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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 000-23223





CURAGEN CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 06-1331400                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|322 East Main Street, Branford, Connecticut                    |  | 06405                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: (203) 481-1104





Indicate by check mark whether the 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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    
No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate
Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant was required to
submit and post such files).    Yes   ̈    No   ̈

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 definitions of large accelerated filer,
accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈                                                |  | Accelerated Filer         |  | x
|                        |  |                                                  | 
|Non-Accelerated Filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller Reporting Company |  |  ̈

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

The number of shares outstanding of the registrants common stock as of July 31, 2009 was 57,205,231.









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CURAGEN CORPORATION

FORM 10-Q

INDEX



|                              |  |                                                                                                          |  |        
|----------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | -------
|                              |  |                                                                                                          |  | Page   
|PART I. Financial Information |  |                                                                                                         
|                              |  |                                                                                                         
|Item 1.                       |  | Financial Statements                                                                                     |  |        
|                              |  |                                                                                                         
|                              |  | Condensed Balance Sheets as of June 30, 2009 and December 31, 2008 (unaudited)                           |  | 3      
|                              |  |                                                                                                         
|                              |  | Condensed Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008 (unaudited) |  | 4      
|                              |  |                                                                                                         
|                              |  | Condensed Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (unaudited)           |  | 5      
|                              |  |                                                                                                         
|                              |  | Notes to Condensed Financial Statements (unaudited)                                                      |  | 6 - 13 
|                              |  |                                                                                                         
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                    |  | 14 - 22
|                              |  |                                                                                                         
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                               |  | 23     
|                              |  |                                                                                                         
|Item 4.                       |  | Controls and Procedures                                                                                  |  | 23     
|                              | 
|PART II. Other Information    |  |                                                                                                         
|                              |  |                                                                                                         
|Item 1.                       |  | Legal Proceedings                                                                                        |  | 24     
|                              |  |                                                                                                         
|Item 1A.                      |  | Risk Factors                                                                                             |  | 24 - 38
|                              |  |                                                                                                         
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                      |  | 39     
|                              |  |                                                                                                         
|Item 6.                       |  | Exhibits                                                                                                 |  | 39     
|                              | 
|Signatures                    |  | 40                                                                                                      
|                              | 
|Exhibit Index                 |  | 41                                                                                                      



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CURAGEN CORPORATION

CONDENSED BALANCE SHEETS

(in thousands, except par value and share data)

(unaudited)



|                                                                                                                                    |  |              |          |   |                  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                    |  | June 30,2009 |          |   | December 31,2008 |  
|ASSETS                                                                                                                              |  |              |          |   |                  |   |          |  
|Current assets:                                                                                                                     |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                           |  | $            | 56,738   |   |                  | $ | 19,103   |  
|Short-term investments                                                                                                              |  |              | 6,016    |   |                  |   | 30,332   |  
|Marketable securities                                                                                                               |  |              | 13,286   |   |                  |   | 38,229   |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|Cash and investments                                                                                                                |  |              | 76,040   |   |                  |   | 87,664   |  
|Income taxes receivable                                                                                                             |  |              | 122      |   |                  |   | 283      |  
|Other current assets                                                                                                                |  |              | 446      |   |                  |   | 211      |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|Total current assets                                                                                                                |  |              | 76,608   |   |                  |   | 88,158   |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|                                                                                                                                    |  |             
|Property and equipment, net                                                                                                         |  |              | 58       |   |                  |   | 102      |  
|Other assets, net                                                                                                                   |  |              | 200      |   |                  |   | 286      |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|Total assets                                                                                                                        |  | $            | 76,866   |   |                  | $ | 88,546   |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|                                                                                                                                    |  |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                |  |              |          |   |                  |   |          |  
|Current liabilities:                                                                                                                |  |              |          |   |                  |   |          |  
|Accounts payable                                                                                                                    |  | $            | 189      |   |                  | $ | 239      |  
|Accrued expenses                                                                                                                    |  |              | 1,947    |   |                  |   | 1,610    |  
|Accrued payroll and related items                                                                                                   |  |              | 400      |   |                  |   | 660      |  
|Interest payable                                                                                                                    |  |              | 180      |   |                  |   | 253      |  
|Other current liabilities                                                                                                           |  |              | 139      |   |                  |   | 1,352    |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|Total current liabilities                                                                                                           |  |              | 2,855    |   |                  |   | 4,114    |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|                                                                                                                                    |  |             
|Convertible subordinated debt                                                                                                       |  |              | 14,142   |   |                  |   | 18,967   |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|                                                                                                                                    |  |             
|Commitments and contingencies                                                                                                       |  |              |          |   |                  |   |          |  
|                                                                                                                                    |  |             
|Stockholders equity:                                                                                                               |  |              |          |   |                  |   |          |  
|Common Stock; $.01 par value, issued and outstanding 57,205,231 shares at June 30, 2009, and 57,118,186 shares at December 31, 2008 |  |              | 572      |   |                  |   | 571      |  
|Additional paid-in capital                                                                                                          |  |              | 527,982  |   |                  |   | 527,294  |  
|Accumulated other comprehensive income                                                                                              |  |              | 305      |   |                  |   | 393      |  
|Accumulated deficit                                                                                                                 |  |              | (468,990 | ) |                  |   | (462,793 | )
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|Total stockholders equity                                                                                                          |  |              | 59,869   |   |                  |   | 65,465   |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                          |  | $            | 76,866   |   |                  | $ | 88,546   |  
|                                                                                                                                    |  |              |          |   |                  |   |          |  

See accompanying notes to condensed financial statements



3



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CURAGEN CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|------------------------------------------------------------------- | ---- | -------------------------- | ------ | ---- | ------------------------ | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                    |      | Three Months EndedJune 30, |        |      | Six Months EndedJune 30, |  
|                                                                    | 2009 |                            |        | 2008 |                          |   | 2009   |   |  | 2008 |       
|Collaboration revenue                                               |      | $                          |       |      |                          | $ | 1,152  |   |  | $    |       |   |  | $ | 1,174  |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                    |      |                            |        |     
|Operating expenses:                                                 |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Research and development                                            |      |                            | 1,815  |      |                          |   | 3,635  |   |  |      | 3,497  |   |  |   | 9,006  |  
|General and administrative                                          |      |                            | 2,925  |      |                          |   | 1,443  |   |  |      | 4,830  |   |  |   | 3,159  |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Total operating expenses                                            |      |                            | 4,740  |      |                          |   | 5,078  |   |  |      | 8,327  |   |  |   | 12,165 |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                    |      |                            |        |     
|Gain on sale of intangible asset                                    |      |                            |       |      |                          |   | 36,397 |   |  |      |       |   |  |   | 36,397 |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                    |      |                            |        |     
|(Loss) income from operations                                       |      |                            | (4,740 | )    |                          |   | 32,471 |   |  |      | (8,327 | ) |  |   | 25,406 |  
|Interest income, net                                                |      |                            | 224    |      |                          |   | 824    |   |  |      | 679    |   |  |   | 1,899  |  
|Interest expense                                                    |      |                            | (159   | )    |                          |   | (451   | ) |  |      | (334   | ) |  |   | (1,248 | )
|Realized (loss) gain on sale of available-for-sale investments, net |      |                            | (1     | )    |                          |   | (165   | ) |  |      | 83     |   |  |   | (169   | )
|Gain on extinguishment of debt                                      |      |                            |       |      |                          |   | 6,991  |   |  |      | 962    |   |  |   | 6,991  |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                    |      |                            |        |     
|(Loss) income before income taxes                                   |      |                            | (4,676 | )    |                          |   | 39,670 |   |  |      | (6,937 | ) |  |   | 32,879 |  
|Income tax benefit (provision)                                      |      |                            | 16     |      |                          |   | (412   | ) |  |      | 740    |   |  |   | (394   | )
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                    |      |                            |        |     
|Net (loss) income                                                   |      | $                          | (4,660 | )    |                          | $ | 39,258 |   |  | $    | (6,197 | ) |  | $ | 32,485 |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                    |      |                            |        |     
|Basic (loss) income per share                                       |      | $                          | (0.08  | )    |                          | $ | 0.68   |   |  | $    | (0.11  | ) |  | $ | 0.56   |  
|Diluted (loss) income per share                                     |      | $                          | (0.08  | )    |                          | $ | 0.64   |   |  | $    | (0.11  | ) |  | $ | 0.53   |  
|                                                                    |      |                            |        |     
|Weighted average number of shares used in computing:                |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Basic (loss) income per share                                       |      |                            | 57,051 |      |                          |   | 56,736 |   |  |      | 57,027 |   |  |   | 56,629 |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Diluted (loss) income per share                                     |      |                            | 57,051 |      |                          |   | 61,148 |   |  |      | 57,027 |   |  |   | 62,443 |  
|                                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  

See accompanying notes to condensed financial statements



4



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CURAGEN CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                     |      |                          |        |      |  |   |         |  
|------------------------------------------------------------------------------------ | ---- | ------------------------ | ------ | ---- |  | - | ------- | -
|                                                                                     |      | Six Months EndedJune 30, |       
|                                                                                     | 2009 |                          |        | 2008 | 
|Cash flows from operating activities:                                                |      |                          |        |      |  |   |         |  
|Net (loss) income                                                                    |      | $                        | (6,197 | )    |  | $ | 32,485  |  
|Adjustments to reconcile net (loss) income to net cash used in operating activities: |      |                          |        |      |  |   |         |  
|Deferred revenue                                                                     |      |                          |       |      |  |   | (1,174  | )
|Depreciation and amortization                                                        |      |                          | 76     |      |  |   | 290     |  
|Stock-based compensation                                                             |      |                          | 666    |      |  |   | 1,102   |  
|Stock-based 401(k) plan employer match                                               |      |                          | 16     |      |  |   | 122     |  
|Non-cash interest income                                                             |      |                          | (82    | )    |  |   | 60      |  
|Non-cash interest income - Restricted cash                                           |      |                          |       |      |  |   | (206    | )
|Realized (gain) loss on available for sale investments                               |      |                          | (83    | )    |  |   | 169     |  
|Gain on extinguishment of debt                                                       |      |                          | (962   | )    |  |   | (6,991  | )
|Gain on sale of intangible asset                                                     |      |                          |       |      |  |   | (36,397 | )
|Changes in assets and liabilities:                                                   |      |                          |        |      |  |   |         |  
|Accrued interest receivable                                                          |      |                          | 296    |      |  |   | 275     |  
|Other current assets                                                                 |      |                          | (74    | )    |  |   | 1,832   |  
|Other assets                                                                         |      |                          |       |      |  |   | (51     | )
|Accounts payable                                                                     |      |                          | (50    | )    |  |   | (50     | )
|Accrued expenses                                                                     |      |                          | 336    |      |  |   | 91      |  
|Accrued payroll and related items                                                    |      |                          | (259   | )    |  |   | (1,034  | )
|Interest payable                                                                     |      |                          | (73    | )    |  |   | (795    | )
|Other current liabilities                                                            |      |                          | (1,213 | )    |  |   | (2,833  | )
|                                                                                     |      |                          |        |      |  |   |         |  
|Net cash used in operating activities                                                |      |                          | (7,603 | )    |  |   | (13,105 | )
|                                                                                     |      |                          |        |      |  |   |         |  
|                                                                                     |      |                         
|Cash flows from investing activities:                                                |      |                          |        |      |  |   |         |  
|Proceeds from sale of fixed assets                                                   |      |                          | 2      |      |  |   | 80      |  
|Purchases of short-term investments                                                  |      |                          |       |      |  |   | (9,430  | )
|Proceeds from sales of short-term investments                                        |      |                          | 3,250  |      |  |   | 6,896   |  
|Proceeds from maturities of short-term investments                                   |      |                          | 21,000 |      |  |   | 7,000   |  
|Purchases of marketable securities                                                   |      |                          | (2,030 | )    |  |   |        |  
|Proceeds from sales of marketable securities                                         |      |                          | 14,316 |      |  |   | 15,467  |  
|Proceeds from maturities of marketable securities                                    |      |                          | 12,505 |      |  |   | 14,800  |  
|Net proceeds from sale of intangible asset                                           |      |                          |       |      |  |   | 24,583  |  
|                                                                                     |      |                          |        |      |  |   |         |  
|Net cash provided by investing activities                                            |      |                          | 49,043 |      |  |   | 59,396  |  
|                                                                                     |      |                          |        |      |  |   |         |  
|                                                                                     |      |                         
|Cash flows from financing activities:                                                |      |                          |        |      |  |   |         |  
|Proceeds from exercise of stock options                                              |      |                          | 7      |      |  |   |        |  
|Payment for extinguishment of debt                                                   |      |                          | (3,812 | )    |  |   | (43,247 | )
|                                                                                     |      |                          |        |      |  |   |         |  
|Net cash used in financing activities                                                |      |                          | (3,805 | )    |  |   | (43,247 | )
|                                                                                     |      |                          |        |      |  |   |         |  
|                                                                                     |      |                         
|Net increase in cash and cash equivalents                                            |      |                          | 37,635 |      |  |   | 3,044   |  
|Cash and cash equivalents, beginning of period                                       |      |                          | 19,103 |      |  |   | 16,730  |  
|                                                                                     |      |                          |        |      |  |   |         |  
|Cash and cash equivalents, end of period                                             |      | $                        | 56,738 |      |  | $ | 19,774  |  
|                                                                                     |      |                          |        |      |  |   |         |  
|                                                                                     |      |                         
|Supplemental cash flow information:                                                  |      |                          |        |      |  |   |         |  
|Interest paid                                                                        |      | $                        | 372    |      |  | $ | 1,896   |  
|                                                                                     |      |                          |        |      |  |   |         |  
|Income tax benefit payments received                                                 |      | $                        | 214    |      |  | $ | 247     |  
|                                                                                     |      |                          |        |      |  |   |         |  
|                                                                                     |      |                         
|Supplemental schedule of noncash investing transactions:                             |      |                          |        |      |  |   |         |  
|Fair value of marketable security acquired                                           |      | $                        |       |      |  | $ | 11,814  |  
|                                                                                     |      |                          |        |      |  |   |         |  

See accompanying notes to condensed financial statements



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CURAGEN CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)



|1. | Basis of Presentation and Business Overview
|-- | -------------------------------------------

On May 29, 2009, the Company announced that it entered into an Agreement and Plan of Merger dated as of May 28, 2009 (the Merger Agreement) by and among Celldex Therapeutics, Inc. (Celldex), CuraGen
Corporation (CuraGen), and Cottrell Merger Sub, Inc., a wholly-owned subsidiary of Celldex (the Merger Sub). The Merger Agreement has been approved by the Boards of Directors of Celldex and CuraGen and is subject to customary
closing conditions, including stockholder approvals. The transaction is expected to be completed in the third quarter of 2009. Please refer to Note 8 for a more detailed description of the proposed merger and the Merger Agreement.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial statements. In the opinion of our management, the accompanying unaudited condensed financial statements include all adjustments, consisting of normal recurring accruals,
necessary to present fairly our financial position, results of operations and cash flows. Interim results are not necessarily indicative of the results that may be expected for the entire year.

CuraGen has evaluated all subsequent events through August 5, 2009, the date of filing of this Form 10-Q.

