**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)


x
            **Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934****For
                the quarterly period ended: June 30, 2008**o
            **Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**Commission
      file number 000-49730**











**DOV
      PHARMACEUTICAL, INC.**


(Exact
      Name of Registrant as Specified in its Charter)


**Delaware**
              (State
                or Other Jurisdiction
              of
                Incorporation or Organization)
            
            **22-3374365**
              (I.R.S.
                Employer
              Identification
                No.)




**150
      Pierce Street**


**Somerset,
      New Jersey 08873**


(Address
      of principal executive office)





**(732) 907-3600**


(Registrant’s
      telephone number, including area code)










Indicate
      by check mark whether registrant (1) has filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
      preceding 12 months (or for such shorter period that registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days. Yes x
      No o





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


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





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




On
      August
      9, 2008,  there
      were outstanding 111,353,889 shares of the registrant’s common stock, par value
      $0.0001 per share.









**DOV
      PHARMACEUTICAL, INC.**





**Form
      10-Q**





**For
      the Quarter Ended June 30, 2008**





**Table
      of Contents**





**PAGE
                NUMBER****PART
                I -**
            **FINANCIAL
                INFORMATION**ITEM
                1.
            Financial
                Statements (Unaudited)Condensed
                Balance Sheets as of June 30, 2008 and December 31, 2007
            4Condensed
                Statements of Operations for the three and six months ended June
                30, 2008
                and 2007
            5Condensed
                Statements of Cash Flows for the six months ended June 30, 2008 and
                2007
            6Notes
                to Unaudited Condensed Financial Statements
            7ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            12ITEM
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            18ITEM
                4T.
            Controls
                and Procedures
            19**PART
                II -**
            **OTHER
                INFORMATION**ITEM
                1.
            Legal
                Proceedings
            20ITEM
                1A.
            Risk
                Factors
            20ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            20ITEM
                6.
            Exhibits
            21Signatures
            22





-
          2
          -


**Special
      Note Regarding Forward-Looking Statements**





**Special
      Note Regarding Forward-Looking Statements**





This
      Report on Form 10-Q includes forward-looking statements within the meaning
      of
      Section 27A of the Securities Act of 1933 and Section 21E of the Securities
      Exchange Act of 1934, each as amended, including statements regarding our
      expectations with respect to the progress of and level of expenses for our
      clinical trial programs.  You
      can
      also identify forward-looking statements by the following words: may, will,
      should, expect, intend, plan, anticipate, believe, estimate, predict, potential,
      continue or the negative of these terms or other comparable terminology. We
      caution you that forward-looking statements are inherently uncertain and are
      simply point-in-time estimates based on a combination of facts and factors
      about
      which we cannot be certain or even relatively confident. Actual results or
      events will surely differ and may differ materially from the forward-looking
      statements contained herein as a result of many factors, some of which we may
      not be able to predict or may not be within our control. Some of the most
      significant challenges we presently face include the following:





l
            our
                need to raise substantial additional capital in order to fund
                operations;l
            our
                need to seek and evaluate strategic alternatives, including with
                respect
                to collaborations and partnerships for certain of our development
                programs
                and product candidates;





l
            the
                need to obtain, maintain and protect all necessary patents, licenses
                and
                other intellectual property rights;





l
            the
                need to demonstrate the safety and efficacy of product candidates
                at each
                stage of development;





l
            our
                need to meet our development schedule for our product candidates,
                including with respect to drug supply and clinical trial initiation,
                enrollment and completion;





l
            the
                need to meet applicable regulatory standards and receive required
                regulatory approvals on a timely basis or at all;
                and





l
            our
                need to fulfill our obligations to our strategic partners so we can
                receive timely payment of milestones and royalties, if any, under
                our
                agreements with them.




If
      we are
      unable to successfully deal with these and other challenges, for example if
      we
      fail to identify additional sources of capital in the very near term, our
      business, results of operations and financial condition would be harmed and
      the
      market value of our common stock would likely decline even further. You should
      refer to “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year
      ended December 31, 2007, for
      a
      more detailed discussion of some of the factors that may cause our actual
      results to differ materially from our forward-looking statements. We qualify
      all
      our forward-looking statements by reference to these cautionary statements.
      As a
      result of the foregoing, you should not place undue reliance on our
      forward-looking statements.










We
      have a
      number of trademarks, including DOV, DOV Pharmaceutical, Inc. and the DOV
      Pharmaceutical logo. All other trademarks used or referred to in this Quarterly
      Report on Form 10-Q are the property of their respective owners.





-
          3
          -


**PART
      I – FINANCIAL INFORMATION**





**ITEM
      I.**  **Financial
      Statements**





**DOV
      PHARMACEUTICAL, INC.**


**CONDENSED
      BALANCE SHEETS**





**June 30, 2008**
            
            **December 31,**
              **2007**(unaudited)
            
            (1)**Assets**Cash
                and cash equivalents
            
            $
            6,230,720
            
            $
            9,236,449Marketable
                securities—short-term
            
            
            *—*
            
            
            400,000Prepaid
                rent
            
            
            1,028,839
            
            
            237,404Prepaid
                expenses and other current assets
            
            
            778,081
            
            
            545,542Total
                current assets
            
            
            8,037,640
            
            
            10,419,395Restricted
                cash—long-term
            
            
            —
            
            
            4,211,109Property
                and equipment, net
            
            
            522,521
            
            
            899,960Total
                assets
            
            $
            8,560,161
            
            $
            15,530,464**Liabilities
                and Stockholders’ Equity**Current
                liabilities:Accounts
                payable
            
            $
            427,276
            
            $
            576,145Accrued
                expenses
            
            
            1,366,050
            
            
            1,171,805Deferred
                credit – current
            
            
            —
            
            
            257,313Total
                current liabilities
            
            
            1,793,326
            
            
            2,005,263Deferred
                credits – non-current
            
            
            —
            
            
            2,101,419Series
                D convertible preferred stock, $1.00 par value, 560,000 authorized
                shares,
                100,000 shares issued and outstanding at June 30, 2008 and December
                31,
                2007
            
            
            6,326,980
            
            
            6,326,980Commitments
                and contingenciesStockholders’
                equity:Preferred
                stock—undesignated preferred stock, $1.00 par value, 6,550,357 shares
                authorized, 0 shares issued and outstanding at June 30, 2008 and
                December
                31, 2007
            
            
            —
            
            
            —Common
                stock, $.0001 par value, 260,000,000 shares authorized, 110,753,889
                issued
                at June 30, 2008 and December 31, 2007
            
            
            11,075
            
            
            11,075Treasury
                stock, at cost; 31,450 common shares at June 30, 2008 and December
                31,
                2007
            
            
            (66,985
            )
            
            (66,985
            )Additional
                paid-in capital
            
            
            205,216,046
            
            
            204,367,735Accumulated
                deficit
            
            
            (204,720,281
            )
            
            (199,215,023
            )Total
                stockholders’ equity
            
            
            439,855
            
            
            5,096,802Total
                liabilities and stockholders’ equity
            
            $
            8,560,161
            
            $
            15,530,464





(1)
      Derived from the Company’s audited financial statements for the year ended
      December 31, 2007.





