we
    believe are most important for you to consider. Additional risks
    and uncertainties not presently known to us, which we currently
    deem immaterial or which are similar to those faced by other
    companies in our industry or business in general, may also
    impair our business operations. If any of the following risks or
    uncertainties actually occurs, our business, financial condition
    and operating results would likely suffer.
  Risks
    Related to our Business
  A
    substantial portion of our future revenues will be dependent
    upon our agreements with GlaxoSmithKline, Amgen Inc. and Bayer
    Schering Pharma AG, Germany.
   24




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We
    anticipate future losses and may never become
    profitable.
        Our
    prior stock option practices may result in significant
    liability.
  Form 10-K
 25




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and/or
  We
    have not been in compliance with SEC reporting requirements and
    NASDAQ listing requirements and may continue to face compliance
    issues with both. If we are unable to remain in compliance with
    SEC reporting requirements and NASDAQ listing requirements,
    there may be a material adverse effect on the Company and our
    stockholders.
  Form 10-K
  Form 10-K, Form 10-K
  If we
    are unsuccessful in our appeal process for Vasovist with the
    FDA, we may never obtain approval to market and sell Vasovist in
    the United States and our revenues will be materially
    harmed.
   26




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30-day
  
    the process of reaching agreement with the FDA on the clinical
    data and on any clinical trial protocol required for regulatory
    approval of Vasovist;
    a re-read, or reanalysis, of images obtained from completed
    Phase 3 trials by a new group of radiologists;
    the timing and process of conducting any clinical trials that
    may be ultimately required if the appeal process ultimately ends
    in denial of our suggested path forward;
    obtaining the desired outcomes of any required clinical
    trials; and
    FDAs review process and conclusions regarding any
    additional Vasovist regulatory submissions.    We
    have never had a commercially available product in the United
    States and we may never succeed in developing marketable
    products.
   27




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in vitro
  If we
    are unable to obtain required regulatory approval of our
    therapeutic product candidates, we will be unable to market and
    sell our therapeutic product candidates and our business will be
    materially harmed.
    
    our failure to demonstrate to the satisfaction of the FDA or
    comparable foreign regulatory authorities that a product
    candidate is safe and effective for a particular indication;
    our inability to demonstrate that a product candidates
    benefits outweigh its risks;
    our inability to demonstrate that the product candidate presents
    a significant advantage over existing therapies; 28




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
    the FDAs or comparable foreign regulatory
    authorities disagreement with the manner in which we and
    our collaborators interpret the data from pre-clinical studies
    or clinical trials;
    the FDAs or comparable foreign regulatory
    authorities failure to approve our manufacturing processes
    or facilities or the processes or facilities of our
    collaborators; or
    a change in the approval policies or regulations of the FDA or
    comparable foreign regulatory authorities.    Our
    clinical trials may not yield results that will enable us to
    obtain regulatory approval for our product
    candidates.
    
    the product candidate may not prove to be safe and efficacious;
    the dosage form of the product candidate may not deliver
    reproducible amounts of product to patients;
    patients may die or suffer other adverse effects for reasons
    that may or may not be related to the product candidate being
    tested;
    the results of later-stage clinical trials may not confirm the
    positive results of earlier trials;
    the results may not meet the level of statistical significance
    required by the FDA or other regulatory agencies for
    approval; and
    the FDA or other regulatory agencies may require additional or
    expanded trials.   29




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If
    clinical trials for our product candidates are prolonged or
    delayed, we may be unable to commercialize our product
    candidates on a timely basis, which would require us to incur
    additional costs and delay our receipt of any revenue from
    potential product sales.
    
    conditions imposed on us by the FDA or any foreign regulatory
    authority regarding the scope or design of our clinical trials;
    delays in obtaining, or our inability to obtain, required
    approvals from institutional review boards or other reviewing
    entities at clinical sites selected for participation in our
    clinical trials;
    delay in developing a clinical dosage form, insufficient supply
    or deficient quality of our product candidates or other
    materials necessary to conduct our clinical trials;
    negative or inconclusive results from clinical trials, or
    results that are inconsistent with earlier results, that
    necessitate additional clinical study;
    serious
    and/or
    unexpected product-related side effects experienced by subjects
    in clinical trials; or
    failure of our third-party contractors or our investigators to
    comply with regulatory requirements or otherwise meet their
    contractual obligations to us in a timely manner.  15-month
   30




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We
    have never generated positive cash flow, and if we fail to
    generate revenue, it will have a material adverse effect on our
    business.
      
    successfully complete our product development efforts;
    obtain required regulatory approvals in a timely manner, if at
    all;
    manufacture our product candidates at an acceptable cost and
    with acceptable quality; or
    successfully market any approved products.    We
    depend on our strategic collaborators for support in product
    development and the regulatory approval process for our product
    candidates and, if approved, for product
    marketing.
   31




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If we
    encounter difficulties enrolling subjects in our clinical trials
    for our product candidates, or subjects drop out of trials in
    progress for our product candidates, our trials could be delayed
    or otherwise adversely affected.
    
    the limited size of the patient population and the availability
    of commercial products for certain target indications, including
    pulmonary arterial hypertension and pulmonary hypertension
    associated with chronic obstructive pulmonary disease;
    the nature and design of the trial protocol;
    the proximity of patients to clinical sites;
    the availability of other effective treatments for the relevant
    disease (whether approved or experimental);
    the eligibility criteria for enrollment in our clinical trials;
    perceived risks and benefits of the product candidate under
    study; and
    competing studies or trials.   32




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We may
    need to raise additional funds necessary to fund our operations,
    and if we do not do so, we may not be able to implement our
    business plan.
    
    the progress and scope of clinical trials;
    the timing and costs of filing future regulatory submissions;
    the timing and costs required to receive both U.S. and foreign
    governmental approvals;
    the cost of filing, prosecuting, defending and enforcing patent
    claims and other intellectual property rights;
    the extent to which our product candidates gain market
    acceptance;
    the timing and costs of product introductions;
    the extent of our ongoing and any new research and development
    programs;
    the extent to which we are required to pay the remaining
    $15.0 million portion of the milestone payment in
    connection with the Predix merger in cash;
    changes in our strategy or our planned activities;
    the costs of training physicians to become proficient with the
    use of our product candidates; and
    the costs of developing marketing and distribution capabilities.    Our
    therapeutic product candidates are currently
    unformulated.
    
    the current dosage may not provide reproducible amounts of
    product;
    the pharmaceutical development of a commercially viable
    formulation may add significant cost and time to our clinical
    development programs for therapeutics; 33




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
    additional trials may be required if the new formulation is not
    bioequivalent to formulations already used in clinical trials;
    future clinical trials may be delayed in order to identify,
    develop, optimize, manufacture and certify a commercially viable
    formulation; and
    regulatory filings,
    and/or
    commercial launch may be delayed due to the lack of a commercial
    process for cGMP manufacturing of the new formulation.    Failure
    to comply with foreign regulatory requirements governing human
    clinical trials and marketing approval for our product
    candidates could prevent us from selling our product candidates
    in foreign markets, which may adversely affect our operating
    results and financial condition.
    Our
    product candidates will remain subject to ongoing regulatory
    requirements even if they receive marketing approval, and if we
    fail to comply with requirements, we could lose these approvals
    and the sale of any approved commercial products could be
    temporarily or permanently suspended.
    
    restrictions on the products, manufacturers or manufacturing
    processes;
    warning letters;
    civil or criminal penalties;
    fines; 34




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
    injunctions;
    product seizures or detentions;
    import bans;
    product recalls and related publicity requirements;
    unanticipated expenditures;
    total or partial suspension of production; and
    refusal to approve pending applications for marketing approval
    of new products or supplements to approved applications.    We are
    focusing our therapeutic product discovery and development
    efforts on G-Protein Coupled Receptor and ion channel-targeted
    product candidates, which have historically had a high incidence
    of adverse side effects.
    The
    application of our in silico therapeutic product discovery
    technology and approach may be limited to a subset of
    therapeutically useful proteins, which may reduce the
    opportunities to develop and commercialize product candidates
    against other important therapeutic targets.
  in
    silico
  in silico in silico
 35




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Integrating
    our organization with Predix may divert managements
    attention away from our operations and, if we are unsuccessful
    in integrating our companies, we may not be able to operate
    efficiently after the merger.
    Our
    competitors may develop products that are less expensive, safer
    or more effective, which may diminish or eliminate the
    commercial success of any future products that we may
    commercialize.
    
    PRX-00023.  If approved, PRX-00023, the product
    candidate we are developing for the treatment of depression,
    will compete with approved products from such pharmaceutical
    companies as Forest Laboratories, Inc., GlaxoSmithKline plc,
    Pfizer Inc. and Wyeth, and may compete with several therapeutic
    product candidates in clinical development from other companies,
    including Sanofi-aventis and Fabre-Kramer Pharmaceuticals, Inc..
    We believe that there are over 45 therapeutic product candidates
    in clinical trials or that have been submitted for approval for
    the treatment of depression.
    PRX-03140.  If approved, PRX-03140, the product
    candidate we are developing for the treatment of
    Alzheimers disease, will compete with approved products
    from such pharmaceutical companies as Forest Laboratories, Inc.,
    Johnson & Johnson, Novartis and Pfizer, and may compete
    with several therapeutic product candidates in clinical
    development from other companies, including Myriad Genetics and
    Neurochem. We believe that there are over 50 therapeutic product
    candidates in clinical trials for the treatment of
    Alzheimers disease.
    PRX-08066.  If approved, PRX-08066, the product
    candidate we are developing for the treatment of pulmonary
    hypertension, will compete with approved products from such
    pharmaceutical companies as Actelion, GlaxoSmithKline plc,
    Pfizer Inc. and United Therapeutics Corporation, and may compete
    with several therapeutic product candidates in clinical
    development by other companies such as Encysive Pharmaceuticals
    Inc. and Gilead Sciences, Inc. We believe that there are
    approximately ten therapeutic product candidates in clinical
    trials or that have been submitted for approval for the
    treatment of pulmonary arterial hypertension
    and/or
    pulmonary hypertension associated with chronic obstructive
    pulmonary disease.
    PRX-07034.  If approved for the treatment of
    obesity, PRX-07034 will compete with approved products from such
    pharmaceutical companies as Abbott Laboratories and Roche
    Holding Ltd., and may compete with several therapeutic product
    candidates in clinical development by other companies, such as
    Sanofi-aventis and Arena Pharmaceuticals, Inc.. We believe that
    there are over 30 therapeutic 36




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product candidates in clinical trials for the treatment of
    obesity. If approved for the treatment of cognitive impairment
    (associated with Alzheimers disease or schizophrenia),
    PRX-07034 will compete with approved products from such
    pharmaceutical companies as Forest Laboratories, Inc.,
    Johnson & Johnson, Novartis AG and Pfizer Inc., and may
    compete with several therapeutic product candidates in clinical
    development from other companies, including GlaxoSmithKline plc
    and Saegis Pharmaceuticals, Inc. We believe that there are over
    50 therapeutic product candidates in clinical trials for the
    treatment of cognitive impairment associated with
    Alzheimers disease or schizophrenia.        If the
    market does not accept our technology and product candidates, we
    may not generate sufficient revenues to achieve or maintain
    profitability.
    
    safety;
    cost-effectiveness relative to alternative therapies, methods or
    products; 37




---



##### Table of Contents




    availability of third-party reimbursement;
    ease of administration;
    clinical efficacy; and
    availability of competitive products.      We may
    not be able to keep up with the rapid technological change in
    the biotechnology and pharmaceutical industries, which could
    make any of our future approved therapeutic products obsolete
    and reduce our revenue.
    We are
    currently focusing our imaging development efforts primarily on
    Vasovist and will have limited prospects for successful imaging
    operations if it does not prove successful.
    Our
    product candidates require significant biological testing,
    pre-clinical testing, manufacturing and pharmaceutical
    development expertise and investment. We rely primarily on
    external partners to complete these activities.
  in vitro in vivo
 38




---



##### Table of Contents



and/or
  If we
    are unable to attract and retain key management and other
    personnel, it would hurt our ability to compete.
    Gadolinium-based
    imaging agents, such as Vasovist and EP-2104R, may cause adverse
    side effects which could limit our ability to receive approval
    for these product candidates and our ability to effectively
    market these product candidates, if approved.
   39




---



##### Table of Contents



and/or
  Our
    research and development efforts may not result in product
    candidates appropriate for testing in human clinical
    trials.
    We
    rely on third parties to conduct our clinical trials, and those
    third-parties may not perform satisfactorily, including failing
    to meet established deadlines for the completion of such
    trials.
    If we
    fail to get adequate levels of reimbursement from third-party
    payors for our product candidates after they are approved in the
    United States and abroad, we may have difficulty commercializing
    our product candidates.
   40




---



##### Table of Contents



We
    deal with hazardous materials and must comply with environmental
    laws and regulations, which can be expensive and restrict how we
    do business.
      Product
    liability claims could increase our costs and adversely affect
    our results of operations.
   41




---



##### Table of Contents



Political
    and military instability and other factors may adversely affect
    our operations in Israel.
    Intellectual
    Property Risks
  We
    depend on patents and other proprietary rights, and if they fail
    to protect our business, we may not be able to compete
    effectively.
   42




---



##### Table of Contents



We
    depend on exclusively licensed technology from Ramot at Tel Aviv
    University Ltd. and Massachusetts General Hospital and, if we
    lose either of these licenses, it is unlikely we could obtain
    such technology elsewhere, which would have a material adverse
    effect on our business.
  country-by-country
  We may
    need to initiate lawsuits to protect or enforce our patents and
    other intellectual property rights, which could result in our
    incurrence of substantial costs and which could result in the
    forfeiture of these rights.
    Other
    rights and measures that we rely upon to protect our
    intellectual property may not be adequate to protect our
    products and services and could reduce our ability to compete in
    the market.
  and/or
  
    the agreements may be breached; 43




---



##### Table of Contents




    we may have inadequate remedies for any breach;
    proprietary information could be disclosed to our
    competitors; or
    others may independently develop substantially equivalent
    proprietary information and techniques or otherwise gain access
    to our trade secrets or disclose such technologies.    Our
    success will depend partly on our ability to operate without
    infringing the intellectual property rights of others, and if we
    are unable to do so, we may not be able to sell our
    products.
    If MRI
    manufacturers are not able to enhance their hardware and
    software sufficiently, we will not be able to complete
    development of our contrast agent for the evaluation of cardiac
    indications.
   44




---



##### Table of Contents



Risks
    Related to our Securities
  Our
    stock price is volatile, which could subject us to securities
    class action litigation.
    
    actual or anticipated fluctuations in our operating results;
    announcements of technological innovation or new commercial
    products by us or our competitors;
    new collaborations entered into by us or our competitors;
    developments with respect to proprietary rights, including
    patent and litigation matters;
    results of pre-clinical studies and clinical trials;
    the timing of our achievement of regulatory milestones;
    conditions and trends in the pharmaceutical and other technology
    industries;
    adoption of new accounting standards affecting such industries;
    changes in financial estimates by securities analysts;
    perceptions of the value of corporate transactions; and
    degree of trading liquidity in our common stock and general
    market conditions.      We
    significantly increased our leverage as a result of the sale of
    3.0% Convertible Senior Notes due 2024, and may be unable to
    repay, repurchase or redeem these notes if, and when,
    required.
    
    make it difficult for us to make payments on the notes;
    make it difficult for us to obtain financing for working
    capital, acquisitions or other purposes on favorable terms, if
    at all; 45




---



##### Table of Contents




    make us more vulnerable to industry downturns and competitive
    pressures; and
    limit our flexibility in planning for, or reacting to changes
    in, our business.    Future
    sales of common stock by our existing stockholders and former
    security holders of Predix may cause the stock price of our
    common stock to fall.
    Certain
    anti-takeover clauses in our charter and by-laws and in Delaware
    law may make an acquisition of us more difficult.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES   46




---



##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS        Form 10-K.
    Form 10-K, Form 10-K Form 10-K
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   47




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Performance
    Graph
  Form 10-K
  COMPARISON
    OF 5-YEAR CUMULATIVE TOTAL RETURN
 AMONG EPIX PHARMACEUTICALS, INC.,
 NASDAQ MARKET INDEX AND NASDAQ PHARMACEUTICAL INDEX
  
  ASSUMES
    $100 INVESTED ON JAN. 1, 2002
 ASSUMES DIVIDEND REINVESTED
 FISCAL YEAR ENDING DEC. 31, 2006
  Performance:
  2001


2002


2003


2004


2005


2006EPIX PHARMACEUTICALS, INC.



