##### Table of Contents

As filed with the Securities and Exchange Commission

on April 3, 2006



SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
|- | --------------------------------------------------------------

SECURITIES EXCHANGE ACT OF 1934



OR



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



For the fiscal year ended December 31, 2005



OR



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



For the transition period from
            to



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- | -----------------------------------------------------------

SECURITIES EXCHANGE ACT OF 1934



Commission file number: 001-117629



GPC Biotech AG

(Exact name of registrant as specified in
its charter)

Not Applicable

(Translation of
registrants name into English)

Federal Republic of Germany

(Jurisdiction of incorporation or organization)

Fraunhoferstrasse 20, D-82152 Martinsried/Munich, Germany

(Address of principal executive offices)



Securities registered or to be registered pursuant to Section 12(b) of the Act:



---

Title of each class:

Ordinary Bearer Shares, without par value

American Depositary Shares (as evidenced

by American Depositary Receipts),
each

representing one Ordinary Bearer Share



Name of each exchange on which registered:

NASDAQ National Market

---



Securities registered or to be registered pursuant to Section 12(g) of the Act:

None



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None



Indicate the number of outstanding shares of each of the issuers
classes of capital or common stock as of the close of the period covered by the annual report:

30,151,757 ordinary bearer shares at December 31,
2005



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.



Yes  ̈    No x



If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.



Yes  ̈    No x



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 is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer  ̈ Accelerated filer x Non-accelerated filer  ̈



Indicate by check mark which financial statement item the registrant has elected to follow:



Item 17  ̈    Item 18 x



If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes  ̈    No x



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##### Table of Contents

TABLE OF CONTENTS



|                                                                                      |  |     
|------------------------------------------------------------------------------------- |  | ----
|PART I                                                                                |  | Page
|                                                                                      | 
|Item 1: Identity of Directors, Senior Management and Advisers                         |  | 2   
|                                                                                      | 
|Item 2: Offer Statistics and Expected Timetable                                       |  | 2   
|                                                                                      | 
|Item 3: Key Information                                                               |  | 2   
|                                                                                      | 
|Item 4: Information on the Company                                                    |  | 25  
|                                                                                      | 
|Item 5: Operating and Financial Review and Prospects                                  |  | 53  
|                                                                                      | 
|Item 6: Directors, Senior Management and Employees                                    |  | 73  
|                                                                                      | 
|Item 7: Major Shareholders and Related Party Transactions                             |  | 97  
|                                                                                      | 
|Item 8: Financial Information                                                         |  | 101 
|                                                                                      | 
|Item 9: The Offer and Listing                                                         |  | 102 
|                                                                                      | 
|Item 10: Additional Information                                                       |  | 103 
|                                                                                      | 
|Item 11: Quantitative and Qualitative Disclosure About Market Risk                    |  | 115 
|                                                                                      | 
|Item 12: Description of Securities Other Than Equity Securities                       |  | 115 
|                                                                                      | 
|PART II                                                                               |  | 115 
|                                                                                      | 
|Item 13: Defaults, Dividend Arrearages and Delinquencies                              |  | 115 
|                                                                                      | 
|Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 115 
|                                                                                      | 
|Item 15: Controls and Procedures                                                      |  | 116 
|                                                                                      | 
|Item 16A: Audit Committee Financial Expert                                            |  | 116 
|                                                                                      | 
|Item 16B: Code of Ethics                                                              |  | 116 
|                                                                                      | 
|Item 16C: Principal Accountant Fees and Services                                      |  | 116 
|                                                                                      | 
|Item 16D: Exemptions from the Listing Standards for Audit Committees                  |  | 116 
|                                                                                      | 
|Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers      |  | 117 
|                                                                                      | 
|PART III                                                                              |  | 117 
|                                                                                      | 
|Item 17: Financial Statements                                                         |  | 117 
|                                                                                      | 
|Item 18: Financial Statements                                                         |  | 117 
|                                                                                      | 
|Item 19: Exhibits                                                                     |  | 117 



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Certain Definitions



In this annual report, references to  are to euro and references to USD, U.S. $, $, dollars and U.S. dollars are to United States dollars. We publish our financial statements in euro.



In this annual report, unless otherwise provided, references to GPC
Biotech, the company, we, us and our refer to GPC Biotech AG and its wholly owned subsidiary, GPC Biotech Inc.



Forward-looking Statements



This annual report and the documents that we incorporate by reference include forward-looking statements. Forward-looking statements may be, but are not
necessarily, identified by words like believe, anticipate, intend, expect, target, goal, estimate, plan, assume, may,
will, could and similar expressions. Forward-looking statements include, but are not limited to, statements about:



| |  | the progress, timing and completion of our research, development and preclinical studies and clinical trials for our product candidates;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



| |  | the timing and ultimate success in obtaining regulatory approval in the U.S., Europe or any other jurisdiction for our lead product candidate, satraplatin, or any of our other product
candidates;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our ability to market, commercialize, achieve market acceptance for and sell our product candidates;
| | - | ----------------------------------------------------------------------------------------------------



| |  | our ability to adequately protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our estimates regarding anticipated operating losses, future revenues, capital requirements and our needs for additional financing.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us, including those listed in Item 3 of this annual report, Key InformationRisk Factors, starting on
page 5 of this annual report, various sections of Item 4, Information on the Company, Item 5, Operating and Financial Review and Prospects, and elsewhere in this annual report. Other factors, besides those listed
here, could also adversely affect us.



In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this annual report might not occur. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in our 6-K reports to the SEC. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.



Enforceability of Civil Liabilities



We are organized under the laws of Germany. Most of our and our subsidiarys
directors and officers, as well as certain of the experts named in this annual report, are non-U.S. residents, and a substantial portion of our assets and the assets of our directors and officers and these experts are located outside the United
States. As a result, a shareholder may not be able to effect service of process within the United States upon these persons or to enforce, in U.S. courts, against these persons judgments of U.S. courts predicated upon any civil liability provisions
of the U.S. federal or state securities laws. In addition, a shareholder may not be able to enforce certain civil liabilities predicated upon U.S. federal or state securities laws in Germany against us, our directors and officers and the persons
named in this annual report.



1



---

##### Table of Contents

PART I



Item 1. Identity of Directors, Senior Management and Advisers.