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




-
          4
          -


**DOV
      PHARMACEUTICAL, INC.**


**CONDENSED
      STATEMENTS OF OPERATIONS**




**Three
                Months Ended**
              **June
                30,**
            
            **Six
                Months Ended**
              **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**(Unaudited)
            
            (Unaudited)Revenue
            
            $
            1,600,000
            
            $
            288,284
            
            $
            1,600,000
            
            $
            8,255,998Operating
                expenses:Research
                and development
                expense
            
            
            1,621,100
            
            
            2,467,697
            
            
            3,508,191
            
            
            9,326,841General
                and administrative
                expense
            
            
            1,920,897
            
            
            1,830,113
            
            
            3,682,014
            
            
            6,343,739License
                expense
            
            
            —
            
            
            —
            
            
            —
            
            
            5,500,000Loss
                from operations
            
            
            (1,941,997
            )
            
            (4,009,526
            )
            
            (5,590,205
            )
            
            (12,914,582
            )Interest
                income
            
            
            28,578
            
            
            261,912
            
            
            104,545
            
            
            774,876Interest
                expense
            
            
            —
            
            
            —
            
            
            —
            
            
            (90,924
            )Gain
                on revaluation of warrants
            
            
            —
            
            
            1,350,000
            
            
            —
            
            
            1,350,000Gain
                on extinguishment of convertible debentures
            
            
            —
            
            
            —
            
            
            —
            
            
            8,390,182Other
                income (expense), net
            
            
            (25,052
            )
            
            (3,211
            )
            
            (19,598
            )
            
            7,247Net
                loss
            
            $
            (1,938,471
            )
            $
            (2,400,825
            )
            $
            (5,505,258
            )
            $
            (2,483,201
            )Basic
                and diluted net loss per share
            
            $
            (0.02
            )
            $
            (0.05
            )
            $
            (0.05
            )
            $
            (0.07
            )Weighted
                average shares used in computing basic and diluted net loss per
                share
            
            
            110,753,889
            
            
            44,284,255
            
            
            110,753,889
            
            
            35,534,473





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




-
          5
          -


**DOV
      PHARMACEUTICAL, INC.**


**CONDENSED
      STATEMENTS OF CASH FLOWS**




**Six
              Months Ended June 30,****2008**
            
            **2007**(Unaudited)**Cash
                flows from operating activities**Net
                loss
            
            $
            (5,505,258
            )
            $
            (2,483,201
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Gain
                on debt extinguishment
            
            
            —
            
            
            (8,390,182
            )Gain
                on warrant revaluation
            
            
            —
            
            
            (1,350,000
            )Non-cash
                amortization of premium paid on
                marketable securities
            
            
            —
            
            
            (31,169
            )Depreciation
            
            
            377,439
            
            
            164,933Amortization
                of deferred
                credits
            
            
            —
            
            
            (58,471
            )Non-cash
                compensation
                charges
            
            
            848,311
            
            
            5,906,593Changes
                in operating assets and liabilities:Prepaid
                rent and deferred
                credits
            
            
            (3,387,571
            )
            
            —Prepaid
                expenses and other current
                assets
            
            
            4,865
            
            
            1,063,046Accounts
                payable
            
            
            (148,869
            )
            
            (1,464,276
            )Accrued
                expenses
            
            
            194,245
            
            
            (3,159,066
            )Net
                cash used in operating
                activities
            
            
            (7,616,838
            )
            
            (9,801,793
            )**Cash
                flows from investing activities**Purchases
                of marketable securities
            
            
            —
            
            
            (40,929,695
            )Sales
                of marketable securities
            
            
            400,000
            
            
            38,769,361Release
                of restricted cash for property lease
            
            
            4,211,109
            
            
            —Net
                cash (used in)/provided by investing
                activities
            
            
            4,611,109
            
            
            (2,160,334
            )**Cash
                flows from financing activities**Redemption
                of convertible debentures
            
            
            —
            
            
            (17,779,458
            )Net
                cash used in financing
                activities
            
            
            —
            
            
            (17,779,458
            )Net
                decrease in cash and cash
                equivalents
            
            
            (3,005,729
            )
            
            (29,741,585
            )Cash
                and cash equivalents, beginning of period
            
            
            9,236,449
            
            
            35,088,467Cash
                and cash equivalents, end of period
            
            $
            6,230,720
            
            $
            5,346,882





**NON-CASH
      FINANCING ACTIVITIES**





On
      March
      15, 2007 the Company exchanged $67.5 million in principal amount of its 2.5%
      convertible subordinated debentures for (i) 439,784 shares
      of
      its series C convertible preferred stock with an estimated value at the time
      of
      $38.1 million, (ii) 100,000 shares of series D convertible preferred stock
      with
      an estimated value at the time of $7.5 million, and (iii) cash of $13.5 million.
      In addition, the Company issued warrants to purchase up to 30,000,000 shares
      of
      common stock at a price of $0.53 per share, having an estimated valued at the
      time of $4.6 million, to the holders of its common stock. All
      shares of the series C convertible preferred stock issued in connection with
      the
      2007 Exchange Offer were converted into a total of 84,010,232 shares of common
      stock on June 11, 2007.





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





-
          6
          -


**DOV
      PHARMACEUTICAL, INC.**


**NOTES
      TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**





**1.
      The Company**





**Organization**





DOV
      Pharmaceutical, Inc. (“DOV” or the “Company”) was incorporated in
      May 1995 in New Jersey and reincorporated in Delaware in November 2000.





DOV
      is a
      biopharmaceutical company focused on the discovery, in-licensing and development
      of novel drug candidates for central nervous system disorders. The Company
      has
      product candidates in various stages of clinical development. The Company has
      established strategic alliances with select partners to access their unique
      technologies and their commercialization capabilities. The Company operates
      principally in the United States but conducts clinical studies outside of the
      United States from time to time.





**2.** **Liquidity/Going
      Concern**





The
      Company estimates that it has sufficient cash and cash equivalents to fund
      operations through December 2008. There are a number of circumstances, however,
      which could result in the Company needing additional capital even sooner than
      anticipated, such as unexpected costs associated with a Phase II clinical trial
      that is currently being conducted in Eastern Europe and the United States.
      While
      the Company intends to continue to actively seek additional capital in 2008
      through public or private financing or collaborative agreements, , there is
      no
      assurance that such financing will be obtained on acceptable terms, if at all.
      These matters raise substantial doubt about the Company’s ability to continue as
      a going concern.





**3.
      Significant Accounting Policies**





**Basis
      of Presentation**





The
      financial statements are presented on the basis of accounting principles that
      are generally accepted in the United States for interim financial information
      and in accordance with the instructions of the Securities and Exchange
      Commission (“SEC”) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
      they do not include all the information and footnotes required by accounting
      principles generally accepted in the United States for complete financial
      statements. In the opinion of management, these financial statements include
      all
      adjustments (consisting only of normal recurring adjustments) necessary for
      a
      fair statement of the financial position, results of operations and cash flows
      for the periods presented.





The
      results of operations for the interim periods shown in this report are not
      necessarily indicative of results expected for the full year or any future
      period. The financial statements should be read in conjunction with the audited
      financial statements and related notes for the year ended December 31, 2007,
      included in the Company’s Annual Report on Form 10-K as filed with the SEC on
      March 31, 2008.





Certain
      prior period amounts have been reclassified to conform to the current period
      presentation.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United
      States requires
      management to make certain estimates and assumptions that can affect the
      reported amounts of assets, liabilities, revenues, earnings, financial position
      and various disclosures. Significant estimates have included the value of
      convertible preferred stock and warrants issued in the Company’s 2007 Exchange
      Offer as described elsewhere herein, the value of investments, the valuation
      allowance recorded for deferred tax assets and the development period for the
      Company’s products. Actual results could differ from these estimates and the
      differences could be material.




-
          7
          -




**Prepaid
      Rent and Deferred Credit**





In
      February 2008, the Company renegotiated its lease on its operating facility
      by
      reducing the monthly amounts payable as well as accelerating the expiration
      of
      the term from June 2016 to January 2009. In exchange, the Company agreed to
      release to the landlord the $4.2 million restricted cash previously held as
      collateral for the lease. Deferred
      credits include the tenant allowance received from DOV’s landlord and the
      straight-lining of future rent escalations under the operating lease agreement.
      Both of these items were being amortized over the life of the lease. This
      transaction resulted in the offset of the deferred credits and the establishment
      of a net prepaid rent of $1.7 million which will be amortized through the
      remaining lease life, or January 2009. In addition, remaining balances of
      leasehold improvements will be amortized over the revised remaining lease life.
      The balance of prepaid rent at June 30, 2008 was approximately $1
      million.





**Net
      Loss Per Share**





Basic
      and
      diluted net loss per share has been computed using the weighted-average number
      of shares of common stock outstanding during the period. The Company has
      excluded the shares issuable on conversion of its series D convertible preferred
      stock, outstanding options, warrants and restricted stock units to purchase
      common stock from the calculation of diluted net loss per share, as such
      securities are anti-dilutive as indicated in the table below.