100.00




50.59




113.93




125.33




28.27




32.19NASDAQ MARKET INDEX (U.S.)



100.00




69.97




106.36




115.98




120.15




134.00NASDAQ PHARMACEUTICAL STOCKS



100.00




61.63




88.91




96.09




105.97




106.27      48




---



##### Table of Contents



High


Low2005First Quarter

$
27.27


$
10.20Second Quarter


14.70



9.39Third Quarter


16.19



10.61Fourth Quarter


12.71



5.672006First Quarter


7.76



5.00Second Quarter


7.25



4.05Third Quarter


8.35



4.05Fourth Quarter


8.75



3.50   mark-up,
      EQUITY
    COMPENSATION PLAN INFORMATION
  and/or
  (A)


(B)


(C)Number of SecuritiesRemaining Available forNumber of Securities





Future Issuance Underto be Issued Upon


Weighted-Average


Equity CompensationExercise of


Exercise Price of


Plans (ExcludingOutstanding Options,


Outstanding Options,


Securities Reflected inPlan Category

Warrants and Rights


Warrants and Rights


Column (A))Equity compensation plans approved
    by security holders


1,931,894


$
11.49



1,251,295Equity compensation plans not
    approved by security holders(1)


1,495,213


$
1.51



1,120,864Total


3,427,107


$
7.14



2,372,159     (1)
    
    Represents the Predix Pharmaceuticals Holdings, Inc. Amended and
    Restated 2003 Stock Incentive Plan assumed in our 2006 merger
    with Predix. 49




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
    Year Ended December 31,2006(1)


2005


2004


2003(3)


2002(3)(Restated)


(Restated)


(Restated)


(Restated)Statement of Operations
    Data:Revenues

$
6,041


$
7,190


$
12,259


$
13,525


$
12,269Operating loss


(157,668
)


(21,760
)


(22,351
)


(26,008
)


(22,282
)Net loss


(157,393
)


(21,269
)


(22,621
)


(25,720
)


(21,657
)Weighted average common shares
    outstanding:Basic and diluted(2)


20,789



15,505



15,259



12,704



11,252Net loss per share, basic and
    diluted(2)

$
(7.57
)

$
(1.37
)

$
(1.48
)

$
(2.02
)

$
(1.92
)   December 31,2006


2005


2004


2003


2002Balance Sheet Data:Cash, cash equivalents and
    marketable securities

$
109,543


$
124,728


$
164,440


$
79,958


$
28,112Total assets


125,027



130,716



171,287



81,875



30,155Long-term liabilities


120,066



100,756



101,210



4,331



7,829     (1)
    
    The company merged with Predix on August 16, 2006. Current
    year includes a charge of $123.5 million for acquired
    in-process research and development related to the merger.(2)
    
    All share and per share information has been retroactively
    restated to reflect a 1.5 to 1 reverse stock split on
    August 16, 2006.(3)
    
    The following adjusts the companys statements of
    operations for the years ended December 31, 2003 and 2002
    for the restatement as described in Note 3 of the
    Consolidated Financial Statements (in thousands except per share
    data).  50




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##### Table of Contents



Year Ended December 31,


Year Ended December 31,2003


2002As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product development revenue

$
9,534


$



$
9,534


$
8,716


$



$
8,716Royalty revenue


2,398







2,398



1,560







1,560License fee revenue


1,593







1,593



1,993







1,993Total revenues


13,525







13,525



12,269







12,269Operating expenses:


















Research and development


28,024



2,797



30,821



29,084



(179
)


28,905General and administrative


6,584



2,128



8,712



6,001



(355
)


5,646Total operating expenses


34,608



4,925



39,533



35,085



(534
)


34,551Operating loss


(21,083
)


(4,925
)


(26,008
)


(22,816
)


534



(22,282
)Other income, net


368







368



719







719Income taxes


80







80



94







94Net loss

$
(20,795
)

$
(4,925
)

$
(25,720
)

$
(22,191
)

$
534


$
(21,657
)Weighted average shares:Basic and diluted(1)


12,704







12,704



11,252







11,252Net loss per share, basic and
    diluted(1)

$
(1.64
)

$
(0.38
)

$
(2.02
)

$
(1.97
)

$
0.05


$
(1.92
)     (1)
    
    All share and per share information has been retroactively
    restated to reflect a 1.5 to 1 reverse stock split on
    August 16, 2006.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K. Form 10-K
  Overview
   51




---



##### Table of Contents



in silico
  1-for-1.5
  Form 10-K.
    Form 10-K, Form 10-K/A Form 10-Q
  Findings
    of the Stock Option Review
   52




---



##### Table of Contents



Stock
    Option Grants Approval Process Prior to Merger With
    Predix
         53




---



##### Table of Contents



Adjustments
    to Measurement Dates Arising From Evidence of Retrospective
    Selection of Grant Dates
    
    minutes of compensation committee meetings;
    unanimous written consents signed by compensation committee
    members, and evidence relating to the date such consents were
    circulated for signature
    and/or
    signed;
    information found in personnel files maintained for optionees;
    electronic mail messages and other electronic files maintained
    in our computer system and in backup media;
    documentation prepared in connection with our annual performance
    reviews of employees as part of the process of determining the
    allocation of stock option grants to individual employees;
    information as to the date of hire of the optionee, including
    (if the grant was a new hire grant) the date of any employment
    agreement or offer letter:
    correspondence and other documentation supporting the option
    grant (including, without limitation, memoranda, SEC Form 4
    filings);
    information concerning the date or dates on which the stock
    option was entered into our stock option tracking system, Equity
    Edge; and
    information obtained during interviews conducted by the special
    committee of numerous individuals, including former officers,
    directors, employees, and outside professionals. 54




---



##### Table of Contents



Re-priced
    Stock Options
  re-pricing, .
    Other
    Dating Errors
     55




---



##### Table of Contents



Other
    Adjustments
    
    Grants made to consultants were erroneously accounted for under
    APB 25 as if they had been made to employees. To correctly
    account for these grants in accordance with
    EITF 96-18,
    we recorded $0.3 million in additional stock-based
    compensation during 1996 through 2001.
    With respect to seven option grants totaling approximately
    44,000 shares, modifications were made to previously granted
    employee and consultant stock options that were not accounted
    for in accordance with APB 25 and related interpretations,
    EITF 96-18
    and FAS 123, as applicable. The modifications included the
    extension of the post-service exercise period for vested stock
    options of terminated employees and or consultants. We recorded
    $0.9 million in additional stock-based compensation expense
    during 2000 through 2004, to properly account for these
    modifications.
    In 1999, we recorded approximately $0.1 million of
    stock-based compensation expense equal to the gain recognized by
    employees when those employees sold stock options that were
    deemed to be disqualifying dispositions. Disqualifying
    dispositions are potential tax deductions for companies and do
    not require recognition as expense in a companys statement
    of operations. As this accounting is not in accordance with
    Generally Accepted Accounting Principles, the stock compensation
    expense was reversed.  Financial
    Impact of the Stock Option Review
  Number of Shares


AmountRetrospective selection of grant
    date


1,387,982


$
3,680,249Re-priced options


867,893



2,518,291Other dating errors


162,196



164,7062,418,071



6,363,246Consultant grants


44,345



272,303Stock option modifications


70,168



906,110Correction of erroneous stock
    compensation charge






(96,828
)2,532,584



7,444,831Employee income and payroll taxes






886,037$
8,330,868     The
    Circumstances Requiring Adjustment of Measurement Dates Occurred
    Entirely Before Our Merger With Predix
   56




---



##### Table of Contents



Late SEC
    Filings and NASDAQ Delisting Proceedings
  Form 10-K.
      Restatement
    of Our Consolidated Financial Statements
  Article 10-01 Regulation S-X.
 57




---



##### Table of Contents



Fiscal Year

Expense (Credit)Year ended December 31, 1996

$
57,182Year ended December 31, 1997


280,609Year ended December 31, 1998


614,966Year ended December 31, 1999


435,269Year ended December 31, 2000


1,091,267Year ended December 31, 2001


2,262,350Year ended December 31, 2002


(534,245
)Year ended December 31, 2003


4,925,406Sub-total


9,132,804Year ended December 31, 2004


2,239,964Year ended December 31, 2005


(3,041,900
)Total

$
8,330,868     Net Impact toAdditional Paid-In


Accumulated


StockholdersFiscal Year

Capital


Deficit


Equity (Deficit)1996

$
57,182


$
(57,182
)

$
1997


280,609



(280,609
)


1998


613,848



(614,966
)


(1,118
)1999


432,536



(435,269
)


(2,733
)2000


1,029,007



(1,091,267
)


(62,260
)2001


2,238,867



(2,262,350
)


(23,483
)2002


(593,335
)


534,245



(59,090
)2003


4,412,355



(4,925,406
)


(513,051
)Sub-total


8,471,069



(9,132,804
)


(661,735
)2004


1,995,577



(2,239,964
)


(244,387
)2005


(3,021,815
)


3,041,900



20,085Total

$
7,444,831


$
(8,330,868
)

$
(886,037
)   Quarterly
    Impact of Stock Option Restatement
  Form 10-Q. Form 10-K.
 58




---



##### Table of Contents



Quarter EndingMarch 31,


June 30,


September 30,


December 31,2005


2005


2005


2005Research and development expense

$
(1,899,382
)

$
277,271


$
(134,052
)

$
(97,640
)General and administrative expense


(1,153,645
)


151,816



(93,399
)


(72,784
)Total

$
(3,053,027
)

$
429,087


$
(227,451
)

$
(170,424
)   Critical
    Accounting Policies And Estimates
      Revenue
    Recognition
  Revenue Recognition
    
    ratably over the development period; or
    based upon the level of research services performed during the
    period of the research contract.         59




---



##### Table of Contents



Product
    development revenue
      
    We calculate our development costs directly related to Vasovist.
    We obtain cost reports, or an estimate of costs, from Bayer
    Schering Pharma AG, Germany for costs incurred by Bayer Schering
    Pharma AG, Germany related to the development of Vasovist during
    the same period. Where estimates are used, we review the
    estimates and record, as necessary, adjustments in the
    subsequent quarter when we receive actual results from Bayer
    Schering Pharma AG, Germany. To date, there have been no
    material adjustments.
    We multiply our and Bayer Schering Pharma AG, Germanys
    development costs by approximately 50% based on the contractual
    allocation of work contemplated under the agreement.
    We then record the net difference as development revenue if the
    balance results in a payment to us and negative revenue if the
    balance results in a payment to Bayer Schering Pharma AG,
    Germany.    Royalty
    revenue
  sub-license
  License
    fee revenue
  Revenue Recognition.
  Research
    and Development
  Accounting for Research and Development
    Costs
 60




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##### Table of Contents



Employee
    Stock Compensation
  Share-Based Payment  An Amendment of FASB
    Statements No. 123 and 95
    Critical
    Accounting Policies and Estimates Applied to the Restatement of
    EPIXs Consolidated Financial Statements.
    Equity
    Edge®
    Entry Date
   61




---



##### Table of Contents



1.
    Large Grants  For certain of the Companys
    grants that were broad-based, including those related to annual
    and mid-year performance reviews, the evidence of the
    investigation supported a practice by the Company of entering
    the grants into Equity Edge on a timely basis (either at
    approval date or within a few business days). Although this was
    not the case for every large grant the Company made, the Company
    concluded that there is significant evidence of the
    Companys timely entrance of these grants into Equity Edge
    soon after approval by the Companys former Chief Executive
    Officer. The Company believes, based on its analysis of all
    Large Grants, that for the Large Grants where the revised
    remeasurement date was the Equity Edge record-added date,
    approval occurred on or around the date when grants were entered
    into Equity Edge. As a result, the Equity Edge record-added date
    serves as a close approximation of the measurement date. Had the
    Company not used the Equity Edge record-added date for such
    grants, but used either the date of the highest or lowest stock
    price during the period from the original grant date to the
    Equity Edge record-added date, the total charge to operations
    would have been either a increase in expense of approximately
    $220,000 or an decrease in expense of approximately $175,000.2.
    Small Grants  For certain of the grants that were for
    limited numbers of employees, including promotion grants, there
    did not appear to be an observable consistent trend in the
    Equity Edge record-added dates occurring soon after the grant
    approval date by the former Chief Executive Officer for the
    Small Grants. As such, the Company has determined that, unlike
    the Large Grants, the Equity Edge record-added dates were not in
    all cases a close approximation of the approval date for Small
    Grants. However, we believe in most cases the Equity Edge entry
    date represents the earliest date when the terms of options to
    individual recipients are known with finality where the date of
    grant approval could not otherwise be determined by reference to
    the information available to us. Had the Company not used the
    Equity Edge record-added date for such grants, but used either
    the date of the highest or lowest stock price during the period
    from the original grant date to the Equity Edge record-added
    date, the total charge to operations would have been either a
    increase in expense of approximately $400,000 or an decrease in
    expense of approximately $215,000.    Re-pricing
    of Stock Options
   62




---



##### Table of Contents



Results
    of Operations
  Research
    and Development Overview
    
    salaries, benefits and related expenses for personnel engaged in
    research and development activities;
    fees paid to contract research organizations to manage and
    monitor clinical trials;
    fees paid to research organizations in conjunction with
    pre-clinical studies;
    fees paid to access chemical and intellectual property databases;
    costs of materials used in research and development and clinical
    studies;
    academic testing and consulting, license and sponsored research
    fees paid to third parties; and
    costs of facilities and equipment, including depreciation, used
    in research and development activities.         63