Not applicable.



Item 2. Offer Statistics and Expected Timetable.



Not applicable.



Item 3. Key Information.



2



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##### Table of Contents

SELECTED CONSOLIDATED FINANCIAL DATA



We have derived the selected consolidated financial data presented in the table below from our audited consolidated financial
statements for the years presented.



The following table presents a
summary of consolidated financial information of GPC Biotech. We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. You should read the following
summary of consolidated financial information in conjunction with the section of this annual report entitled Operating and Financial Review and Prospects in Item 5 and our consolidated financial statements and the related notes
contained in Item 18 of this annual report.



|                                                                                         |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|---------------------------------------------------------------------------------------- |  | --------------------------------------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                                         |  | Year ended December 31,                                         |           
|                                                                                         |  | 2005                                                            |            |   | 2004 |   |            | 2003 |  |   | 2002       |   |  | 2001 |           
|                                                                                         |  | (amounts in thousands of euro, except share and per share data) |           
|Statement of operations data:                                                            |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Revenues                                                                                 |  |                                                                 | 9,341      |   |      |   | 12,649     |      |  |   | 21,594     |   |  |      | 21,511     |   |  |   | 13,889     |  
|Research and development expenses                                                        |  |                                                                 | 55,684     |   |      |   | 39,955     |      |  |   | 37,535     |   |  |      | 38,053     |   |  |   | 30,644     |  
|Impairment of goodwill                                                                   |  |                                                                 |           |   |      |   |           |      |  |   |           |   |  |      | 7,314      |   |  |   |           |  
|Acquired in-process research and development                                             |  |                                                                 | 683        |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total operating expenses                                                                 |  |                                                                 | 77,374     |   |      |   | 53,541     |      |  |   | 51,068     |   |  |      | 57,907     |   |  |   | 45,239     |  
|Operating loss                                                                           |  |                                                                 | (68,033    | ) |      |   | (40,892    | )    |  |   | (29,474    | ) |  |      | (36,396    | ) |  |   | (31,350    | )
|Net loss                                                                                 |  |                                                                 | (62,207    | ) |      |   | (39,927    | )    |  |   | (26,831    | ) |  |      | (32,934    | ) |  |   | (26,217    | )
|Per share data:                                                                          |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Basic and diluted loss per share                                                         |  |                                                                | (2.08      | ) |      |  | (1.60      | )    |  |  | (1.29      | ) |  |     | (1.59      | ) |  |  | (1.42      | )
|Shares used in computing basic and diluted loss per share                                |  |                                                                 | 29,877,348 |   |      |   | 24,950,638 |      |  |   | 20,731,535 |   |  |      | 20,688,515 |   |  |   | 18,509,398 |  
|                                                                                         | 
|                                                                                         |  | At December 31,                                                 |           
|                                                                                         |  | 2005                                                            |            |   | 2004 |   |            | 2003 |  |   | 2002       |   |  | 2001 |           
|                                                                                         |  | (amounts in thousands of euro)                                  |           
|Balance sheet data:                                                                      |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Cash and cash equivalents(1)                                                             |  |                                                                 | 30,559     |   |      |   | 59,421     |      |  |   | 34,947     |   |  |      | 39,947     |   |  |   | 91,245     |  
|Marketable securities and short-term investments                                         |  |                                                                 | 63,061     |   |      |   | 69,248     |      |  |   | 54,221     |   |  |      | 74,935     |   |  |   | 48,885     |  
|Total assets                                                                             |  |                                                                 | 139,263    |   |      |   | 141,893    |      |  |   | 101,564    |   |  |      | 132,333    |   |  |   | 167,860    |  
|Long-term debt, including capital lease obligations                                      |  |                                                                 |           |   |      |   |           |      |  |   | 959        |   |  |      | 1,528      |   |  |   | 1,680      |  
|Total shareholders equity                                                               |  |                                                                 | 83,533     |   |      |   | 124,833    |      |  |   | 81,879     |   |  |      | 107,270    |   |  |   | 139,093    |  
|                                                                                         | 
|                                                                                         |  | Year ended December 31,                                         |           
|                                                                                         |  | 2005                                                            |            |   | 2004 |   |            | 2003 |  |   | 2002       |   |  | 2001 |           
|                                                                                         |  | (amounts in thousands of euro)                                  |           
|Other financial data:                                                                    |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Net cash provided by (used in) operating activities                                      |  |                                                                 | (42,787    | ) |      |   | (37,816    | )    |  |   | (22,974    | ) |  |      | (23,537    | ) |  |   | 2,372      |  
|Net cash provided by (used in) investing activities                                      |  |                                                                 | 33         |   |      |   | (17,049    | )    |  |   | 18,723     |   |  |      | (26,771    | ) |  |   | 1,477      |  
|Net cash provided by (used in) financing activities                                      |  |                                                                 | 11,501     |   |      |   | 79,672     |      |  |   | 42         |   |  |      | (255       | ) |  |   | 35,019     |  
|Depreciation, amortization and impairment of tangible and intangible assets and goodwill |  |                                                                 | 3,895      |   |      |   | 1,981      |      |  |   | 3,827      |   |  |      | 10,840     |   |  |   | 6,616      |  

---

|(1) | Does not include restricted cash of 1.6 million, 2.3 million and 2.5 million at December 31, 2005, 2004 and 2003, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Exchange Rate Information



The following table shows, for the years and dates indicated, certain information concerning the rate of exchange of euro per U.S. dollar based on the Noon Buying
Rates quoted by the Federal Reserve Bank of New York for euro expressed in U.S. dollars for one euro. No representation is made that the euro or the U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or
euro, as the case may be, at any particular rate.



|     |  |                           |  |        |  |                  |  |          
|---- |  | ------------------------- |  | ------ |  | ---------------- |  | ---------
|     |  | U.S. dollars for one euro
|Year |  | High                      |  | Low    |  | PeriodAverage(1) |  | PeriodEnd
|2005 |  | 1.3476                    |  | 1.1667 |  | 1.2401           |  | 1.1842   
|2004 |  | 1.3625                    |  | 1.1801 |  | 1.2478           |  | 1.3538   
|2003 |  | 1.2597                    |  | 1.0361 |  | 1.1411           |  | 1.2597   
|2002 |  | 1.0485                    |  | 0.8594 |  | 0.9495           |  | 1.0485   
|2001 |  | 0.9520                    |  | 0.8370 |  | 0.8909           |  | 0.8901   