**Three
                Months Ended**
              **June
                30,**
            
            **Six
                Months Ended**
              **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**(Unaudited)
            
            (Unaudited)Net
                loss
            
            $
            (1,938,471
            )
            $
            (2,400,825
            )
            $
            (5,505,258
            )
            $
            (2,483,201
            )Basic
                and diluted:Weighted
                –average shares used in computing basic and diluted net loss per
                share
            
            
            110,753,889
            
            
            44,284,255
            
            
            110,753,889
            
            
            35,534,473Basic
                and diluted net loss per share
            
            $
            (0.02
            )
            $
            (0.05
            )
            $
            (0.05
            )
            $
            (0.07
            )Antidilutive
                securities not included in basic and diluted net loss per share
                calculation:Series
                D convertible preferred stock
            
            
            19,102,612
            
            
            19,102,612
            
            
            19,102,612
            
            
            19,102,612Options
            
            
            9,745,715
            
            
            4,123,928
            
            
            9,745,715
            
            
            4,123,928Warrants
            
            
            29,792,842
            
            
            29,792,842
            
            
            29,792,842
            
            
            29,792,842Restricted
                stock units
            
            
            1,902,000
            
            
            —
            
            
            1,902,000
            
            
            —60,543,169
            
            
            53,019,382
            
            
            60,543,169
            
            
            53,019,382





**Comprehensive
      Loss**


**Three
                  Months Ended**
                **June
                  30,**
              
              **Six
                  Months Ended**
                **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**(Unaudited)
              
              (Unaudited)Net
                  loss
              
              $
              (1,938,471
              )
              $
              (2,400,825
              )
              $
              (5,505,258
              )
              $
              (2,483,201
              )Net
                  unrealized gains on marketable securities and investments
              
              
              —
              
              
              960
              
              
              —
              
              
              5,170Comprehensive
                  loss
              
              $
              (1,938,471
              )
              $
              (2,399,865
              )
              $
              (5,505,258
              )
              $
              (2,478,031
              )





**Concentration
      of Credit Risk**





Cash
      and
      cash equivalents are deposited with financial institutions. The Company has
      not
      experienced any losses on its deposits of cash and cash equivalents. Management
      believes that the financial institutions are financially sound and, accordingly,
      minimal credit risk exists. Approximately $519,000 of the Company's cash balance
      was uninsured at June 30, 2008.




-
          8
          -




**Recent
      Accounting Pronouncements**





In
      February 2007, the FASB issued SFAS No. 159 which permits entities to choose
      to
      measure many financial instruments and certain other items at fair value. The
      objective is to improve financial reporting by providing entities with the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The Company adopted SFAS No. 159 on January 1, 2008.
      The
      adoption of this statement did not have a material impact on its financial
      position or results of operations.




In
      June
      2007, the FASB ratified EITF 07-03, " *Accounting
      for Nonrefundable Advance Payments for Goods or Services to Be Used in Future
      Research and Development Activities* ",
      which
      requires nonrefundable advance payments for future research and development
      activities to be capitalized and recognized as an expense as the goods are
      delivered or services are performed. The Company adopted EITF-07-03 on January
      1, 2008. The adoption of EITF 07-03 did not have a material impact on the
      Company’s financial position or results of operations.





Refer
      to
“Item 2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations” for additional information regarding recent accounting
      pronouncements.





**Income
      Taxes**





In
      July
      2006, the FASB issued FASB Interpretation No.48 “Accounting for Uncertainty in
      Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”),
      which clarifies the accounting and disclosure for uncertainty in tax positions,
      as defined. FIN 48 seeks to reduce the diversity in practices associated with
      certain aspects of recognition and measurement related to accounting for income
      taxes. The Company adopted the provisions of FIN 48 as of January 1, 2007,
      and
      has analyzed its filing positions in all open tax years in jurisdictions where
      it may be obligated to file returns. The Company has identified its Federal
      tax
      return and its state tax return in New Jersey as “major” tax jurisdictions, as
      defined. The Company believes that its income tax filing position and deductions
      would be sustained on audit and does not anticipate any adjustments that will
      result in a material change to its financial position. Therefore, no reserves
      for uncertain income tax positions have been recorded pursuant to FIN 48. In
      addition, the Company did not record a cumulative effect adjustment related
      to
      the adoption of FIN 48. The
      Company’s policy is to recognize interest and/or penalties related to income tax
      matters in income tax expense. The Company had no accrual for interest or
      penalties at June 30, 2008. As of January 1, 2007 the Company had no
      unrecognized tax benefit and there was no significant change during the three
      and six month periods ended June 30, 2008. In addition, future changes in
      unrecognized tax benefit will have no impact on the effective tax rate due
      to
      the existence of the valuation allowance.





Since
      its
      inception, the Company has generated net operating losses (“NOLs”) for tax
      purposes and to date has not utilized its NOLs to offset income tax liabilities.
      Hence all prior tax return years of the Company remain open for audit
      purposes.




**4.
      Stock-Based Compensation**





**2000
      Stock Option and Grant Plan**




The
      Company’s 2000 Stock Option and Grant Plan (the “2000 Plan”) was adopted by the
      Company’s board of directors on November 18, 2000, was amended and restated
      several times through May 30, 2006. Under the 2000 Plan, the Company has granted
      options and restricted stock, or RSAs, to certain employees and non-employee
      advisors. The 2000 Plan provides the Company’s board of directors with the
      discretion to accelerate exercisability of any award. In May 2006, the Company
      amended the 2000 Plan providing for the full acceleration and vesting of all
      outstanding options and RSAs immediately prior to a change of control of the
      Company. This change did not impact the fair value of the options and did not
      impact expense recognized under SFAS 123(R). The Exchange Offer completed on
      March 15, 2007 discussed in Note 6 below constituted a change of control under
      the 2000 Plan and all outstanding options issued prior to January 2007 and
      restricted stock awards were immediately accelerated pursuant to the terms
      of
      the 2000 Plan. As a result, the Company recorded unrecognized compensation
      expense of $5.9 million for certain outstanding awards that were accelerated
      in
      the first quarter of 2007.




-
          9
          -






**2007
      Stock Award and Incentive Plan**




The
      Company’s board of directors adopted the Company’s 2007 Stock Award and
      Incentive Plan (“the 2007 Plan”) on June 15, 2007. The 2007 Plan was
      subsequently approved by the Company’s stockholders on July 30, 2007. The 2007
      Plan replaced the 2000 Plan and is administered by the compensation committee
      of
      the board of directors. The 2007 Plan authorizes a broad range of awards giving
      greater flexibility to implement equity awards. The remaining available shares
      under the 2000 Plan are available under the 2007 Plan as well as shares covered
      by any forfeited awards under the 2000 Plan. The 2007 Plan also includes an
      “evergreen” provision, which provides for automatic annual increases in the
      number of shares reserved under the 2007 plan equal to 3.5% of the total
      outstanding common stock of the Company at the end of each fiscal year, plus
      3.5% of any increase in the number of outstanding shares of common stock during
      the year, provided that these increases may not add shares to the extent that
      the aggregate added under the evergreen provision would exceed 20% of the then
      outstanding class of common stock. On
      May
      16, 2008 the Company modified, by changing the vesting period and exercise
      price, approximately 7.4 million previously granted options, canceled
      approximately 6.0 million options and granted additional options. The Company
      recognized $511,000 non-cash compensation expense for the options that were
      cancelled during the three and six months ended June 30, 2008. In addition,
      the
      modification to outstanding options during the three and six months ended June
      30, 2008 resulted in an unrecognized incremental compensation cost of $14,000
      which will be recognized over the modified vesting period. The weighted average
      fair value of options granted during the three and six months ended June 30,
      2008 was $0.04 per option.As of June 30, 2008, there were approximately
      10.5 **** million
      shares available for issuance under the 2007 Plan.