---



##### Table of Contents



DrugCandidate

Disease Indication

Clinical Trial StatusPRX-08066


PAH/COPD


Phase 2aPRX-00023


Depression


Phase 2bPRX-03140


Alzheimers disease


Phase 2aPRX-07034


Obesity/cognitive impairment


Phase 1b           follow-up
        Clinical




EstimatePhase


Objective

Completion PeriodPhase 1


Establish safety in healthy
    volunteers and occasionally in patients; study how the drug
    works, is metabolized and interacts with other drugs


1-2 yearsPhase 2


Evaluate efficacy, optimal dosages
    and expanded evidence of safety


2-3 yearsPhase 3


Further evaluate efficacy and
    safety of the drug candidate in a larger patient population


2-3 years  64




---



##### Table of Contents



project-by-project
  PRX-08066

$
1.4 millionPRX-00023

$
2.8 millionPRX-03140

$
1.3 millionPRX-07034

$
2.3 million     Financial
    Results
  Years
    ended December 31, 2006 and 2005
  Revenues
    Years Ended December 31,2006


2005


2004Increase





IncreaseRevenue


(Decrease)


Revenue


(Decrease)


RevenueProduct development revenue

$
2,909,402



(31
)%

$
4,195,530



(45
)%

$
7,594,280Royalty revenue


1,603,230



(31
)%


2,333,384



272
%


626,685License fee revenue


1,527,910



131
%


660,747



(84
)%


4,037,636Total

$
6,040,542



(16
)%

$
7,189,661



(41
)%

$
12,258,601    65




---



##### Table of Contents



EP-2104R
  ®
    Royalty
    Expenses
        Research
    and Development Expenses
   66




---



##### Table of Contents



In-Process
    Research and Development Charge
  in-process
  General
    and Administrative Expenses
    Restructuring
    Costs
   67




---



##### Table of Contents



Interest
    Income and Interest Expense
    30-day
  Provision
    for Income Taxes
    Years
    ended December 31, 2005 and 2004
  Revenues
  proof-of-concept
 68




---



##### Table of Contents



Research
    and Development Expenses
    General
    and Administrative Expenses
    Restructuring
    Costs
    Interest
    Income and Interest Expense
   69




---



##### Table of Contents



Provision
    for Income Taxes
    Quarterly
    Information
    March 31, 2006


June 30, 2006


September 30, 2006


December 31, 2006Revenues:Product development revenue

$
1,082,867


$
731,191


$
569,378


$
525,966Royalty revenue


457,778



462,718



362,449



320,285License fee revenue


161,597



161,597



413,802



790,914Total revenues


1,702,242



1,355,506



1,345,629



1,637,165Operating expenses:Royalty expense


43,795



28,233



31,778



959,296Research and development


3,865,001



3,135,417



7,881,361



11,373,221Acquired in-process research and
    development










123,500,000



General and administrative


2,422,528



1,777,927



3,146,316



4,910,549Restructuring costs


289,633



61,472



282,133



Total operating expenses


6,620,957



5,003,049



134,841,588



17,243,066Operating loss


(4,918,715
)


(3,647,543
)


(133,495,959
)


(15,605,901
)Other income (expense), net


435,210



535,297



436,958



(987,232
)Income taxes


43,816



43,818



31,551



26,128Net loss

$
(4,527,321
)

$
(3,156,064
)

$
(133,090,552
)

$
(16,619,261
)Weighted average shares:Basic and diluted


15,523,207



15,523,207



22,193,441



29,917,696Net loss per share, basic and
    diluted

$
(0.29
)

$
(0.20
)

$
(6.00
)

$
(0.56
)   70




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##### Table of Contents



March 31, 2005


June 30, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product development revenue

$
1,475,819


$



$
1,475,819


$
314,026


$



$
314,026Royalty revenue


444,289







444,289



578,321







578,321License fee revenue


165,896







165,896



165,896







165,896Total revenues


2,086,004







2,086,004



1,058,243







1,058,243Operating expenses:Royalty expense


19,646







19,646



26,335







26,335Research and development


5,339,318



(1,899,382
)


3,439,936



5,449,209



277,271



5,726,480General and administrative


2,917,892



(1,152,796
)


1,765,096



2,732,417



152,665



2,885,082Restructuring costs






















Total operating expenses


8,276,856



(3,052,178
)


5,224,678



8,207,961



429,936



8,637,897Operating loss


(6,190,852
)


3,052,178



(3,138,674
)


(7,149,718
)


(429,936
)


(7,579,654
)Other income (expense), net


(64,703
)






(64,703
)


53,634







53,634Income taxes






















Net loss

$
(6,255,555
)

$
3,052,178


$
(3,203,377
)

$
(7,096,084
)

$
(429,936
)

$
(7,526,020
)Weighted average shares:


















Basic and diluted


15,484,451







15,484,451



15,504,798







15,504,798Net loss per share, basic and
    diluted

$
(0.40
)

$
0.19


$
(0.21
)

$
(0.46
)

$
(0.03
)

$
(0.49
)   September 30, 2005


December 31, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product development revenue

$
1,297,720


$



$
1,297,720


$
1,107,965


$



$
1,107,965Royalty revenue


798,484







798,484



512,290







512,290License fee revenue


165,894







165,894



163,061







163,061Total revenues


2,262,098







2,262,098



1,783,316







1,783,316Operating expenses:Royalty expense


32,463







32,463



19,645







19,645Research and development


5,416,276



(134,052
)


5,282,224



3,942,921



(97,640
)


3,845,281General and administrative


2,667,056



(116,032
)


2,551,024



2,456,864



(71,934
)


2,384,930Restructuring costs














971,828







971,828Total operating expenses


8,115,795



(250,084
)


7,865,711



7,391,258



(169,574
)


7,221,684Operating loss


(5,853,697
)


250,084



(5,603,613
)


(5,607,942
)


169,574



(5,438,368
)Other income, net


193,940







193,940



350,471







350,471Income taxes














41,991







41,991Net loss

$
(5,659,757
)

$
250,084


$
(5,409,673
)

$
(5,299,462
)

$
169,574


$
(5,129,888
)Weighted average shares:Basic and diluted


15,515,383







15,515,383



15,516,736







15,516,736Net loss per share, basic and
    diluted

$
(0.36
)

$
0.01


$
(0.35
)

$
(0.34
)

$
0.01


$
(0.33
)   Liquidity
    and Capital Resources
  available-for-sale available-for-sale
 71




---



##### Table of Contents



available-for-sale country-by-country
     72




---



##### Table of Contents



Payments Due by PeriodLess Than


1-3


3-5


More ThanContractual Obligations

Total


1 Year


Years


Years


5 YearsLong-term debt obligations,
    including interest payments

$
113,500,000


$
3,000,000


$
6,000,000


$
104,500,000


$
Operating lease obligations


18,921,918



3,600,142



5,186,591



4,593,417



5,541,768Capital lease obligations


213,545



102,008



104,910



6,627



Unconditional purchase obligations


7,248,519



7,248,519











Merger consideration payable


18,504,084



18,504,084











Other long-term liabilities


2,905,000



245,000



280,000



280,000



2,100,000Total

$
161,293,066


$
32,699,753


$
11,571,501


$
109,380,044


$
7,641,768   ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK     73




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Index to Consolidated Financial Statements

NumberReport of Independent Registered
    Public Accounting Firm


F-2Consolidated Financial Statements:Consolidated Balance Sheets


F-3Consolidated Statements of
    Operations


F-4Consolidated Statements of
    Stockholders Equity (Deficit)


F-5Consolidated Statements of Cash
    Flows


F-6Notes to Consolidated Financial
    Statements


F-7   ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    Item 9A.
    CONTROLS
    AND PROCEDURES  Stock
    Option Grant Practices and Restatement
  Form 10-K,
    Remediation
    of Past Material Weaknesses in Internal Control Over Financial
    Reporting
     74




---



##### Table of Contents




    We have developed a formal written policy for stock option
    awards granting effective March 28, 2007 which requires a
    more regular schedule for when grants are made.
    Beginning in 2007, our compensation committee will perform
    periodic reviews of our equity award granting policies.
    Beginning in 2007, stock option grants cannot be approved via
    unanimous written consent.
    Beginning in 2007, our Chief Financial Officer will oversee the
    stock option process.
    We will introduce additional controls related to the equity
    award granting and administration process where necessary.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-14
  Rules 13a-15(e)
 75




---



##### Table of Contents



Changes
    in Internal Controls over Financial Reporting
    Item 9B.
    OTHER
    INFORMATION   76




---



##### Table of Contents



Managements
    Report on Internal Controls
  Rules 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflects transactions in and
    dispositions of our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.          Changes in Internal Control over Financial
    Reporting:
 77




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
                 
    78




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE      ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  Item 15(a).
  Form 10-K
  Item 15(a)
    (1) and (2).
  Form 10-K.
 79




---



##### Table of Contents



Item 15(a) (3).  Exhibits  Form 10-K.
  ExhibitNumber

Description3
.1@

Restated Certificate of
    Incorporation of the Company. Filed as Exhibit 3.1 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.3
.2@

Amended and Restated By-Laws of
    the Company. Filed as Exhibit 4.2 to the Companys
    Registration Statement on
    Form S-8
    filed July 1, 1997 (File
    No. 333-30531)
    and incorporated herein by reference.4
.1@

Specimen certificate for shares of
    Common Stock of the Company. Filed as Exhibit 4.1 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006
    (File No. 000-21863) and incorporated herein by
    reference.4
.2@

Indenture dated as of June 7,
    2004 between the Company and U.S. Bank National Association
    as Trustee, relating to 3% Convertible Senior Notes due
    June 15, 2024. Filed as Exhibit 4.1 to the
    Companys Current Report on
    Form 8-K
    filed June 7, 2004 (File No. 000-21863) and incorporated
    herein by reference.4
.3@

Warrant issued to RRD
    International, LLC. Filed as Exhibit 4.3 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.4
.4@

Warrant issued to General Electric
    Capital Corporation. Filed as Exhibit 4.4 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.4
.5@

Warrant issued to Oxford
    Bioscience Management Partners II. Filed as
    Exhibit 4.5 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.1@+

Amended and Restated License
    Agreement between the Company and The General Hospital
    Corporation dated July 10, 1995. Filed as
    Exhibit 10.14 to the Companys Registration Statement
    on
    Form S-1
    filed December 10, 1996 (File
    No. 333-17581)
    and incorporated herein by reference.10
.2@#

Amended and Restated 1992 Equity
    Incentive Plan. Filed as Appendix A to the Companys 2003
    Definitive Proxy Statement on Schedule 14A filed April 29,
    2003 (File No. 000-21863) and incorporated herein by reference.10
.3@#

Form of Incentive Stock Option
    Certificate. Filed as Exhibit 10.29 to the Companys
    Registration Statement on
    Form S-1
    filed December 10, 1996 (File
    No. 333-17581)
    and incorporated herein by reference.10
.4@#

Form of Nonstatutory Stock Option
    Certificate. Filed as Exhibit 10.30 to the Companys
    Registration Statement on
    Form S-1
    filed December 10, 1996 (File
    No. 333-17581)
    and incorporated herein by reference.10
.5@#

Amended and Restated
    1996 Director Stock Option Plan. Filed as Appendix B to the
    Companys 2003 Definitive Proxy Statement on Schedule 14A
    filed April 29, 2003 (File No. 000-21863) and incorporated
    herein by reference.10
.6@#

Amended and Restated 1996 Employee
    Stock Purchase Plan. Filed as Appendix C to the Companys
    2003 Definitive Proxy Statement on Schedule 14A filed
    April 29, 2003 (File No. 000-21863) and incorporated herein
    by reference.10
.7@

Short Form Lease from Trustees of
    the Cambridge East Trust to the Company with a commencement date
    of January 1, 1998. Filed as Exhibit 10.39 to the
    Companys Registration Statement on
    Form S-1
    filed October 21, 1997 (File
    No. 333-38399)
    and incorporated herein by reference.10
.8@

First Amendment dated
    February 8, 1999 to the Short Form Lease dated as of
    July 7, 1998 with a commencement date as of January 1,
    1998 between the Company and the Trustees of The Cambridge East
    Trust. Filed as Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended March 31, 1999 (File No. 000-21863)
    and incorporated herein by reference. 80




---



##### Table of Contents



ExhibitNumber

Description10
.9@

Second Amendment dated
    June 30, 2000 to the Short Form Lease dated as of
    July 7, 1998 with a commencement date as of January 1,
    1998 between the Company and the Trustees of The Cambridge East
    Trust. Filed as Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2000 and incorporated herein
    by reference.10
.10@++

Amended and Restated Strategic
    Collaboration Agreement dated as of June 9, 2000, among the
    Company, Mallinckrodt Inc. (a Delaware corporation) and
    Mallinckrodt Inc. (a New York corporation). Filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.11@++

Strategic Collaboration Agreement
    dated as of June 9, 2000, between the Company and Schering
    Aktiengesellschaft. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.12@

Stock Purchase Agreement, dated as
    of June 9, 2000, between the Company and Schering Berlin
    Venture Corporation. Filed as Exhibit 10.3 to the Companys
    Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.13@

Standstill Agreement, dated as of
    June 9, 2000, between the Company and Schering Berlin
    Venture Corporation. Filed as Exhibit 10.4 to the Companys
    Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.14@++

Reacquisition Agreement dated
    December 22, 2000 between the Company and Daiichi
    Radioisotope Laboratories, Ltd. Filed as Exhibit 10.32 to
    the Companys Annual Report on
    Form 10-K
    for the period ended December 31, 2000 (File No. 000-21863)
    and incorporated herein by reference.10
.15@

Amendment No. 1 dated as of
    December 22, 2000 to the Strategic Collaboration Agreement,
    dated as of June 9, 2000, between the Company and Schering
    Aktiengesellschaft. Filed as Exhibit 10.33 to the
    Companys Annual Report on
    Form 10-K
    for the period ended December 31, 2000 (File No. 000-21863)
    and incorporated herein by reference.10
.16@++

Worldwide License Agreement, dated
    as of September 25, 2001, by and between the Company and
    Bracco Imaging S.p.A. Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed September 25, 2001 (File No. 000-21863) and
    incorporated herein by reference.10
.17@

Settlement and Release Agreement
    dated as of September 25, 2001, by and between the Company
    and Bracco Imaging S.p.A. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed September 25, 2001 (File No. 000-21863) and
    incorporated herein by reference.10
.18@

Third Amendment, dated May 1,
    2002, to the Short Form Lease dated as July 7, 1998 with a
    commencement date as of January 1, 1998 between the Company
    and the Trustees of the Cambridge East Trust. Filed as an
    Exhibit 10.31 to the Companys Quarterly Report for
    the period ended June 30, 2002 (File No. 000-21863) and
    incorporated herein by reference.10
.19@++

Thrombus Development Agreement
    between the Company and Schering Aktiengesellschaft, dated as of
    May 26, 2003. Filed as Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.20@++

Collaborative Research Agreement
    between the Company and Schering Aktiengesellschaft, dated as of
    May 26, 2003. Filed as Exhibit 10.2 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.21@

Intellectual Property Agreement by
    and between the Company and Dr. Martin R. Prince, dated
    November 17, 2003. Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed November 18, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.22@++