---

|(1) | The average of the Noon Buying Rates on the last business day of each full month during the relevant period.
|--- | ------------------------------------------------------------------------------------------------------------



The high and low exchange rates for the euro for the
periods indicated are set forth below:



|               |  |                          |  |       
|-------------- |  | ------------------------ |  | ------
|               |  | U.S. dollars forone euro
|Month          |  | High                     |  | Low   
|September 2005 |  | 1.2538                   |  | 1.2011
|October 2005   |  | 1.2148                   |  | 1.1914
|November 2005  |  | 1.2067                   |  | 1.1667
|December 2005  |  | 1.2041                   |  | 1.1699
|January 2006   |  | 1.2287                   |  | 1.1980
|February 2006  |  | 1.2197                   |  | 1.1886
|March 2006     |  |                          |  |       



The Noon Buying Rate for the euro on
March 31, 2006, was quoted by the Federal Reserve Bank of New York at 1.2139 U.S. dollars for one euro.



Item 3B.Capitalization and Indebtedness.



Not applicable.



Item 3C.Reasons for the offer and use of proceeds.



Not applicable.



4



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##### Table of Contents

RISK FACTORS



An investment in our shares or American Depository Shares, or ADSs, involves a high degree of risk. You should consider carefully the specific risk factors
described below, together with all of the other information in this annual report. The trading price of our shares and ADSs could decline as a result of any of these risks, and you may lose part or all of your investment.



Risks Related to Our Business



We are substantially dependent on the success of our lead product candidate, satraplatin. If we do not receive regulatory approval
or achieve market acceptance for satraplatin, we will be unable to commercialize satraplatin successfully.



We have expended significant time, money and effort developing satraplatin. In December 2005, we completed enrollment in a Phase 3 registrational trial, the SPARC
trial, testing satraplatin as a second-line chemotherapy treatment of hormone refractory prostate cancer, or HRPC. We also began the rolling submission of a New Drug Application, or NDA, with the U.S. Food and Drug Administration, or FDA, with the
goal to complete our NDA filing by the end of 2006. Before we or our partners can market and sell satraplatin, we will need to obtain necessary approvals from the FDA and similar regulatory agencies in Europe and elsewhere. Since satraplatin has
received a fast track designation from the FDA as a potential second-line chemotherapy treatment for HRPC, it is eligible to be considered for an accelerated approval by the FDA. An accelerated approval could be advantageous since it may allow us to
market and sell satraplatin at an earlier date than would be possible if we only seek and obtain full approval from the FDA. There is currently no procedural process in Europe equivalent to accelerated approval. As agreed with the FDA and the
European Medicines Agency, or EMEA, the primary endpoint for the SPARC trial is progression-free survival and the secondary endpoints are overall survival and time to pain progression. If we seek an accelerated approval for satraplatin from the FDA,
the FDA will review the progression-free survival data together with available overall survival data in considering whether to grant such an approval, whereas for any marketing authorization application filed with the EMEA, the EMEA will review such
data in determining whether to grant full approval. If satraplatin is approved by the FDA on an accelerated basis it may be subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical
trials. To obtain full approval from the FDA, we will need to submit final overall survival data to the agency for review or demonstrate that patients in the satraplatin arm of the trial derived a clear clinical benefit (such as delay in time to
progression of pain) relative to the control arm.

The independent data monitoring board, or DMB, established for the SPARC trial has set a date in
late April 2006 to conduct a pre-planned interim efficacy analysis of progression-free survival data from the SPARC trial. Full progression-free survival data are expected in the second half of 2006. Full overall survival data are anticipated in the
second half of 2007. Although we expect data from the SPARC trial in 2006 and 2007, the timing and ultimate outcome of the review of the SPARC trial by regulatory agencies remain uncertain. With regard to the interim analysis, there also can be no
assurances regarding any recommendation by the DMB based upon the interim analysis or whether data from such interim analysis would be sufficient to form the basis of a submission for regulatory approval in the United States or Europe. In addition,
although satraplatin is eligible for accelerated approval by the FDA, the FDA may not grant an accelerated approval if it concludes that the progression-free survival data and available overall survival data do not demonstrate that satraplatin
provides a meaningful therapeutic benefit to patients over existing treatments or that the data are otherwise inadequate to support the granting of an accelerated approval due to weaknesses, inconsistencies or differences in the data with respect to
data subsets or subpopulations in the treatment group.Although the SPARC trial is modeled on an earlier 50 patient study, conducted by others, of satraplatin as a first line chemotherapy, the results from the earlier study may not accurately
predict the results of the SPARC



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trial. If the trial fails to demonstrate that satraplatin is safe or effective in FDAs risk/benefit evaluation, or the results of the trial are not statistically
convincing, internally consistent or clinically meaningful or are otherwise deemed inadequate by the FDA, the EMEA or other regulatory agencies, full regulatory approval of satraplatin would be significantly delayed or may not be obtainable at all.
Our strategy and timing for seeking regulatory approval of this drug may change depending on the results of our studies. In case of a delay, the overall costs of the program will increase and the time at which we can introduce the drug into the
marketplace and begin to generate product revenues will also be delayed. Also, if regulatory approval is significantly delayed, competing therapies could be developed, which could decrease the market potential for satraplatin.



Even if we ultimately receive regulatory approval for satraplatin, satraplatin may not
gain market acceptance. Furthermore, the availability of less expensive and/or more effective alternative treatments may affect our ability to successfully commercialize satraplatin.



Our other product candidates are in earlier stages of development. We may not successfully develop these product candidates. Even if
their further development is successful, it will take several more years before we can file for regulatory approval of these product candidates. Therefore, if we fail to commercialize satraplatin, our ability to achieve profitability will be
significantly delayed and our business prospects will be seriously limited, and you could lose all or part of your investment.



The development and commercialization of our lead product candidate, satraplatin, partially depends on the efforts of a third party and, therefore, we do not
fully control its success and commercial viability in all territories around the world.