**Options**
            
            **Weighted Average**
              **Options Exercise**
              **Price**
            
            **Aggregate Intrinsic**
              **Value (millions)**Options
                Outstanding, December 31, 2007
            
            
            15,162,471
            
            $
            2.06Granted
            
            
            1,864,500
            
            
            .04Exercised
            
            
            —
            
            
            —Forfeited/Cancelled
            
            
            7,281,256
            
            
            3.63Options
                Outstanding, June 30, 2008
            
            
            9,745,715
            
            
            0.51
            
            
            —Options
                Exercisable, June 30, 2008
            
            
            436,200
            
            
            9.24
            
            
            —





The
      total
      intrinsic value is calculated as the difference between the exercise price
      of
      the underlying awards and the quoted price of our common stock for the options
      that were in-the-money as of June 30, 2008. The following is a summary of
      outstanding stock options at June 30, 2008:


**Options Outstanding as of**
                **June 30, 2008**
              
              **Options Exercisable as of**
                **June 30, 2008****Weighted**
                **Average**
                **Remaining**
                **Contractual**
                **Life**
              
              **Number**
                **Outstanding**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**
              
              **Weighted**
                **Average**
                **Remaining**
                **Contractual**
                **Life**
              
              **Number**
                **Exercisable**
              
              **Weighted**
                **Average**
                **Exercise Price**Price
                  range $0.04 - $0.10
              
              
              9.2 years
              
              
              7,209,515
              
              $
              0.06
              
              
              
              
              
              —
              
              
              —Price
                  range$0.11
                  - $0.20
              
              
              9.1 years
              
              
              1,050,000
              
              $
              0.20
              
              
              
              
              
              —
              
              
              —Price
                  range $0.21 - $0.30
              
              
              9.1 years
              
              
              1,050,000
              
              $
              0.25
              
              
              
              
              
              —
              
              
              —Price
                  range $0.31 - $13.49
              
              
              4.7 years
              
              
              436,200
              
              $
              9.24
              
              
              4.7 years
              
              
              436,200
              
              
              9.249,745,715
              
              
              
              
              
              
              
              
              436,200





At
      June
      30, 2008 the Company had approximately $677,000 of total unrecognized
      compensation expense, net of estimated forfeitures, related to stock options
      that will be recognized over the weighted average period of six
      months.





RSU
      activity was as follows:





**RSUs**
            
            **Weighted Average**
              **Grant Date Fair**
              **Value**Outstanding,
                December 31, 2007
            
            
            920,000
            
            $
            0.20Granted
            
            
            1,166,500
            
            
            0.04Exercised
            
            
            —
            
            
            —Forfeited
            
            
            184,500
            
            
            0.19RSUs
                Outstanding, June 30, 2008
            
            
            1,902,000
            
            
            0.10RSUs
                Exercisable, June 30, 2008
            
            
            —
            
            
            —


-
          10
          -





At
      June
      30, 2008 the Company had approximately $66,000 of total unrecognized
      compensation expense, net of estimated forfeitures, related to RSUs that will
      be
      recognized over the weighted average period of thirteen months.





**5.
      Research and Development Expense**





Research
      and development costs are expensed when incurred and include allocations for
      payroll and related costs and other corporate overhead.





The
      following represents a detail of amounts included in research and development
      expense:


**Three Months Ended**
                **June 30,**
              
              **Six Months Ended**
                **June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**(Unaudited)
              
              (Unaudited)Payroll
                  related and associated overhead
              
              $
              943,083
              
              $
              1,440,536
              
              $
              1,733,935
              
              $
              6,551,425Clinical
                  and preclinical development costs and manufacturing
                  supplies
              
              
              553,277
              
              
              884,238
              
              
              1,439,714
              
              
              2,478,072Professional
                  fees
              
              
              124,740
              
              
              142,923
              
              
              334,542
              
              
              297,344Total
                  research and development expense
              
              $
              1,621,100
              
              $
              2,467,697
              
              $
              3,508,191
              
              $
              9,326,841





**6.
      Convertible Subordinated Debentures and Equity Issuance**




In
      December 2004 and January 2005, the Company completed a private placement of
      $80.0 million in aggregate principal amount of 2.5% convertible subordinated
      debentures due January 15, 2025, of which $70.0 million in aggregate principal
      amount remained outstanding as of December 31, 2006 and none remained
      outstanding as of December 31, 2007 and June 30, 2008.





In
      March
      2007, the Company consummated the 2007 Exchange Offer pursuant to which $67.5
      million in principal amount of its convertible subordinated debentures were
      exchanged for (i) 439,784 shares of series C, (ii) 100,000 shares of series
      D
      convertible preferred stock, and (iii) $14.3 million in cash, which included
      accrued interest of $843,000. Additionally, the $2.5 million in principal amount
      of debentures that remained outstanding after the consummation of the 2007
      Exchange Offer was repaid for $2.6 million (an amount equal to unpaid principal
      plus accrued interest). On June 11, 2007, the 439,784 shares of series C
      convertible preferred stock issued in connection with the exchange offer were
      converted into 84,010,232 shares of common stock. In addition, on May 24, 2007,
      the Company distributed to holders of its common stock additional warrants
      to
      purchase 29,417,546 shares of its common stock at an exercise price of $0.523
      per share. The warrants are exercisable until December 31, 2009, unless sooner
      redeemed.




The
      2007
      Exchange Offer has been recorded pursuant to SFAS No. 15, “Accounting by Debtors
      and Creditors for Troubled Debt Restructurings”. The difference between the
      amount of the face value of the debentures and the fair value of the assets
      given to the debenture holders in the 2007 Exchange Offer of $8.4 million was
      recorded as a gain on debt extinguishment in the first quarter of 2007. The
      fair
      value of the series C and the series D convertible preferred stock was estimated
      at $38.1 million and $7.5 million, respectively, with a significant amount
      of
      the value reflecting the value of the underlying common stock. The balance
      reflected for the series D convertible preferred stock is reduced by the
      attributable portion of the 2007 Exchange Offer expenses of $288,000 and the
      estimated value of the warrants to be issued to common shareholders of
      approximately $602,000. The Company estimated the fair value of the warrants
      using the Black-Scholes methodology. The liability was revalued at the date
      that
      the registration statement for the shares underlying the warrants was deemed
      effective, or June 25, 2007. The liability value was reduced by $1.4 million
      and
      was recorded as other income during the quarter ended June 30, 2007. The
      warrants were then reclassified from a liability to equity and, as such, the
      value is reflected in additional paid in capital.


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          11
          -


*Terms
      of Series D Preferred Stock.* The
      100,000 shares of series D convertible preferred stock have no voting rights
      and
      no liquidation preference. The series D convertible preferred stock is
      convertible but may not convert into common stock if such conversion would
      result in beneficial ownership in excess of 9.9% of the Company’s voting capital
      stock for the converting holder. Accordingly, the Series D convertible preferred
      stock is classified as temporary equity on the balance sheet. The series D
      is
      convertible into 191.02612 shares of common stock per share, or a total of
      19,102,612 shares as of June 30, 2008.





**8.
      Significant Agreements**





**XTL
      Agreement**





In
      January 2007, the Company entered into an agreement with XTL Biopharmaceuticals,
      Ltd. relating to its proprietary compound bicifadine. Under the agreement,
      the
      Company granted XTL the exclusive right to develop products incorporating
      bicifadine for the treatment of all human diseases, disorders and
      conditions, except for the treatment of symptoms in certain areas of women’s
      health. The Company received an up-front payment of $6.5 million, of which
      $5.0
      million was paid to Wyeth as a result of the acceleration of a milestone
      payment.  XTL later made an additional $1.0 million payment to the Company
      in February 2007.





**Milestone
      and Royalty Monetization**





In
      May
      2008, the Company sold to a private investor the right to receive $1.6 million,
      or 24.62%, of a $6.5 million contingent milestone payment that may become due
      to
      the Company under the XTL Agreement. The milestone may be payable perhaps as
      early as the fourth quarter of 2008, although there can be no assurance that
      the
      milestone payment will be payable in 2008, if ever. In the same transaction,
      the
      Company also sold a fractional interest in future royalties otherwise payable
      to
      the Company. The Company received a non-refundable $1.6 million payment upon
      closing of the transaction which has been recorded as revenue in the second
      quarter of 2008 as the transaction qualifies as a sale as there are no further
      obligations of the Company pertaining to this payment. Under certain
      circumstances if and when the $6.5 million milestone becomes payable, the
      investor has the right, among other options, to “put” the fractional royalty
      interest back to the Company for $1.6 million. Since the receipt of the
      milestone and the investor’s put right are both contingent on separate events,
      the Company will not recognize this liability until and unless the milestone
      is
      received and the investor exercises the put right.





**ITEM
      2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**





You
      should read the following discussion of our results of operations and financial
      condition together with our unaudited financial statements and related notes
      contained elsewhere in this report.