Stock Purchase Agreement by and
    between the Company and Dr. Martin R. Prince, dated as of
    November 17, 2003. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed November 18, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.23@#

Description of Director
    Compensation Arrangements. Filed as Exhibit 10.27 to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2004 (file No. 000-218039)
    and incorporated herein by reference. 81




---



##### Table of Contents



ExhibitNumber

Description10
.24@#

Named Executive Officer
    Compensation Arrangements. Filed with the Companys Current
    Report on
    Form 8-K
    filed February 16, 2006 (File No. 000-21863) and
    incorporated herein by reference.10
.25@#

Form of Indemnification Agreement.
    Filed as Exhibit 10.29 to the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 2004 (file No. 000-218039)
    and incorporated herein by reference.10
.26@

Form of Amendment to Stock Option
    Agreement. Filed as Exhibit 10.30 to the Companys Annual
    Report on
    Form 10-K
    for the year ended December 31, 2004 (file No. 000-218039)
    and incorporated herein by reference.10
.27@#

Amendment to the Collaborative
    Research Agreement dated as of May 26, 2003, between the
    Company and Schering Aktiengesellschaft, dated
    September 30, 2005. Filed as Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed October 7, 2005 (File No. 000-21863) and incorporated
    herein by reference.10
.28@#

Employment Agreement between the
    Company and Michael J. Astrue, dated September 21, 2005.
    Filed as Exhibit 10.2 to the Companys Quarterly
    Report on
    Form 10-Q
    for the period ended September 30, 2005 (File No.
    000-21863) and incorporated  herein by reference.10
.29@#

Amendment Number One to Employment
    Agreement between the Company and Michael J. Astrue, dated as of
    March 7, 2006. Filed as Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed March 9, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.30@#

Severance and Incentive Agreement
    by and between the Company and Andrew Uprichard, M.D.,
    dated September 14, 2005. Filed as Exhibit 10.3 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2005 (File No.
    000-21863) and incorporated  herein by reference.10
.31@#

Amendment to Severance and
    Incentive Agreement by and between the Company and Andrew
    Uprichard, M.D., dated as of May 19, 2006. Filed as
    Exhibit 99.1 to the Companys Current Report on
    Form 8-K
    filed May 24, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.32@#

Separation Agreement between the
    Company and Michael D. Webb, dated September 14, 2005.
    Filed as Exhibit 10.4 to the Companys Quarterly
    Report on
    Form 10-Q
    for the period ended September 30, 2005 (File No.
    000-21863) and incorporated  herein by reference.10
.33@

Consulting Agreement between the
    Company and Michael J. Astrue, dated as of May 5, 2006.
    Filed as Exhibit 99.2 to the Companys Current Report
    on
    Form 8-K
    filed May 8, 2006 (File No. 000-21863) and
    incorporated herein by reference.10
.34@

Retention Agreement by and between
    the Company and Robert Pelletier, dated as of July 25,
    2006. Filed as Exhibit 99.1 to the Companys Current
    Report on
    Form 8-K
    filed July 26, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.35@

Consulting Agreement by and
    between the Company and Robert Pelletier, dated as of
    July 25, 2006. Filed as Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    filed July 26, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.36@

Predix Pharmaceuticals Holdings,
    Inc. Amended and Restated 2003 Stock Incentive Plan. Filed as
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.37@

Physiome Sciences, Inc. Stock
    Option Plan (as amended September 21, 2001). Filed as
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.38@++

Amended and Restated License
    Agreement between Ramot at Tel Aviv University Ltd., Company
    Registration No. 51-066714-0 and Predix Pharmaceuticals
    Holdings, Inc., dated as of May 20, 2004. Filed as
    Exhibit 10.3 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.39@++

Research, Development and
    Commercialization Agreement between Predix Pharmaceuticals
    Holdings, Inc. and Cystic Fibrosis Foundation Therapeutics
    Incorporated, dated as of March 7, 2005. Filed as
    Exhibit 10.4 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference. 82




---



##### Table of Contents



ExhibitNumber

Description10
.40@++

License Agreement between Amgen
    Inc. and Predix Pharmaceuticals Holdings, Inc., dated as of
    July 31, 2006. Filed as Exhibit 10.5 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.41@

Lease by and between Trustees of 4
    Maguire Road Realty Trust and Predix Pharmaceuticals Holdings,
    Inc., dated as of January 30, 1998, as amended by First
    Amendment to Lease by and between Trustees of 4 Maguire Road
    Realty Trust and EPIX Delaware, Inc., dated as of
    August 31, 2006. Filed as Exhibit 10.6 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.42@

Lease Agreement by and between 150
    College Road, LLC and Physiome Sciences, Inc., dated as of
    December 21, 2000, as amended. Filed as Exhibit 10.7
    to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.43@

Sublease by and between Predix
    Pharmaceuticals Holdings, Inc. and Novo Nordisk Pharmaceuticals,
    Inc., dated as of December 12, 2003. Filed as
    Exhibit 10.8 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.44@

Unprotected Lease Agreement
    between Emed Real Estate Development and Investments
    Company Ltd. and Predix Pharmaceuticals Ltd., dated as of
    September 26, 2004. Filed as Exhibit 10.9 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.45@#

Bio-I.T. (Bio Information
    Technologies) Ltd. Employment Agreement between Bio-I.T. (Bio
    Information Technologies) Ltd. and Dr. Silvia Noiman, dated
    as of October 31, 2000. Filed as Exhibit 10.11 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.46@#

Predix Pharmaceuticals, Inc.
    Employment Agreement between Predix Pharmaceuticals, Inc. and
    Chen Schor, dated as of November 23, 2003. Filed as
    Exhibit 10.13 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.47@#

Bio-I.T. (Bio Information
    Technologies) Ltd. Employment Agreement between Bio-I.T. (Bio
    Information Technologies) Ltd. and Dr. Oren Becker, dated
    as of October 31, 2000. Filed as Exhibit 10.14 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.48@#

Employment Agreement between
    Predix Pharmaceuticals, Inc. and Stephen R. Donahue, M.D.,
    dated as of September 24, 2004. Filed as Exhibit 10.15
    to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.49@#

Release Agreement by and between
    the Company and Silvia Noiman, dated as of November 10,
    2006. Filed as Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    filed November 13, 2006 (File No. 000-21863) and
    incorporated herein by reference.10
.50@++

Development and License Agreement
    among SmithKline Beecham Corporation, doing business as
    GlaxoSmithKline, Glaxo Group Limited and the Company, dated as
    of December 11, 2006. Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K/A
    filed January 18, 2007 (File No. 000-21863) and
    incorporated herein by reference.10
.51@

Stock Purchase Agreement among the
    Company, Glaxo Group Limited and SmithKline Beecham Corporation,
    doing business as GlaxoSmithKline, dated as of December 11,
    2006. Filed as Exhibit 10.2 to the Companys Current Report
    on
    Form 8-K/A
    filed January 18, 2007 (File No. 000-21863) and
    incorporated herein by reference.10
.52*

First Amendment to License
    Agreement between Amgen Inc. and the Company, dated as of
    March 20, 2007.10
.53@#

Employment Agreement between the
    Company and Kimberlee C. Drapkin, dated as of March 26,
    2007. Filed as Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    filed March 29, 2007. 83




---



##### Table of Contents



ExhibitNumber

Description10
.54@#

Employment Agreement between the
    Company and Michael G. Kauffman, M.D., Ph.D., dated as of
    March 27, 2007. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed March 29, 2007.10
.55@#

Release Agreement by and between
    the Company and Oren Becker, dated as of April 5, 2007.
    Filed as Exhibit 10.1 to the Companys Current Report
    on
    Form 8-K
    filed April 6, 2007
    (File No. 000-21863)
    and incorporated herein by reference.12
.1*

Ratio of Earnings to Fixed Charges14
.1@

The Companys Code of Conduct
    and Ethics. Filed as Exhibit 14.1 to the Companys
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003 (File No.
    000-21863) and incorporated herein by reference.21
.1*

Subsidiaries of the Company23
.1*

Consent of Independent Registered
    Public Accounting Firm.31
.1*

Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 for Michael
    G. Kauffman.31
.2*

Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 for Kim C.
    Drapkin.32
*

Certification pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections
    (a) and (b) of Section 1350, Chapter 63 of
    Title 18, U.S. Code)     @
    
    Incorporated by reference as indicated.*
    
    Filed herewith.#
    
    Identifies a management contract or compensatory plan or
    agreement in which an executive officer or director of the
    Company participates.+
    
    Certain confidential material contained in the document has been
    omitted and filed separately with the Securities and Exchange
    Commission pursuant to Rule 406 of the Securities Act of
    1933, as amended.++
    
    Certain confidential material contained in the document has been
    omitted and filed separately with the Securities and Exchange
    Commission pursuant to
    Rule 24b-2
    of the Securities Exchange Act of 1934, as amended. 84




---



##### Table of Contents



SIGNATURES
      By:
    /s/  KIM
    C. DRAPKIN          Signature

Title

Date/s/  MICHAEL
    G. KAUFFMAN,Michael
    G. Kauffman, M.D., Ph.D.

Chief Executive Officer and
    Director 
    (Principal Executive Officer)

April 10, 2007/s/  KIM
    C. DRAPKINKim
    C. Drapkin, CPA

Chief Financial Officer
    (Principal Financial and Accounting Officer)

April 10, 2007/s/  CHRISTOPHER
    F.O. GABRIELIChristopher
    F.O. Gabrieli

Chairman of the Board of Directors

April 10, 2007/s/  FREDERICK
    FRANKFrederick
    Frank

Vice Chairman of the Board of
    Directors

April 10, 2007/s/  PATRICK
    J. FORTUNE,Patrick
    J. Fortune, Ph.D.

Director

April 10, 2007/s/  MICHAEL
    GILMAN,Michael
    Gilman, Ph.D.

Director

April 10, 2007/s/  MARK
    LEUCHTENBERGERMark
    Leuchtenberger

Director

April 10, 2007/s/  ROBERT
    J. PEREZRobert
    J. Perez

Director

April 10, 2007/s/  GREGORY
    D. PHELPSGregory
    D. Phelps

Director

April 10, 2007/s/  IAN
    F. SMITHIan
    F. Smith, CPA, ACA

Director

April 10, 2007  85




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description3
.1@

Restated Certificate of
    Incorporation of the Company. Filed as Exhibit 3.1 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.3
.2@

Amended and Restated By-Laws of
    the Company. Filed as Exhibit 4.2 to the Companys
    Registration Statement on
    Form S-8
    filed July 1, 1997 (File
    No. 333-30531)
    and incorporated herein by reference.4
.1@

Specimen certificate for shares of
    Common Stock of the Company. Filed as Exhibit 4.1 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006
    (File No. 000-21863) and incorporated herein by
    reference.4
.2@

Indenture dated as of June 7,
    2004 between the Company and U.S. Bank National Association
    as Trustee, relating to 3% Convertible Senior Notes due
    June 15, 2024. Filed as Exhibit 4.1 to the
    Companys Current Report on
    Form 8-K
    filed June 7, 2004 (File No. 000-21863) and incorporated
    herein by reference.4
.3@

Warrant issued to RRD
    International, LLC. Filed as Exhibit 4.3 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.4
.4@

Warrant issued to General Electric
    Capital Corporation. Filed as Exhibit 4.4 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.4
.5@

Warrant issued to Oxford
    Bioscience Management Partners II. Filed as
    Exhibit 4.5 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006
    (File No. 000-21863) and incorporated herein by
    reference.10
.1@+

Amended and Restated License
    Agreement between the Company and The General Hospital
    Corporation dated July 10, 1995. Filed as
    Exhibit 10.14 to the Companys Registration Statement
    on
    Form S-1
    filed December 10, 1996 (File
    No. 333-17581)
    and incorporated herein by reference.10
.2@#

Amended and Restated 1992 Equity
    Incentive Plan. Filed as Appendix A to the Companys 2003
    Definitive Proxy Statement on Schedule 14A filed April 29,
    2003 (File No. 000-21863) and incorporated herein by reference.10
.3@#

Form of Incentive Stock Option
    Certificate. Filed as Exhibit 10.29 to the Companys
    Registration Statement on
    Form S-1
    filed December 10, 1996 (File
    No. 333-17581)
    and incorporated herein by reference.10
.4@#

Form of Nonstatutory Stock Option
    Certificate. Filed as Exhibit 10.30 to the Companys
    Registration Statement on
    Form S-1
    filed December 10, 1996 (File
    No. 333-17581)
    and incorporated herein by reference.10
.5@#

Amended and Restated
    1996 Director Stock Option Plan. Filed as Appendix B to the
    Companys 2003 Definitive Proxy Statement on Schedule 14A
    filed April 29, 2003 (File No. 000-21863) and incorporated
    herein by reference.10
.6@#

Amended and Restated 1996 Employee
    Stock Purchase Plan. Filed as Appendix C to the Companys
    2003 Definitive Proxy Statement on Schedule 14A filed
    April 29, 2003 (File No. 000-21863) and incorporated herein
    by reference.10
.7@

Short Form Lease from Trustees of
    the Cambridge East Trust to the Company with a commencement date
    of January 1, 1998. Filed as Exhibit 10.39 to the
    Companys Registration Statement on
    Form S-1
    filed October 21, 1997 (File
    No. 333-38399)
    and incorporated herein by reference.10
.8@

First Amendment dated
    February 8, 1999 to the Short Form Lease dated as of
    July 7, 1998 with a commencement date as of January 1,
    1998 between the Company and the Trustees of The Cambridge East
    Trust. Filed as Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended March 31, 1999 (File No. 000-21863)
    and incorporated herein by reference. 86




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##### Table of Contents



ExhibitNumber

Description10
.9@

Second Amendment dated
    June 30, 2000 to the Short Form Lease dated as of
    July 7, 1998 with a commencement date as of January 1,
    1998 between the Company and the Trustees of The Cambridge East
    Trust. Filed as Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2000 and incorporated herein
    by reference.10
.10@++

Amended and Restated Strategic
    Collaboration Agreement dated as of June 9, 2000, among the
    Company, Mallinckrodt Inc. (a Delaware corporation) and
    Mallinckrodt Inc. (a New York corporation). Filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.11@++

Strategic Collaboration Agreement
    dated as of June 9, 2000, between the Company and Schering
    Aktiengesellschaft. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.12@

Stock Purchase Agreement, dated as
    of June 9, 2000, between the Company and Schering Berlin
    Venture Corporation. Filed as Exhibit 10.3 to the Companys
    Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.13@

Standstill Agreement, dated as of
    June 9, 2000, between the Company and Schering Berlin
    Venture Corporation. Filed as Exhibit 10.4 to the Companys
    Current Report on
    Form 8-K
    filed June 29, 2000 (File No. 000-21863) and incorporated
    herein by reference.10
.14@++

Reacquisition Agreement dated
    December 22, 2000 between the Company and Daiichi
    Radioisotope Laboratories, Ltd. Filed as Exhibit 10.32 to
    the Companys Annual Report on
    Form 10-K
    for the period ended December 31, 2000 (File No. 000-21863)
    and incorporated herein by reference.10
.15@