In December 2005, we entered into a co-development and license agreement for satraplatin with Pharmion GmbH, a wholly-owned subsidiary of Pharmion Corporation. Under the terms of the agreement, Pharmion has exclusive
commercialization rights (including the right to develop, market and distribute) for satraplatin for Europe, the Middle East, including Turkey, Australia and New Zealand and will lead regulatory and commercial activities relating to the promotion
and sale of satraplatin in those territories. We have also formed a joint development committee with Pharmion to coordinate, evaluate and expedite global development activities for satraplatin in a variety of tumor types. Pharmion has announced
that, if supported by the results of the SPARC trial, they plan to file for marketing approval of satraplatin in Europe in the first quarter of 2007 but we cannot assure you that this filing or Pharmions other development and/or commercial
activities for satraplatin in its territories will be timely or ultimately successful. Our success with respect to the commercialization of satraplatin in Pharmions territories depends largely and its development for other tumor types depends
partially on Pharmions efforts, over which we have limited control. If Pharmion is not successful or does not adequately fulfill its obligations, our business may be adversely affected.



The primary patents covering satraplatin in the United States will expire in 2008
and 2010, and in 2009 in most other countries. If we and our licensor are unable to extend the protection of these patents beyond such dates, we may be subject to competition from third parties with products with the same active pharmaceutical
ingredients as satraplatin.



Even if our product candidates and
technologies are covered by valid and enforceable patents, the patents will provide protection only for a limited amount of time. For example, the primary patents covering the active pharmaceutical ingredient and anticancer use of satraplatin will
expire in 2008 and 2010 in the United States, respectively, and in 2009 in most other countries. Thereafter, we will have no direct means to prevent third parties from making, selling, using or importing satraplatin in the United States, Europe or
Japan. Instead, we and our licensor expect to rely upon the U.S. Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, and comparable foreign legislation, to seek additional product exclusivity for
satraplatin. While we believe that satraplatin will meet the Hatch-Waxman criteria for patent extension, delays in the



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completion of our Phase 3 registrational trial or in obtaining regulatory approval may jeopardize our ability to obtain a timely patent extension or a patent extension
may ultimately not be granted. The terms of the Hatch-Waxman Act, or similar foreign statutes, could be amended to our disadvantage. If we do not qualify or timely apply for such patent extension for satraplatin, the competition we will face upon
expiration of the primary patents would increase significantly, reducing our potential revenues and harming our ability to achieve profitability.



Under the provisions of the Hatch-Waxman Act, we and our licensor may also have to defend one or more of our patents, if challenged. Although we are currently not
involved in any litigation concerning our intellectual property related to satraplatin and we are not currently aware of any threats or challenges with respect to our product candidates, the risk of a challenge increases as our product candidates
progress toward commercialization. Information about the patents covering drug products in the United States is published by the FDA in a publicly available database, Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the
Orange Book. A competitor (usually a generic drug company) seeking to market a proposed competing or generic version of our drug products in the United States may notify us that its competing drug product would not infringe one or more patents
listed in the Orange Book covering our product, or may challenge the validity or enforceability of one or more of our listed patents covering our product. Once we are so notified we would have 45 days in which to file a lawsuit claiming patent
infringement based on the competitors assertion about the characteristics of its proposed product. If we file such a lawsuit within 45 days, the FDA is required to delay, or stay, final approval of the competing product for up to thirty
months. If a court determines that the patent would be infringed by the product proposed in the competitors drug application, the FDA will not approve the application until the patent expires. If, however, the court decides that the patent
would not be infringed, is invalid or is unenforceable, the FDA may approve the competitors drug application when that decision occurs. The FDA may approve the application at the thirty-month date, even if the litigation is ongoing. If
litigation is pending and the FDA approves the application at the end of the thirty-month period, the competitor may launch a competing product. Under the provisions of the Medicare Prescription Drug Improvement and Modernization Act of 2003, we are
limited to only a single thirty-month stay per competing or generic drug application.



We have a history of losses and our future profitability is uncertain.



We have incurred losses in each year since our inception in 1997 because our research and development and general and administrative expenses exceeded our revenues.
Our net loss for the years ended December 31, 2005, 2004 and 2003 was 62.2 million, 39.9 million and 26.8 million, respectively. As of
December 31, 2005, we had an accumulated deficit of 229.5 million.



To attain profitability, we will need to develop and bring products to market. We have
never generated revenue from product sales in the market, and there is no guarantee that we will be able to do so in the future.



We have expended significant funds in the initiation of additional clinical trials of satraplatin in other tumor types and as a combination therapy with other
treatments. We expect to make substantial additional expenditures and incur substantial losses in the future as we continue our clinical trials of satraplatin, file for regulatory approvals and commercialize satraplatin, if and when we receive
regulatory approvals. We also expect to make substantial expenditures to advance the development of 1D09C3, our monoclonal antibody, and to continue our other research activities. As our product candidates advance, we will continue to need resources
for research and development activities, for regulatory approval filings and for commercialization of any approved drugs.



If satraplatin fails to show positive results in our ongoing Phase 3 registrational trial, we do not receive regulatory approval for satraplatin, or if satraplatin
does not achieve market acceptance even if approved, we will not become profitable in the foreseeable future. Furthermore, if our other product



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candidates do not advance to clinical trials or fail in clinical trials, we may not be able to achieve or maintain profitability. If we fail to become or remain
profitable, or if we are unable to fund our continuing expenses, we may be unable to continue our research and development programs, and you could lose all or part of your investment.



As our relationship with ALTANA Pharma matures, we will increasingly depend on our collaboration with Pharmion for a significant
portion of our revenues. If this collaboration terminates early or Pharmion does not meet all or a significant portion of its obligations, it would materially impact our revenues and harm our business.



In the past three years, we have derived almost all of our revenues from our agreements
with ALTANA Pharma AG, accounting for approximately 97% of our total revenue in 2005, 99% of our total revenue in 2004 and 94% of our total revenue in 2003. However, committed revenues from the collaboration and license agreement and the
LeadCodeagreement with ALTANA Pharma will continue to decrease substantially as the collaboration terms of those agreements
approach their expiration in mid-2007.