The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes
thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008. All dollar amounts herein are shown in thousands, except par value and per share data.



|2. | Stock-Based Compensation
|-- | ------------------------

During
the three and six months ended June 30, 2009 and 2008, the Company recognized compensation expense in total operating expenses on the condensed statements of operations with respect to employee stock options and restricted stock grants as
follows:



|                                                             |      |                            |      |                          |      |     |      |   |     |  |   |    
|------------------------------------------------------------ | ---- | -------------------------- | ---- | ------------------------ | ---- | --- | ---- | - | --- |  | - | ---
|                                                             |      | Three Months EndedJune 30, |      | Six Months EndedJune 30,
|                                                             | 2009 |                            | 2008 |                          | 2009 |     | 2008
|Compensation expense with respect to employee stock options  |      | $                          | 195  |                          | $    | 279 |      | $ | 461 |  | $ | 554
|Compensation expense with respect to restricted stock grants |      | $                          | 71   |                          | $    | 207 |      | $ | 204 |  | $ | 554

The fair value of options granted during the three months ended June 30, 2009
and 2008 were estimated as of the grant date using the Black-Scholes option valuation model with the following assumptions:



|                                |      |                            |   |      |      |  
|------------------------------- | ---- | -------------------------- | - | ---- | ---- | -
|                                |      | Three Months EndedJune 30, |  
|                                | 2009 |                            |   | 2008 |     
|Expected stock price volatility |      | 72                         | % |      | 68   | %
|Risk-free interest rate         |      | 2.84                       | % |      | 4.14 | %
|Expected option term in years   |      | 6.25                       |   |      | 6.25 |  
|Expected dividend yield         |      | 0                          | % |      | 0    | %



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The approximate weighted-average grant date fair values using the Black-Scholes option
valuation model of all stock options granted during the three and six months ended June 30, 2009 and 2008 were as follows:



|                           |      |      |   |     
|-------------------------- | ---- | ---- | - | ----
|Three Months EndedJune 30,
|2009                       |      | 2008
|$                          | 0.66 |      | $ | 0.72
|                          
|Six Months EndedJune 30,  
|2009                       |      | 2008
|$                          | 0.44 |      | $ | 0.47

The 2007 Stock Incentive Plan (2007 Stock Plan) was approved by the
Companys stockholders as of May 2, 2007. The 2007 Stock Plan provides for the issuance of stock options and stock grants to employees, directors and consultants of CuraGen. A total of 3,000,000 shares of common stock were originally
reserved for issuance under the 2007 Stock Plan. In May 2008, upon approval of the Companys stockholders, the amount reserved under the 2007 stock plan was increased to 6,000,000.

A summary of the stock option activity under the 2007 Stock Plan, as of June 30, 2009, and changes during the three months ended
June 30, 2009, are as follows:



|                          |  |                  |   |  |                               |      |                                                     |      |                          |   |      
|------------------------- |  | ---------------- | - |  | ----------------------------- | ---- | --------------------------------------------------- | ---- | ------------------------ | - | -----
|                          |  | Numberof Options |   |  | WeightedAverageExercise Price |      | Weighted AverageRemainingContractual Life(in years) |      | AggregateIntrinsic Value
|Outstanding April 1, 2009 |  | 3,639,465        |   |  | $                             | 0.86 |                                                     | 9.17 |                          | $ | 636  
|Granted                   |  | 4,167            |   |  |                               | 1.00 |                                                     |     |                          |   | 2    
|Exercised                 |  | (10,000          | ) |  |                               | 0.69 |                                                     |     |                          |   | 7    
|                          |  |                  |   |  |                               |      |                                                     |      |                          |   |      
|Outstanding June 30, 2009 |  | 3,633,632        |   |  |                               | 0.86 |                                                     | 8.94 |                          |   | 2,254
|                          |  |                  |   |  |                               |      |                                                     |      |                          |   |      
|                          |  |                  |   | 
|Exercisable June 30, 2009 |  | 1,055,340        |   |  |                               | 1.06 |                                                     | 8.47 |                          |   | 529  
|                          |  |                  |   |  |                               |      |                                                     |      |                          |   |      

The total intrinsic value of stock options exercised under the 2007 Stock Plan
during the three months ended June 30, 2009 was $7. There were no options exercised under the 2007 Stock Plan during the three months ended June 30, 2008.

A summary of the stock option activity under the 1997 Employee, Director and Consultant Stock Plan (1997 Stock Plan) as of
June 30, 2009, and changes during the three months ended June 30, 2009, are as follows:



|                          |  |                  |   |  |                               |      |                                                     |      |                          |  
|------------------------- |  | ---------------- | - |  | ----------------------------- | ---- | --------------------------------------------------- | ---- | ------------------------ | -
|                          |  | Numberof Options |   |  | WeightedAverageExercise Price |      | Weighted AverageRemainingContractual Life(in years) |      | AggregateIntrinsic Value
|Outstanding April 1, 2009 |  | 1,523,348        |   |  | $                             | 5.68 |                                                     | 5.12 |                          | 
|Canceled or lapsed        |  | (67,919          | ) |  |                               | 3.85 |                                                     |     |                          | 
|                          |  |                  |   |  |                               |      |                                                     |      |                          |  
|Outstanding June 30, 2009 |  | 1,455,429        |   |  |                               | 5.77 |                                                     | 5.10 |                          | 
|                          |  |                  |   |  |                               |      |                                                     |      |                          |  
|                          |  |                  |   | 
|Exercisable June 30, 2009 |  | 1,311,388        |   |  |                               | 5.96 |                                                     | 4.98 |                          | 
|                          |  |                  |   |  |                               |      |                                                     |      |                          |  

There were no options exercised under the 1997 Stock Plan during the three months
ended June 30, 2009 and 2008.

In accordance with the terms of the Merger Agreement with Celldex (see Note 8), all
unvested options under the 1997 Stock Plan will immediately vest and become fully exercisable for a specified period of time prior to the consummation of the merger, and will terminate if they are not exercised during that period. The acceleration
of all unvested options under the 1997 Stock Plan is subject to approval by the CuraGen Compensation Committee. As of June 30, 2009, total unrecognized compensation expense related to unvested stock option grants under the 1997 Stock Plan is
$250. All options under the 2007 Stock Plan will be assumed by Celldex pursuant to the merger, as further discussed in Note 8 below.

As of June 30, 2009 there was $1,368 of total unrecognized compensation expense related to unvested stock option grants under the 1997 Stock Plan and 2007 Stock Plan, and this expense is expected to be recognized over a
weighted-average period of 1.35 years. However, this weighted-average period could be accelerated pursuant to the discussion above regarding the immediate vesting and specified exercise period for unvested options under the 1997 Stock Plan.



7



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##### Table of Contents

A summary of all restricted stock activity under the 2007 Stock Plan as of June 30,
2009, and changes during the three months ended June 30, 2009, are as follows:



|                          |  |                                    |   |  |                                      |     
|------------------------- |  | ---------------------------------- | - |  | ------------------------------------ | ----
|                          |  | Numberof Sharesof Restricted Stock |   |  | WeightedAverageGrant Date Fair Value
|Outstanding April 1, 2009 |  | 75,000                             |   |  | $                                    | 1.17
|Restrictions lapsed       |  | (37,500                            | ) |  |                                      | 1.66
|                          |  |                                    |   |  |                                      |     
|Outstanding June 30, 2009 |  | 37,500                             |   |  |                                      | 0.68
|                          |  |                                    |   |  |                                      |     

The total intrinsic value of restricted shares vested under the 2007 Stock Plan
during the three months ended June 30, 2009 and 2008 was $54 and $36, respectively.

There was no restricted stock
activity under the 1997 Stock Plan during the three months ended June 30, 2009. As of June 30, 2009, there were 75,000 restricted shares outstanding under the 1997 Stock Plan.



|3. | (Loss) Income Per Share
|-- | -----------------------

The
Company adopted FASB Staff Position (FSP) FSP-EITF No. 03-6-1 on January 1, 2009. The adoption of FSP-EITF No. 03-6-1 impacted the determination and reporting of earnings per share by requiring the inclusion of restricted
stock, which has the right to share in dividends, if declared, equally with common shareholders as participating securities. During periods of net income, participating securities are allocated a proportional share of net income determined by
dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (the two-class method). During periods of net loss, no effect is given to the participating
securities because they do not share in the losses of the Company. Including these shares in the Companys earnings per share calculation during periods of net income has the effect of diluting both basic and diluted earnings per share. In
accordance with FSP-EITF No. 03-6-1, prior period basic and diluted shares outstanding, as well as per share amounts presented below, have been adjusted retroactively.

For the three and six months ended June 30, 2008, potentially dilutive securities representing 1,449,400 shares of common stock
related to unvested stock options were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. Due to the net loss for the period ended June 30, 2009, anti-dilutive potential common shares,
consisting of convertible subordinated debt and outstanding stock options, were 6,549,122 as of June 30, 2009.



|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|--------------------------------------------------- |  | ------------------------------ | ---------- | - | ------------------------------ | - | ---------- | ---------------------------- |  | - | ---------------------------- | - |  | - | ---------- | -
|                                                    |  | Three MonthsEndedJune 30, 2009 |            |   | Three MonthsEndedJune 30, 2008 |   |            | Six MonthsEndedJune 30, 2009 |  |   | Six MonthsEndedJune 30, 2008 |  
|Basic:                                              |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Numerator:                                          |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Net (loss) income                                   |  | $                              | (4,660     | ) |                                | $ | 39,258     |                              |  | $ | (6,197                       | ) |  | $ | 32,485     |  
|Net income associated with participating securities |  |                                |           |   |                                |   | 550        |                              |  |   |                             |   |  |   | 586        |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Basic net (loss) income                             |  | $                              | (4,660     | ) |                                | $ | 38,708     |                              |  | $ | (6,197                       | ) |  | $ | 31,899     |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|                                                    |  |                                |            |  
|Denominator:                                        |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Weighted average common shares                      |  |                                | 57,051,427 |   |                                |   | 56,735,950 |                              |  |   | 57,026,680                   |   |  |   | 56,628,688 |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Net (loss) income per share - basic                 |  | $                              | (0.08      | ) |                                | $ | 0.68       |                              |  | $ | (0.11                        | ) |  | $ | 0.56       |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|                                                    |  |                                |            |  
|Diluted:                                            |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Numerator:                                          |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Net (loss) income                                   |  | $                              | (4,660     | ) |                                | $ | 39,258     |                              |  | $ | (6,197                       | ) |  | $ | 32,485     |  
|Interest expense                                    |  |                                |           |   |                                |   | 437        |                              |  |   |                             |   |  |   | 1,222      |  
|Net income associated with participating securities |  |                                |           |   |                                |   | (517       | )                            |  |   |                             |   |  |   | (552       | )
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Net (loss) income                                   |  | $                              | (4,660     | ) |                                | $ | 39,178     |                              |  | $ | (6,197                       | ) |  | $ | 33,155     |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|                                                    |  |                                |            |  
|Denominator:                                        |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Weighted average common shares                      |  |                                | 57,051,427 |   |                                |   | 56,735,950 |                              |  |   | 57,026,680                   |   |  |   | 56,628,688 |  
|Weighted average effect of dilutive securities:     |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Convertible subordinated notes                      |  |                                |           |   |                                |   | 4,411,679  |                              |  |   |                             |   |  |   | 5,813,663  |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|Diluted weighted average common shares              |  |                                | 57,051,427 |   |                                |   | 61,147,629 |                              |  |   | 57,026,680                   |   |  |   | 62,442,351 |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  
|                                                    |  |                                |            |  
|Net (loss) income per share - diluted               |  | $                              | (0.08      | ) |                                | $ | 0.64       |                              |  | $ | (0.11                        | ) |  | $ | 0.53       |  
|                                                    |  |                                |            |   |                                |   |            |                              |  |   |                              |   |  |   |            |  



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##### Table of Contents

|4. | Restructuring Charge
|-- | --------------------

During 2008,
in connection with a reduction in work force of eight employees in December 2008, the Company recorded a restructuring charge of $529 which consisted of employee separation costs, payable in cash during the first half of 2009. The reserve had been
classified within other current liabilities as of December 31, 2008.

The following table sets forth the cash payments
and the balance of the restructuring reserve as of and for the six months ended June 30, 2009:



|                           |     |                     |   |                      |  |                        |    |  |   |  
|-------------------------- | --- | ------------------- | - | -------------------- |  | ---------------------- | -- |  | - | -
|Reserve atDecember 31,2008 |     | CashPaymentsin 2009 |   | Change inReserve2009 |  | Reserve atJune 30,2009
|$                          | 523 |                     | $ | 510                  |  | $                      | 13 |  | $ | 



|5. | Investments
|-- | -----------

The following tables
show the amortized cost, gross unrealized gains and losses and estimated fair value for available-for-sale securities as of December 31, 2008 and June 30, 2009 based on published closing prices by major security type (in thousands).



|                                             |               |                   |                      |  |                       |     |                    |   |     |  |   |       
|-------------------------------------------- | ------------- | ----------------- | -------------------- |  | --------------------- | --- | ------------------ | - | --- |  | - | ------
|                                             |               | December 31, 2008
|                                             | AmortizedCost |                   | GrossUnrealizedGains |  | GrossUnrealizedLosses |     | EstimatedFairValue
|Agency bonds                                 |               | $                 | 26,951               |  | $                     | 239 |                    | $ |    |  | $ | 27,190
|Agency mortgage backed securities            |               |                   | 8,252                |  |                       | 163 |                    |   |    |  |   | 8,415 
|Corporate and municipal bonds                |               |                   | 11,921               |  |                       | 81  |                    |   | 166 |  |   | 11,836
|US Treasury notes                            |               |                   | 9,076                |  |                       | 71  |                    |   |    |  |   | 9,147 
|Commercial paper and certificates of deposit |               |                   | 4,007                |  |                       | 5   |                    |   |    |  |   | 4,012 
|Asset backed securities                      |               |                   | 7,961                |  |                       |    |                    |   |    |  |   | 7,961 
|                                             |               |                   |                      |  |                       |     |                    |   |     |  |   |       
|Total                                        |               | $                 | 68,168               |  | $                     | 559 |                    | $ | 166 |  | $ | 68,561
|                                             |               |                   |                      |  |                       |     |                    |   |     |  |   |       



|                                  |               |               |                      |  |                       |     |                    |   |    |  |   |       
|--------------------------------- | ------------- | ------------- | -------------------- |  | --------------------- | --- | ------------------ | - | -- |  | - | ------
|                                  |               | June 30, 2009
|                                  | AmortizedCost |               | GrossUnrealizedGains |  | GrossUnrealizedLosses |     | EstimatedFairValue
|Agency bonds                      |               | $             | 10,022               |  | $                     | 76  |                    | $ |   |  | $ | 10,098
|Agency mortgage backed securities |               |               | 6,933                |  |                       | 240 |                    |   |   |  |   | 7,173 
|Corporate bond                    |               |               | 2,042                |  |                       |    |                    |   | 11 |  |   | 2,031 
|                                  |               |               |                      |  |                       |     |                    |   |    |  |   |       
|Total                             |               | $             | 18,997               |  | $                     | 316 |                    | $ | 11 |  | $ | 19,302
|                                  |               |               |                      |  |                       |     |                    |   |    |  |   |       

The accumulated balance of other comprehensive income is disclosed as a separate
component of stockholders equity and consists of unrealized gains and losses on short-term investments and marketable securities. Total comprehensive loss is as follows:



|                                                                             |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|---------------------------------------------------------------------------- | ---- | -------------------------- | ------ | ---- | ------------------------ | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                                             |      | Three Months EndedJune 30, |        |      | Six Months EndedJune 30, |  
|                                                                             | 2009 |                            |        | 2008 |                          |   | 2009   |   |  | 2008 |       
|Net (loss) income                                                            |      | $                          | (4,660 | )    |                          | $ | 39,258 |   |  | $    | (6,197 | ) |  | $ | 32,485 |  
|                                                                             |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|                                                                             |      |                            |        |     
|Other comprehensive loss:                                                    |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Unrealized (losses) gains on securities:                                     |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Unrealized (losses) gains arising during period                              |      |                            | (54    | )    |                          |   | (93    | ) |  |      | (171   | ) |  |   | 342    |  
|Reclassification adjustment for (losses) gains included in net (loss) income |      |                            | (1     | )    |                          |   | (165   | ) |  |      | 83     |   |  |   | (169   | )
|                                                                             |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Net unrealized (loss) gain on securities                                     |      |                            | (55    | )    |                          |   | (258   | ) |  |      | (88    | ) |  |   | 173    |  
|                                                                             |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  
|Total comprehensive (loss) income                                            |      | $                          | (4,715 | )    |                          | $ | 39,000 |   |  | $    | (6,285 | ) |  | $ | 32,658 |  
|                                                                             |      |                            |        |      |                          |   |        |   |  |      |        |   |  |   |        |  



9



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The Company reviews its investment portfolio on a regular basis to determine if there is
an impairment that is other than temporary. As of June 30, 2009 there was one security with an unrealized loss of $11 which was deemed to be temporary. All other securities had unrealized gains. During the first quarter of 2009, the Company
sold all of the asset-backed securities and corporate and municipal bonds in its investment portfolio.

All of the
securities in the Companys investment portfolio are priced by the Companys investment manager. On a quarterly basis, the Company obtains a second price for each security to compare to the price obtained from the Companys investment
manager. As of June 30, 2009, there were no material variances in the prices obtained from these two sources and as such the Company has used the pricing provided by the Companys investment manager.