**Liquidity/Going
      Concern**





We
      estimate that we have cash and cash equivalents sufficient to fund our
      operations through December 2008. There are a number of circumstances, however,
      which could result in our needing additional capital even sooner than
      anticipated, such as unexpected costs associated with the Phase II clinical
      trial we are currently conducting in Eastern Europe and the United States.
Based
      upon projected enrollment rates, this trial was expected to be completed as
      early as the fourth quarter of 2008. However, as the actual enrollment rate
      has
      been lower than anticipated, we now expect this trial will be completed in
      the
      second half of 2009. This delay will add additional costs to the trial that
      will
      require financing for completion.We intend to continue to actively seek
      additional capital in 2008 through public or private financing or collaborative
      agreements but there is no assurance that financing will be obtained on
      acceptable terms, if at all. These matters raise substantial doubt about our
      ability to continue as a going concern.





**Executive
      Overview**





We
      are a
      biopharmaceutical company focused on the development of novel drug candidates
      for disorders of the central nervous system. Since our inception, we have
      incurred significant operating losses and we expect to continue to incur
      significant operating losses for the foreseeable future. As of June 30, 2008,
      we
      had an accumulated deficit of $204.7 million. We have historically depended
      upon
      equity and debt financings and license fee and milestone payments from our
      collaborative partners and licensees to fund our research and product
      development programs.





We
      anticipate that our quarterly results of operations will fluctuate for several
      reasons, including the timing and extent of research and development efforts
      and, the timing of milestone payments, if any, under our sublicense agreements.
      In pursuing our strategy, we have entered into strategic collaboration and/or
      license agreements. We currently have such agreements with XTL, Blue Note,
      Wyeth
      and Neurocrine.


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          12
          -





In
      January 2007, we granted XTL the exclusive right to develop products
      incorporating our proprietary compound bicifadine in return for the right to
      receive future milestone payments and royalties based on product development
      and
      future sales, if any. We received an up-front payment of $6.5 million, of which
      $5.0 million was paid to Wyeth, from whom we licensed bicifadine.  In
      addition, we paid Elan $500,000 pursuant to a prior agreement with them. XTL
      later made an additional $1.0 million payment to us upon transfer to XTL of
      an
      existing IND and certain program documentation relating to bicifadine. As the
      up-front payment was not associated with continuing obligations from us, the
      payment was recorded as revenue in the first quarter of 2007.  In May 2008,
      we sold to a private investor the right to receive $1.6 million, or 24.62%,
      of a
      $6.5 million contingent milestone payment that may become due to DOV under
      the
      XTL Agreement. In the same transaction, we also sold a fractional interest
      in
      future royalties otherwise payable to us. We received a non-refundable $1.6
      million payment upon closing of the transaction which has been recorded as
      revenue in the second quarter of 2008 as the transaction qualifies as a sale
      as
      there are no further obligations of DOV pertaining to this payment. Under
      certain circumstances if and when the $6.5 million milestone becomes payable,
      the investor has the right, among other options, to “put” the fractional royalty
      interest back to us for $1.6 million. Since the receipt of the milestone and
      the
      investor’s put right are both contingent on separate events, we will not
      recognize this liability until and unless the milestone is received and the
      investor exercises the put right.





Our
      revenue consists primarily of license fees and milestone payments from our
      collaborative partners. We record revenue on an accrual basis when amounts
      are
      realized or realizable and earned. In accordance with EITF 00-21, we evaluate
      all new agreements to determine if they are a single unit of accounting or
      separable. Revenue received in advance of performance obligations, or in cases
      where we have a continuing obligation to perform services, is deferred and
      amortized over the performance period. Revenue from milestone payments that
      represent the culmination of a separate earnings process is recorded when the
      milestone is achieved. Contract revenues are recorded as the services are
      performed. License and milestone revenues are typically not consistent or
      recurring in nature. Our revenue has fluctuated from year-to-year and
      quarter-to-quarter and this will likely continue.





Our
      operating expenses consist primarily of license expense, costs associated with
      research and development and general and administrative costs associated with
      our operations. Research and development expense consists primarily of
      compensation and other related costs of our personnel dedicated to research
      and
      development activities, clinical and preclinical trial expenses, including
      toxicology studies, costs of manufacturing clinical and preclinical trial
      materials and professional fees related to clinical trials and patent strategy
      and prosecution. General and administrative expense consists primarily of the
      costs of our senior management, finance and administrative staff, business
      insurance and professional fees.





**Exchange
      Offer**





In
      March
      2007, we consummated an exchange offer, or the “2007 Exchange Offer”, pursuant
      to which $67.5 million in principal amount of DOV’s outstanding convertible
      subordinated debentures were exchanged for 439,784 shares of series C and
      100,000 shares of series D convertible preferred stock and $14.3 million in
      cash, which included $843,000 of accrued interest. Additionally, the $2.5
      million in principal amount of debentures that remained outstanding after the
      consummation of the 2007 Exchange Offer was repaid for $2.6 million (an amount
      equal to par plus accrued interest). ** Please
      refer to Note 6 to our financial statements included under Part I, Item 1 of
      this Form 10-Q *.*





**Stock-based
      Compensation**





We
      account for stock options under the provisions of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payment,” or SFAS 123(R), which requires
      the recognition of the fair value of stock-based compensation. Under the fair
      value recognition provisions for SFAS 123(R), stock-based compensation cost
      is
      estimated at the grant date based on the fair value of the awards expected
      to
      vest and recognized as expense ratably over the requisite service period of
      the
      award. We have used the Black-Scholes valuation model, or BSM, to estimate
      fair
      value of our stock-based awards, which requires various judgmental assumptions
      including estimating stock price volatility, forfeiture rates, and expected
      life. Our computation of expected volatility is based on our historical
      volatility. In addition, we consider many factors when estimating expected
      forfeitures and expected life, including types of awards and historical
      experience. If any of the assumptions used in the BSM model change
      significantly, stock-based compensation expense may differ materially in the
      future from that recorded in the current period.


-
          13
          -





We
      adopted SFAS 123(R) using the modified prospective method which requires the
      application of the accounting standard as of January 1, 2006. The 2007 Exchange
      Offer effected a technical change of control and, as a result, pursuant to
      the
      2000 Plan all outstanding options issued prior to January 2007 and restricted
      stock awards were immediately accelerated. Thus the Company recognized a
      non-cash compensation charge in the first quarter of 2007 of approximately
      $5.9
      million.





**Results
      of Operations**





*Three
      Months Ended June 30, 2008 and 2007*





*Revenue.* Revenue
      was $1.6 million and $288,000 for the three months ended June 30, 2008 and
      2007,
      respectively. In
      May
      2008, we sold to a private investor the right to receive $1.6 million, or
      24.62%, of a $6.5 million contingent milestone payment that may become due
      to
      DOV under the XTL Agreement. In the same transaction, we also sold a fractional
      interest in future royalties otherwise payable to us. We received a
      non-refundable $1.6 million payment upon closing of the transaction which has
      been recorded as revenue in the second quarter of 2008 as the transaction
      qualifies as a sale as there are no further obligations of DOV pertaining to
      this payment. Under certain circumstances if and when the $6.5 million milestone
      becomes payable, the investor has the right, among other options, to “put” the
      fractional royalty interest back to us for $1.6 million. Since the receipt
      of
      the milestone and the investor’s put right are both contingent on separate
      events, we will not recognize this liability until and unless the milestone
      is
      received and the investor exercises the put right. Our revenue for the three
      months ended June 30, 2007 was comprised solely of r eimbursement
      of certain costs incurred by us for services provided to our partner
      XTL.




*Research
      and Development Expense.* Research
      and development expense decreased $847,000 to $1.6 million for the second
      quarter of 2008 from $2.5 million for the comparable period in 2007.
      Approximately $497,000 of the decrease related to decreased payroll and
      associated overhead expense $600,000 of direct costs for our preclinical
      programs due primarily to the restructuring we announced in January 2008 as
      well
      as decreased clinical development costs of $76,000 for bicifadine as XTL is
      now
      responsible for these costs. These decreases were offset by an increase in
      expenses of $344,000 for DOV 21,947 as we progressed our Phase II clinical
      trial.