Under our co-development and
license agreement for satraplatin with Pharmion, we received an upfront payment of $37.1 million, which includes an $18 million reimbursement for past satraplatin clinical development costs and a $19.1 million payment for the funding of certain
ongoing clinical development activities. Furthermore, Pharmion has an additional obligation to fund $22.2 million for shared costs incurred in connection with global development activities. We are also entitled to receive up to $105.5 million upon
the achievement of initial regulatory filing and approval milestones, up to $105 million for achievement of significant annual sales milestones in the Pharmion territories and royalties on sales of satraplatin by Pharmion in its territories at rates
of 26% to 30% on net annual sales up to $500 million, and 34% on net annual sales over $500 million.



These cost-sharing, milestone and royalty payments from Pharmion will represent a significant portion of our revenues for the foreseeable future. If Pharmion is
unable to successfully commercialize satraplatin in its territories or is otherwise unable to meet its contractual obligations, it would have a significant impact on our revenues and financial results.



If our competitors develop and market products that are more effective, safer or
more affordable than ours, or obtain marketing approval before we do, our commercial opportunities will be more limited.



Competition in the biotechnology and pharmaceutical industries is intense and continues to increase, particularly in the area of cancer treatment. Our competitors
include other biotechnology companies, pharmaceutical companies, as well as academic institutions and other research institutions engaged in the discovery and development of anticancer drugs and therapies. Many of our competitors have significantly
greater research and development capabilities, greater experience in obtaining regulatory approvals, manufacturing and marketing, or greater financial and management resources than we have. Our competitors may succeed in developing products that are
more effective, safer or more affordable than the ones we have under development or that render our product candidates or technologies noncompetitive or obsolete. Moreover, competitors that are able to achieve patent protection, obtain regulatory
approvals and commence commercial sales of their products before we do, and competitors that have already done so, may enjoy a significant competitive advantage.



Satraplatin may face significant competition from other drugs that are either marketed or that may be developed for treating prostate
cancer, as well as from other platinum-based compounds and other chemotherapy drugs.



In the prostate cancer market, currently approved drugs include Emcyt® (Pfizer, Inc.), Novantrone® (OSI Pharmaceuticals
Inc./Serono S.A.), Quadramet® (Schering AG/CYTOGEN



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Corporation), Metastron® (GE Healthcare/Medi-Physics, Inc.) and Taxotere®
(Sanofi-Aventis S.A.). Novantrone and Quadramet are injectable pharmaceuticals approved for use in treating bone pain in cancer patients, and Emcyt is an oral drug used to relieve symptoms of advanced prostate cancer. The most recently approved of
these prostate cancer drugs, Taxotere, is an injectable pharmaceutical that is approved in the United States and Europe, in combination with prednisone (a commonly used synthetic steroid), for the treatment of patients with advanced prostate cancer.
Taxotere has been shown to prolong survival of patients with HRPC.



In
addition to the drugs mentioned above, a Phase 2 clinical trial for Alimta® (Eli
Lilly and Company) has recently been initiated, testing that drug as a second-line therapy for HRPC patients. Other examples of drugs in development for both advanced HRPC and earlier stages of prostate cancer, which may compete with satraplatin,
are calcitriol (Novacea Inc.), Provenge® (Dendreon Corporation), ixabepilone
(Bristol-Myers Squibb Company), Avastin (Genentech), Velcade® (Millenium
Pharmaceuticals Inc./Johnson & Johnson Pharmaceutical Research & Development, LLC), and Nexavar® (Onyx Pharmaceuticals, Inc./Bayer Pharmaceuticals Corporation).



There are currently three marketed platinum-based drugs in the United States and in Europe. These are cisplatin, carboplatin and oxaliplatin. All three agents are
administered intravenously and are not approved for the treatment of prostate cancer. In addition to these, there are other platinum-based compounds approved and/or marketed in Asian markets such as lobaplatin (China), nedaplatin (Japan) and
eptaplatin (South Korea). These drugs are not approved, however, for the treatment of prostate cancer. All three of these are also administered intravenously. Another platinum-based drug, which is not currently on the market, is picoplatin.
Picoplatin is administered intravenously and has shown activity for HRPC in a Phase 2 clinical trial. NeoRx has initiated a Phase 2 clinical trial with the intravenous formulation of picoplatin for the treatment of small-cell lung cancer (SCLC) that
is resistant/refractory to cisplatin. If picoplatin does show efficacy in the clinic against disease that is resistant/refractory to cisplatin and if it is eventually approved for marketing, it could be a significant competitor to satraplatin. There
are no reported clinical trials for an oral formulation of picoplatin. We are aware that other companies may be developing orally bioavailable platinum-based compounds. We are not aware, however, of any other orally bioavailable platinum-based
compounds that are approved or are in Phase 3 clinical trials.



If 1D09C3
is approved and commercialized, it will face significant competition. Currently marketed antibodies for the treatment of non-Hodgkins lymphoma are Rituxan®(Biogen Idec, Inc./Genentech, Inc./Roche Holdings AG), Zevalin®(Biogen Idec, Inc./Schering AG), and
Bexxar®(GlaxoSmithKline). Campath®(Berlex Laboratories) is approved for
chronic lymphocytic leukemia. In addition, there are a number of other antibodies and other drugs in development for the treatment of lymphoma and leukemia.



1D09C3 could also be developed for the treatment of leukemias and melanoma. There is, and will continue to be, significant competition
in these markets from both large molecule drugs (antibodies and other therapeutic proteins) and small molecule drugs.



Even if our product candidates are approved for marketing, they may not be competitive with established drugs and therapies or may not be able to supplant
established products and therapies in the disease settings that we target, thereby reducing the commercial value of our products.



Our operating results may fluctuate considerably on a quarterly basis. These fluctuations could have an adverse effect on the price of our shares and ADSs.



Our results of operations may fluctuate significantly in the future
on a quarterly basis as a result of a number of factors, many of which are beyond our control. Although many companies may encounter this problem, it is particularly relevant to us because of our relatively small size, the fact that



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we do not have any marketed products and the dynamics of the biotechnology industry in which we operate. Factors that could cause our results of operations to
fluctuate include, among others:



| |  | timing of clinical trial expenses;
| | - | ----------------------------------



| |  | failure to achieve milestones under collaborative arrangements;
| | - | ---------------------------------------------------------------



| |  | regulatory events;
| | - | ------------------



| |  | new product introductions by us or our competitors;
| | - | ---------------------------------------------------



| |  | variations in the demand for products we may introduce;
| | - | -------------------------------------------------------



| |  | litigation involving patents, licenses or other intellectual property; and
| | - | --------------------------------------------------------------------------



| |  | product failures or product liability lawsuits.
| | - | -----------------------------------------------



Any of the foregoing factors could cause us to fail to meet the expectations of securities analysts or investors, which could cause the trading price of our shares
and ADSs to decline.