On January 1, 2008, the Company adopted Statement of Financial Accounting Standards 157, Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, provides a consistent framework for measuring fair value under Generally Accepted Accounting Principles and expands fair value financial statement disclosure requirements. The valuation techniques
defined in SFAS 157 are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. SFAS 157 classifies these inputs into the
following hierarchy:

Level 1 Inputs  Quoted prices for identical instruments in active markets.

Level 2 Inputs  Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs  Instruments with primarily unobservable value drivers.

The
following table represents the fair value hierarchy for those financial assets measured at fair value on a recurring basis as of June 30, 2009.



|                                                                 |  |         |        |          |   |           |  |       |   |  |   |       
|---------------------------------------------------------------- |  | ------- | ------ | -------- | - | --------- |  | ----- | - |  | - | ------
|Fair Value Measurements on a Recurring Basis as of June 30, 2009
|                                                                 |  |         |        |         
|Assets                                                           |  | Level I |        | Level II |   | Level III |  | Total
|Cash equivalents                                                 |  | $       | 56,238 |          | $ |          |  | $     |  |  | $ | 56,238
|Short-term investments                                           |  |         |       |          |   | 6,016     |  |       |  |  |   | 6,016 
|Marketable securities                                            |  |         |       |          |   | 13,286    |  |       |  |  |   | 13,286
|                                                                 |  |         |        |          |   |           |  |       |   |  |   |       
|Total Investments                                                |  | $       | 56,238 |          | $ | 19,302    |  | $     |  |  | $ | 75,540
|                                                                 |  |         |        |          |   |           |  |       |   |  |   |       

Level I securities in the Companys portfolio consist primarily of Money
Market accounts. Level II securities in the Companys portfolio primarily consist of Federal government agency sponsored securities.



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##### Table of Contents

|6. | Extinguishment of Debt
|-- | ----------------------

During
February 2009, the Company repurchased $4,825 of its 4% convertible subordinated debentures due February 2011, for total consideration of $3,812, plus accrued interest of $90 at the date of repurchase. As a result of the transaction, in the first
quarter of 2009 the Company recorded a gain of $962 which is net of the write-off of the ratable portion of unamortized deferred financing costs relating to the repurchased debt.

As of June 30, 2009, the market value of the Companys $14,142 4% convertible subordinated notes due 2011, based on quoted
market prices, was approximately $11,400.

In July 2009, the Company repurchased $1,639 of its 4% convertible subordinated
debentures due February 2011, for total consideration of $1,393, plus accrued interest of $29 at the date of repurchase. As a result of the transactions, in the third quarter of 2009 the Company will record a gain of $232 which is net of the
write-off of the ratable portion of unamortized deferred financing costs relating to the repurchased debt.



|7. | Recently Enacted Pronouncements
|-- | -------------------------------

In
February 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position 157-2, Effective Date of FASB Statement 157 (FSP FAS 157-2). FSP FAS 157-2 deferred the effective date of FAS 157
for non-financial assets and liabilities that are not on a recurring basis recognized or disclosed at fair value in the financial statements, to fiscal years and interim periods beginning after November 15, 2008. The Company adopted FSP FAS
157-2 on January 1, 2009 and the adoption did not have any impact on its financial statements.

In April 2009, the FASB
issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, (FSP FAS 107-1 and APB28-1) which amends FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28,
Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The adoption of FSP FAS 107-1 and APB 28-1 did not have a material impact on the Companys financial statements.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, (FSP FAS 157-4) which provides additional guidance for estimating fair value in accordance with FASB Statement No. 157,
Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This
FSP shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. The adoption of FSP FAS 157-4 did not have a material impact on the Companys financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments (FSP FAS 115-2 and FAS 124-2) which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial statements. This FSP shall be effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. Earlier adoption for periods ending before March 15, 2009 is not permitted. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a material impact on the Companys financial statements.

In May 2009, the FASB issued Statement No. 165, Subsequent Events (SFAS 165) which provides guidance
on managements assessment of subsequent events. SFAS 165 clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements
are issued or are available to be issued. Management must perform its assessment for both interim and annual financial reporting periods. SFAS 165 is effective prospectively for interim or annual financial periods ending after June 15,
2009. See Note 1 for disclosure related to the Companys evaluation of subsequent events.

In June 2009, the FASB
issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (SFAS 168) which identifies the
sources of accounting principles and the framework for selecting the principles used in



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the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting prinicples
(GAAP) in the United States (the GAAP hierarchy). The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a
particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered nonauthoritative. SFAS 168 shall be effective for financial
statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 is not expected to have a material impact on the Companys financial statements.



|8. | Merger Agreement with Celldex
|-- | -----------------------------

Under the terms of the Merger Agreement, each share of CuraGen Common Stock issued and outstanding immediately prior to the effective time of the Merger (the Effective Time), including shares of restricted stock, shall be
converted into the right to receive a number of shares of Celldexs common stock, par value $0.01 (Celldex Common Stock), calculated pursuant to an exchange ratio described in the Merger Agreement (the Exchange Ratio).
The aggregate purchase price payable in the Merger, which is initially set at $94,500, is subject to adjustment based, in part, on CuraGens net cash position as of the Closing. The purchase price will be adjusted upward if CuraGens Cash
at Closing Amount (as defined in the Merger Agreement) exceeds $54,500 by $1.30 for each $1.00 of excess until the aggregate purchase price reaches $97,500, and thereafter by $1.00 for each $1.00 of excess up to a maximum aggregate purchase price of
$100,000. The purchase price will be adjusted downward if CuraGens Cash at Closing Amount is less than $54,500 by $1.00 for each $1.00 of the shortfall. Due primarily to the agreement in principle to settle the Capps and Smith
actions (see Note 9) and the monthly defense costs of litigating these actions, CuraGen currently expects that its Cash at Closing Amount will be between $53,500 and $54,000, resulting in an aggregate purchase price of between $93,500 and $94,000.
However, the actual Cash at Closing Amount may be lower or higher due to a number of factors.

Notwithstanding the
foregoing, the aggregate number of shares of Celldex Common Stock issuable pursuant to the Merger (including shares issuable upon exercise of CuraGen options with an exercise price of $1.67 per share or less assumed by Celldex in the Merger) shall
in no event exceed 58.0% or fall beneath 32.5% of the sum of total number of shares of Celldex Common Stock outstanding immediately after the Effective Time (which number includes the shares of CuraGen Common Stock outstanding immediately prior to
the Effective Time that are converted into shares of Celldex common stock in the Merger) plus the maximum number of shares of Celldex Common Stock issuable upon exercise of CuraGen options with an exercise price of $1.67 or less assumed by
Celldex in the Merger).

Under the terms of the Merger Agreement, Celldex shall, at the Effective Time, assume all CuraGen
stock options that were issued under CuraGens 2007 Stock Plan. These options will be converted into options to acquire a number of shares of Celldex Common Stock determined by multiplying the number of shares of CuraGen Common Stock subject to
such options immediately prior to the Effective Time by the Exchange Ratio, at an exercise price per share determined by dividing the exercise price per share of CuraGen Common Stock at which such options were exercisable immediately prior to the
Effective Time by the Exchange Ratio. Celldex shall not assume any of CuraGens stock options that were issued under CuraGens 1997 Stock Plan, which stock options will, to the extent not yet vested, fully vest and be exercisable for a
specified period of time prior to the Effective Time, and will terminate and be of no further force and effect upon consummation of the Merger if not exercised prior to that time.

Further, the Merger Agreement provides for Celldex to assume CuraGens obligations in respect of CuraGens 4.0% Convertible
Subordinated Notes due February 15, 2011 through execution and delivery of a supplemental indenture as of the closing.

CuraGen may be required to pay Celldex a termination fee of $3,500 if the Merger Agreement is terminated under certain circumstances, all as described in the Merger Agreement.

On May 28, 2009, prior to the execution of the Merger Agreement, CuraGens Board of Directors approved an amendment (the
Rights Amendment) to the Stockholder Rights Agreement (the Rights Agreement) dated as of March 27, 2002 between CuraGen and American Stock Transfer & Trust Company, LLC as rights agent, which Rights Amendment
renders the Rights Agreement inapplicable to the Merger.



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##### Table of Contents

|9. | Commitments and Contingencies
|-- | -----------------------------

Following the announcement of the proposed acquisition by Celldex of CuraGen, on June 9, 2009, a putative class action complaint, Margaret Capps v. Timothy Shannon, et al., was filed in the Connecticut Superior Court, Judicial
District of New Haven. On June 15, 2009, a second putative class action complaint, Cheryl Smith v. CuraGen Corporation, et al., was filed in the Court of Chancery of the State of Delaware.

Both lawsuits purport to be brought on behalf of all public stockholders of CuraGen, and name CuraGen, all of its directors, Celldex, and
Cottrell Merger Sub as defendants. The complaints allege, among other things, that the merger consideration to be paid to CuraGen stockholders in the merger is unfair and undervalues CuraGen. In addition, the complaints allege that CuraGens
directors violated their fiduciary duties by, among other things, failing to maximize stockholder value and failing to engage in a fair sale process. The complaints also allege that CuraGen and Celldex aided and abetted the alleged breach of
fiduciary duties by CuraGens directors. The plaintiffs in both lawsuits also have sought to add claims that CuraGens directors breached their fiduciary duty of disclosure by making purportedly misleading and incomplete disclosures in the
preliminary proxy concerning the merger. The complaints seek, among other relief, an injunction preventing completion of the merger or, if the merger is consummated, rescission of the merger.

On July 21, 2009, the parties reached an agreement in principle, expressed in a memorandum of understanding, to settle the
Capps and Smith actions. Pursuant to the terms of the memorandum, the Company agreed to make certain additional disclosures in the final proxy statement concerning the Celldex-CuraGen merger and, if approved by the court, a
payment of $300 for the stockholder plaintiffs attorney fees and expenses. The settlement is subject to documentation and court approval.

In accordance with FAS 5, Accounting for Contingencies, as of June 30, 2009 we have accrued $300 for a payment to plaintiffs counsel of attorney fees and expenses, if approved by the
court.



|10. | Seattle Genetics, Inc. Collaboration Agreement
|--- | ----------------------------------------------

In
June 2004, CuraGen and Seattle Genetics, Inc. (Seattle Genetics) entered into a collaboration agreement to license Seattle Genetics proprietary antibody-drug conjugate (ADC) technology for use with the Companys
proprietary antibodies for the potential treatment of cancer. The Company paid an upfront fee of $2,000 for access to the ADC technology for use in one of its proprietary antibody programs. In February 2005, the Company also exercised its option to
access Seattle Genetics ADC technology for use with a second antibody program in exchange for a $1,000 payment. In June 2006, the Company paid a milestone payment for the enrollment of the first patient in the first Phase I clinical trial of
CR011-vcMMAE for the treatment of metastatic melanoma. In April 2008, the Company paid a milestone payment for the initiation of a Phase II clinical trial of CR011-vcMMAE. Milestone payments under this collaboration agreement are payable upon the
initiation of each phase of clinical trials and upon marketing approval. Under the terms of the agreement, total milestone payments from the initiation of clinical trials through marketing approval will be $14,000 for each antibody-drug conjugate.
All milestones were fully expensed at the time of the achievement of the milestone, pursuant to CuraGens accounting policy for such fees.



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CURAGEN CORPORATION



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Our managements discussion and analysis of our financial condition and results of operations include the identification of certain trends and other statements that may predict or anticipate future business or
financial results that are subject to important factors that could cause our actual results to differ materially from those indicated. See Part II, Item 1A, Risk Factors.

Overview

We are a biopharmaceutical development
company dedicated to improving the lives of patients by developing novel therapeutics for the treatment of cancer. We have taken a systematic approach to identifying and validating promising therapeutics and are now focused on developing and
advancing a potential drug candidate through clinical development. We are currently focusing the majority of our human and financial resources on our oncology therapeutic area.

Royalties or other revenue generated from commercial sales of products developed through the application of our technologies or expertise is not expected
for several years, if at all. We expect that our revenue or income sources for at least the next several years may be limited to potential milestones and other potential payments related to partnering CR011-vcMMAE and interest income.

We expect to continue incurring expenses relating to our research and development efforts as we focus on clinical trials required for the development of
CR011-vcMMAE. Conducting clinical trials is a lengthy, time-consuming and expensive process and we expect to incur continued losses over the next several years.

Significant Recent Developments

In July 2009, we repurchased a total of $1.6 million of our 4% convertible subordinated
debentures due February 2011, for an aggregate purchase price of $1.3 million, reflecting an aggregate discount from the face value of such notes of approximately 15% and resulting in a $0.3 million gain.

On May 28, 2009, we entered a definitive agreement to be acquired by Celldex. Under the terms of the Merger Agreement, Celldex will acquire CuraGen
in a tax-free stock-for-stock transaction, which values CuraGen at approximately $94.5 million, subject to certain adjustments and limitations described in the Merger Agreement, including a collar of between 32.5% and 58% of Celldexs
outstanding common stock following the transaction (counting for this purpose Celldex shares issuable upon the exercise of certain CuraGen stock options to be assumed by Celldex). The aggregate purchase price payable in the Merger, which is
initially set at $94.5 million, is subject to adjustment based, in part, on CuraGens net cash position as of the Closing. The purchase price will be adjusted upward if CuraGens Cash at Closing Amount (as defined in the Merger Agreement)
exceeds $54.5 million by $1.30 for each $1.00 of excess until the aggregate purchase price reaches $97.5 million, and thereafter by $1.00 for each $1.00 of excess up to a maximum aggregate purchase price of $100 million. The purchase price will be
adjusted downward if CuraGens Cash at Closing Amount is less than $54.5 million by $1.00 for each $1.00 of the shortfall. CuraGen currently expects that its Cash at Closing Amount will be between $53.5 million and $54.0 million, resulting in
an aggregate purchase price of between $93.5 million and $94.0 million, but the actual Cash at Closing Amount may be lower or higher due to a number of factors. The transaction, which is subject to the receipt of CuraGen and Celldex stockholder
approvals and other customary closing conditions, is expected to be completed in the third quarter of 2009. Please refer to Note 8 to our Condensed Financial Statements included in this report on Form 10-Q for a more detailed description of the
proposed merger and the Merger Agreement.

In February 2009, we announced our plan to undertake a review of strategic alternatives that
could enhance shareholder value. These alternatives ranged from selling or licensing CR011, to acquiring additional assets or business lines, to selling the company. This strategic review process resulted in our entering into the Merger
Agreement with Celldex.



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In February 2009, we repurchased a total of $4.8 million of our 4% convertible subordinated debentures
due February 2011, for an aggregate purchase price of $3.8 million, reflecting an aggregate discount from the face value of such notes of approximately 21% and resulting in a $1.0 million gain.

CR011-vcMMAE for the Treatment of Cancer

CR011-vcMMAE is an antibody-drug conjugate, or ADC, comprised of CR011, a fully-human monoclonal antibody resulting from our collaboration with Amgen Fremont linked to monomethylauristatin E, or vcMMAE, using technology licensed from
Seattle Genetics. CR011 targets glycoprotein NMB, or GPNMB, a protein located on the surface of cancer cells including melanoma and breast cancer. After CR011-vcMMAE binds to the target protein, the ADC is transported inside the cancer cell where
vcMMAE is cleaved from the antibody and inhibits tubulin polymerization leading to cell death.

CR011-vcMMAE Clinical Development Program

In June 2006 we initiated a Phase I/II open-label, multi-center, dose escalation study evaluating the safety, tolerability and
pharmacokinetics of CR011-vcMMAE for patients with unresectable Stage III or Stage IV melanoma who have failed no more than one prior line of cytotoxic therapy. We are currently evaluating CR011-vcMMAE in clinical trials for the treatment of
patients with advanced melanoma and for the treatment of patients with metastatic breast cancer, as further described in the table below.



|                    |  |       |  |                                                                                           |  |                                 |  |                                                                            
|------------------- |  | ----- |  | ----------------------------------------------------------------------------------------- |  | ------------------------------- |  | ---------------------------------------------------------------------------
|Indication          |  | Phase |  | Regimen                                                                                   |  | Initiation of PatientEnrollment |  | Status                                                                     
|Metastatic melanoma |  | I/II  |  | 0.03 to 2.63 mg/kg every three weeks in Phase I; 1.88 mg/kg every three weeks in Phase II |  | June 2006                       |  | Enrollment completed.                                                      
|                    |  |       |  |                                                                                          
|                    |  |       |  | Weekly and two out of every three week regimens                                           |  | Sept 2007                       |  | Enrollment ongoing.                                                        
|                    |  |       |  |                                                                                          
|Breast cancer       |  | I/II  |  | Every three weeks regimen                                                                 |  | June 2008                       |  | Enrollment ongoing. Updated results anticipated in the second half of 2009.