Amendment No. 1 dated as of
    December 22, 2000 to the Strategic Collaboration Agreement,
    dated as of June 9, 2000, between the Company and Schering
    Aktiengesellschaft. Filed as Exhibit 10.33 to the
    Companys Annual Report on
    Form 10-K
    for the period ended December 31, 2000 (File No. 000-21863)
    and incorporated herein by reference.10
.16@++

Worldwide License Agreement, dated
    as of September 25, 2001, by and between the Company and
    Bracco Imaging S.p.A. Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed September 25, 2001 (File No. 000-21863) and
    incorporated herein by reference.10
.17@

Settlement and Release Agreement
    dated as of September 25, 2001, by and between the Company
    and Bracco Imaging S.p.A. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed September 25, 2001 (File No. 000-21863) and
    incorporated herein by reference.10
.18@

Third Amendment, dated May 1,
    2002, to the Short Form Lease dated as July 7, 1998 with a
    commencement date as of January 1, 1998 between the Company
    and the Trustees of the Cambridge East Trust. Filed as an
    Exhibit 10.31 to the Companys Quarterly Report for
    the period ended June 30, 2002 (File No. 000-21863) and
    incorporated herein by reference.10
.19@++

Thrombus Development Agreement
    between the Company and Schering Aktiengesellschaft, dated as of
    May 26, 2003. Filed as Exhibit 10.1 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.20@++

Collaborative Research Agreement
    between the Company and Schering Aktiengesellschaft, dated as of
    May 26, 2003. Filed as Exhibit 10.2 to the Companys
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.21@

Intellectual Property Agreement by
    and between the Company and Dr. Martin R. Prince, dated
    November 17, 2003. Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed November 18, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.22@++

Stock Purchase Agreement by and
    between the Company and Dr. Martin R. Prince, dated as of
    November 17, 2003. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed November 18, 2003 (File No. 000-21863) and
    incorporated herein by reference.10
.23@#

Description of Director
    Compensation Arrangements. Filed as Exhibit 10.27 to the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2004 (file No. 000-218039)
    and incorporated herein by reference. 87




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##### Table of Contents



ExhibitNumber

Description10
.24@#

Named Executive Officer
    Compensation Arrangements. Filed with the Companys Current
    Report on
    Form 8-K
    filed February 16, 2006 (File No. 000-21863) and
    incorporated herein by reference.10
.25@#

Form of Indemnification Agreement.
    Filed as Exhibit 10.29 to the Companys Annual Report
    on
    Form 10-K
    for the year ended December 31, 2004 (file No. 000-218039)
    and incorporated herein by reference.10
.26@

Form of Amendment to Stock Option
    Agreement. Filed as Exhibit 10.30 to the Companys Annual
    Report on
    Form 10-K
    for the year ended December 31, 2004 (file No. 000-218039)
    and incorporated herein by reference.10
.27@#

Amendment to the Collaborative
    Research Agreement dated as of May 26, 2003, between the
    Company and Schering Aktiengesellschaft, dated
    September 30, 2005. Filed as Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed October 7, 2005 (File No. 000-21863) and incorporated
    herein by reference.10
.28@#

Employment Agreement between the
    Company and Michael J. Astrue, dated September 21, 2005.
    Filed as Exhibit 10.2 to the Companys Quarterly
    Report on
    Form 10-Q
    for the period ended September 30, 2005 (File No.
    000-21863) and incorporated  herein by reference.10
.29@#

Amendment Number One to Employment
    Agreement between the Company and Michael J. Astrue, dated as of
    March 7, 2006. Filed as Exhibit 99.1 to the
    Companys Current Report on
    Form 8-K
    filed March 9, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.30@

Severance and Incentive Agreement
    by and between the Company and Andrew Uprichard, M.D.,
    dated September 14, 2005. Filed as Exhibit 10.3 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2005 (File No.
    000-21863) and incorporated  herein by reference.10
.31@#

Amendment to Severance and
    Incentive Agreement by and between the Company and
    Andrew Uprichard, M.D., dated as of May 19, 2006.
    Filed as Exhibit 99.1 to the Companys Current Report
    on
    Form 8-K
    filed May 24, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.32@#

Separation Agreement between the
    Company and Michael D. Webb, dated September 14, 2005.
    Filed as Exhibit 10.4 to the Companys Quarterly
    Report on
    Form 10-Q
    for the period ended September 30, 2005 (File No.
    000-21863) and incorporated  herein by reference.10
.33@

Consulting Agreement between the
    Company and Michael J. Astrue, dated as of May 5, 2006.
    Filed as Exhibit 99.2 to the Companys Current Report
    on
    Form 8-K
    filed May 8, 2006 (File No. 000-21863) and
    incorporated herein by reference.10
.34@

Retention Agreement by and between
    the Company and Robert Pelletier, dated as of July 25,
    2006. Filed as Exhibit 99.1 to the Companys Current
    Report on
    Form 8-K
    filed July 26, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.35@

Consulting Agreement by and
    between the Company and Robert Pelletier, dated as of
    July 25, 2006. Filed as Exhibit 99.2 to the
    Companys Current Report on
    Form 8-K
    filed July 26, 2006 (File No. 000-21863) and incorporated
    herein by reference.10
.36@

Predix Pharmaceuticals Holdings,
    Inc. Amended and Restated 2003 Stock Incentive Plan. Filed as
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.37@

Physiome Sciences, Inc. Stock
    Option Plan (as amended September 21, 2001). Filed as
    Exhibit 10.2 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.38@++

Amended and Restated License
    Agreement between Ramot at Tel Aviv University Ltd., Company
    Registration No. 51-066714-0 and Predix Pharmaceuticals
    Holdings, Inc., dated as of May 20, 2004. Filed as
    Exhibit 10.3 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference. 88




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##### Table of Contents



ExhibitNumber

Description10
.39@++

Research, Development and
    Commercialization Agreement between Predix Pharmaceuticals
    Holdings, Inc. and Cystic Fibrosis Foundation Therapeutics
    Incorporated, dated as of March 7, 2005. Filed as
    Exhibit 10.4 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.40@++

License Agreement between Amgen
    Inc. and Predix Pharmaceuticals Holdings, Inc., dated as of
    July 31, 2006. Filed as Exhibit 10.5 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.41@

Lease by and between Trustees of 4
    Maguire Road Realty Trust and Predix Pharmaceuticals Holdings,
    Inc., dated as of January 30, 1998, as amended by First
    Amendment to Lease by and between Trustees of 4 Maguire Road
    Realty Trust and EPIX Delaware, Inc., dated as of
    August 31, 2006. Filed as Exhibit 10.6 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.42@

Lease Agreement by and between 150
    College Road, LLC and Physiome Sciences, Inc., dated as of
    December 21, 2000, as amended. Filed as Exhibit 10.7
    to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.43@

Sublease by and between Predix
    Pharmaceuticals Holdings, Inc. and Novo Nordisk Pharmaceuticals,
    Inc., dated as of December 12, 2003. Filed as
    Exhibit 10.8 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.44@

Unprotected Lease Agreement
    between Emed Real Estate Development and
    Investments Company Ltd. and Predix Pharmaceuticals Ltd., dated
    as of September 26, 2004. Filed as Exhibit 10.9 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.45@#

Bio-I.T. (Bio Information
    Technologies) Ltd. Employment Agreement between Bio-I.T. (Bio
    Information Technologies) Ltd. and Dr. Silvia Noiman, dated
    as of October 31, 2000. Filed as Exhibit 10.11 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.46@#

Predix Pharmaceuticals, Inc.
    Employment Agreement between Predix Pharmaceuticals, Inc. and
    Chen Schor, dated as of November 23, 2003. Filed as
    Exhibit 10.13 to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.47@#

Bio-I.T. (Bio Information
    Technologies) Ltd. Employment Agreement between Bio-I.T. (Bio
    Information Technologies) Ltd. and Dr. Oren Becker, dated
    as of October 31, 2000. Filed as Exhibit 10.14 to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.48@#

Employment Agreement between
    Predix Pharmaceuticals, Inc. and Stephen R. Donahue, M.D.,
    dated as of September 24, 2004. Filed as Exhibit 10.15
    to the Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 (File No.
    000-21863) and incorporated herein by reference.10
.49@#

Release Agreement by and between
    the Company and Silvia Noiman, dated as of November 10,
    2006. Filed as Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    filed November 13, 2006 (File No. 000-21863) and
    incorporated herein by reference.10
.50@++

Development and License Agreement
    among SmithKline Beecham Corporation, doing business as
    GlaxoSmithKline, Glaxo Group Limited and the Company, dated as
    of December 11, 2006. Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K/A
    filed January 18, 2007 (File No. 000-21863) and
    incorporated herein by reference.10
.51@

Stock Purchase Agreement among the
    Company, Glaxo Group Limited and SmithKline Beecham Corporation,
    doing business as GlaxoSmithKline, dated as of December 11,
    2006. Filed as Exhibit 10.2 to the Companys Current Report
    on
    Form 8-K/A
    filed January 18, 2007 (File No. 000-21863) and
    incorporated herein by reference. 89




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##### Table of Contents



ExhibitNumber

Description10
.52*

First Amendment to License
    Agreement between Amgen Inc. and the Company, dated as of
    March 20, 2007.10
.53@#

Employment Agreement between the
    Company and Kimberlee C. Drapkin, dated as of March 26,
    2007. Filed as Exhibit 10.1 to the Companys Current
    Report on
    Form 8-K
    filed March 29, 2007.10
.54@#

Employment Agreement between the
    Company and Michael G. Kauffman, M.D., Ph.D., dated as of
    March 27, 2007. Filed as Exhibit 10.2 to the
    Companys Current Report on
    Form 8-K
    filed March 29, 2007.10
.55@#

Release Agreement by and between
    the Company and Oren Becker, dated as of April 5, 2007.
    Filed as Exhibit 10.1 to the Companys Current Report
    on
    Form 8-K
    filed April 6, 2007
    (File No. 000-21863)
    and incorporated herein by reference.12
.1*

Ratio of Earnings to Fixed Charges14
.1@

The Companys Code of Conduct
    and Ethics. Filed as Exhibit 14.1 to the Companys
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003 (File No.
    000-21863) and incorporated herein by reference.21
.1*

Subsidiaries of the Company23
.1*

Consent of Independent Registered
    Public Accounting Firm.31
.1*

Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 for Michael
    G. Kauffman.31
.2*

Certification pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 for Kim C.
    Drapkin.32
*

Certification pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections
    (a) and (b) of Section 1350, Chapter 63 of
    Title 18, U.S. Code)     @
    
    Incorporated by reference as indicated.*
    
    Filed herewith.#
    
    Identifies a management contract or compensatory plan or
    agreement in which an executive officer or director of the
    Company participates.+
    
    Certain confidential material contained in the document has been
    omitted and filed separately with the Securities and Exchange
    Commission pursuant to Rule 406 of the Securities Act of
    1933, as amended.++
    
    Certain confidential material contained in the document has been
    omitted and filed separately with the Securities and Exchange
    Commission pursuant to
    Rule 24b-2
    of the Securities Exchange Act of 1934, as amended. 90




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##### Table of Contents



EPIX
    PHARMACEUTICALS, INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Report of
    Independent Registered Public Accounting Firm

F-2Consolidated Financial StatementsConsolidated
    Balance Sheets

F-3Consolidated
    Statements of Operations

F-4Consolidated
    Statements of Stockholders Equity (Deficit)

F-5Consolidated
    Statements of Cash Flows

F-6Notes to
    Consolidated Financial Statements

F-7  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
    F-2




---



##### Table of Contents



EPIX
    PHARMACEUTICALS, INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005(Restated)ASSETSCurrent assets:Cash and cash equivalents

$
30,332,468


$
72,502,906Available-for-sale
    marketable securities


79,210,430



52,225,590Accounts receivable


46,367



149,287Prepaid expenses and other assets


2,575,265



346,919Total current assets


112,164,530



125,224,702Property and equipment, net


3,592,570



2,517,859Other assets


4,330,578



2,973,155Goodwill


4,939,814



Total assets

$
125,027,492


$
130,715,716LIABILITIES AND
    STOCKHOLDERS EQUITY
    (DEFICIT)Current liabilities:Accounts payable

$
1,982,032


$
1,268,325Accrued expenses


7,695,548



5,196,040Contract advances


4,605,079



6,112,549Merger consideration payable


18,504,084



Current portion of capital lease
    obligation


84,633



Deferred revenue


3,665,120



435,861Other current liabilities


446,137



Total current liabilities


36,982,633



13,012,775Deferred revenue


17,101,165



755,647Capital lease obligation


102,077



Other liabilities


2,862,898



Convertible debt


100,000,000



100,000,000Total liabilities


157,048,773



113,768,422Commitments and contingencies






Stockholders equity
    (deficit):Preferred Stock, $0.01 par
    value, 1,000,000 shares authorized; no shares issued






Common Stock, $0.01 par
    value, 100,000,000 shares authorized; 32,524,726 and
    15,523,207 shares issued and outstanding at
    December 31, 2006 and 2005, respectively


325,247



155,232Additional
    paid-in-capital


312,984,862



204,833,760Accumulated deficit


(345,368,698
)


(187,975,500
)Accumulated other comprehensive
    income (loss)


37,308



(66,198
)Total stockholders equity
    (deficit)


(32,021,281
)


16,947,294Total liabilities and
    stockholders equity (deficit)

$
125,027,492


$
130,715,716    F-3




---



##### Table of Contents



EPIX
    PHARMACEUTICALS, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
   Year ended December 31,2006


2005


2004(Restated)


(Restated)Revenues:Product development revenue

$
2,909,402


$
4,195,530


$
7,594,280Royalty revenue


1,603,230



2,333,384



626,685License fee revenue


1,527,910



660,747



4,037,636Total revenues


6,040,542



7,189,661



12,258,601Operating expenses:Royalty expense


1,063,102



98,089



31,000Research and development


26,255,000



18,293,921



23,182,480Acquired in-process research and
    development


123,500,000







General and administrative


12,257,320



9,586,132



11,395,852Restructuring costs


633,238



971,828



Total operating expenses


163,708,660



28,949,970



34,609,332Operating loss


(157,668,118
)


(21,760,309
)


(22,350,731
)Interest income


5,496,081



4,146,532



1,958,152Interest expense


(5,075,848
)


(3,613,190
)


(2,128,738
)Loss before provision for income
    taxes


(157,247,885
)


(21,226,967
)


(22,521,317
)Provision for income taxes


145,313



41,991



99,905Net loss

$
(157,393,198
)

$
(21,268,958
)

$
(22,621,222
)Weighted average shares:Basic and diluted


20,789,388



15,505,458



15,259,115Net loss per share, basic and
    diluted

$
(7.57
)

$
(1.37
)

$
(1.48
)    F-4




---



##### Table of Contents



EPIX
    PHARMACEUTICALS, INC.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    (DEFICIT)
  Accumulated


TotalAdditional





Other


StockholdersCommon Stock


Paid-In


Accumulated


Comprehensive


EquityShares


Amount


Capital


Deficit


Income (Loss)