Currency fluctuations may expose us to increased
costs and revenue decreases.



Our business is affected by
fluctuations in foreign exchange rates between the U.S. dollar and the euro. A significant portion of our revenues are denominated in U.S. dollars but are reported in euro. Therefore currency fluctuations could cause our revenues to decline.
Historically, the majority of our expenses were denominated in euro, but, on a going forward basis we expect that the majority of our expenses will be denominated in U.S. dollars. The majority of our cash and cash equivalents are denominated in
euro. In addition, we conduct clinical trials in many different countries, which exposes us to cost increases if the euro declines in value compared to the currencies of those countries.



We may need substantial additional funding and may be unable to raise capital when needed, which could force us to delay, reduce or
eliminate our drug discovery, development and commercialization activities.



We may need to raise additional capital to fund our operations and clinical trials, to continue our research and development activities and to commercialize future product candidates.



We believe our cash, cash equivalents, marketable securities, and short-term
investments on hand, as well as future payments we expect to receive from our collaborations with Pharmion and ALTANA Pharma and interest earned on our investments are sufficient to fund our anticipated operating requirements for at least the next
18 months. However, we may need to raise additional funds in the future. Our ability to raise additional funds will depend on financial, economic, market conditions and other factors, many of which are beyond our control. If necessary funds are not
available to us on satisfactory terms, or at all, we may have to reduce expenditures for research and development and clinical trials, which could delay, reduce or eliminate our drug discovery, development and commercialization activities. Any delay
in our development activities could delay our ability to commercialize a product.



Our success depends on recruiting and retaining key personnel and, if we fail to do so, it may be more difficult for us to execute our business strategy.



We depend on key members of our management team and scientific personnel. The loss of key managers or scientists, such as Marcel
Rozencweig, our senior vice president for drug development, could delay the advancement of our research and development activities. We do not maintain any key man insurance. The implementation of our business strategy and our future success will
also depend in large part on our continued ability to attract and retain other highly qualified



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scientific, technical and management personnel, as well as personnel with expertise in clinical testing, regulatory approval, and sales and marketing.



We face competition for personnel from other companies, universities, public and
private research institutions and other organizations. The process of hiring suitably qualified personnel is often lengthy. If our recruitment and retention efforts are unsuccessful in the future, it may be more difficult for us to execute our
business strategy.



The members of the Management Board and of the
management team identified in Item 6 entitled Directors, Senior Management and Employees comprise our key employees. The members of our Management Board have service agreements for a term of four years each, except for
Dr. Seizinger who has a service agreement for a term of five years. The Germany-based member of the management team, David Bancroft, has a standard German employment contract of indefinite duration subject to termination in accordance with
applicable law and upon reaching the age of 65. In the United States, only Gregory Hamm has an employment contract; the employment relationships of all other US-based members of our management team are terminable at will.



We expect to expand our research, clinical development, and sales and marketing
capabilities and, as a result, may encounter difficulties in managing our growth, which could disrupt our operations.



As our research and development programs continue to advance, we expect that the number of our employees and the scope of our operations will grow. Our operations
may also expand as the result of mergers and acquisitions, such as the acquisition of substantially all of the assets of Axxima Pharmaceuticals AG and the related hiring of 40 former employees of Axxima at the time of the acquisition in early 2005.
To manage our anticipated future growth, we must continue to improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Because we are a relatively small
company, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations, including the establishment of a sales and marketing force, could
increase our costs significantly and may divert our management and business development resources. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our
ability to manage future growth effectively.



We depend on
intellectual property licensed from third parties, and termination of any of these licenses could result in the loss of significant rights, which would harm our business.



We hold licenses granted by Spectrum Pharmaceuticals, Inc. for satraplatin, and by MorphoSys AG for our antibody product candidate,
1D09C3, and by other parties related to certain of our pre-clinical research projects. In addition, because the field of antibody therapeutics is characterized by a large amount of intellectual property, we also have a number of other licenses in
addition to our license from MorphoSys related to the discovery or the production and commercialization of 1D09C3. We also hold licenses to third party patents important for our research technologies. Any termination of these licenses could result
in the loss of significant rights and could harm our ability to commercialize our drug candidates or technologies. Our ownership of patents relating to some or all of our products will not reduce our reliance on these and other third party patents.



Our agreement with Spectrum Pharmaceuticals is a sublicense under a
license agreement between Spectrum Pharmaceuticals and Johnson Matthey Plc. We must therefore rely on Spectrum Pharmaceuticals to enforce its rights and Johnson Mattheys obligations under their license agreement. If Spectrum Pharmaceuticals
were to become insolvent or go into receivership, we would have limited access to assets related to satraplatin and limited ability to enforce directly any of Spectrum



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Pharmaceuticals rights or Johnson Mattheys obligations under such agreement. As a result, our development and commercialization of satraplatin could be
significantly delayed or prevented.



When we license intellectual
property from third parties, those parties generally retain most or all of the obligations to maintain, as well as the rights to assert, that intellectual property. We generally have no rights to require our licensors to apply for new patents,
except to the extent that we actually assist in the creation or development of patentable intellectual property. With respect to intellectual property that we license, we are generally also subject to all of the same risks with respect to its
protection as we are for intellectual property that we own, which are described below.



We rely on third parties to supply the active pharmaceutical ingredients in our product candidates. If they do not supply materials of satisfactory quality, in a timely manner, in sufficient quantities or at an acceptable
cost, clinical development and commercialization of our product candidates could be delayed.