Phase II Trial Results for the Treatment of Metastatic Melanoma Cancer

In June 2006, we initiated a Phase I/II open-label, multi-center, dose escalation study evaluating the safety, tolerability and pharmacokinetics of
CR011-vcMMAE for patients with unresectable Stage III or Stage IV melanoma who have failed no more than one prior line of cytotoxic therapy.

During Phase I, doses of CR011-vcMMAE between 0.03 mg/kg to 2.63 mg/kg were evaluated and generally well tolerated, with rash and neutropenia emerging at higher doses. The maximum tolerated dose, or MTD, was determined to be 1.88 mg/kg
administered intravenously (IV) once every three weeks.

On June 1, 2009, we announced the results from this ongoing study at the 2009
American Society of Clinical Oncology, or ASCO, Annual Meeting. As of April 17, 2009, 36 patients were treated in the Phase II portion of the study. Of the patients enrolled, 94% had Stage IV disease of which two-thirds were classified as M1c,
the poorest risk group.

The study successfully met its primary activity endpoint, with 5 objective responses (1 unconfirmed) observed in
34 evaluable patients, and median duration of response of 5.3 months. The median overall progression-free survival, or PFS, was 4.4 months. Tumor shrinkage was observed in 58% of patients, and 20 patients had best response of stable disease.
Dermatologic adverse events consisting of rash, alopecia, and pruritus were the most common toxicities in this study. Other adverse events included fatigue, diarrhea, musculoskeletal pain, anorexia and nausea. Grade 3 or 4 neutropenia was observed
in 5 patients. The absence of rash in the first cycle of treatment predicted a worse PFS. Additionally, in a subset of patients with tumor biopsies, high levels of tumor expression of GPNMB appeared to correlate with favorable outcome.

We are also enrolling patients into the Phase I portion of the melanoma trial to evaluate more frequent dosing schedules of CR011-vcMMAE, including a
weekly and a two out of every three-week regimen, to explore if more frequent administration can provide additional activity in patients with metastatic melanoma. Data from 28 patients were presented at ASCO. Thus far, a dose of 1.0 mg/kg given once
every week has been identified as the MTD in a weekly schedule, and a dose of 1.5mg/kg is currently being explored in the two out of three week schedule. Although median duration of follow-up is only 6 weeks, objective responses have thus far been
observed in 3 of 11 evaluable patients treated with weekly CR011-vcMMAE (1 confirmed) and 1 confirmed response in 8 evaluable patients treated with CR011-vcMMAE two out of every three weeks.



15



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##### Table of Contents

Phase II Trial Results for the Treatment of Breast Cancer

On June 25, 2008, we announced the initiation of patient dosing in an open-label, multi-center Phase II study of CR011-vcMMAE administered
intravenously once every three weeks to patients with locally advanced or metastatic breast cancer who have received prior therapy. The study began with a bridging phase to confirm the MTD and has expanded into a Phase II open-label, multi-center
study. Preliminary data were presented at ASCO on 18 evaluable patients treated at doses of 1.0  1.88mg/kg from the Phase I portion and the initial portion of the Phase II study. Selection for enrollment was not based on expression of GPNMB in
patients tumors. The median number of prior chemotherapy regimens for metastatic disease was 4 (range 2-11). Triple negative disease (ER/PR/Her-2 negative) was present in 44% of patients. Partial responses were seen in 3 patients (1
confirmed), including a patient with triple negative disease. Fifty percent (50%) of patients showed tumor shrinkage. Toxicities were similar to those observed in previous studies with CR011-vcMMAE; the most common adverse events were rash,
alopecia, and fatigue.

On June 17, 2009, we announced that the Phase II study of CR011-vcMMAE in breast cancer has met the efficacy
criteria for advancement to the second stage of enrollment. Fifteen patients have now been enrolled in the Phase II portion of the study at a dose of 1.88mg/kg given once every three weeks. Two of the first four evaluable Phase II patients were
progression-free at 12 weeks, therefore, as part of the Simon 2-Stage design, the Phase II trial will now advance to the second stage and enroll a total of approximately 25 patients.

We anticipate presenting updated results from this study during the second half of 2009.

Critical Accounting Policies and Use of Estimates

Our discussion and analysis of our financial
condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses. On an on-going basis, we evaluate our estimates, including those related to investment valuation, accrued expenses, and stock based
compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are more fully described in Note 1 to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Results of Operations

The following table sets forth a comparison of the components of our net (loss)/income for the three months ended June 30, 2009 and
2008 (in millions):



|                                                             |      |                             |      |      |  |   |          |   |  |          |       |   |  |      |   
|------------------------------------------------------------ | ---- | --------------------------- | ---- | ---- |  | - | -------- | - |  | -------- | ----- | - |  | ---- | --
|                                                             |      | Three Months Ended June 30, |     
|                                                             | 2009 |                             |      | 2008 |  |   | $ Change |   |  | % Change |      
|Collaboration revenue                                        |      | $                           |     |      |  | $ | 1.2      |   |  | $        | (1.2  | ) |  | (100 | )%
|Research and development expenses                            |      |                             | 1.8  |      |  |   | 3.6      |   |  |          | (1.8  | ) |  | (50  | )%
|General and administrative expenses                          |      |                             | 2.9  |      |  |   | 1.4      |   |  |          | 1.5   |   |  | 104  | % 
|Gain on sale of intangible asset                             |      |                             |     |      |  |   | 36.4     |   |  |          | (36.4 | ) |  | (100 | )%
|Interest income                                              |      |                             | 0.2  |      |  |   | 0.8      |   |  |          | (0.6  | ) |  | (75  | )%
|Interest expense                                             |      |                             | 0.2  |      |  |   | 0.5      |   |  |          | (0.3  | ) |  | (60  | )%
|                                                             |      |                             |      |     
|Realized loss on sale of available-for-sale investments, net |      |                             |     |      |  |   | (0.2     | ) |  |          | 0.2   |   |  | (100 | )%
|Gain on extinguishment of debt                               |      |                             |     |      |  |   | 7.0      |   |  |          | (7.0  | ) |  | (100 | )%
|Income tax benefit (provision)                               |      |                             |     |      |  |   | (0.4     | ) |  |          | 0.4   |   |  | (100 | )%
|                                                             |      |                             |      |      |  |   |          |   |  |          |       |   |  |      |   
|Net (loss) income                                            |      | $                           | (4.7 | )    |  | $ | 39.3     |   |  |          |       |   |  |      |   
|                                                             |      |                             |      |      |  |   |          |   |  |          |       |   |  |      |   



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##### Table of Contents

The following table sets forth a comparison of the components of our net (loss)/income for the six
months ended June 30, 2009 and 2008 (in millions):



|                                                                    |      |                           |      |      |  |   |          |   |  |          |       |   |  |      |   
|------------------------------------------------------------------- | ---- | ------------------------- | ---- | ---- |  | - | -------- | - |  | -------- | ----- | - |  | ---- | --
|                                                                    |      | Six Months Ended June 30, |     
|                                                                    | 2009 |                           |      | 2008 |  |   | $ Change |   |  | % Change |      
|Collaboration revenue                                               |      | $                         |     |      |  | $ | 1.2      |   |  | $        | (1.2  | ) |  | (100 | )%
|Research and development expenses                                   |      |                           | 3.5  |      |  |   | 9.0      |   |  |          | (5.5  | ) |  | (61  | )%
|General and administrative expenses                                 |      |                           | 4.8  |      |  |   | 3.2      |   |  |          | 1.6   |   |  | 49   | % 
|Gain on sale of intangible asset                                    |      |                           |     |      |  |   | 36.4     |   |  |          | (36.4 | ) |  | (100 | )%
|Interest income                                                     |      |                           | 0.7  |      |  |   | 1.9      |   |  |          | (1.2  | ) |  | (63  | )%
|Interest expense                                                    |      |                           | 0.3  |      |  |   | 1.2      |   |  |          | (0.9  | ) |  | (75  | )%
|Realized gain (loss) on sale of available-for-sale investments, net |      |                           | 0.1  |      |  |   | (0.2     | ) |  |          | 0.3   |   |  | 150  | % 
|Gain on extinguishment of debt                                      |      |                           | 1.0  |      |  |   | 7.0      |   |  |          | (6.0  | ) |  | (86  | )%
|Income tax benefit (provision)                                      |      |                           | 0.7  |      |  |   | (0.4     | ) |  |          | 1.1   |   |  | 275  | % 
|                                                                    |      |                           |      |      |  |   |          |   |  |          |       |   |  |      |   
|Net (loss) income                                                   |      | $                         | (6.2 | )    |  | $ | 32.5     |   |  |          |       |   |  |      |   
|                                                                    |      |                           |      |      |  |   |          |   |  |          |       |   |  |      |   

Collaboration revenue.The decrease in collaboration revenue for the three and
six months ended June 30, 2009, as compared to the same periods in 2008 was due to the recognition of $1.2 million of the $1.3 million received during 2006 from TopoTargets licensing agreement with an unrelated third party. We do not
expect any collaboration revenue in 2009.

Research and development expenses.Research and development expenses consist
primarily of: contractual and manufacturing costs; salary and benefits; license fees and milestone payments; drug supply; and allocated facility costs. Our research and development efforts are concentrated solely on clinical trials. We budget and
monitor our research and development costs by expense category, rather than by project, because these costs often benefit multiple projects and/or our technology platform as a whole.

Below is a summary that reconciles our total research and development expenses for the three and six month periods ended June 30, 2009 and 2008 by
the major categories (in millions):



|                                        |      |                             |      |  |          |     |  |          |      |   |  |     |   
|--------------------------------------- | ---- | --------------------------- | ---- |  | -------- | --- |  | -------- | ---- | - |  | --- | --
|                                        |      | Three Months Ended June 30, |     
|                                        | 2009 |                             | 2008 |  | $ Change |     |  | % Change |     
|Contractual and manufacturing costs     |      | $                           | 0.7  |  | $        | 2.1 |  | $        | (1.4 | ) |  | (66 | )%
|Salary and benefits                     |      |                             | 0.4  |  |          | 1.0 |  |          | (0.6 | ) |  | (60 | )%
|License fee and milestone payments      |      |                             | 0.1  |  |          |    |  |          | 0.1  |   |  |     | * 
|Allocated facility costs                |      |                             | 0.6  |  |          | 0.5 |  |          | 0.1  |   |  | 20  | % 
|                                        |      |                             |      |  |          |     |  |          |      |   |  |     |   
|Total research and development expenses |      | $                           | 1.8  |  | $        | 3.6 |  |          |      |   |  |     |   
|                                        |      |                             |      |  |          |     |  |          |      |   |  |     |   



|* | Based on prior year amounts, percentage change does not provide meaningful information.
|- | ---------------------------------------------------------------------------------------



|                                       |      |                           |      |  |          |     |  |          |      |   |  |     |   
|-------------------------------------- | ---- | ------------------------- | ---- |  | -------- | --- |  | -------- | ---- | - |  | --- | --
|                                       |      | Six Months Ended June 30, |     
|                                       | 2009 |                           | 2008 |  | $ Change |     |  | % Change |     
|Contractual and manufacturing costs    |      | $                         | 1.6  |  | $        | 4.2 |  | $        | (2.6 | ) |  | (62 | )%
|Salary and benefits                    |      |                           | 1.1  |  |          | 2.1 |  |          | (1.0 | ) |  | (48 | )%
|License fee and milestone payments     |      |                           | 0.1  |  |          | 1.6 |  |          | (1.5 | ) |  | (94 | )%
|Allocated facility costs               |      |                           | 0.7  |  |          | 1.1 |  |          | (0.4 | ) |  | (36 | )%
|                                       |      |                           |      |  |          |     |  |          |      |   |  |     |   
|Total research and development expense |      | $                         | 3.5  |  | $        | 9.0 |  |          |      |   |  |     |   
|                                       |      |                           |      |  |          |     |  |          |      |   |  |     |   

The decrease in our research and development expenses for the three and six months ended
June 30, 2009 as compared to the three and six months ended June 30, 2008 was primarily due to the transfer agreement entered into in the second quarter 2008 with TopoTarget which effectively sold our rights to belinostat, a Phase I/II
HDAC inhibitor and any other HDAC inhibitors, such that we would no longer incur additional clinical trial expenses. We also incurred a decrease in salary and benefits caused by a reduction in workforce in the fourth quarter 2008, and a decrease in
allocated facility costs due to reducing our office space. We had a decrease in license fees and milestone payments for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, due to milestone expenses
incurred relating to our collaboration agreements with Amgen Fremont and Seattle Genetics for advancing CR011-vcMMAE to Phase II in the first quarter of 2008. We anticipate our research and development expenses for the remainder of 2009 will be
consistent as compared to the first half of the year.



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##### Table of Contents

As soon as we advance a potential clinical candidate into clinical trials, we begin to track research and
development expenses associated with that potential clinical candidate. The following table shows the cumulative research and development expenses by category for our remaining active clinical program CR011-vcMMAE (in millions):



|                                                                             |  |                                                                         |     |                                |   |    
|---------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | --- | ------------------------------ | - | ---
|                                                                             |  | Clinical Development CostsCR011-vcMMAEMetastatic melanoma/Breast cancer
|                                                                             |  | Three MonthsEndedJune 30, 2009                                          |     | Three MonthsEndedJune 30, 2008
|Salary and benefits                                                          |  | $                                                                       | 0.4 |                                | $ | 0.6
|Contractual costs, milestones and manufacturing and allocated facility costs |  |                                                                         | 1.2 |                                |   | 0.7
|                                                                             |  |                                                                         |     |                                |   |    
|Total direct costs                                                           |  | $                                                                       | 1.6 |                                | $ | 1.3
|                                                                             |  |                                                                         |     |                                |   |    
|                                                                             |  |                                                                        
|                                                                             |  | Six MonthsEndedJune 30, 2009                                            |     | Six MonthsEndedJune 30, 2008  
|Salary and benefits                                                          |  | $                                                                       | 1.1 |                                | $ | 1.0
|Contractual costs, milestones and manufacturing and allocated facility costs |  |                                                                         | 2.1 |                                |   | 2.6
|                                                                             |  |                                                                         |     |                                |   |    
|Total direct costs                                                           |  | $                                                                       | 3.2 |                                | $ | 3.6
|                                                                             |  |                                                                         |     |                                |   |    



|                                                                             |  |                               |     
|---------------------------------------------------------------------------- |  | ----------------------------- | ----
|                                                                             |  | Cumulative as ofJune 30, 2009
|                                                                             |  | SinceCommencementof Phase I  
|Salary and benefits                                                          |  | $                             | 5.2 
|Contractual costs, milestones and manufacturing and allocated facility costs |  |                               | 8.6 
|                                                                             |  |                               |     
|Total direct costs                                                           |  | $                             | 13.8
|                                                                             |  |                               |     

During the three and six month periods ended June 30, 2008 we had two active programs:
CR011-vcMMAE and belinostat, and one inactive program, velafermin. On April 21, 2008, the Company sold the ownership and development rights of belinostat to TopoTarget and on October 11, 2007 the Company discontinued the development of
velafermin, although, the Company continued to incur costs for velafermin related to protocol-specified safety monitoring during 2008. Cumulative expenses since the commencement of Phase I for belinostat were $48.2 million and for velafermin were
$51.6 million as of December 31, 2008 and we do not expect to incur any additional costs with these programs in 2009. We expect that the research and development expenses incurred in connection with our development of CR011-vcMMAE in 2009 will
have a slight increase in the second half of 2009 due to the manufacturing of CR011-vcMMAE.

Currently, our potential pharmaceutical
products require significant research and development efforts and preclinical testing, and will require extensive evaluation in clinical trials prior to submitting an application to regulatory agencies for their commercial use. Although we are
conducting human studies with respect to CR011-vcMMAE, we may not be successful in developing or commercializing this or other products. Our product candidates are subject to the risks of failure inherent in the development and commercialization of
pharmaceutical products and we cannot currently provide reliable estimates as to when, if ever, our product candidates will generate revenue and cash flows.