(Deficit)Balance at December 31, 2003
    (as reported)


14,879,095


$
148,791


$
188,926,344


$
(134,952,516
)

$
33,953


$
54,156,572Adjustments to opening
    stockholders equity










8,471,069



(9,132,804
)






(661,735
)Balance at December 31, 2003
    (as restated)


14,879,095



148,791



197,397,413



(144,085,320
)


33,953



53,494,837Issuance of common stock upon
    exercise of options


482,369



4,824



5,214,215











5,219,039Issuance of common stock under
    employee stock purchase plan


10,639



106



232,003











232,109Issuance of common stock


88,000



880



2,338,160











2,339,040Stock-based compensation expense
    (as restated)










2,092,885











2,092,885Net loss (as restated)














(22,621,222
)






(22,621,222
)Available-for-sale
    marketable securities unrealized loss


















(280,836
)


(280,836
)Comprehensive loss (as restated)






















(22,902,058
)Balance at December 31, 2004
    (as restated)


15,460,103



154,601



207,274,676



(166,706,542
)


(246,883
)


40,475,852Issuance of common stock upon
    exercise of options


50,332



503



473,612











474,115Issuance of common stock under
    employee stock purchase plan


12,772



128



103,868











103,996Stock-based compensation expense
    (as restated)










(3,018,396
)










(3,018,396
)Net loss (as restated)














(21,268,958
)






(21,268,958
)Available-for-sale
    marketable securities unrealized gain


















180,685



180,685Comprehensive loss (as restated)






















(21,088,273
)Balance at December 31, 2005
    (as restated)


15,523,207



155,232



204,833,760



(187,975,500
)


(66,198
)


16,947,294Issuance of common stock under
    employee stock purchase plan


11,165



112



59,863











59,975Issuance of common stock upon
    exercise of options


360,018



3,600



454,124











457,724Sale of common stock to
    GlaxoSmithKline


3,009,027



30,090



17,469,910











17,500,000Stock-based compensation expense










4,203,663











4,203,663Cash paid for fractional shares


(29
)






(205
)










(205
)Issuance of common stock in
    connection with merger


13,621,338



136,213



85,963,747











86,099,960Net loss














(157,393,198
)






(157,393,198
)Available-for-sale
    marketable securities unrealized gain


















103,506



103,506Comprehensive loss






















(157,289,692
)Balance at December 31, 2006


32,524,726


$
325,247


$
312,984,862


$
(345,368,698
)

$
37,308


$
(32,021,281
)    F-5




---



##### Table of Contents



EPIX
    PHARMACEUTICALS, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2006


2005


2004(Restated)


(Restated)Operating activities:Net loss

$
(157,393,198
)

$
(21,268,958
)

$
(22,621,222
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation, amortization and
    asset write offs


1,548,422



1,188,610



1,000,101Write-off of in-process research
    and development


123,500,000







Stock compensation expense (credit)


4,203,663



(3,018,396
)


2,092,885Noncash interest expense from
    embedded derivative


936,536







Amortization of deferred financing
    costs


492,337



475,115



260,188Changes in operating assets and
    liabilities, exclusive of amounts acquired from the merger with
    Predix:Accounts receivable


852,920



173,259



(276,474
)Prepaid expenses and other current
    assets


(282,827
)


238,219



(191,459
)Other assets and liabilities


2,073,119







4,943Accounts payable


216,567



329,827



(999,867
)Accrued expenses


(5,892,204
)


71,084



(1,056,598
)Contract advances


(1,507,470
)


(37,464
)


2,977,306Merger consideration payable


465,517







Deferred revenue


15,741,238



(2,406,099
)


(3,650,620
)Net cash used in operating
    activities


(15,045,380
)


(24,254,803
)


(22,460,817
)Investing activities:Cash paid for merger with Predix,
    net of cash acquired


(7,142,601
)






Purchases of marketable securities


(124,598,368
)


(88,618,059
)


(93,663,936
)Sales or redemptions of marketable
    securities


97,717,034



127,648,784



45,607,145Restricted cash


(243,327
)






Purchases of fixed assets


(1,314,374
)


(1,215,665
)


(2,077,559
)Net cash provided by (used in)
    investing activities


(35,581,636
)


37,815,060



(50,134,350
)Financing activities:Net proceeds from issuance of
    convertible debt










96,350,000Proceeds from loan payable from
    strategic partner






45,000,000



52,500,000Repayment of loan payable to
    strategic partner






(60,000,000
)


(45,000,000
)Principal payments of notes payable


(9,516,380
)






Principal payments of capital leases


(44,536
)






Proceeds from sale of common stock


17,500,000







Proceeds from stock options


457,724



474,115



5,219,039Proceeds from Employee Stock
    Purchase Plan


59,975



103,996



232,109Cash paid for fractional shares
    from reverse stock split


(205
)






Net cash provided by (used in)
    financing activities


8,456,578



(14,421,889
)


109,301,148Net increase (decrease) in cash and
    cash equivalents


(42,170,438
)


(861,632
)


36,705,981Cash and cash equivalents at
    beginning of year


72,502,906



73,364,538



36,658,557Cash and cash equivalents at end of
    year

$
30,332,468


$
72,502,906


$
73,364,538Supplemental cash flow information:Cash paid for interest

$
3,383,774


$
3,145,883


$
1,747,236Cash paid for taxes

$
145,313


$
41,991


$
107,889Supplemental disclosure of noncash
    financing and investing activities:Issuance of common stock in
    connection with Intellectual Property Agreement

$



$



$
2,339,040  F-6




---



##### Table of Contents



EPIX
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Business  1-for-1.5
    in silico
 F-7




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    Significant
    Accounting Policies  Principles
    of Consolidation
    Translation
    of Foreign Currencies
    Cash
    Equivalents
    Marketable
    Securities
  Accounting for Certain
    Investments in Debt and Equity Securities available-for-sale other-than-temporary available-for-sale
  Fair
    Value of Financial Instruments
  available-for-sale available-for-sale
   F-8




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentrations
    of Credit Risk
  available-for-sale available-for-sale
  Property
    and Equipment
    Long-Lived
    Assets
  Accounting
    for the Impairment or Disposal of Long-Lived Assets,
  Other
    Assets
    Goodwill
    Income
    Taxes
  Accounting for Income
    Taxes.
 F-9




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Segment
    Information
  Disclosure about Segments of an
    Enterprise and Related Information,
  Revenue
    Revenue Recognition in
    Financial Statements,
    
    ratably over the development period; or
    based upon the level of research services performed during the
    period of the research contract.          Product
    development revenue
  non-U.S. sales.
 F-10




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     
    The Company calculates its development costs directly related to
    Vasovist.
    The Company obtains cost reports, or an estimate of costs, from
    Bayer Schering Pharma AG, Germany for costs incurred by Bayer
    Schering Pharma AG, Germany related to the development of
    Vasovist during the same period. Where estimates are used, the
    Company reviews the estimates and records, as necessary,
    adjustments in the subsequent quarter when the Company receives
    actual results from Bayer Schering Pharma AG, Germany. To date,
    there have been no material adjustments.
    The Company multiplies its and Bayer Schering Pharma AG,
    Germanys development costs by approximately 50% based on
    the contractual allocation of work contemplated under the
    agreement.
    The Company then records the net difference as development
    revenue if the balance results in a payment to the Company and
    negative revenue if the balance results in a payment to Bayer
    Schering Pharma AG, Germany.         F-11




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Royalty
    revenue
  sub-license
  sub-licensed sub-licenses.
  country-by-country
  License
    fee revenue
        sub-licensed
   F-12




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Use of
    Estimates
    Research
    and Development Expenses
      Loss
    Per Share
  Earnings per
    Share.
 F-13




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         2006


2005


2004Stock options and awards


3,427,107



2,181,184



2,373,592Shares issuable on conversion of
    3% Convertible Senior Notes


2,239,393



2,239,393



2,239,393Shares issuable in satisfaction of
    merger consideration payable (1)


3,008,726







Total


8,675,226



4,420,577



4,612,985   (1)
    
    Share amount calculated as if the merger consideration was
    payable as of December 31, 2006. Actual settlement date for
    the merger consideration is October 29, 2007.  Comprehensive
    Income (Loss)
  Reporting
    Comprehensive Income available-for-sale
  Employee
    Stock Compensation
  Share-Based Payment  An Amendment of FASB
    Statements No. 123 and 95
  Accounting for Stock Issued to Employees
 F-14




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Reclassifications
    Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes 
    An Interpretation of FASB Statement No. 109
  Fair Value
    Measurements
  3.
    Restatement
    of Consolidated Financial Statements     F-15




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Adjustments
    to Measurement Dates Arising From Evidence of Retrospective
    Selection of Grant Dates
   F-16




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Minutes of compensation committee meetings;
    Unanimous written consents signed by compensation committee
    members, and evidence relating to the date such consents were
    circulated for signature
    and/or
    signed;
    Information found in personnel files maintained for optionees;
    Electronic mail messages and other electronic files maintained
    in our computer system and in backup media;
    Documentation prepared in connection with our annual performance
    reviews of employees as part of the process of determining the
    allocation of stock option grants to individual employees;
    Information as to the date of hire of the optionee, including
    (if the grant was a new hire grant) the date of any employment
    agreement or offer letter:
    Correspondence and other documentation supporting the option
    grant (including, without limitation, memoranda, SEC Form 4
    filings);
    Information concerning the date or dates on which the stock
    option was entered into our stock option tracking system, Equity
    Edge; and
    Information obtained during interviews conducted by the special
    committee of numerous individuals, including former officers,
    directors, employees, and outside professionals.    Re-priced
    Stock Options
   F-17




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Adjustments to Measurement Dates Arising From Evidence of
    Retrospective Selection of Grant Dates.
    Other
    Dating Errors
      Other
    Adjustments
    
    Grants made to consultants were erroneously accounted for under
    APB 25 as if they had been made to employees. To correctly
    account for these grants in accordance with
    EITF 96-18,
    the Company recorded $0.3 million in additional stock-based
    compensation during 1996 through 2001.
    With respect to seven option grants totaling approximately
    44,000 shares, modifications were made to previously
    granted employee and consultant stock options that were not
    accounted for in accordance with APB 25 and related
    interpretations,
    EITF 96-18
    and FAS 123, as applicable. The modifications included the
    extension of the post-service exercise period for vested stock
    options of terminated employees and or consultants. The Company
    recorded $0.9 million in additional stock-based
    compensation expense during 2000 through 2004, to properly
    account for these modifications.
    In 1999, the Company recorded approximately $0.1 million of
    stock-based compensation expense equal to the gain recognized by
    employees when those employees sold stock options that were
    deemed to be disqualifying dispositions. Disqualifying
    dispositions are potential tax deductions for companies and do
    not require recognition as expense in a companys statement
    of operations. As this accounting is not in accordance with
    Generally Accepted Accounting Principles, the stock compensation
    expense was reversed. F-18




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Financial
    Impact of the Stock Option Review
  Numberof Shares


AmountRestrospective selection of grant
    date


1,387,982


$
3,680,249Re-priced options


867,893



2,518,291Other dating errors


162,196



164,7062,418,071



6,363,246Consultant grants


44,345



272,303Stock option modifications


70,168



906,110Correction of erroneous stock
    compensation charge






(96,828
)2,532,584



7,444,831Employee income and payroll taxes






886,037$
8,330,868     Restatement
    of Our Consolidated Financial Statements
   F-19




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Fiscal Year

Expense (Credit)Year ended December 31, 1996

$
57,182Year ended December 31, 1997


280,609Year ended December 31, 1998


614,966Year ended December 31, 1999


435,269Year ended December 31, 2000


1,091,267Year ended December 31, 2001


2,262,350Year ended December 31, 2002


(534,245
)Year ended December 31, 2003


4,925,406Sub-total


9,132,804Year ended December 31, 2004


2,239,964Year ended December 31, 2005


(3,041,900
)Total

$
8,330,868  F-20




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year ended December 31,2005


2004As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product development revenue

$
4,195,530


$



$
4,195,530


$
7,594,280


$



$
7,594,280Royalty revenue


2,333,384







2,333,384



626,685







626,685License fee revenue


660,747







660,747



4,037,636







4,037,636Total revenues


7,189,661







7,189,661



12,258,601







12,258,601Operating expenses:Royalty expense


98,089







98,089



31,000







31,000Research and development


20,147,724



(1,853,803
)


18,293,921



21,873,991



1,308,489



23,182,480General and administrative


10,774,229



(1,188,097
)


9,586,132



10,464,377



931,475



11,395,852Restructuring costs


971,828







971,828











Total operating expenses


31,991,870



(3,041,900
)


28,949,970



32,369,368



2,239,964



34,609,332Operating loss


(24,802,209
)


3,041,900



(21,760,309
)


(20,110,767
)


(2,239,964
)


(22,350,731
)Interest income


4,146,532







4,146,532



1,958,152







1,958,152Interest expense


(3,613,190
)






(3,613,190
)


(2,128,738
)






(2,128,738
)Loss before provision for income
    taxes


(24,268,867
)


3,041,900



(21,226,967
)


(20,281,353
)


(2,239,964
)


(22,521,317
)Provision for income taxes


41,991







41,991



99,905







99,905Net loss

$
(24,310,858
)

$
3,041,900


$
(21,268,958
)

$
(20,381,258
)

$
(2,239,964
)

$
(22,621,222
)Weighted average shares:Basic and diluted


15,505,458







15,505,458



15,259,115







15,259,115Net loss per share, basic and
    diluted

$
(1.57
)

$
0.20


$
(1.37
)

$
(1.34
)

$
(0.14
)

$
(1.48
)  F-21




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2005As PreviouslyReported


Adjustments


As RestatedASSETSCurrent assets:Cash and cash equivalents

$
72,502,906


$



$
72,502,906Available-for-sale
    marketable securities


52,225,590







52,225,590Accounts receivable


149,287







149,287Prepaid expenses and other assets


346,919







346,919Total current assets


125,224,702







125,224,702Property and equipment, net


2,517,859







2,517,859Other assets


2,973,155







2,973,155Total assets

$
130,715,716


$



$
130,715,716LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,268,325


$



$
1,268,325Accrued expenses


4,310,003



886,037



5,196,040Contract advances


6,112,549







6,112,549Deferred revenue


435,861







435,861Total current liabilities


12,126,738



886,037



13,012,775Deferred revenue


755,647







755,647Convertible debt


100,000,000







100,000,000Total liabilities


112,882,385



886,037



113,768,422Stockholders equity:Preferred Stock, $0.01 par value










Common Stock, $0.01 par value


155,232







155,232Additional
    paid-in-capital


197,388,929



7,444,831



204,833,760Accumulated deficit


(179,644,632
)


(8,330,868
)


(187,975,500
)Accumulated other comprehensive
    income (loss)


(66,198
)






(66,198
)Total stockholders equity


17,833,331



(886,037
)


16,947,294Total liabilities and
    stockholders equity

$
130,715,716


$



$
130,715,716  F-22




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Net Impact toAdditional Paid-In


Accumulated


StockholdersFiscal Year

Capital


Deficit


Equity (Deficit)1996

$
57,182


$
(57,182
)