We depend and will depend on supply, quality and other agreements for compounds that are essential for the development and commercialization of our product
candidates, including satraplatin. In 2005, we entered into an exclusive commercial supply agreement with Johnson Matthey for additional supplies of the active pharmaceutical ingredient (API) for satraplatin for future clinical trials, as well as
for commercial amounts of satraplatin. Johnson Matthey has been our sole supplier of satraplatin to date. If supply of satraplatin from Johnson Matthey were to be interrupted for any reason, we estimate that identifying and contracting with an
alternative supplier for satraplatin would cost approximately $1 million.



Satraplatin manufacturing runs conducted to validate the process at commercial scale are scheduled for the fourth quarter of 2006. If Johnson Matthey is unable to successfully complete these validation runs, or if unforeseen problems arise
during such runs, the regulatory approval or commercial launch of satraplatin may be delayed or there may be a shortage of supply, which could negatively affect our future product sales.



To date, the sole supplier of 1D09C3, our monoclonal antibody product candidate, has been ICOS Corporation. We believe that the
initial supplies manufactured by ICOS are sufficient for our current and planned Phase 1/2 clinical trials, however, we are in the process of selecting a vendor for late-stage clinical development (Phase 3) and commercial manufacture. Even though we
have taken steps to assure the stability of our existing supplies, the material may degrade or otherwise become unacceptable for completion of our planned early-stage trials. Additionally, a strategic change in the current clinical development plan
may require supplies beyond what is available from the existing inventory of material. Since supplies from the vendor being selected for late-stage development would not be available for at least 24 months, this could result in a delay in the
clinical development of 1D09C3 until replacement or additional supplies become available.



Our supply of the active ingredient for satraplatin and other product candidates may become limited, be interrupted or become restricted in certain geographic regions, and our suppliers may not perform their contractual
obligations, for reasons including a shortage of raw materials or adverse regulatory actions. In this event, if we have not yet completed negotiations with alternate suppliers, we may not be able to obtain materials of acceptable quality from other
manufacturers, or at prices, on terms or in quantities acceptable to us or in a timeframe consistent with project plans. Any inability to obtain alternate suppliers, including an inability to obtain approval of an alternate supplier from the FDA and
other regulatory agencies, would delay or prevent the clinical development and commercialization of satraplatin and our other product candidates.



We rely on third parties to manufacture the finished form of our product candidates. If they do not manufacture our product candidates in finished form of
satisfactory quality, in a



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timely manner, in sufficient quantities or at an acceptable cost, clinical development and commercialization of our product candidates could be delayed.



We do not currently own or operate manufacturing or finishing
facilities and rely and expect to continue to rely on third parties for the production of clinical and commercial quantities of the finished form of our product candidates. Our current and anticipated future dependence upon others for the
manufacture of the finished form of our product candidates may adversely affect our ability to develop and commercialize any product candidates on a timely and competitive basis. We may not be able to maintain or renew our existing manufacturing
arrangements on acceptable terms, if at all.



To date, our product
candidates have been manufactured at the scale required for preclinical studies or clinical trials. If any of our product candidates is approved by the FDA or other regulatory agencies for commercial sale, we will need to have it manufactured in
commercial quantities. We have selected a commercial vendor for satraplatin finished product but have not yet completed the supply agreement. A secondary or backup commercial supplier for satraplatin finished product has not yet been selected. We
are also currently negotiating a contract with a vendor for the packaging and labeling of satraplatin for commercial sale. At the present time, we have a single clinical supply manufacturer for 1D09C3; other potential manufacturers have been
identified, but have not been evaluated.



We rely on third parties to
conduct clinical trials and assist with preclinical activities. If they do not perform as contractually required or expected, we may not be able to obtain regulatory approval for or commercialize our product candidates.



We do not have the ability to independently conduct clinical trials for our product
candidates, and we rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct our clinical trials. In particular, with regard to our Phase 3 registrational trial
for satraplatin, we have contracts with two contract research organizations, PharmaNet LLC and Cvitkovic Associés Consultants S.A. In the event that one of these contract research organizations were to terminate its agreement with us, we
would shift the full responsibility for conducting the trial to the remaining contract research organization. In the event that both of our contract research organizations were to terminate their agreements with us and, as a result, we needed to
transfer responsibilities to a new contract research organization, we believe we could engage one or more new contract research organizations with sufficient qualifications and international capabilities. Any of the foregoing events could, however,
cause significant delays, disruptions and cost increases in our satraplatin trials.



In addition, we rely on third parties to assist us with our preclinical development of product candidates. Our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, if:



| |  | these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| |  | these third parties need to be replaced; or
| | - | -------------------------------------------



| |  | the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



If any of these events occur, we may not be able to obtain
regulatory approval for, or successfully commercialize our product candidates.



We depend in part on the continued availability of outside scientific collaborators, including researchers at clinical research organizations and universities, in areas relevant to our research and product development. The competition for
these relationships is intense, and we cannot assure you that we will be able to maintain such relationships on acceptable terms, if at all. In addition, these



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outside relationships may be terminated by the collaborator at any time. Our scientific collaborators are not employees of GPC Biotech. As a result, we have limited
control, if any, over their activities and can expect that only limited amounts of their time will be dedicated to GPC Biotech activities. In addition, we may not control any intellectual property resulting from their activities.



We may not be successful in building an internal marketing and sales organization
and are, and may continue to be, dependent upon collaborative arrangements to complete the development and commercialization of satraplatin in the United States and certain other key territories and of our other product candidates. These
collaborative arrangements may place the development and commercialization of our product candidates outside of our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us.



We have limited experience in selling, marketing or distributing products and if we
receive regulatory approval to commence commercial sales of satraplatin or any of our product candidates, we will either have to establish a sales and marketing organization with appropriate technical expertise and supporting distribution
capability, or engage one or more collaboration partners, such as a pharmaceutical or other healthcare company with an existing distribution network and direct sales and marketing organization such as the relationship we have established with
Pharmion for Europe and certain other territories. We cannot assure you that we will be successful in the timely establishment of an internal sales and marketing organization to market and sell satraplatin in the United States and other territories
not covered by our agreement with Pharmion and/or in finding appropriate partners on terms favorable to us. Our failure to do so may cause us to have to enter into such collaborative arrangements on terms not favorable to us, which could adversely
affect our ability to generate revenues from the sale of our product candidates. It could also delay or hinder our ability to develop and commercialize our product candidates and could increase our costs of development and commercialization.