*General
      and Administrative Expense.* General
      and administrative expense increased $91,000 to $1.9 million for the second
      quarter of 2008 from $1.8 million for the comparable period in 2007. The
      increase is primarily attributable to an increase in non-cash compensation
      expense of $358,000, increased depreciation expense of $57,000 and increased
      rent expense of $134,000. These increases were offset by decreased payroll
      and
      payroll related expenses of $226,000, lower office and office related expenses
      of $184,000 due to the restructuring we announced in January 2008 and decreased
      professional fees of $50,000.





*Interest
      Income.* Interest
      income decreased $233,000 to $29,000 in the second quarter of 2008 from $262,000
      in the comparable period in 2007 primarily due to lower average cash balances,
      offset by higher effective interest rate yield.





*Gain
      on Revaluation of Warrants* .
      At
      March 31, 2007 we estimated the fair value of the warrants to be distributed
      to
      common stockholders pursuant to the 2007 Exchange Offer at $4.6 million using
      a
      Black-Scholes methodology. The liability was revalued at the date the
      registration statement for the shares underlying the warrants was deemed
      effective on June 25, 2007. The liability value was reduced by $1.4 million
      and
      was recorded as other income during the quarter ended June 30, 2007. The
      warrants were then reclassified from a liability to equity and, as such, no
      further revaluation is required. Please refer to Note 6 of our financial
      statements included
      under Part I, Item 1 of this
      Form
      10-Q.





*Six
      Months Ended June 30, 2008 and 2007*





*Revenue.* Our
      revenue for the six months ended June 30, 2008 is comprised of the $1.6 million
      received from an investor upon the closing of the bicifadine milestone and
      royalty monetization described above. Our revenue for the six months ended
      June
      30, 2007 is comprised of the $7.5 million received from XTL pursuant to the
      licensing of bicifadine on January 15, 2007 and from reimbursement of certain
      costs incurred by us for services provided during the transition period
      following the consummation of the licensing transaction.


-
          14
          -


*Research
      and Development Expense.* Research
      and development expense decreased $5.8 million to $3.5 million for the six
      months ended June 30, 2008, from $9.3 million for the comparable period in
      2007.
      Approximately $4.8 million of the decrease related to decreased payroll and
      associated overhead expense. The first quarter of 2007 included non-cash stock
      compensation of $3.1 million related to the acceleration of certain stock
      options as a result of the change of control effected by the consummation of
      the
      2007 Exchange Offer. The remaining decrease in research and development expense
      was associated with decreased payroll and associated overhead expense of $1.7
      million, and $1.2 million for our preclinical programs primarily due to the
      restructuring we announced in January 2008 and decreased clinical development
      costs of $604,000 for bicifadine as XTL is now responsible for these costs.
      These decreases were offset by an increase in expenses of $784,000 for DOV
      21,947 as we progressed our Phase II clinical trial.




*General
      and Administrative Expense.* General
      and administrative expense decreased $2.6 million to $3.7 million for the six
      months ended June 30, 2008, from $6.3 million for the comparable period in
      2007.
      The decrease was primarily attributable to a decrease in payroll and related
      benefits as the first quarter of 2007 included non-cash stock compensation
      of
      $2.4 million related to the acceleration of certain stock options as a result
      of
      the change of control effected by the consummation of the 2007 Exchange Offer
      and the remainder related to an overall reduction in personnel.





*License
      Expense* . License
      expense for the first quarter of 2007 was comprised of the $5.0 million paid
      to
      Wyeth and $500,000 paid to Elan in connection with the licensing of certain
      rights to bicifadine to XTL in January 2007. ** As
      these
      milestone payments were prior to FDA approval, the entire amount was expensed
      in
      the first quarter of 2007.





*Interest
      Income.* Interest
      income decreased $670,000 to $105,000 in the six months ended June 30, 2008
      from
      $775,000 in the comparable period in 2007 primarily due to lower average cash
      balances and lower effective interest rate yield.





*Interest
      Expense.* Interest
      expense decreased $91,000 to $0 from $91,000 in the comparable period in 2007
      primarily due to the completion of the 2007 Exchange Offer which reduced our
      outstanding debentures to zero .  Please
      refer to Note 6 of our financial statements included
      under Part I, Item 1of this
      Form
      10-Q.





*Gain
      on Revaluation of Warrants* .
      At
      March 31, 2007 we estimated the fair value of the warrants to be distributed
      to
      common stockholders pursuant to the 2007 Exchange Offer at $4.6 million using
      a
      Black-Scholes methodology. The liability was revalued at the date the
      registration statement for the shares underlying the warrants was deemed
      effective on June 25, 2007. The liability value was reduced by $1.4 million
      and
      was recorded as other income during the six months ended June 30, 2007. The
      warrants were then reclassified from a liability to equity and, as such, no
      further revaluation is required. Please refer to Note 6 of our financial
      statements included
      under Part I, Item 1 of this
      Form
      10-Q.




*Gain
      on Extinguishment of Convertible Debentures.* In
      March
      2007, we consummated the 2007 Exchange Offer. The exchange transaction falls
      under the guidance of SFAS No. 15, Accounting by Debtors and Creditors for
      Troubled Debt Restructurings. The difference between the amount of the face
      value of the debentures and the fair value of the assets given up in the
      exchange of $8.4 million was recorded as a gain on debt extinguishment in the
      first quarter of 2007. Please refer to Note 6 to our financial statements
      included under Part I, Item 1 of this Form 10-Q.





**Liquidity
      and Capital Resources**




At
      June
      30, 2008, our cash and cash equivalents and marketable securities totaled $6.2
      million as compared with $9.6 million at December 31, 2007. Although
      we estimate that we have capital to fund operations through the end of 2008,
      we
      will continue to have capital needs. There are a number of circumstances,
      however, which could result in our needing additional capital even sooner than
      anticipated, such as unexpected costs associated with the Phase II clinical
      trial we are currently conducting in Eastern Europe and the United States.
      We
      intend to continue to actively seek additional capital in 2008 through public
      or
      private financing or collaborative agreements however there is no assurance
      that
      such financing will be obtained. These matters raise substantial doubt about
      our
      ability to continue as a going concern.





Net
      cash
      used in operations during the six months ended June 30, 2008 amounted to $7.6 million
      as compared to $9.8 million in the same period of 2007. The
      decrease in cash used in operations was primarily related to the restructuring
      of our operations in January 2008 to reduce headcount and spending on research
      projects. This reduction was offset by the restructuring of our facility lease. In
      February 2008, we renegotiated our facility lease by reducing the monthly rent
      payment and accelerating the termination of the lease from June 2016 to January
      2009. In exchange, we agreed to release to the landlord the $4.2 million
      restricted cash previously held as collateral for the lease and utilized a
      portion of this amount to prepay rent. Net
      non-cash expense related to stock-based compensation and depreciation and
      amortization expenses was $1.2 million in the six months ended June 30, 2008
      and
      $6.0 million in the comparable period in 2007.


-
          15
          -





Net
      cash
      provided by investing activities during the six months ended June 30, 2008
      was
      $4.6 million as compared to $2.2 million used in investing activities during
      the
      same period in 2007. This fluctuation resulted primarily from the timing
      differences in investment purchases, sales and maturities and the fluctuations
      in our portfolio mix between cash equivalents and short-term investment holdings
      and the release of the restricted cash in connection with our lease amendment.
      In February 2006, we committed to a ten-year operating lease for a 133,686
      square foot facility in Somerset, New Jersey which has served as our corporate
      headquarters and principal place of business since June 2006. In connection
      with
      this lease, we restricted $4.2 million to serve as collateral for our
      performance under the lease. Effective February 25, 2008, we entered into an
      amendment to this lease and in connection with this amendment we released the
      $4.2 million restricted cash.





Net
      cash
      used in financing activities during the six months ended June 30, 2008 was $0 as
      compared to $17.8 million in the comparable period in 2007. In March 2007,
      we
      consummated the 2007 Exchange Offer pursuant to which $67.5 million in principal
      amount of our convertible subordinated debentures were exchanged for 439,784
      shares of series C and 100,000 shares of series D convertible preferred stock
      and $14.3 million in cash, which included $843,000 of accrued interest which
      is
      not classified as a financing activity. Additionally, the $2.5 million in
      principal amount of Debentures that remained outstanding after the consummation
      of the 2007 Exchange Offer was repaid for $2.6 million (an amount equal to
      par
      plus accrued interest). ** The
      Company incurred approximately $1.8 million for costs related to the 2007
      Exchange Offer.