$
1997


280,609



(280,609
)


1998


613,848



(614,966
)


(1,118
)1999


432,536



(435,269
)


(2,733
)2000


1,029,007



(1,091,267
)


(62,260
)2001


2,238,867



(2,262,350
)


(23,483
)2002


(593,335
)


534,245



(59,090
)2003


4,412,355



(4,925,406
)


(513,051
)Sub-total


8,471,069



(9,132,804
)


(661,735
)2004


1,995,577



(2,239,964
)


(244,387
)2005


(3,021,815
)


3,041,900



20,085Total

$
7,444,831


$
(8,330,868
)

$
(886,037
)  F-23




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2005


Year Ended December 31, 2004As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedOperating activities:Net loss

$
(24,310,858
)

$
3,041,900


$
(21,268,958
)

$
(20,381,258
)

$
(2,239,964
)

$
(22,621,222
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation, amortization and
    asset write offs


1,188,610







1,188,610



1,000,101







1,000,101Stock compensation expense (credit)


3,419



(3,021,815
)


(3,018,396
)


97,308



1,995,577



2,092,885Amortization of deferred financing
    costs


475,115







475,115



260,188







260,188Changes in operating assets and
    liabilities, exclusive of amounts acquired from the merger with
    Predix:Accounts receivable


173,259







173,259



(276,474
)






(276,474
)Prepaid expenses and other current
    assets


238,219







238,219



(191,459
)






(191,459
)Other assets and liabilities














4,943







4,943Accounts payable


329,827







329,827



(999,867
)






(999,867
)Accrued expenses


91,169



(20,085
)


71,084



(1,300,985
)


244,387



(1,056,598
)Contract advances


(37,464
)






(37,464
)


2,977,306







2,977,306Deferred revenue


(2,406,099
)






(2,406,099
)


(3,650,620
)






(3,650,620
)Net cash used in operating
    activities


(24,254,803
)






(24,254,803
)


(22,460,817
)






(22,460,817
)Investing activities:Cash paid for merger with Predix,
    net of cash acquired






















Purchases of marketable securities


(88,618,059
)






(88,618,059
)


(93,663,936
)






(93,663,936
)Sales or redemptions of marketable
    securities


127,648,784







127,648,784



45,607,145







45,607,145Purchases of fixed assets


(1,215,665
)






(1,215,665
)


(2,077,559
)






(2,077,559
)Net cash provided by (used in)
    investing activities


37,815,060







37,815,060



(50,134,350
)






(50,134,350
)Financing activities:Net proceeds from issuance of
    convertible debt














96,350,000







96,350,000Proceeds from loan payable from
    strategic partner


45,000,000







45,000,000



52,500,000







52,500,000Repayment of loan payable to
    strategic partner


(60,000,000
)






(60,000,000
)


(45,000,000
)






(45,000,000
)Proceeds from stock options


474,115







474,115



5,219,039







5,219,039Proceeds from Employee Stock
    Purchase Plan


103,996







103,996



232,109







232,109Net cash provided by (used in)
    financing activities


(14,421,889
)






(14,421,889
)


109,301,148







109,301,148Net increase (decrease) in cash and
    cash equivalents


(861,632
)






(861,632
)


36,705,981







36,705,981Cash and cash equivalents at
    beginning of year


73,364,538







73,364,538



36,658,557







36,658,557Cash and cash equivalents at end of
    year

$
72,502,906


$



$
72,502,906


$
73,364,538


$



$
73,364,538Supplemental cash flow information:Cash paid for interest

$
3,145,883


$



$
3,145,883


$
1,747,236


$



$
1,747,236Cash paid for taxes

$
41,991


$



$
41,991


$
107,889


$



$
107,889Supplemental disclosure of noncash
    financing and investing activities:Issuance of common stock in
    connection with Intellectual Property Agreement

$



$



$



$
2,339,040


$



$
2,339,040  F-24




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Marketable
    Securities    2006


2005Fair Value


Cost


Fair Value


CostGovernment-sponsored agency
    securities

$
61,036,088


$
61,002,190


$
19,559,610


$
19,584,572Corporate bonds


16,348,698



16,342,795



25,112,035



25,153,272Commercial paper


1,825,644



1,828,137



3,980,788



3,980,787Certificates of deposit










3,573,157



3,573,157$
79,210,430


$
79,173,122


$
52,225,590


$
52,291,788   available-for-sale
  December 31,2006


2005Due within one year

$
79,210,430


$
48,447,012Due after one year through two
    years






3,778,578$
79,210,430


$
52,225,590   other-than-temporary
    5.
    Acquisition
    of Predix  sphingosine-1-phosphate
 F-25




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  30-day
    Fair value of EPIX shares issued

$
80,402,420Fair value of vested Predix stock
    options exchanged for EPIX options


5,697,540Milestone payment due to Predix
    stockholders


35,000,000Fair value of milestone payment
    embedded derivative


2,090,000Cash paid in lieu of fractional
    shares


1,389Direct acquisition costs


3,580,643Total purchase price

$
126,771,992   five-day
 F-26




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Business Combinations.
  In-process research and development

$
123,500,000Cash and cash equivalents


16,426,010Other current assets


2,695,520Property and equipment


1,308,759Other assets


1,664,547Goodwill


4,939,814Total assets acquired


150,534,650Current liabilities


12,241,986Notes payable


9,516,380Other liabilities


2,004,292Total liabilities assumed


23,762,658Net assets acquired

$
126,771,992       
    Contract-based intangible assets (licensing arrangements):
    Predixs contractual relationship with Amgen and CFFT. The
    terms of the agreements were considered to be ostensibly fair to
    both parties thus having no value separable from goodwill.
    Technology-based intangible assets (technology platform,
    existing product candidates and patents, in-process research and
    development): Existing clinical compounds and related patents
    were determined to F-27




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  be separable from goodwill and were valued as in-process
    research and development. The technology platforms value
    in the development of future yet to be identified compounds was
    not considered reliably quantifiable.  Accounting for Research and Development
    Costs
    Unaudited
    Pro Forma Condensed Consolidated Statement of Operations
    Year Ended December 31, 2005
  Historical


Pro Forma


Note


ConsolidatedEPIX


Predix


Adjustments


Ref


Pro Forma(Restated)(In thousands, except per share data)Revenues:Product development revenue

$
4,196


$
1,737


$







$
5,933Royalty revenue


2,333















2,333License fee revenue


661



563











1,224Total revenues:


7,190



2,300











9,490Operating expenses:Royalty expense


98















98Research and development


18,294



29,351



725



(A
)


48,370General and administrative


9,586



7,031



1,616



(A
)


18,233Restructuring costs


972



205











1,177Total operating expenses


28,950



36,587



2,341







67,878Operating loss


(21,760
)


(34,287
)


(2,341
)






(58,388
)Other income (expense):Interest income


4,146



614











4,760Interest expense


(3,613
)


(30
)










(3,643
)Loss before provision for income
    taxes


(21,227
)


(33,703
)


(2,341
)






(57,271
)Provision for income taxes


42















42Net loss

$
(21,269
)

$
(33,703
)

$
(2,341
)





$
(57,313
)Net loss per share, basic and
    diluted

$
(1.37
)













$
(1.97
)Weighted average shares, basic and
    diluted


15,505







13,621



(D
)


29,126  F-28




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Unaudited
    Pro Forma Condensed Consolidated Statement of Operations
    Year Ended December 31, 2006
  HistoricalPredix (January 1,2006 through


Pro Forma


Note


ConsolidatedEPIX


August 15, 2006)


Adjustments


Ref


Pro Forma(In thousands, except per share data)Revenues:Product development revenue

$
2,909


$
3,692


$







$
6,601Royalty revenue


1,603















1,603License fee revenue


1,528



1,133











2,661Total revenues:


6,040



4,825











10,865Operating expenses:Royalty expense


1,063



1,120











2,183Research and development


26,255



18,204



577



A



45,036Acquired in-process research and
    development


123,500







(123,500
)


B



General and administrative


12,257



7,154



902



A



19,551



(762
)


CRestructuring costs


633



60











693Total operating expenses


163,708



26,538



(122,783
)






67,463Operating loss


(157,668
)


(21,713
)


122,783







(56,598
)Other income (expense):Interest income


5,496



126











5,622Interest expense


(5,076
)


(1,395
)










(6,471
)Loss before provision for income
    taxes


(157,248
)


(22,982
)


122,783







(57,447
)Provision for income taxes


145















145Net loss

$
(157,393
)

$
(22,982
)

$
122,783






$
(57,592
)Net loss per share, basic and
    diluted

$
(7.57
)













$
(1.79
)Weighted average shares, basic and
    diluted


20,789







11,376



D



32,165     (A)
    
    To record compensation expense relating to the unvested Predix
    options exchanged for unvested EPIX options.(B)
    
    To eliminate the charge for the fair value of in-process
    research and development acquired in the merger, which was
    recorded as an expense immediately following the completion of
    the merger. Because this expense is directly attributable to the
    acquisition and will not have a continuing impact, it is not
    reflected in the pro forma condensed statement of operations.(C)
    
    To eliminate the merger-related costs incurred by Predix and
    recorded as general and administrative expense.(D)
    
    To record the weighted average issuance of EPIX shares to Predix
    shareholders to effect the merger. F-29




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Property
    and Equipment    December 31,2006


2005Leasehold improvements

$
4,444,244


$
3,880,443Laboratory equipment


2,524,697



2,669,880Furniture, fixtures and other
    equipment


2,164,636



1,052,7039,133,577



7,603,026Less accumulated depreciation and
    amortization


(5,541,007
)


(5,085,167
)$
3,592,570


$
2,517,859   7.
    Accrued
    Expenses    December 31,2006


2005Accrued contractual product
    development expenses

$
2,021,998


$
1,680,790Accrued compensation


1,968,127



1,768,330Other accrued expenses


3,705,423



1,746,920$
7,695,548


$
5,196,040   8.
    Restructuring
    Charges  Accounting for Costs Associated
    with Exit or Disposal Activities.
   F-30




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Asset


LeaseSeverance


Write Off


Obligation


TotalRestructuring charges in fourth
    quarter of 2005

$
971,828


$



$



$
971,828Balance at December 31, 2005


971,828











971,828Restructuring charge


134,642



177,906



320,690



633,238Cash payments


(1,106,470
)






(90,714
)


(1,197,184
)Non-cash items






(177,906
)






(177,906
)Balance at December 31, 2006

$



$



$
229,976


$
229,976   9.
    Financing
    Arrangements  Convertible
    Debt
        Loan
    Agreement to Strategic Partner
   F-31




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Commitments  Leases
      Capital Leases


Operating Leases2007

$
102,008


$
3,600,1422008


72,794



2,687,2792009


32,115



2,499,3122010


6,628



2,466,6422011






2,126,775Thereafter






5,541,768Total minimum lease payments


213,545



18,921,918Less aggregate future sublease
    income






(2,595,375
)213,545


$
16,326,543Less amount representing interest


(26,835
)Present value of minimum lease
    payment


186,710Less current portion of capital
    lease obligation


(84,633
)Capital lease obligations, net of
    current portion

$
102,077     Late
    SEC Filings and NASDAQ Delisting Proceedings
   F-32




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Commitments
    11.
    Stockholders
    Equity  Common
    Stock
  Form S-3 12-month Form S-3 Form 10-K
    1-for-1.5
  Equity
    Plans
  non-statutory),
 F-33




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         F-34




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2005


Year Ended December 31, 2004As Reported


Adjustments


As Restated


As Reported


Adjustments


As RestatedNet loss  as reported

$
(24,310,858
)

$
3,041,900


$
(21,268,958
)

$
(20,381,258
)

$
(2,239,964
)

$
(22,621,222
)Add: employee stock-based
    compensation expense included in net loss






(3,021,815
)


(3,021,815
)


97,308



1,967,395



2,064,703Less: pro forma adjustment for
    stock-based compensation


(4,141,790
)


(370,192
)


(4,511,982
)


(6,047,438
)


(707,543
)


(6,754,981
)Net loss  pro forma

$
(28,452,648
)

$
(350,107
)

$
(28,802,755
)

$
(26,331,388
)

$
(980,112
)

$
(27,311,500
)Net loss per share, basic and
    dilutedAs reported

$
(1.57
)

$
0.20


$
(1.37
)

$
(1.34
)

$
(0.14
)

$
(1.48
)Pro forma

$
(1.84
)

$
(0.02
)

$
(1.86
)

$
(1.73
)

$
(0.06
)

$
(1.79
)     Options


ESPPYear Ended December 31,2006


2005


2004


2006


2005


2004Expected life of options (in years)


6.3



6.9



7.3



0.5



0.5



0.5Expected stock price volatility


70
%


83
%


85
%


71
%


82
%


84
%Weighted average risk-free
    interest rate


4.69
%


3.77
%


3.25
%


4.93
%


3.51
%


1.40
%Expected annual dividend per share

$



$



$



$



$



$
    F-35




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted-Weighted-


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term (In Years)


ValueOutstanding at December 31,
    2005


2,181,184


$
17.09Granted


1,226,553



6.75Exchanged in Predix merger


1,891,721



1.46Exercised


(360,018
)


1.27Cancelled


(1,512,333
)


15.48Outstanding at December 31,
    2006


3,427,107


$
7.14



8.07


$
8,448,823Exercisable at December 31,
    2006


1,397,273


$
7.56



6.89


$
4,660,736Vested and expected to vest at
    December 31, 2006


3,163,026


$
7.14



7.98


$
8,064,021   1996
    Employee Stock Purchase Plan
   F-36




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   12.
    Income
    Taxes    December 31,2006


2005(Restated)Deferred tax assets:Net operating loss carry forwards

$
122,730,000


$
71,710,000Research and development tax
    credits


12,160,000



8,381,000Book over tax depreciation and
    amortization


4,090,000



2,582,000Deferred revenue


7,323,000



451,000Other


1,487,000



208,000Total deferred tax assets


147,790,000



83,332,000Valuation allowance


(147,790,000
)


(83,332,000
)Deferred income taxes, net

$



$
        F-37




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,


Year Ended December 31,2006


2005


2004


2006


2005


2004(Restated)


(Restated)





(Restated)


(Restated)Tax at U.S. statutory rate

$
(53,464,281
)

$
(7,217,169
)

$
(7,657,248
)


(34.00
)%


(34.00
)%


(34.00
)%Permanent differences, net of
    federal benefit


43,305,862



18,185



248,973



27.54
%


0.09
%


1.11
%Foreign taxes


145,313



41,991



99,905



0.09
%


0.20
%


0.44
%Operating losses not benefited


10,158,419



7,198,984



7,408,275



6.46
%


33.91
%


32.89
%Income tax expense

$
145,313


$
41,991


$
99,905



0.09
%


0.20
%


0.44
%   13.
    Defined
    Contribution Plan    14.
    Strategic
    Alliances and Collaborations    GlaxoSmithKline
  5-HT4 PRX-03140,
   F-38




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  product-by-product country-by-country
  product-by-product country-by-country
        Amgen
     F-39