General and administrative expenses.The increase in general and administrative expenses for the three and six months ended June 30, 2009, as compared to same period in 2008, was due to
legal, audit and advisor fees incurred in conjunction with our Merger Agreement with Celldex announced in May 2009. We anticipate that general and administrative expenses during the second half of 2009 may materially vary from the first half of
2009, as we expect to incur additional transaction expenses related to the Celldex merger up to and through the closing of the merger.



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##### Table of Contents

Gain on sale of intangible asset. The gain on sale of intangible asset of $36.4
million for the three and six month periods ended June 30, 2008 was a result of the sale of belinostat to TopoTarget in April 2008, which provided us with net cash proceeds of $24.6 million, and 5 million shares of TopoTarget stock valued
at $11.8 million on the closing date, April 21, 2008. These shares were liquidated in June 2008 for cash proceeds of $11.8 million.

Interest income, net. Interest income for the three and six months ended June 30, 2009, decreased as compared to the three months and six months ended June 30, 2008 due to a reduction in our cash and investment
portfolio balance. Our lower cash and investment balance was due to the repurchase of $3.8 million of our 4% convertible subordinated debentures which occurred in February 2009 to retire $4.8 million of debt in addition to debt repurchases completed
in the second quarter of 2008 and cash used for operations during the first quarter of 2009. We earned an average yield of 1.2% during the second quarter of 2009 as compared to 3.5% in the second quarter of 2008, and earned an average yield of 1.9%
during the first six months of 2009 as compared to 3.6% during the same period in 2008. We anticipate interest income to decrease in 2009 due to lower cash and investment balances caused by the utilization of cash and investment balances in the
normal course of operations which may include future repurchases of our 4% convertible subordinated debentures due February 2011, such as occurred in July 2009. We also expect the yields in our investment portfolio to decrease during the year as a
result of lower short term interest rates and the mix of investments in our portfolio.

Interest expense. Interest
expense for the three and six months ended June 30, 2009 decreased as compared to the three and six months ended June 30, 2008 primarily due to the repurchases of our 4% convertible subordinated debentures due February 2011. The
repurchases consisted of $50.9 million in May 2008 and $4.8 million in February 2009. We expect interest expense, including interest paid to debt holders, as well as amortization of deferred financing costs, to approximate $0.6 million for the full
year of 2009.

Realized (loss) gain on sale of available-for-sale investments, net. During the six months ended
June 30, 2009 we realized a gain on the sale of available-for sale investments of $0.1 million. The gain was due to the sale in the first quarter of 2009 of our asset-backed securities and our corporate and municipal bonds.

Gain on extinguishment of debt. The gain on extinguishment of debt for the six months ended June 30, 2009 was due to the
repurchase of $4.8 million of our 4% convertible subordinated debentures due February 2011, for $3.8 million plus accrued interest of $0.1 million in February 2009. We recorded a gain of approximately $1.0 million which is net of the write-off of
the ratable portion of unamortized deferred financing costs relating to the repurchased debt.

Income tax benefit
(provision). We recorded an income tax benefit of $0.7 million during the six months ended June 30, 2009 as a result of the expiration of the State of Connecticut statute of limitations, as it relates to the Year 2004 income tax
benefit. Connecticut legislation allows companies to obtain cash refunds from the State of Connecticut at a rate of 65% of their annual research and development expense credit, in exchange for forgoing carryforward of the research and development
credit. We expect the 2009 income tax benefit to be lower than 2008 due to anticipated lower research and development expenditures.

Liquidity and
Capital Resources

Since our inception, we have financed our operations and met our capital expenditure requirements primarily through:
private placements of equity securities; convertible subordinated debt offerings; public equity offerings; sales of assets; and revenues received under our collaborative research agreements. Since inception, we have not had any off-balance sheet
arrangements. To date, inflation has not had a material effect on our business.

In July 2009, we repurchased a total of $1.6 million of
our 4% convertible subordinated debentures due February 2011, for an aggregate purchase price of $1.3 million, reflecting an aggregate discount from the face value of such notes of approximately 15% and resulting in a $0.3 million gain.

In February 2009, we repurchased a total of $4.8 million of our 4% convertible subordinated debentures due February 2011, for an aggregate purchase
price of $3.8 million reflecting an aggregate discount from the face value of such 2011 notes of approximately 21%, resulting in a gain of approximately $1.0 million.



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Cash, restricted cash and investments.The following table depicts changes in the
cash, restricted cash, and investments for the six month periods ended June 30, 2009 and 2008, using the direct method (in millions):



|                                                                               |      |                          |       |      |  |   |       |  
|------------------------------------------------------------------------------ | ---- | ------------------------ | ----- | ---- |  | - | ----- | -
|                                                                               |      | Six months endedJune 30, |      
|                                                                               | 2009 |                          |       | 2008 | 
|Cash paid to suppliers, employees and advisors                                 |      | $                        | (7.8  | )    |  | $ | (10.1 | )
|Restructuring charges paid                                                     |      |                          | (0.5  | )    |  |   | (2.8  | )
|Interest income received                                                       |      |                          | 0.6   |      |  |   | 1.7   |  
|Interest expense paid                                                          |      |                          | (0.4  | )    |  |   | (1.9  | )
|Income tax benefit received                                                    |      |                          | 0.2   |      |  |   | (0.3  | )
|Gain on sale of intangible asset                                               |      |                          |      |      |  |   | 36.4  |  
|Cash paid for extinguishment of debt                                           |      |                          | (3.8  | )    |  |   | (43.2 | )
|Net unrealized (loss) gain on short-term investments and marketable securities |      |                          | (0.1  | )    |  |   | 0.2   |  
|Net realized gain on short-term investments and marketable securities          |      |                          | 0.1   |      |  |   |      |  
|Net decrease in cash, restricted cash and investments                          |      |                          | (11.7 | )    |  |   | (20.0 | )
|Cash, restricted cash and investments, beginning of period                     |      |                          | 87.7  |      |  |   | 115.0 |  
|                                                                               |      |                          |       |      |  |   |       |  
|Cash, restricted cash and investments, end of period                           |      | $                        | 76.0  |      |  | $ | 95.0  |  
|                                                                               |      |                          |       |      |  |   |       |  

In accordance with our investment policy, we are utilizing the following investment objectives for
cash and investments: (1) investment decisions are made with the expectation of minimum risk of principal loss, even with a modest penalty in yield; (2) appropriate cash balances and related short-term funds are maintained for immediate
liquidity needs, and appropriate liquidity is available for medium-term cash needs; and (3) maximum yield is achieved.

Future
Liquidity.

Proposed Merger with Celldex

We recently entered into a Merger Agreement with Celldex. The merger with Celldex is expected to close in the third quarter of 2009. Until the merger is consummated, we expect to use funds from our cash and investment
balances and interest income for the development costs of CR011-vcMMAE, including contractual services related to clinical trials and manufacturing, salary and benefits, and license fees, as well as for transaction costs related to the merger. We
may also use these funds to repurchase our outstanding 4% convertible debentures that mature on February 15, 2011, subject to certain restrictions contained in the Merger Agreement. Please refer to Note 8 to our Condensed Financial Statements
included in this report on Form 10-Q for a more detailed description of the proposed merger and the Merger Agreement.

Future Liquidity
in the Event the Proposed Merger with Celldex is Not Completed

In the event our proposed merger with Celldex is not completed, we
expect to continue to fund our operations by a combination of the following sources: cash and investment balances; interest income; potential private equity offerings; debt financing or additional collaborations and licensing arrangements. We intend
to use our cash and investment balances for the development costs of CR011-vcMMAE and also for other uses which could include strategic transactions. We do not anticipate any material capital expenditures in the near future. Accordingly, we foresee
the following as uses of short term liquidity in the event the merger is not completed: contractual services related to clinical trials and manufacturing; salary and benefits; and license fees. We will also continue to evaluate potential
acquisitions, including complementary businesses, technologies and products.

We will continue to evaluate options to repurchase or
refinance all or a portion of our outstanding 4% convertible debentures that mature on February 15, 2011, subject to certain restrictions contained in the Merger Agreement. Repurchases might occur through cash purchases and/or exchange for
equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
The amounts involved in any such transactions, individually or in the aggregate, may be material. In July 2009, we repurchased a total of $1.6 million of our 4% convertible subordinated debentures due February 2011, for an aggregate purchase price
of $1.3 million.



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If the merger with Celldex is not completed, we may use sources of liquidity for working capital, general
corporate purposes and potentially for future acquisitions of businesses, products or technologies. The amounts and timing of our actual expenditures will depend upon numerous factors, including the amount and extent of any acquisitions, our product
development activities, our investments in technology and the amount of cash generated by our operations and may vary substantially from our estimates. Our failure to use sources of liquidity effectively could have a material adverse effect on our
business, results of operations and financial condition.

We believe that our existing cash and investment balances and other sources of
liquidity will be sufficient to meet our requirements through 2011. We consider our operating expenditures to be crucial to our future success, and intend to continue to make strategic investments in our clinical drug pipeline. In appropriate
situations, we may seek financing from other sources, and expect that we will need additional funds to meet our future operating requirements. To the extent that we need to obtain additional funding, the amount of additional capital we would need to
raise would depend on many factors, including: the number, breadth, progress and results of our research, product development and clinical programs; the costs and timing of obtaining regulatory approvals for any of our products; in-licensing and
out-licensing of pharmaceutical products; acquisitions, including complementary technologies and products; costs incurred in enforcing and defending our patent claims and other intellectual property rights.

While we will continue to explore alternative sources for financing our business activities in the event the merger with Celldex is not completed,
including the possibility of private strategic-driven common stock offerings, we cannot be certain that in the future these sources of liquidity will be available when needed, particularly in light of the current economic environment, or that our
actual cash requirements will not be greater than anticipated. In appropriate strategic situations, we may seek financing from other sources, including contributions by others to joint ventures and other collaborative or licensing arrangements for
the development and testing of products under development. However, should we be unable to obtain future financing either through the methods described above or through other means, we may be unable to meet the critical objective of our long-term
business plan, which is to successfully develop and market pharmaceutical products, and may be unable to continue operations. This result could cause our shareholders to lose all or a substantial portion of their investment.

Contractual Obligations

In the table below, we set
forth our enforceable and legally binding obligations, along with future commitments related to all contracts that we are likely to continue, regardless of the fact that they are cancelable as of June 30, 2009.

Some of the amounts included in this table under purchase commitments are based on managements estimates and assumptions about these obligations,
including their duration, anticipated actions by third parties, progress of our clinical programs and other factors. These amounts exclude items accrued for on the balance sheet.



|                                          |       |                                                  |      |  |      |     |      |   |      |  |      |      |            |   |   |  |   |   |  |   |     
|----------------------------------------- | ----- | ------------------------------------------------ | ---- |  | ---- | --- | ---- | - | ---- |  | ---- | ---- | ---------- | - | - |  | - | - |  | - | ----
|                                          |       | Payments DueYear ended
December 31,(in millions)
|                                          | Total |                                                  | 2009 |  | 2010 |     | 2011 |   | 2012 |  | 2013 |      | Thereafter
|Long-term debt obligations                |       | $                                                | 14.1 |  | $    |    |      | $ |     |  | $    | 14.1 |            | $ |  |  | $ |  |  | $ |    
|Interest on convertible subordinated debt |       |                                                  | 1.2  |  |      | 0.3 |      |   | 0.6  |  |      | 0.3  |            |   |  |  |   |  |  |   |    
|Purchase commitments                      |       |                                                  | 2.5  |  |      | 2.0 |      |   | 0.5  |  |      |     |            |   |  |  |   |  |  |   |    
|Milestone payments                        |       |                                                  | 12.7 |  |      |    |      |   |     |  |      | 2.6  |            |   |  |  |   |  |  |   | 10.1
|                                          |       |                                                  |      |  |      |     |      |   |      |  |      |      |            |   |   |  |   |   |  |   |     
|Total                                     |       | $                                                | 30.5 |  | $    | 2.3 |      | $ | 1.1  |  | $    | 17.0 |            | $ |  |  | $ |  |  | $ | 10.1
|                                          |       |                                                  |      |  |      |     |      |   |      |  |      |      |            |   |   |  |   |   |  |   |     

The expected timing of payment of the obligations discussed above is estimated based on current
information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

For the purposes of this table, contractual obligations for the purchase of services are defined as agreements that support our external cost related to
current clinical trials through completion. Our purchases are based on current operating needs and are fulfilled by vendors within short time periods. We have unrecognized tax benefits of $0.1 million at June 30, 2009. This amount is excluded
from the table above.

In addition, we have committed to make potential future milestone payments to third parties based on the initiation
of clinical trials and marketing approval of our products. The milestone payments for CR011-vcMMAE are reflected in the table above based on our current development plan.



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Recently Enacted Pronouncements

In February 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position 157-2, Effective Date of FASB Statement 157 (FSP FAS 157-2). FSP FAS 157-2 deferred the
effective date of FAS 157 for non-financial assets and liabilities that are not on a recurring basis recognized or disclosed at fair value in the financial statements, to fiscal years and interim periods beginning after November 15, 2008. We
adopted FSP FAS 157-2 on January 1, 2009 and the adoption did not have an impact on our financial statements.

In June 2008, the FASB
issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. (FSP EITF 03-6-1). The FSP affects entities that accrue cash dividends
on share-based payment awards during the awards service period when the dividends do not need to be returned if the employees forfeit the awards. Retroactive adjustment of all prior-period earnings per share computations is necessary to
reflect the provisions of this FSP, which is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP EITF 03-6-1 did not have a material effect on our financial
statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, (FSP FAS 107-1 and APB 28-1) which amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for
interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at
interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of FSP FAS 107-1 and APB 28-1 did not have
a material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, (FSP FAS 157-4) which provides additional guidance for estimating fair value in accordance
with FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a
transaction is not orderly. This FSP shall be effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The
adoption of FSP FAS 157-4 did not have a material impact on our financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS
124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2) which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP shall be effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009 is not permitted. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a material impact on our
financial statements.

In May 2009, the FASB issued Statement 165, Subsequent Events (SFAS 165) which
provides guidance on managements assessment of subsequent events. SFAS 165 clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date through the date that the
financial statements are issued or are available to be issued. Management must perform its assessment for both interim and annual financial reporting periods. SFAS 165 is effective prospectively for interim or annual financial periods ending
after June 15, 2009. See Note 1 to our Condensed Financial Statements included in this report on Form 10-Q for disclosure related to our evaluation of subsequent events.

In June 2009, the FASB issued Statement No. 168 The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, a replacement of FASB Statement No. 162 (SFAS 168)



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which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally accepted accounting prinicples (GAAP) in the United States (the GAAP hierarchy). The Codification does not change current U.S. GAAP, but is intended to simplify
user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in
the Codification will be considered nonauthoritative. SFAS 168 shall be effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 is not expected to have a material impact
on our financial statements.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Our outstanding long-term liabilities as of June 30, 2009 consisted of $14.1 million of our 4% convertible subordinated notes due February 15, 2011. As the debentures and notes bear interest at a fixed rate, our results of
operations are not affected by interest rate changes. As of June 30, 2009, the market value of our $14.1 million 4% convertible subordinated notes due 2011, based on quoted market prices, was approximately $11.4 million.

We review our investment portfolio on a regular basis to determine if there is an impairment that is other than temporary. We believe that the individual
unrealized loss as of June 30, 2009 represents only a temporary impairment, and no adjustment of carrying values is warranted at this time. We continue to monitor our investment portfolio on a regular basis for any other potential impairment.



|Item 4. | Controls and Procedures
|------- | -----------------------



| | (a) | Evaluation of Disclosure Controls and Procedures
| | --- | ------------------------------------------------

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2009. The term disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the Exchange Act), means controls and other procedures of a company that are designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the
companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of
our disclosure controls and procedures as of June 30, 2009, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.



| | (b) | Changes in Internal Controls
| | --- | ----------------------------

No change in our
internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.



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Part II - Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

Following the
announcement of the proposed acquisition by Celldex of CuraGen, on June 9, 2009, a putative class action complaint, Margaret Capps v. Timothy Shannon, et al., was filed in the Connecticut Superior Court, Judicial District of New Haven.

On June 15, 2009, a second putative class action complaint, Cheryl Smith v. CuraGen Corporation, et al., was
filed in the Court of Chancery of the State of Delaware.