**Factors
      That May Affect Future Financial Condition and Liquidity**





We
      believe that our existing cash and cash equivalents will be sufficient to fund
      our anticipated operating expenses and capital requirements through the end
      of
      2008. Our ongoing cash requirements and future capital uses and requirements
      depend on numerous factors, including:




·
            our
                progress with research and development activities;·
            our
                ability to maintain and establish, and the scope of, collaborations
                that
                finance research and development on our clinical
                candidates;


·
            the
                progress and success of clinical trials and preclinical studies of
                our
                product candidates;·
            the
                costs and timing of obtaining, enforcing and defending our patent
                and
                intellectual rights; and


·
            the
                costs and timing of regulatory
                approvals.





In
      addition to the foregoing, our cash needs and requirements are also dependent
      in
      part on the ability of our licensees and collaborative partners to meet their
      obligations to us, including the fulfillment of their development and
      commercialization responsibilities in respect of our product candidates. Our
      sublicensee partners, XTL, Blue Note and Neurocrine, may encounter conflicts
      of
      interest, changes in business or clinical strategy, or they may acquire or
      develop rights to competing products, all of which could adversely affect their
      ability or willingness to fulfill their obligations to us and, consequently,
      require us to satisfy, through the commitment of additional funds or personnel
      or both, any shortfalls in their performance.





To
      continue to operate in 2009, we will need to raise additional funds through
      equity or debt financings, collaborative agreements with corporate partners
      or
      from other sources. If adequate funds are not available, or not available on
      an
      acceptable basis, we will be required to curtail or delay significantly our
      remaining product development programs or possibly discontinue operations.
      In
      addition, future milestone payments under some of our collaborative or license
      agreements are contingent upon our meeting particular research or development
      goals. The amount and timing of future milestone payments are contingent upon
      the terms of each collaborative or license agreement. Milestone performance
      criteria are specific to each agreement and based upon future performance.
      Therefore, we are subject to significant variation in the timing and amount
      of
      our revenues, milestone expenses and results of operations from period to
      period.


-
          16
          -


**Contractual
      Obligations**





Future
      minimum payments for all contractual obligations for years subsequent to June
      30, 2008, are as follows:





**Payments Due by Period****Less than**
              **1 Year**
            
            **1- 3 Years**
            
            **3- 5 Years**
            
            **More Than**
              **5 Years**
            
            **Total**Operating
                leases(1)
            
            $
            581,944
            
            $
            432
            
            $
            —
            
            $
            —
            
            $
            582,376Total
                (2)
            
            $
            581,944
            
            $
            432
            
            $
            —
            
            $
            —
            
            $
            582,376





(1)
      In
      February 2008, we renegotiated our facility lease included in the operating
      lease line by reducing the term to January 2009 as well as the monthly rent
      payments. In exchange, we agreed to release to the landlord the $4.2 million
      letter of credit previously held as collateral for the lease. Thus the remaining
      lease payments due under the amended lease as of June 30, 2008 total
      $567,000.





(2)
      The
      table excludes legal expenses to be reimbursed on behalf of a board member
      related to an inquiry by regulatory authorities into trading in our common
      stock
      in April 2006. While the board of directors has granted contractual
      indemnification, the amounts are neither certain nor quantifiable at this time.




The
      table
      also excludes any severance or termination payments that would be due to certain
      of our employees under their employment contracts should they be terminated
      without cause or following a change of control, as these terms are defined
      in
      each such employee’s agreement, prior to the expiration of each employee’s
      contract term because the amounts are not determinable at this time. As of
      June
      30, 2008, the maximum aggregate amount of severance or termination payments
      that
      may be payable under these employment agreements is $1.6 million. Our employment
      agreements with our current and former executive officers are on file with
      the
      SEC and available at www.sec.gov.





The
      table
      above also excludes future milestones and royalties (as summarized in the table
      below) that may be owed to Wyeth, Elan and Biovail, under terms of existing
      agreements as payments are contingent upon future events. The table does not
      reflect the amounts that may be received from our collaborative partners with
      respect to these payments. We do not expect to pay any royalties or milestones
      under these agreements in 2008.





**Milestone
                Payments****NDA Filing**
            
            **NDA Approval or**
              **Marketing**
              **Authorization**
            
            **Upon License or**
              **Introduction to**
              **Market**
            
            **Royalty/Payments**
              **on Net Sales, if Any**Bicifadine
            
            
            —
            
            $
            4,500,000
            
            $
            500,000
            
            
            10.0
            %DOV 21,947(1)
            
            
            —
            
            $
            2,250,000
            
            
            —
            
            
            —DOV
                102,677(1)
            
            
            —
            
            $
            2,250,000
            
            
            —
            
            
            —DOV
                216,303(1)
            
            
            —
            
            $
            4,500,000
            
            
            —
            
            
            3.5
            %DOV
                Diltiazem
            
            
            —
            
            $
            3,000,000
            
            
            —
            
            
            Up to $7.5 millionOcinaplon
            
            $
            2,500,000
            
            $
            4,500,000
            
            $
            2,000,000
            
            
            3.5
            %




(1)
      We
      are obligated to pay milestones upon NDA (or equivalent) approval in the U.S.,
      Europe or Japan, but only if such milestone becomes payable prior to payment
      of
      the $4.5 million milestone payable on an NDA (or equivalent) approval for DOV
      216,303. Any milestone payments made with respect to DOV 21,947 or DOV 102,677
      reduce, dollar-for-dollar, our $4.5 million milestone obligation for DOV
      216,303.





**Recent
      Accounting Pronouncements**




In
      February 2007, the FASB issued SFAS No. 159 which permits entities to choose
      to
      measure many financial instruments and certain other items at fair value. The
      objective is to improve financial reporting by providing entities with the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. SFAS No. 159 is effective as of the beginning of an
      entity’s first fiscal year that begins after November 15, 2007, which
      for us was as of the beginning of fiscal 2008. The adoption of this
      Statement did not have a material impact on the company's financial position
      or
      results of operations.




In
      June 2007, the FASB ratified EITF 07-03, " *Accounting
      for Nonrefundable Advance Payments for Goods or Services to Be Used in Future
      Research and Development Activities* ",
      which
      requires nonrefundable advance payments for future research and development
      activities to be capitalized and recognized as an expense as the goods are
      delivered or services are performed. Earlier application is not permitted.
      EITF 07-03 is effective for fiscal years beginning after December 15,
      2007, and interim periods within those fiscal years. The adoption of
      EITF 07-1 did not have a material impact on our financial position or
      results of operations.




-
          17
          -




In
      September 2007, the FASB ratified Emerging Issues Task Force Issue No. 07-1
      " *Accounting
      for Collaborative Agreements* ",
      ("EITF 07-1"). EITF 07-1 defines collaborative agreements as
      contractual arrangements that involve a joint operating activity. These
      arrangements involve two (or more) parties who are both active participants
      in
      the activity and that are exposed to significant risks and rewards dependent
      on
      the commercial success of the activity. EITF 07-1 provides that a company
      should report the effects of adoption as a change in accounting principle
      through retrospective application to all periods and requires additional
      disclosures about a company's collaborative arrangements. EITF 07-1 is
      effective for us as of January 1, 2009. The adoption of EITF 07-1 is
      not expected to have a material impact on our financial position or results
      of
      operations.




In
      December 2007, the FASB issued SFAS No. 141(R) " *Business
      Combinations* "
      ("SFAS 141(R)"). SFAS 141(R) changes several underlying principles in
      applying the purchase method of accounting. Among the significant changes,
      SFAS 141(R) requires a redefining of the measurement date of a business
      combination, expensing direct transaction costs as incurred, capitalizing
      in-process research and development costs as an intangible asset and recording
      a
      liability for contingent consideration at the measurement date with subsequent
      re-measurements recorded in the results of operations. SFAS 141(R) also
      requires that costs for business restructuring and exit activities related
      to
      the acquired company will be included in the post-combination financial results
      of operations and also provides new guidance for the recognition and measurement
      of contingent assets and liabilities in a business combination. In addition,
      SFAS 141(R) requires several new disclosures, including the reasons for the
      business combination, the factors that contribute to the recognition of
      goodwill, the amount of acquisition related third-party expenses incurred,
      the
      nature and amount of contingent consideration, and a discussion of pre-existing
      relationships between the parties. SFAS 141(R) is effective for the Company
      as of January 1, 2009. SFAS 141(R) will only have an impact on our
      financial position or results of operations if we enter into a business
      combination.