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Amgen is required to obtain third-party rights to develop and
    commercialize a product that incorporates an EPIX compound; and
    Amgen develops and commercializes products that are not covered
    by the intellectual property rights the Company licensed to
    Amgen, such as for example, S1P1-modulating products that may be
    acquired by Amgen from a third party.  product-by-product country-by-country
      Cystic
    Fibrosis Foundation Therapeutics Incorporated
    and/or
 F-40




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    The first program is focused on correcting a malfunction of the
    Cystic Fibrosis Transmembrane conductance Regulator, or CFTR,
    ion channel protein. The Company is using its proprietary
    structure-based technologies to model the structure of this ion
    channel protein target and identify binding sites in the channel
    for therapeutic intervention. Once these sites are identified,
    the Company aims to use its drug discovery capabilities to
    discover a drug that restores proper functionality to the
    channel in patients with cystic fibrosis. If the preliminary
    program is successful, the Company and CFFT have agreed to
    negotiate towards a follow-on agreement under which the Company
    will explore a structure-based approach for the discovery and
    commercialization of a drug that will target CFTR, with the
    financial support of CFFT and subject to a royalty payable to
    CFFT.
    The second program is focused on the discovery of a
    small-molecule agonist to the G-Protein Coupled Receptor known
    as P2Y(2), which plays a role in cystic fibrosis, using the
    Companys proprietary structure-based drug design system.
    The Company retains the right to develop and commercialize any
    drug candidates discovered through this second program, and is
    obligated to make aggregate royalty payments of up to
    $15 million to CFFT for the first drug candidate that
    reaches particular regulatory and sales milestones.    Bayer
    Schering Pharma AG, Germany
    region-by-region
   F-41




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    last-to-expire last-to-expire
  Technology
    Agreements
  Ramot
    PRX-07034,
   F-42




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  country-by-country
      Tyco
    Massachusetts
    General Hospital
  country-by-country
 F-43




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    15.
    Quarterly
    Financial Information (unaudited)    March 31, 2006


June 30, 2006


September 30, 2006


December 31, 2006Revenues:Product development revenue

$
1,082,867


$
731,191


$
569,378


$
525,966Royalty revenue


457,778



462,718



362,449



320,285License fee revenue


161,597



161,597



413,802



790,914Total revenues


1,702,242



1,355,506



1,345,629



1,637,165Operating expenses:Royalty expense


43,795



28,233



31,778



959,296Research and development


3,865,001



3,135,417



7,881,361



11,373,221Acquired in-process research and
    development










123,500,000



General and administrative


2,422,528



1,777,927



3,146,316



4,910,549Restructuring costs


289,633



61,472



282,133



Total operating expenses


6,620,957



5,003,049



134,841,588



17,243,066Operating loss


(4,918,715
)


(3,647,543
)


(133,495,959
)


(15,605,901
)Other income, net


435,210



535,297



436,958



(987,232
)Income taxes


43,816



43,818



31,551



26,128Net loss

$
(4,527,321
)

$
(3,156,064
)

$
(133,090,552
)

$
(16,619,261
)Weighted average shares, basic and
    diluted


15,523,207



15,523,207



22,193,441



29,917,696Net loss per share:Basic and diluted

$
(0.29
)

$
(0.20
)

$
(6.00
)

$
(0.56
)   F-44




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  March 31, 2005


June 30, 2005


September 30, 2005


December 31, 2005(Restated)


(Restated)


(Restated)


(Restated)Revenues:Product development revenue

$
1,475,819


$
314,026


$
1,297,720


$
1,107,965Royalty revenue


444,289



578,321



798,484



512,290License fee revenue


165,896



165,896



165,894



163,061Total revenues


2,086,004



1,058,243



2,262,098



1,783,316Operating expenses:Royalty expense


19,646



26,335



32,463



19,645Research and development


3,439,936



5,726,480



5,282,224



3,845,281General and administrative


1,765,096



2,885,082



2,551,024



2,384,930Restructuring costs














971,828Total operating expenses


5,224,678



8,637,897



7,865,711



7,221,684Operating loss


(3,138,674
)


(7,579,654
)


(5,603,613
)


(5,438,368
)Other income, net


(64,703
)


53,634



193,940



350,471Income taxes














41,991Net loss

$
(3,203,377
)

$
(7,526,020
)

$
(5,409,673
)

$
(5,129,888
)Weighted average shares, basic and
    diluted


15,484,451



15,504,798



15,515,383



15,516,736Net loss per share:Basic and diluted

$
(0.21
)

$
(0.49
)

$
(0.35
)

$
(0.33
)     March 31, 2005


June 30, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product development revenue

$
1,475,819


$



$
1,475,819


$
314,026


$



$
314,026Royalty revenue


444,289







444,289



578,321







578,321License fee revenue


165,896







165,896



165,896







165,896Total revenues


2,086,004







2,086,004



1,058,243







1,058,243Operating expenses:Royalty expense


19,646







19,646



26,335







26,335Research and development


5,339,318



(1,899,382
)


3,439,936



5,449,209



277,271



5,726,480General and administrative


2,917,892



(1,152,796
)


1,765,096



2,732,417



152,665



2,885,082Total operating expenses:


8,276,856



(3,052,178
)


5,224,678



8,207,961



429,936



8,637,897Operating loss


(6,190,852
)


3,052,178



(3,138,674
)


(7,149,718
)


(429,936
)


(7,579,654
)Other income, net


(64,703
)






(64,703
)


53,634







53,634Income taxes






















Net loss

$
(6,255,555
)

$
3,052,178


$
(3,203,377
)

$
(7,096,084
)

$
(429,936
)

$
(7,526,020
)Weighted average shares:Basic and diluted


15,484,451







15,484,451



15,504,798







15,504,798Net loss per share, basic and
    diluted

$
(0.40
)

$
0.19


$
(0.21
)

$
(0.46
)

$
(0.03
)

$
(0.49
)   F-45




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  September 30, 2005


December 31, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedRevenues:Product development revenue

$
1,297,720


$



$
1,297,720


$
1,107,965


$



$
1,107,965Royalty revenue


798,484







798,484



512,290







512,290License fee revenue


165,894







165,894



163,061







163,061Total revenues


2,262,098







2,262,098



1,783,316







1,783,316Operating expenses:Royalty expense


32,463







32,463



19,645







19,645Research and development


5,416,276



(134,052
)


5,282,224



3,942,921



(97,640
)


3,845,281General and administrative


2,667,056



(116,032
)


2,551,024



2,456,864



(71,934
)


2,384,930Restructuring costs














971,828







971,828Total operating expenses


8,115,795



(250,084
)


7,865,711



7,391,258



(169,574
)


7,221,684Operating loss


(5,853,697
)


250,084



(5,603,613
)


(5,607,942
)


169,574



(5,438,368
)Other income, net


193,940







193,940



350,471







350,471Income taxes














41,991







41,991Net loss

$
(5,659,757
)

$
250,084


$
(5,409,673
)

$
(5,299,462
)

$
169,574


$
(5,129,888
)Weighted average shares:Basic and diluted


15,515,383







15,515,383



15,516,736







15,516,736Net loss per share, basic and
    diluted

$
(0.36
)

$
0.01


$
(0.35
)

$
(0.34
)

$
0.01


$
(0.33
)   F-46




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  March 31, 2006


June 30, 2006As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedAssetsCurrent assets:Cash and cash equivalents

$
75,963,558


$



$
75,963,558


$
66,740,536


$



$
66,740,536Available-for-sale
    marketable securities


42,882,538







42,882,538



47,277,256







47,277,256Accounts receivable


94,699







94,699











Prepaid expenses and other assets


479,906







479,906



537,297







537,297Total current assets


119,420,701







119,420,701



114,555,089







114,555,089Property and equipment, net


2,107,960







2,107,960



1,919,158







1,919,158Other assets


3,492,867







3,492,867



4,336,863







4,336,863Total assets

$
125,021,528


$



$
125,021,528


$
120,811,110


$



$
120,811,110Liabilities and
    Stockholders EquityCurrent liabilities:Accounts payable

$
541,148


$



$
541,148


$
326,432


$



$
326,432Accrued expenses


3,894,527



886,037



4,780,564



3,263,484



886,037



4,149,521Contract advances


5,425,318







5,425,318



4,754,808







4,754,808Deferred revenue


330,598







330,598



225,335







225,335Total current liabilities


10,191,591



886,037



11,077,628



8,570,059



886,037



9,456,096Deferred revenue


699,314







699,314



642,980







642,980Convertible debt


100,000,000







100,000,000



100,000,000







100,000,000Total liabilities


110,890,905



886,037



111,776,942



109,213,039



886,037



110,099,076Stockholders equity:Preferred stock, $0.01 par
    value






















Common stock, $0.01 par value


155,232







155,232



155,307







155,307Additional
    paid-in-capital


198,181,684



7,444,831



205,626,515



198,805,907



7,444,831



206,250,738Accumulated deficit


(184,171,953
)


(8,330,868
)


(192,502,821
)


(187,328,017
)


(8,330,868
)


(195,658,885
)Accumulated other comprehensive
    income (loss)


(34,340
)






(34,340
)


(35,126
)






(35,126
)Total stockholders equity


14,130,623



(886,037
)


13,244,586



11,598,071



(886,037
)


10,712,034Total liabilities and
    stockholders equity

$
125,021,528


$



$
125,021,528


$
120,811,110


$



$
120,811,110   F-47




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  September 30, 2006As PreviouslyReported


Adjustments


As RestatedAssetsCurrent assets:Cash and cash equivalents

$
66,825,143


$



$
66,825,143Available-for-sale
    marketable securities


46,270,036







46,270,036Prepaid expenses and other assets


1,817,866







1,817,866Total current assets


114,913,045







114,913,045Property and equipment, net


2,951,882







2,951,882Other assets


4,309,797







4,309,797Goodwill


3,506,274







3,506,274Total assets

$
125,680,998


$



$
125,680,998Liabilities and
    Stockholders Equity (Deficit)Current liabilities:Accounts payable

$
5,389,737


$



$
5,389,737Accrued expenses


8,236,974



886,037



9,123,011Contract advances


4,506,710







4,506,710Merger consideration payable


20,000,000







20,000,000Other current liabilities


380,387







380,387Deferred revenue


3,699,119







3,699,119Current portion of capital lease
    obligation


42,801







42,801Total current liabilities


42,255,728



886,037



43,141,765Deferred revenue


947,779







947,779Capital lease obligation


79,705







79,705Merger consideration payable


15,000,000







15,000,000Other liabilities


1,845,108







1,845,108Convertible debt


100,000,000







100,000,000Total liabilities


160,128,320



886,037



161,014,357Stockholders equity
    (deficit):Preferred stock, $0.01 par
    value










Common stock, $0.01 par value


291,528







291,528Additional
    paid-in-capital


285,668,130



7,444,831



293,112,961Accumulated deficit


(320,418,569
)


(8,330,868
)


(328,749,437
)Accumulated other comprehensive
    income (loss)


11,589







11,589Total stockholders equity
    (deficit)


(34,447,322
)


(886,037
)


(35,333,359
)Total liabilities and
    stockholders equity (deficit)

$
125,680,998


$



$
125,680,998  F-48




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  March 31, 2005


June 30, 2005As Previously








As PreviouslyReported


Adjustments


As Restated


Reported


Adjustments


As RestatedAssetsCurrent assets:Cash and cash equivalents

$
69,446,753


$



$
69,446,753


$
74,318,112


$



$
74,318,112Available-for-sale
    marketable securities


89,172,287







89,172,287



77,107,458







77,107,458Accounts receivable


664,183







664,183



361,609







361,609Prepaid expenses and other assets


716,191







716,191



764,374







764,374Total current assets


159,999,414







159,999,414



152,551,553







152,551,553Property and equipment, net


2,384,659







2,384,659



2,630,883







2,630,883Other assets


3,333,409







3,333,409



3,212,827







3,212,827Total assets

$
165,717,482


$



$
165,717,482


$
158,395,263


$



$
158,395,263Liabilities and
    Stockholders EquityCurrent liabilities:Accounts payable

$
1,021,759


$



$
1,021,759


$
1,078,226


$



$
1,078,226Accrued expenses


5,110,668



906,972



6,017,640



4,428,126



907,821



5,335,947Contract advances


5,999,672







5,999,672



6,921,611







6,921,611Loan payable to strategic partner


15,000,000







15,000,000



15,000,000







15,000,000Deferred revenue


1,951,304







1,951,304



1,424,598







1,424,598Total current liabilities


29,083,403



906,972



29,990,375



28,852,561



907,821



29,760,382Deferred revenue


1,043,829







1,043,829



877,934







877,934Convertible debt


100,000,000







100,000,000



100,000,000







100,000,000Total liabilities


130,127,232



906,972



131,034,204



129,730,495



907,821



130,638,316Stockholders equity:Preferred stock, $0.01 par value






















Common stock, $0.01 par value


155,047







155,047



155,114







155,114Additional
    paid-in-capital


197,248,395



7,413,619



204,662,014



197,322,986



7,842,705



205,165,691Accumulated deficit


(161,589,329
)


(8,320,591
)


(169,909,920
)


(168,685,413
)


(8,750,526
)


(177,435,939
)Accumulated other comprehensive
    income (loss)


(223,863
)






(223,863
)


(127,919
)






(127,919
)Total stockholders equity


35,590,250



(906,972
)


34,683,278



28,664,768



(907,821
)


27,756,947Total liabilities and
    stockholders equity

$
165,717,482


$



$
165,717,482


$
158,395,263


$



$
158,395,263   F-49




---



##### Table of Contents



EPIX PHARMACEUTICALS, INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  September 30, 2005As Previously Reported


Adjustments


As RestatedAssetsCurrent assets:Cash and cash equivalents

$
81,502,706


$



$
81,502,706Available-for-sale
    marketable securities


64,431,943







64,431,943Accounts receivable


251,746







251,746Prepaid expenses and other assets


694,374







694,374Total current assets


146,880,769







146,880,769Property and equipment, net


2,842,161







2,842,161Other assets


3,095,861







3,095,861Total assets

$
152,818,791


$



$
152,818,791Liabilities and
    Stockholders EquityCurrent liabilities:Accounts payable

$
1,151,074


$



$
1,151,074Accrued expenses


5,560,570



885,188



6,445,758Contract advances


6,610,619







6,610,619Loan payable to strategic partner


15,000,000







15,000,000Deferred revenue


618,997







618,997Total current liabilities


28,941,260



885,188



29,826,448Deferred revenue


796,249







796,249Convertible debt


100,000,000







100,000,000Total liabilities


129,737,509



885,188



130,622,697Stockholders equity:Preferred stock, $0.01 par
    value










Common stock, $0.01 par value


155,166







155,166Additional
    paid-in-capital


197,355,294



7,615,254



204,970,548Accumulated deficit


(174,345,170
)


(8,500,442
)


(182,845,612
)Accumulated other comprehensive
    income (loss)


(84,008
)






(84,008
)Total stockholders equity


23,081,282



(885,188
)


22,196,094Total liabilities and
    stockholders equity

$
152,818,791


$



$
152,818,791  F-50