Both lawsuits purport to be brought on behalf of all public
stockholders of CuraGen, and name CuraGen, all of its directors, Celldex, and Cottrell Merger Sub as defendants. The complaints allege, among other things, that the merger consideration to be paid to CuraGen stockholders in the merger is unfair and
undervalues CuraGen. In addition, the complaints allege that CuraGens directors violated their fiduciary duties by, among other things, failing to maximize stockholder value and failing to engage in a fair sale process. The complaints also
allege that CuraGen and Celldex aided and abetted the alleged breach of fiduciary duties by CuraGens directors. The plaintiffs in both lawsuits also have sought to add claims that CuraGens directors breached their fiduciary duty of
disclosure by making purportedly misleading and incomplete disclosures in the preliminary proxy concerning the merger. The complaints seek, among other relief, an injunction preventing completion of the merger or, if the merger is consummated,
rescission of the merger.

On July 21, 2009, the parties reached an agreement in principle, expressed in a memorandum
of understanding, to settle the Capps and Smith actions. Pursuant to the terms of the memorandum, the Company agreed to make certain additional disclosures in the final proxy statement concerning the Celldex-CuraGen merger
and, if approved by the court, a payment of $0.3 million for the stockholder plaintiffs attorney fees and expenses. The settlement is subject to documentation and court approval.



|Item 1A. | Risk Factors
|-------- | ------------

Statements contained or
incorporated by reference in this Quarterly Report on Form 10-Q that are not based on historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, projections, intentions, goals,
strategies, plans, prospects and the beliefs and assumptions of our management including, without limitation, our expectations regarding the proposed merger with Celldex , results of operations, general and administrative expenses, research and
development expenses, current and future development efforts, regulatory filings, clinical trial results and the sufficiency of our cash for future operations. Forward-looking statements can be identified by terminology such as
anticipate, believe, could, could increase the likelihood, hope, target, project, goals, potential, predict, might,
estimate, expect, intend, is planned, may, should, will, will enable, would be expected, look forward, may provide,
would or similar terms, variations of such terms or the negative of those terms.

We cannot assure investors that our
assumptions and expectations will prove to have been correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Such factors that could cause or contribute to such
differences include those factors discussed below. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If any of the following risks actually
occur, our business, financial condition or results of operations would likely suffer.

The following discussion includes four new risk
factors (There can be no assurances that the pending merger between CuraGen and Celldex will be consummated. Failure to complete the merger could negatively impact the stock price and the future business and financial results of CuraGen,
The aggregate purchase price payable to CuraGen stockholders in the merger is subject to adjustment based on CuraGens net cash at the closing of the merger, and therefore will be lower than expected if CuraGens net cash at the
closing is lower than expected, CuraGen will be subject to business uncertainties and contractual restrictions while the merger is pending and We and Celldex may not achieve the benefits we expect from the merger, which may
have a material adverse effect on the combined companys business, financial, and operating results.) and two deleted risk factors (Our common



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stock could be delisted from the NASDAQ Global Market if our stock price continues to trade below $1.00 per share and We currently have only one
significant asset (other than cash), which is CR011. We are currently considering strategic alternatives ranging from selling or licensing CR011, to acquiring additional assets or business lines, to selling the company. As a result, the nature of
our business could change significantly and our future is highly uncertain), as well as updates to various risk factors in general.

Risks Related to Our Business

There can be no assurances that the pending merger between CuraGen and Celldex will be consummated.
Failure to complete the merger could negatively impact the stock price and the future business and financial results of CuraGen.

On
May 29, 2009, we announced that we entered into an Agreement and Plan of Merger dated as of May 28, 2009 by and among Celldex Therapeutics, Inc. (Celldex), us, and Cottrell Merger Sub, Inc., a wholly-owned subsidiary of
Celldex. The Merger Agreement has been approved by the Boards of Directors of Celldex and CuraGen and is subject to customary closing conditions, including stockholder approvals.

If the stockholders of CuraGen and Celldex fail to approve the Merger Agreement, we will not be able to complete the merger. Additionally, if other
closing conditions set forth in the Merger Agreement are not met, we will not be able to complete the merger. As a result, there can be no assurance that the merger will be completed in a timely manner or at all.

If the merger is not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the merger,
we will be subject to a number of risks, including the following:



| |  |  | We may be required to pay Celldex a termination fee of $3.5 million if the Merger Agreement is terminated under certain circumstances, as described in the Merger
Agreement;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We will be required to pay certain costs relating to the merger (such as legal, accounting and investment banking fees), whether or not the merger is completed, and
we expect these costs to be significant;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The market price of our common stock could decline following an announcement that the merger has been abandoned, to the extent that the current market price
reflects a premium based on the assumption that the merger will be completed;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The fact that the merger was not completed may be viewed negatively by current and potential investors, partners and suppliers, which may cause a decline in the
trading price of our common stock and harm our ability to enter into collaboration, manufacturing, supply and other agreements crucial to our business;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Matters relating to the merger (including integration planning) may require substantial commitments of time and resources by our management, which could otherwise
have been devoted to other opportunities that may have been beneficial to CuraGen.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We also could be subject to
litigation related to any failure to complete the merger. If the merger is not completed, these risks may materialize and may adversely affect our business, financial results and stock price.

The aggregate purchase price payable to CuraGen stockholders in the merger is subject to adjustment based on CuraGens net cash at the closing of the merger, and
therefore will be lower than expected if CuraGens net cash at the closing is lower than expected.

The aggregate purchase price
payable in the merger is initially set at $94.5 million, assuming that CuraGens Cash at Closing Amount (as defined in the Merger Agreement) is $54.5 million. The purchase price will be adjusted downward if CuraGens Cash at Closing Amount
is less than $54.5 million by $1.00 for each $1.00 of the shortfall. Due primarily to the agreement in principle to settle the Capps and Smith actions (See Note 9 to our Condensed Financial Statements included in this report on Form
10-Q) and the monthly defense costs of litigating these actions, CuraGen currently expects that its Cash at Closing Amount will be between $53.5 and $54.0 million, resulting in an aggregate purchase price of between $93.5 million and $94.0 million.
However the actual Cash at Closing Amount may be lower due to a number of factors, including the following:



| |  |  | A delay in the closing of the merger beyond the currently expected timeframe. The longer the delay in closing, the lower the Cash at Closing Amount will be, due to
CuraGens ongoing operating costs;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Greater than anticipated severance payments to CuraGen employees;
| | - |  | -----------------------------------------------------------------



| |  |  | Greater than anticipated advisor fees, including investment banking fees and expenses, attorney fees and expenses and auditor fees and expenses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Greater than expected settlement costs and expenses, including attorney fees, associated with the shareholder class action lawsuits discussed in Item 1
 Legal Proceedings above, especially if the proposed settlement agreement is not approved by the court, or if there are any objections to the proposed settlement; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Greater than expected Company operating costs
| | - |  | ---------------------------------------------

CuraGen will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty
about the effect of the merger on employees and customers may have an adverse effect on CuraGen. These uncertainties may impair CuraGens ability to attract, retain and motivate key personnel until the merger is consummated, and could cause
suppliers, partners and others who deal with CuraGen to seek to change existing business relationships with CuraGen. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty
about their future roles with Celldex. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Celldex, CuraGens business could be harmed. In addition, the Merger
Agreement restricts CuraGen from making certain acquisitions and taking other specified actions until the merger occurs without the consent of Celldex. These restrictions may prevent CuraGen from pursuing attractive business opportunities that may
arise prior to the completion of the merger.

We and Celldex may not achieve the benefits we expect from the merger, which may have a material adverse
effect on the combined companys business, financial, and operating results.

CuraGen and Celldex entered into the Merger
Agreement with the expectation that the merger will result in benefits to the combined company. However, it is possible that the expected benefits will not be achieved for a number of reasons, including



| |  |  | Difficulties with integrating CuraGens operation and personnel with Celldex because of possible cultural conflicts and different opinions on scientific and
regulatory matters; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Diversion of the attention of Celldex management to the transition and integration process, which could result in delays in clinical trial programs and otherwise
harm the combined companys business, financial condition and operating results.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If the combined company is not
successful in addressing these and other challenges, then the benefits of the merger may not be realized and, as a result, the combined companys operating results and the market price of Celldexs common stock may be adversely affected.
In addition, any delay in completing the merger may reduce the benefits that we and Celldex expect to achieve if we successfully complete the merger within the currently expected timeframe.

We have a history of operating losses and expect to incur operating losses in the foreseeable future. We do not expect to have a meaningful source of recurring
revenue in the near future.

We have incurred losses since inception, except for 2007 and 2008, both years in which we had
non-recurring transactions which resulted in net income. We generated net income of $24.8 million in 2008 as a result of the sale of belinostat to TopoTarget and gains on the extinguishment of our convertible subordinated debt, and we also generated
net income of $25.4 million in 2007 principally resulting from the sale of our former majority-owned subsidiary 454 Life Sciences Corporation, or 454. We incurred a net loss of $59.8 million in 2006. As of June 30, 2009, we had an accumulated
deficit of $469.0 million. We expect to continue to incur operating losses for the foreseeable future. We anticipate incurring additional losses related to investments in CR011-vcMMAE and do not expect to have a meaningful source of recurring
revenue in the near future.

We can not ensure that our existing cash and investment balances will be sufficient to meet our requirements for the
future.

We believe that our existing cash and investment balances and other sources of liquidity will be sufficient to meet our
requirements through 2011. We consider our operating expenditures to be crucial to our future success, and by continuing to make investments in CR011-vcMMAE, we believe that we are building value for our stockholders. The adequacy of our available
funds to meet our future operating and capital requirements will depend on many factors which are difficult to predict. These factors include: the number, breadth, progress and results of our research, product development and clinical programs; the
costs and timing of obtaining regulatory approvals for any of our products; in-licensing and out-licensing of pharmaceutical products; and costs incurred in enforcing and defending our patent claims and other intellectual property rights.



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Our drug candidates are still in development and remain subject to clinical testing and regulatory approval. If we are
unable to successfully develop and test our drug candidates, we will not be successful.

To date, we have not marketed, distributed or
sold any drug candidates. The success of our business depends primarily upon our ability to develop and commercialize our drug candidates successfully. Our only clinical stage drug candidate is CR011-vcMMAE, which is currently in Phase II clinical
trials. Further development of our preclinical candidates will be limited in the foreseeable future due to our decision to focus our resources on the development of CR011-vcMMAE. Our drug candidates must satisfy rigorous standards of safety and
efficacy before they can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy testing and obtain regulatory approval of our drug candidates. Despite our efforts, our drug candidates may not:



| |  |  | offer therapeutic or other improvement over existing comparable drugs;
| | - |  | ----------------------------------------------------------------------



| |  |  | be proven safe and effective in clinical trials;
| | - |  | ------------------------------------------------



| |  |  | meet applicable regulatory standards;
| | - |  | -------------------------------------



| |  |  | be capable of being produced in commercial quantities at acceptable costs; or
| | - |  | -----------------------------------------------------------------------------



| |  |  | be successfully commercialized.
| | - |  | -------------------------------

Positive results in preclinical studies of a drug candidate may not be predictive of similar results in humans during clinical trials, and promising results from early clinical trials of a drug candidate may not be replicated in later
clinical trials. For example, in the fourth quarter of 2007, we decided to discontinue the development of velafermin, a protein we were investigating for the prevention of oral mucositis in cancer patients receiving chemotherapy, after reviewing and
evaluating the results of Phase II clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late stage clinical trials even after achieving promising results in early stage
development. Accordingly, the results from the completed preclinical studies and clinical trials and ongoing clinical trials for CR011-vcMMAE and our other potential future drug candidates may not be predictive of the safety, efficacy or dosing
results we may obtain in later stage trials. We do not expect any of our drug candidates to be commercially available for at least several years.

We
may not be able to execute our business strategy if we are unable to enter into alliances with other companies that can provide capabilities and funds for the development and commercialization of our drug candidates. If we are unsuccessful in
forming or maintaining these alliances on favorable terms, our business may not succeed.

We have entered into collaboration
arrangements with several companies for the research, development and commercialization of our drug candidates, and we may enter into additional collaborative arrangements in the future. For example, we may enter into alliances with major
biotechnology or pharmaceutical companies to jointly develop specific drug candidates and to jointly commercialize them if they are approved. We may not be successful in entering into any such alliances on favorable terms. Even if we do succeed in
securing such alliances, we may not be able to maintain them if, for example, development or approval of a drug candidate is delayed or sales of an approved drug are disappointing. Furthermore, any delay in entering into collaboration agreements
could delay the development and commercialization of our drug candidates and reduce their competitiveness even if they reach the market. Any such delay related to our collaborations could adversely affect our business.

We may also depend on our alliances with other companies to provide substantial additional funding for development and potential commercialization of our
drug candidates. We may not be able to obtain funding on favorable terms from these alliances, and if we are not successful in doing so, we may not have sufficient funds to develop a particular drug candidate internally, or to bring drug candidates
to market. Failure to bring our drug candidates to market will prevent us from generating sales revenues, and this may substantially harm our business.

We rely significantly on our collaborative partners to gain access to specified technologies and our business could be harmed if we are unable to maintain strategic alliances.

As part of our business strategy, we have strategic research and development alliances with companies to gain access to specific technologies. These
alliances with other pharmaceutical and biotechnology companies may provide us with access to unique technologies, access to capital, near-term revenues, milestone and/or royalty payments, and potential profit sharing arrangements. In return, we
provide access to unique technologies, expertise in genomics, and information on the molecular basis of disease, drug targets, and drug candidates. We currently have a strategic alliance with Seattle Genetics, in addition to numerous smaller
agreements to facilitate these efforts.



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In these strategic alliances, either party can terminate the agreement at any time the alliance permits them to or if either party materially breaches the
contract. We may not be able to maintain or expand existing alliances or establish any additional alliances. If any of our existing collaborators were to breach or terminate their agreements with us or otherwise fail to conduct activities
successfully and in a timely manner, the preclinical or clinical development or commercialization of product candidates or research programs may be delayed or terminated, which may materially and adversely affect our business, financial condition,
and results of operations.

We rely on third parties to conduct our clinical trials and provide other services, and those third parties may not perform
satisfactorily, including failing to meet established deadlines for the completion of such services.

We do not have the ability to
independently conduct some preclinical studies and the clinical trials for our drug candidates, and we rely on third parties such as contract laboratories, contract research organizations, medical institutions and clinical investigators to design
and conduct these studies and our clinical trials. Our reliance on these third parties reduces our control over these activities. Accordingly, these third-party contractors may not complete activities on schedule, or may not conduct the studies of
our clinical trials in accordance with regulatory requirements of our trial design. To date, we believe our contract research organizations and other similar entities with which we are working have performed well. However, if these third parties do
not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them. Although we believe that there are a number of other third-party contractors we could engage to continue these activities, it may
result in delays. Accordingly, our efforts to obtain regulatory approvals for and commercialize our drug candidates may be delayed.

In
addition, our ability to bring our future products to market depends on the quality and integrity of the data we present to regulatory authorities in order to obtain marketing authorizations. We cannot guarantee the authenticity or accuracy of data
compiled by third parties, nor can we be certain that such data has not been fraudulently generated. The failure of these third parties to carry out their obligations would materially adversely affect our ability to develop and market new products
and implement our strategies.

We currently depend on third-party manufacturers to produce our clinical drug supplies and intend to rely upon
third-party manufacturers to produce commercial supplies of any approved drug candidates. If, in the future, we manufacture any of our drug candidates, we will be required to incur significant costs and devote significant efforts to establish and
maintain these capabilities.

We have relied upon third parties to produce material for clinical testing purposes and intend to
continue to do so in the future. Although we believe that we will not have any material supply issues, we cannot be certain that we will be able to obtain long-term supplies of those materials on acceptable terms, if at all. We also expect to rely
upon third parties to produce materials required for the commercial production of our drug candidates if we succeed in obtaining necessary regulatory approvals. If we are unable to arrange for third-party manufacturing, or to do so on commercially
reasonable terms, we may not be able to complete development of our drug candidates or market them. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured drug candidates ourselves, including reliance
on the third party for regulatory compliance and quality assurance, the possibility of breach of a manufacturing agreement by the third party because of factors beyond our control and the possibility of termination or nonrenewal of the agreement by
the third party, based on its own business priorities, at a time that is costly or damaging to us. In addition, the FDA and other regulatory authorities require that our drug candidates be manufactured according to current Good Manufacturing
Practices, or cGMP, regulations. Any failure by us or our third-party manufacturers to comply with cGMP and/or our failure to scale up our manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval of any of our drug
candidates. In addition, such failure could be the basis for action by the FDA to withdraw approvals for drug candidates previously granted to us and for other regulatory action.