In
      December 2007, the FASB issued SFAS No. 160 " *Noncontrolling
      Interests in Consolidated Financial Statements, an Amendment of ARB
      No. 51* ",
      ("SFAS 160"). SFAS 160 establishes accounting and reporting standards
      for the noncontrolling interest in a subsidiary and for the deconsolidation
      of a
      subsidiary. SFAS 160 requires noncontrolling interests in subsidiaries
      initially to be measured at fair value and classified as a separate component
      of
      equity. SFAS 160 also requires a new presentation on the face of the
      consolidated financial statements to separately report the amounts attributable
      to controlling and non-controlling interests. SFAS 160 is effective for the
      Company as of January 1, 2009. Management is currently evaluating the
      impact of adopting this Statement, but we do not expect it to have a material
      impact on our financial position or results of operations.





In
      March
      2008, the Financial Accounting Standards Board (FASB) issued Statement of
      Financial Accounting Standards (SFAS) 161, *Disclosures
      about Derivative Instruments and Hedging Activities –an amendment of SFAS
      133* .
       SFAS 161 seeks to improve financial reporting for derivative instruments
      and hedging activities by requiring enhanced disclosures regarding the impact
      on
      financial position, financial performance, and cash flows.  To achieve this
      increased transparency, SFAS 161 requires: (1) the disclosure of the fair value
      of derivative instruments and gains and losses in a tabular format; (2) the
      disclosure of derivative features that are credit risk-related; and (3)
      cross-referencing within the footnotes.  SFAS 161 is effective for us on
      January 1, 2009.  We are in the process of evaluating the new disclosure
      requirements under SFAS 161.





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





To
      date,
      we have invested our cash balances with substantial financial institutions.
      The
      primary objective of our investment activities is to preserve the principal
      and
      maximize the income we receive with acceptable risk. Some of the securities
      that
      we invest in may have market risk. This means that a change in prevailing
      interest rates may cause the principal amount of the investment to fluctuate.
      To
      mitigate this risk, we intend to maintain our portfolio of cash equivalents
      and
      investments in a variety of securities, including commercial paper, money market
      funds, government and non-government debt securities and corporate obligations.
      Due to the short holding period of these types of investments, we have concluded
      that at the present time we do not have a material financial market risk
      exposure.





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          18
          -




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





As
      required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures as of the end of the period covered by this report. Management
      has used the framework set forth in Internal Control - Integrated Framework
      published by the Committee of Sponsoring Organizations of the Treadway
      Commission, known as COSO, to evaluate the effectiveness of the Company's
      internal control over financial reporting. This
      evaluation was carried out by management as of June 30, 2008, under the
      supervision and with the participation of our chief executive officer. Based
      upon that evaluation, our chief executive officer concluded that our disclosure
      controls and procedures are effective.





There
      was
      no significant change in our internal control over financial reporting that
      occurred during our most recently completed fiscal quarter that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.


-
          19
          -


**PART
      II — OTHER INFORMATION**





**ITEM
      1.**  **Legal
      Proceedings**





From
      time
      to time we may become involved in litigation incidental to the conduct of our
      business. We are not currently a party to any material legal
      proceedings.





**ITEM
      1A. Risk Factors**





The
      nature of our business, particularly when combined with our extremely limited
      financial resources, subjects us to a number of significant risks which affect
      our ability to execute our business strategy and build our business. Some of
      the
      most significant challenges we presently face include the following:





·
            our
                need to raise substantial additional capital in order to fund
                operations;·
            our
                need to seek and evaluate strategic alternatives, including with
                respect
                to collaborations and partnerships for certain of our development
                programs
                and product candidates;


·
            the
                need to obtain, maintain and protect all necessary patents, licenses
                and
                other intellectual property rights;


·
            the
                need to demonstrate the safety and efficacy of product candidates
                at each
                stage of development;


·
            our
                need to meet our development schedule for our product candidates,
                including with respect to drug supply and clinical trial initiation,
                enrollment and completion;


·
            the
                need to meet applicable regulatory standards and receive required
                regulatory approvals on a timely basis or at all; and


·
            our
                need to fulfill our obligations to our strategic partners so we can
                receive timely payment of milestones and royalties, if any, under
                our
                agreements with them.





If
      we are
      unable to successfully deal with these and other challenges, for example if
      we
      fail to identify additional sources of capital in the very near term, our
      business, results of operations and financial condition would be harmed and
      the
      market value of our common stock would likely decline even further. You should
      refer to “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year
      ended December 31, 2007, for a more detailed discussion of some of the
      challenges and the associated risks we face.




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





(a)
      DOV’s
      annual meeting of stockholders was held on May 16, 2008.





(b)
      The
      following Class III directors were elected at the 2008 annual meeting to serve
      for a period of three years and until their respective successors are duly
      elected and qualified:





**Name**
            
            **Position**
            
            **Term Expires**Arnold
                Lippa
            
            Class
                III Director
            
            2011Patrick
                Ashe
            
            Class
                III Director
            
            2011





The
      following Class I and II directors continue to serve their respective terms,
      which expire on our annual meeting of stockholders in the year
      noted:





**Name**
            
            **Position**
            
            **Term Expires**Dennis
                Podlesak
            
            Class
                I Director
            
            2009Daniel
                S. Van Riper
            
            Class
                I Director
            
            2009Barbara
                Duncan
            
            Class
                I Director
            
            2009Joseph
                Zakrzewski
            
            Class
                II Director
            
            2010Zola
                Horovitz
            
            Class
                II Director
            
            2010


-
          20
          -





At
      the
      2008 annual meeting, stockholders voted on three propositions: (i) the election
      of two Class III directors for a term of three years expiring in 2011, (ii)
      the
      authorization of the Company’s board of directors, in its discretion, to amend
      the Company’s Fourth Amended and Restated Certificate of Incorporation, to
      effect a reverse stock split of the issued and outstanding shares of the
      Company’s common stock, and (iii) the ratification of the selection of Amper,
      Politziner & Mattia as the Company’s independent registered public
      accounting firm for the fiscal year ending December 31, 2008. All matters were
      approved by the Company’s stockholders. The voting results were:





**Proposition
                1:**
              **Election
                of Directors**
            
            **For**
            
            **Withheld**Arnold
                Lippa
            
            
            59,055,882
            
            
            40,572,863Patrick
                Ashe
            
            
            91,128,204
            
            
            8,500,541








**Proposition
                2:**
            
            **For**
            
            **Against**
            
            **Abstain**Authorization
                of the Board of Directors to Effect a Reverse Stock Split
            
            
            96,011,473
            
            
            3,512,266
            
            
            106,006








**Proposition
                3:**
            
            **For**
            
            **Against**
            
            **Abstain**Ratification
                of Selection of Registered Independent Public Accounting
                Firm
            
            
            99,315,183
            
            
            271,948
            
            
            41,614




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





(a)
            Exhibits.





The
      following is a complete list of exhibits filed or incorporated by reference
      as
      part of this report.





Exhibit
                No.10.60
            Form
                of Stock Option Agreement for stock options granted under the 2007
                Stock
                Award and Incentive Plan.10.61
            Form
                of Restricted Stock Unit Agreement for restricted stock units granted
                under the 2007 Stock Award and Incentive Plan.31.1
            Certification
                of Chief Executive Officer and Principal Financial Officer of DOV
                Pharmaceutical, Inc., pursuant to Rules 13a-14(a) and 15d-14(a),
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32
            Certification
                of Chief Executive Officer and Principal Financial Officer of DOV
                Pharmaceutical, Inc., pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




-
          21
          -


**SIGNATURES**





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





DOV
                PHARMACEUTICAL, INC.Date:
                August 13, 2008
            By:
            /s/
                BARBARA DUNCANName: 
                Barbara Duncan
              Title:  
                 Chief Executive Officer and Principal Financial
                OfficerDOV
              PHARMACEUTICAL, INC.Date:
                August 13, 2008
            By:
            /s/
                WILLIAM C. KALTNECKERName:William
                C. Kaltnecker
              Title:Chief
                Accounting Officer and Controller





-
          22
          -