We currently rely on a limited number of manufacturers for the clinical supplies of our antibody, and ADC drug candidates and do not currently have
contractual relationships for redundant supply or a second source for any of these drug candidates. To date, our third-party manufacturers have met our manufacturing requirements, but we cannot assure that they will continue to do so. Any
performance failure on the part of our existing or future manufacturers could delay clinical development or regulatory approval of our drug candidates or commercialization of any approved products. If for some reason our current contract
manufacturers cannot perform as agreed, we may be required to replace them. Although we believe there are a number of potential replacements as our manufacturing processes are not manufacturer specific, we may incur added costs and delays in
identifying and qualifying any such replacements. Furthermore, although we generally do not begin a clinical trial unless we believe we have a sufficient supply of a drug candidate to complete the trial, any significant delay in the supply of a drug
candidate for an ongoing trial due to the need to replace a third-party manufacturer could delay completion of the trial.



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We may in the future elect to manufacture certain of our drug candidates in our own manufacturing
facilities. If we do so, we will require substantial additional funds and need to recruit qualified personnel in order to build or lease and operate any manufacturing facilities.

Because we have limited experience in developing, commercializing and marketing products, we may be unsuccessful in our efforts to do so.

Our products in development will require significant research and development and preclinical and clinical testing prior to our submitting any regulatory
application for their commercial use. These activities, even if undertaken without the collaboration of others, will require us to expend significant funds and will be subject to the risks of failure inherent in the development of a pharmaceutical
product. Even if we complete such studies, our ability to commercialize products will depend on our ability to:



| |  |  | obtain and maintain necessary intellectual property rights to our products;
| | - |  | ---------------------------------------------------------------------------



| |  |  | enter into arrangements with third parties to manufacture our products on our behalf; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | deploy sales and marketing resources effectively or enter into arrangements with third parties to provide these services.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

As a result of these possibilities, we may not be able to develop any commercially viable products. In addition, should we choose to develop
pharmaceutical products internally, we will have to make significant investments in pharmaceutical product development, marketing, sales, and regulatory compliance resources and we will have to establish or contract for the manufacture of products
under the FDA cGMPs. Any potential products developed by our licensees will be subject to the same risks.

We do not currently have any
marketed products. If we develop products that can be marketed, we intend to market the products either independently or together with collaborators or strategic partners. If we decide to market any products independently, we will incur significant
additional expenditures and commit significant additional management resources to establish a sales force. For any products that we market together with partners, we will rely, in whole or in part, on the marketing capabilities of those parties. We
may also contract with other third parties to market certain of our products. Ultimately, we and our partners may not be successful in marketing our products.

If clinical trials for our drug candidates are prolonged or delayed, we may be unable to commercialize our drug candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any product revenue.

We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause us
or regulatory authorities to delay or suspend clinical trials, or delay the analysis of data from our completed or ongoing clinical trials. Any of the following could delay the clinical development of our drug candidates:



| |  |  | ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | delays in receiving or the inability to obtain required approvals from institutional review boards or other reviewing entities at clinical sites selected for
participation in our clinical trials;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delays in enrolling volunteers and patients into clinical trials;
| | - |  | -----------------------------------------------------------------



| |  |  | a lower than anticipated retention rate of volunteers and patients in clinical trials;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the need to repeat clinical trials as a result of inconclusive or negative results or unforeseen complications in testing;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | inadequate supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unfavorable FDA inspection and review of a clinical trial site or records of any clinical or preclinical investigation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | serious and unexpected drug-related side effects experienced by participants in our clinical trials; or
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the placement by the FDA of a clinical hold on a trial.
| | - |  | -------------------------------------------------------

Our ability to enroll patients in our clinical trials in sufficient numbers and on a timely basis will be subject to a number of factors, including the size of the patient population, the nature of the protocol, the
proximity of patients to clinical sites, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial. Delays in patient enrollment may result in increased costs and longer development times.
In addition, subjects may withdraw from our clinical trials, and thereby impair the validity or statistical significance of the trials.



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We, the FDA or other applicable regulatory authorities may suspend clinical trials of a drug candidate at
any time if we or they believe the subjects or patients participating in such clinical trials are being exposed to unacceptable health risks or for other reasons.

We cannot predict whether any of our drug candidates will encounter problems during clinical trials which will cause us or regulatory authorities to delay or suspend these trials, or which will delay the analysis of
data from these trials. In addition, it is impossible to predict whether legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be. If we
experience any such problems, we may not have the financial resources to continue development of the drug candidate that is affected or the development of any of our other drug candidates.

If a collaborative partner terminates or fails to perform its obligations under agreements with us, the development and commercialization of our drug candidates could
be delayed or terminated.

If any current or future collaborative partner does not devote sufficient time and resources to
collaboration arrangements with us, we may not realize the potential commercial benefits of the arrangement, and our results of operations may be adversely affected. In addition, if any existing or future collaboration partner were to breach or
terminate its arrangements with us, the development and commercialization of the affected drug candidate could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue development and
commercialization of the drug candidate on our own.

Much of the potential revenue from our existing and future collaborations will consist
of contingent payments, such as payments for achieving development milestones and royalties payable on sales of drugs developed using our technologies. The milestone and royalty revenues that we may receive under these collaborations will depend
upon our collaborators ability to successfully develop, introduce, market and sell new products. In addition, our collaborators may decide to enter into arrangements with third parties to commercialize products developed under our existing or
future collaborations using our technologies, which could reduce the milestone and royalty revenue that we may receive, if any. In many cases we will not be involved in these processes and accordingly will depend entirely on our collaborators. Our
collaboration partners may fail to develop or effectively commercialize products using our products or technologies because they:



| |  |  | decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite scientific expertise, limited cash resources
or specialized equipment limitations, or the belief that other drug development programs may have a higher likelihood of obtaining regulatory approval or may potentially generate a greater return on investment;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | do not have sufficient resources necessary to carry the drug candidate through clinical development, regulatory approval and commercialization;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | decide to pursue a competitive drug candidate developed outside of the collaboration; or
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | cannot obtain the necessary regulatory approvals.
| | - |  | -------------------------------------------------

If our collaboration partners fail to develop or effectively commercialize drug candidates or drugs for any of these reasons, we may not be able to replace the collaboration partner with another partner to develop and
commercialize a drug candidate or drugs under the terms of the collaboration. We may also be unable to obtain a license from such collaboration partner on terms acceptable to us, or at all.

Because neither we nor any of our collaborative partners have received marketing approval for any product resulting from our research and development efforts, and may
never be able to obtain any such approval, we may not be able to generate any product revenue.

Any products being developed by our
collaborative partners will require additional research and development, extensive preclinical studies and clinical trials, and regulatory approval prior to any commercial sales. In some cases, the length of time that it takes for our collaborative
partners to achieve various regulatory approval milestones may affect the payments that we are eligible to receive under our collaboration agreements. We and our collaborative partners may need to address a number of technical challenges
successfully in order to complete development of our drug candidates. Moreover, these drug candidates may not be effective in treating any disease or may prove to have undesirable or unintended side effects, toxicities, or other characteristics that
may preclude our obtaining regulatory approval or prevent or limit commercial use.



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If we are unable to obtain U.S. and/or foreign regulatory approval, we will be unable to commercialize our drug
candidates.

Our drug candidates are subject to extensive governmental regulations relating to development, clinical trials,
manufacturing and commercialization. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required in the United States and in many foreign jurisdictions prior to the commercial sale of our drug
candidates. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the drug candidates we are developing will obtain marketing approval. In
connection with the clinical trials for CR011-vcMMAE and any other drug candidate we may seek to develop in the future, we face risks that:



| |  |  | the drug candidate may not prove to be efficacious;
| | - |  | ---------------------------------------------------



| |  |  | the drug may not prove to be safe;
| | - |  | ----------------------------------



| |  |  | the results may not confirm the positive results from earlier preclinical studies or clinical trials; and
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | the results may not meet the level of statistical significance required by the FDA or other regulatory authorities.
| | - |  | -------------------------------------------------------------------------------------------------------------------

We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA. The
time required to complete clinical trials and for the FDA and other countries regulatory review processes is uncertain and typically takes many years. Our analysis of data obtained from preclinical and clinical activities is subject to
confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unanticipated delays or increased costs due to government regulation from future legislation or administrative
action or changes in FDA policy during the period of product development, clinical trials and FDA regulatory review.

Any delay in
obtaining, or failure to obtain, required approvals could materially adversely affect our ability to generate revenues from the particular drug candidate. Furthermore, any regulatory approval to market a product may be subject to limitations on the
indicated uses for which we may market the product. These limitations may limit the size of the market for the product. We are also subject to numerous foreign regulatory requirements governing the conduct of clinical trials, manufacturing and
marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of foreign requirements.
Approval by the FDA does not ensure approval by regulatory authorities outside the United States. Foreign jurisdictions may have different approval procedures than those required by the FDA and may impose additional testing requirements for our drug
candidates.

Even if we obtain regulatory approvals, our drug candidates will be subject to ongoing regulatory review. If we fail to comply with
continuing U.S. and applicable foreign regulations, we could lose those approvals, and our business would be seriously harmed.

Even if
we receive regulatory approval of any drugs we may develop, we will be subject to continuing regulatory review, including the review of clinical results which are reported after our drug candidates become commercially available approved drugs. Since
drugs are more widely used by patients once approval has been obtained, side effects and other problems may be observed after approval that were not seen or anticipated during pre-approval clinical trials. In addition, the manufacturer, and the
manufacturing facilities we use to make any of our drug candidates, will also be subject to periodic review and inspection by the FDA. The subsequent discovery of previously unknown problems with the drug, manufacturer or facility may result in
restrictions on the drug, manufacturer or facility, including withdrawal of the drug from the market. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory
approval, product recalls and seizures, operating restrictions and criminal prosecutions.

Our business has a substantial risk of product liability
claims. If we are unable to obtain appropriate levels of insurance, a product liability claim could adversely affect our business.

Our
business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and sales and marketing of human therapeutic products. Although we do not currently commercialize any products, claims could be
made against us based on the use of our drug candidates in clinical trials. We currently have clinical trial insurance and will seek to obtain product liability insurance prior to the sales and marketing of any of our drug candidates. However, our
insurance may not provide adequate coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to maintain current amounts of insurance
coverage or obtain additional or sufficient insurance at a reasonable cost to protect against losses that could have a material adverse effect on us. If a claim is brought against us, we might be required to pay legal and other expenses to defend
the claim, as well as uncovered



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damages awards resulting from a claim brought successfully against us. Furthermore, whether or not we are ultimately successful in defending any such claims,
we might be required to direct significant financial and managerial resources to such defense, and adverse publicity is likely to result.

If we are
unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our drug candidates, we may not generate product revenue.

We have no commercial products and we do not currently have an organization for the sales and marketing of pharmaceutical products. In order to
successfully commercialize any drugs that may be approved in the future by the FDA or comparable foreign regulatory authorities, we must build our sales and marketing capabilities or make arrangements with third parties to perform these services.
There are risks involved with establishing our own sales and marketing capabilities, as well as entering into arrangements with third parties to perform these services. For example, developing a sales force is expensive and time consuming and could
delay any product launch. In addition, to the extent that we enter into arrangements with third parties to perform sales, marketing and distribution services, we will have less control over sales of our products, and our future revenues would depend
heavily on the success of the efforts of these third parties. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and may
not become profitable.

If physicians, patients and third-party payors do not accept any future drugs that we may develop, we may be unable to generate
significant revenue, if any.

Even if CR011-vcMMAE or any other drug candidates we may develop or acquire in the future obtain
regulatory approval, they may not gain market acceptance among physicians, patients and health care payers. Physicians may elect not to recommend these drugs for a variety of reasons including:



| |  |  | timing of market introduction of competitive drugs;
| | - |  | ---------------------------------------------------



| |  |  | lower demonstrated clinical safety and efficacy compared to other drugs;
| | - |  | ------------------------------------------------------------------------



| |  |  | lack of cost-effectiveness;
| | - |  | ---------------------------



| |  |  | lack of availability of reimbursement from third-party payors;
| | - |  | --------------------------------------------------------------



| |  |  | convenience and ease of administration;
| | - |  | ---------------------------------------



| |  |  | prevalence and severity of adverse side effects;
| | - |  | ------------------------------------------------



| |  |  | other potential advantages of alternative treatment methods; and
| | - |  | ----------------------------------------------------------------



| |  |  | ineffective marketing and distribution support.
| | - |  | -----------------------------------------------

If our approved drugs fail to achieve market acceptance, we would not be able to generate sufficient revenue from product sales to maintain or grow our business.

If third-party payors do not adequately reimburse customers for any of our product candidates that are approved for marketing, they might not be purchased or used,
and our revenues and profits will not develop or increase.

Our revenues and profits will depend heavily upon the availability of
adequate reimbursement for the use of our approved product candidates from governmental and other third-party payors, both in the United States and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors,
including the third-party payors determination that use of a product is:



| |  |  | a covered benefit under its health plan;
| | - |  | ----------------------------------------



| |  |  | safe, effective and medically necessary;
| | - |  | ----------------------------------------



| |  |  | appropriate for the specific patient;
| | - |  | -------------------------------------



| |  |  | cost-effective; and
| | - |  | -------------------



| |  |  | neither experimental nor investigational.
| | - |  | -----------------------------------------

Obtaining reimbursement approval for a product from each government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use
of our products to each payor. We may not be able to provide data sufficient to gain acceptance with respect to reimbursement. Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that
preclude payment for some uses that are approved by the FDA or comparable



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authority. Moreover, eligibility for coverage does not imply that any product will be reimbursed in all cases or at a rate that allows us to make a profit or
even cover our costs. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which
it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare,
Medicaid or other data used to calculate these rates. Net prices for products may be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of certain medical
products from countries where they may be sold at lower prices than in the United States.

There have been, and we expect that there will
continue to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for our products. The Centers for Medicare and Medicaid Services, or CMS, frequently change product descriptors,
coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both CMS and other
third-party payors may have sufficient market power to demand significant price reductions. Due in part to actions by third-party payors, the health care industry is experiencing a trend toward containing or reducing costs through various means,
including lowering reimbursement rates, limiting therapeutic class coverage and negotiating reduced payment schedules with service providers for drug products.

Our inability to promptly obtain coverage and profitable reimbursement rates from government-funded and private payors for our products could have a material adverse effect on our operating results and our overall
financial condition.

We depend on attracting and retaining key employees.

We are highly dependent on the principal members of our senior management and scientific staff. Our future success will depend in part on the continued
services of our key management and scientific personnel. The loss of services of any of these personnel could materially adversely affect our business, financial condition, and results of operations. We have entered into employment agreements with
all of the principal members of our senior management team. Our future success will also depend in part on our ability to attract, hire, and retain additional personnel. There is intense competition for qualified personnel and there can be no
assurance that we will be able to continue to attract and retain such personnel. Failure to attract and retain key personnel could materially, adversely affect our business, financial condition, and results of operations.

We depend on academic collaborators, consultants, and scientific advisors.

We have relationships with collaborators, consultants, and scientific advisors at academic and other institutions that conduct research or provide consulting services at our request. These collaborators, consultants,
and scientific advisors are not our employees. Substantially all of our collaborators, consultants, and scientific advisors are employed by employers other than us and may have commitments to, or collaboration, consulting, or advisory contracts
with, other entities that may limit their availability to us. As a result, we have limited control over their activities and, except as otherwise required by our collaboration, consulting agreements, and advisory agreements, can expect only limited
amounts of their time to be dedicated to our activities. Our ability to explore and validate biological activity of therapeutic candidates and commercialize products based on these discoveries may depend, in part, on continued collaborations with
researchers at academic and other institutions. We may not be able to negotiate additional acceptable collaborations with collaborators, consultants, or scientific advisors at academic and other institutions.

Our academic collaborators, consultants, and scientific advisors may have relationships with other commercial entities, some of which could compete with
us. Our academic collaborators, consultants and scientific advisors sign agreements which provide for confidentiality of our proprietary information and of the results of studies. We may not be able to maintain the confidentiality of our technology
and other confidential information in connection with every academic collaboration, consulting, or advisory arrangement, and any unauthorized dissemination of our confidential information could materially adversely affect our business, financial
condition, and results of operations. Further, any such collaborator, consultant or advisor may enter into an employment agreement or consulting arrangement with one of our competitors.



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Competition in our field is intense and likely to increase.

We are subject to significant competition in the development and commercialization of new drugs from organizations that are pursuing strategies,
approaches, technologies and products that are similar to our own. Many of the organizations competing with us have greater capital resources, research and development staffs and facilities and marketing capabilities. We face competition from a
number of biotechnology and pharmaceutical companies with products in preclinical development, clinical trials, or approved for conditions identical or similar to the ones we are pursuing. In addition, many other pharmaceutical and biotechnology
companies are engaged in research and development for the treatment of cancer from which we may face intense competition.

If we do not obtain adequate
intellectual property protection, we may not be able to prevent our competitors from commercializing our discoveries.

Our business and
competitive position depends on our ability to protect our products and processes, including obtaining patent protection on genes and proteins for which we or our collaborators discover utility, and on products, methods and services based on such
discoveries.

The patent positions of pharmaceutical, biopharmaceutical, and biotechnology companies, including us, are generally uncertain
and involve complex legal and factual questions. The law relating to the scope of patent claims in the technology fields in which we operate is evolving, and the degree of future protection for our proprietary rights is uncertain. Furthermore, even
if patents are issued to us, there can be no assurance that others will not develop alternative technologies or design around the patented technologies developed by us. Therefore, our patent applications may not protect our products, processes, and
technologies for at least the following reasons:



| |  |  | there is no guarantee that any of our pending patent applications will result in additional issued patents;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | there is no guarantee that any patents issued to us or our collaborative customers will provide a basis for commercially viable products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | there is no guarantee that any patents issued to us or our collaborative customers will provide us with any competitive advantages;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | there is no guarantee that any patents issued to us or our collaborative customers will not be challenged or circumvented or invalidated by third parties; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | there is no guarantee that any patents issued to others will not have an adverse effect on our ability to do business.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

The issuance of a patent is not conclusive as to its validity or enforceability, nor does it provide the patent holder with freedom to operate without
infringing the patent rights of others. A patent could be challenged by litigation and, if the outcome of such litigation were adverse to the patent holder, competitors could be free to use the subject matter covered by the patent. The invalidation
of key patents owned by or licensed to us or the non-approval of pending patent applications could increase competition and materially adversely affect our business, financial condition, and results of operations.

Litigation, which could result in substantial cost to us, also may be necessary to enforce our patent and proprietary rights and/or to determine the
scope and validity of others proprietary rights. We may participate in interference proceedings that may in the future be declared by the USPTO to determine priority of invention, which could result in substantial cost to us. The outcome of
any such litigation or interference proceeding might not be favorable to us, and we might not be able to obtain licenses to technology that we require or, even if obtainable, such technology may not be available at a reasonable cost.

If we infringe on the intellectual property rights of others, we may be required to obtain a license, pay damages, and/or cease the commercialization of our
technology.

We believe that there may be significant litigation in the industry regarding patent and other intellectual property
rights. It is possible that the commercialization of our technology could infringe the patents or other intellectual property rights of others. In addition, others may have filed, and in the future are likely to file, patent applications covering
genes or gene products or antibodies against the gene products that are similar or identical to our products. Any such patent applications may have priority over our patent applications, and may result in the issuance of patents to others that could
be infringed by our products or processes.

A number of competitors are producing proteins from genes and claiming both the proteins as
potential therapeutics as well as the antibodies against these proteins. In many cases, generic antibody claims are being issued by the USPTO even though competitors have not actually made antibodies against the protein of interest, or do not have
cellular, animal, or human data to support the use of these antibodies as therapeutics. These claims to proteins



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as therapeutics, to all antibodies against a protein, and to methods of use in broad human indications are being filed at a rapid rate, and patents including
such claims have issued and may continue to issue. Such patents may prevent us from commercializing some products or processes or, if licenses under the patents are made available, may make the royalty burden on these products and processes so high
as to prevent commercial success.

In addition, we have sought and intend to continue to seek patent protection for novel uses for genes
and proteins and therapeutic antibodies that may have been patented by third parties. In such cases, we would need a license from the holder of the patent with respect to such gene or protein in order to make, use, or sell such gene or protein for
such use. We may not be able to acquire such licenses on commercially reasonable terms, if at all.

Any legal action against us or our
collaborators for patent infringement relating to our products and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continue to manufacture or market
the affected products and processes, or could enjoin us from continuing to manufacture or market the affected products and processes. There can be no assurance that we or our collaborators would prevail in any such action or that any license
required under any such patent would be made available on commercially acceptable terms, if at all. If we become involved in such litigation, it could consume a substantial portion of our managerial and financial resources.

We cannot be certain that our security measures will protect our confidential information and proprietary technologies.

We rely upon trade secret protection for some of our confidential and proprietary information that is not the subject matter for which patent protection
is being sought. We have taken security measures to protect our proprietary technologies, processes, information systems, and data and continue to explore ways to enhance such security. Such measures, however, may not provide adequate
protection for our trade secrets or other proprietary information. While we require employees, academic collaborators, consultants, and scientific advisors to enter into confidentiality and/or non-disclosure agreements where appropriate, any of the
following could still occur:



| |  |  | proprietary information could be disclosed;
| | - |  | -------------------------------------------



| |  |  | others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, technology, or
disclose such information; or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to meaningfully protect our trade secrets.
| | - |  | -------------------------------------------------------------

If the security of our confidential information is breached, our business could be materially adversely affected.

We
depend upon our ability to license technologies.

We may have to acquire or license certain components of our technologies or products
from third parties. We may not be able to acquire from third parties or develop new technologies, either alone or with others. We may not be able to acquire licenses on commercially reasonable terms, if at all. Failure to license or otherwise
acquire necessary technologies could materially adversely affect our business, financial condition, and results of operations.

If we do not comply with
laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research
and development efforts involve the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed
by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to
numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Although we maintain workers compensation
insurance to cover us for costs we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. Due to the small amount of hazardous materials
that we generate, we do not currently maintain any environmental liability or toxic tort claim insurance coverage to cover pollution conditions or other extraordinary or unanticipated events relating to our use and disposal of hazardous materials.
Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.



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Risks Related to Our Financial Results

We have convertible debt and our debt service obligations may prevent us from taking actions that we would otherwise consider to be in our best interests.

As of June 30, 2009, we had total outstanding convertible debt of $14.1 million which is due in February 2011. For the year ended
December 31, 2008, we had earnings available to cover fixed charges of $25.1 million due primarily to our sale of belinostat to TopoTarget, which was a one time non-recurring event. A variety of uncertainties and contingencies will affect our
future performance, many of which are beyond our control. We may not generate sufficient cash flow in the future to enable us to meet our anticipated fixed charges, including our debt service requirements. The following table shows, as of
June 30, 2009, the remaining aggregate amount of our interest payments due in each of the years listed (in millions):



|      |  |                   |    
|----- |  | ----------------- | ---
|Year  |  | AggregateInterest
|2009  |  | $                 | 0.3
|2010  |  |                   | 0.6
|2011  |  |                   | 0.3
|      |  |                   |    
|Total |  | $                 | 1.2
|      |  |                   |    

Our leverage could have significant negative consequences for our future operations, including:



| |  |  | increasing our vulnerability to general adverse economic and industry conditions;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | limiting our ability to obtain additional financing;
| | - |  | ----------------------------------------------------



| |  |  | requiring the dedication of a substantial portion of our expected cash flow to service our indebtedness, thereby reducing the amount of our expected cash flow
available for other purposes, including working capital and capital expenditures;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; or
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | placing us at a possible competitive disadvantage compared to less leveraged competitors and competitors that have better access to capital resources.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

We will likely need to raise additional funding, which may not be available on favorable terms, if at all.

We believe that we have sufficient capital to satisfy our funding requirements through 2011. However, our future funding requirements will depend on many
factors and we anticipate that we will likely need to raise additional capital to fund our business plan and research and development efforts on a going-forward basis. To the extent that we need to obtain additional funding, the amount of additional
capital we would need to raise would depend on many factors, including:



| |  |  | the number, breadth, and progress of our research, product development, and clinical programs;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | our ability to establish future potential strategic collaborations;
| | - |  | -------------------------------------------------------------------



| |  |  | the progress of our collaborators;
| | - |  | ----------------------------------



| |  |  | our costs incurred in enforcing and defending our patent claims and other intellectual property rights; and
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the costs and timing of obtaining regulatory approvals for any of our products.
| | - |  | -------------------------------------------------------------------------------

We expect that we would raise any additional capital we require through private equity offerings, debt financings, or additional collaborations and
licensing arrangements. We cannot be certain that in the future these sources of liquidity will be available when needed, particularly in light of the current economic environment, or that our actual cash requirements will not be greater than
anticipated. In appropriate strategic situations, we may seek financing from other sources, including contributions by others to joint ventures and other collaborative or licensing arrangements for the development and testing of products under
development. If we raise additional capital by issuing equity securities, the issuance of such securities would result in ownership dilution to our stockholders. If we raise additional funds through collaborations and licensing arrangements, we may
be required to relinquish rights to



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certain of our technologies or product candidates, or to grant licenses on unfavorable terms. The relinquishing of rights or granting of licenses on
unfavorable terms could materially adversely affect our business, financial condition, and results of operations. If adequate funds are not available, our business, financial condition, and results of operations would be materially adversely
affected. However, should we be unable to obtain future financing either through the methods described above or through other means, we may be unable to meet the critical objective of our long-term business plan, which is to successfully develop and
market pharmaceutical products. If we require additional capital at a time when investment in biotechnology companies such as ours, or in the marketplace in general, is limited due to the then prevailing market or other conditions, we may not be
able to raise such funds at the time that we desire or any time thereafter.

Our quarterly operating results have fluctuated greatly and may continue to
do so.

Our operating results have fluctuated on a quarterly basis. We expect that losses will continue to fluctuate from quarter to
quarter and that these fluctuations may be substantial. Our results of operations are difficult to predict and may fluctuate significantly from period to period, which may cause our stock price to decline and result in losses to investors. Some of
the factors that could cause our operating results to fluctuate include:



| |  |  | the nature, pricing, and timing of products and services provided to our collaborators and customers;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | our ability to compete effectively in our therapeutic development efforts against competitors that have greater financial or other resources or drug candidates that
are in further stages of development;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquisition, licensing, and other costs related to our operations;
| | - |  | ------------------------------------------------------------------



| |  |  | losses and expenses related to our investments;
| | - |  | -----------------------------------------------



| |  |  | regulatory developments;
| | - |  | ------------------------



| |  |  | regulatory actions and changes related to the development of drugs;
| | - |  | -------------------------------------------------------------------



| |  |  | changes in intellectual property laws that affect our patent rights;
| | - |  | --------------------------------------------------------------------



| |  |  | payments of milestones, license fees, or research payments under the terms of our external alliances and our ability to monitor and enforce such payments; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing of intellectual property licenses that we may enter.
| | - |  | ---------------------------------------------------------------

We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. In addition, fluctuations in quarterly results could
affect the market price of our common stock in a manner unrelated to our long-term operating performance.

Our debt investments are impacted by the
financial viability of the underlying companies or assets.

Our fixed-rate debt investments comply with our policy of investing in only
highly rated debt instruments. The ability for the debt to be repaid upon maturity or to have a viable resale market is dependent, in part, on the financial success of the underlying company or assets. Should the underlying company or assets suffer
significant financial difficulty, the debt instrument could either be downgraded or, in the worst case, our investment could be worthless. This would result in our losing the cash value of the investment and incurring a charge to our statement of
operations.

The market price of our common stock is highly volatile.

The market price of our common stock has fluctuated widely and may continue to do so. For example, during the quarter ended June 30, 2009 the sales price of our stock ranged from a high of $1.48 per share to a
low of $0.85 per share. Many factors could cause the market price of our common stock to rise and fall. These factors include:



| |  |  | the current economic and credit crisis and associated turmoil in world financial markets;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | changes in the markets assessment of the proposed merger with Celldex and the likelihood that the merger will be completed in the expected timeframe;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | variations in our quarterly operating results;
| | - |  | ----------------------------------------------



| |  |  | announcements of clinical results, technological innovations, or new products by us or our competitors;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | acquisitions or strategic alliances by us or others in our industry;
| | - |  | --------------------------------------------------------------------



| |  |  | announcement by the government or other agencies regarding the economic health of the United States and the rest of the world;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | the hiring or departure of key personnel;
| | - |  | -----------------------------------------



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| |  |  | changes in market valuations of companies within the biotechnology industry; and
| | - |  | --------------------------------------------------------------------------------



| |  |  | changes in estimates of our performance or recommendations by financial analysts.
| | - |  | ---------------------------------------------------------------------------------

Securities we issue to fund our operations could cause dilution to our stockholders ownership.

We may decide to raise additional funds through a private debt or equity financing to fund our operations. If we raise funds by issuing equity securities, the percentage ownership of current stockholders will be reduced, and the new equity
securities may have rights with priority over our common stock. We may not be able to obtain sufficient financing on terms that are favorable to us or our existing stockholders, if at all.

We may effect future repurchases of our 4% convertible debentures due in February 2011, which may adversely affect our liquidity.

We may from time to time seek to repurchase or refinance all or a portion of our outstanding $14.1 million 4% convertible debentures that mature on
February 15, 2011, subject to certain restrictions contained in the Merger Agreement. Any repurchases might occur through cash purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on
prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transaction, individually or in the aggregate, may be material and could adversely affect our liquidity and
ability to fund ongoing operations.

We may from time to time exceed the Federal Deposit Insurance Corporation limits in our bank accounts.

We may from time to time have a balance in our bank account which exceeds the $250,000 per depositor, per insured bank amount
guaranteed by the Federal Deposit Insurance Corporation, or FDIC. The FDIC insures deposits in most banks and savings associations located in the United States. The FDIC protects depositors against the loss of their deposits if an FDIC-insured bank
or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.



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##### Table of Contents

|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

Our Annual Meeting of Stockholders was held on June 19, 2009.

There were present at
the Annual Meeting, in person or by proxy, stockholders holding an aggregate of 33,480,735 shares of common stock. The results of the vote taken at the Annual Meeting with respect to the election of the nominees to serve as Class II Directors were
as follows:



|                             |  |                   |  |                 
|---------------------------- |  | ----------------- |  | ----------------
|Class I Director Nominees    |  | For               |  | Withheld        
|                             |  |                  
|Vincent T. DeVita Jr., M.D.  |  | 31,768,922 shares |  | 1,711,813 shares
|                             |  |                  
|James J. Noble, M.A., F.C.A. |  | 31,695,223 shares |  | 1,785,512 shares

Dr. DeVita and Mr. Noble were each elected to serve for a three-year
term of office or until their successors are duly elected and qualified. John H. Forsgren and Robert E. Patricelli, J.D. are currently serving as Class I Directors and Timothy M. Shannon, M.D. and Patrick J. Zenner are currently serving as Class III
Directors.



|Item 6. | Exhibits
|------- | --------



|             |  |                                                                                                                                                                             
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | Amgen Letter Agreement, by and between the Registrant and Amgen Fremont, Inc. dated May 2, 2009                                                                             
|             | 
|Exhibit 31.1 |  | Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|             | 
|Exhibit 31.2 |  | Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|             | 
|Exhibit 32   |  | Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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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.



|                      |  |                     |  |                                                               
|--------------------- |  | ------------------- |  | --------------------------------------------------------------
|Dated: August 5, 2009 |  | CuraGen Corporation
|                      |  |                    
|                      |  | By:                 |  | /s/ Timothy M. Shannon, M.D.                                  
|                      |  |                     |  | Timothy M. Shannon, M.D.                                      
|                      |  |                     |  | President and Chief Executive Officer                         
|                      |  |                     |  | (Principal Executive Officer of the Registrant)               
|                      |  |                    
|Dated: August 5, 2009 |  | By:                 |  | /s/ Sean A. Cassidy                                           
|                      |  |                     |  | Sean A. Cassidy                                               
|                      |  |                     |  | Vice-President and Chief Financial Officer                    
|                      |  |                     |  | (Principal Financial and Accounting Officer of the Registrant)



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CURAGEN CORPORATION

EXHIBIT INDEX

No.



|             |  |                                                                                                                                                                             
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | Amgen Letter Agreement, by and between the Registrant and Amgen Fremont, Inc. dated May 2, 2009                                                                             
|             | 
|Exhibit 31.1 |  | Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|             | 
|Exhibit 31.2 |  | Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|             | 
|Exhibit 32   |  | Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



41