Dependence on collaborative arrangements will subject us to a number of
additional risks, including:



| |  | we may not be able to control the amount or timing of resources that our collaborators may devote to the product candidates;
| | - | ----------------------------------------------------------------------------------------------------------------------------



| |  | we may have to relinquish important rights, including intellectual property, marketing and distribution rights with respect to satraplatin or any of our other product candidates;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | should a collaborator fail to develop or commercialize one of our product candidates, we may not receive any future milestone payments or royalties;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | a collaborator could separately move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our collaborators may experience financial difficulties;
| | - | --------------------------------------------------------



| |  | business combinations or significant changes in a collaborators business strategy may also adversely affect a collaborators willingness or ability to complete its obligations
under any arrangement; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | collaborative research and development arrangements are often terminated or allowed to expire, which may delay the development and may increase the cost of developing our product candidates.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Risks Related to Our Industry



Early-stage drug discovery is subject to a high degree of failure.



Although we devote significant resources to the discovery of new anticancer drugs
and employ advanced technologies in our efforts to identify promising drug candidates to advance into preclinical studies, the risk that all or any one of our early-stage product candidates will fail is high. According to pharmaceutical industry
statistics published in 2001 by the Pharmaceutical Research and



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Manufacturers of America, only 1 in 1000 early stage drug discovery compounds is tested in clinical trials, and only 1 in 5 compounds that enters clinical trials
receives FDA approval for marketing as a prescription drug. Moreover, the results from preclinical studies and early clinical trials may not accurately predict the results obtained in later-stage clinical trials required for regulatory approval.
Because there is no prior experience in treating humans with early-stage product candidates, we cannot assure you that early-stage product candidates will prove in clinical testing to be effective and safe for use in humans. If our early-stage
product candidates do not prove to be effective or safe in such tests, regulatory approval for such products would be delayed or may not be obtainable.



Our product candidates must undergo rigorous clinical testing, the results of which are uncertain and could substantially delay or prevent us from bringing these
products to market.



Before we can obtain regulatory approval for a
product candidate, we must undertake extensive clinical testing in humans to demonstrate the products safety and effectiveness. These clinical trials are expensive, time-consuming and often take years to complete. According to pharmaceutical
industry statistics published in 2001 by the Pharmaceutical Research and Manufacturers of America, an average drug candidate receiving approval for marketing as a prescription drug required 6.5 years of clinical testing prior to submission of a
request to the FDA for marketing approval.



In connection with clinical
trials, we face risks that:



| |  | the product candidate may not be efficacious;
| | - | ---------------------------------------------



| |  | the product candidate may cause harmful side effects or patients may die;
| | - | -------------------------------------------------------------------------



| |  | the results may not confirm the results of earlier trials; or
| | - | -------------------------------------------------------------



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



Any of these events could cause a trial to fail and may significantly delay or prevent
us from obtaining regulatory approval for a product candidate.



Difficulties in enrolling patients in our clinical trials may increase costs and negatively affect the timing and outcome of our trials.



Completion of clinical trials depends, among other things, on our ability to enroll a sufficient number of patients, which is a function of many factors, including:



| |  | the nature of the clinical protocol;
| | - | ------------------------------------



| |  | the therapeutic endpoints chosen for evaluation;
| | - | ------------------------------------------------



| |  | the eligibility criteria for the trial that is related to the protocol;
| | - | -----------------------------------------------------------------------



| |  | the size of the patient population required for analysis of the trials therapeutic endpoints;
| | - | ----------------------------------------------------------------------------------------------



| |  | our ability to recruit clinical trial investigators with the appropriate competencies and experience;
| | - | -----------------------------------------------------------------------------------------------------



| |  | competition for patients by clinical trial programs for other treatments;
| | - | -------------------------------------------------------------------------



| |  | the proportion of patients leaving the study before reaching an endpoint; and
| | - | -----------------------------------------------------------------------------



| |  | the availability of adequate insurance.
| | - | ---------------------------------------



We may experience difficulties in enrolling patients in our clinical trials, which could increase the costs or affect the timing or outcome of these trials.



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We are subject to significant regulatory approval requirements, which could delay, prevent or limit our ability
to market our product candidates.



Our research and development
activities, preclinical studies, clinical trials and the anticipated manufacturing and marketing of our product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the United States and by comparable
authorities in Europe and elsewhere. We require the approval of the relevant regulatory authorities before we may commence commercial sales of our product candidates in a given market. The regulatory approval process is expensive and time-consuming,
and the timing of receipt of regulatory approval is difficult to predict.



Our product candidates could require a significantly longer time to gain regulatory approval than expected, or may never gain approval. A delay or denial of regulatory approval could delay our ability to generate product revenues and to
achieve profitability.



We have had an End-of-Phase 2 Meeting
with the FDA and completed a Special Protocol Assessment under which the FDA has evaluated our registrational approach for satraplatin to assess whether it is adequate to meet scientific and regulatory requirements in the United States. As a result,
the FDA confirmed its agreement with us that successful completion of the SPARC trial will form the primary basis for an efficacy claim, if executed flawlessly. In 2004, we also received a Scientific Advice Letter from the European Medicines Agency,
or EMEA, relating to our registrational approach for satraplatin in the European Union and in February 2006 received Additional Scientific Advice pertaining to the content of the clinical data required for a submission based upon progression-free
survival. The 2004 Scientific Advice Letter from the EMEA also identifies specific issues to be addressed in the clinical trial program and indicates that if the clinical data are not sufficiently convincing, then one Phase 3 trial will be
insufficient to obtain approval. A successful End-of-Phase 2 Meeting, Special Protocol Assessment and a Scientific Advice Letter, however, do not guarantee that satraplatin will receive regulatory approval and, in any event, are subject
to further developments in the medical and regulatory field. If the trial fails to demonstrate that satraplatin is safe or effective in FDAs risk/benefit evaluation, or the results of the trial are not statistically convincing, internally
consistent or clinically meaningful or are otherwise deemed inadequate by the FDA, the EMEA or other regulatory agencies, regulatory approval of satraplatin would be significantly delayed or may not be obtainable at all.



Changes in the regulatory approval policy during the development period of any of our
product candidates, changes in, or the enactment of, additional regulations or statutes, or changes in regulatory review practices for a submitted product application may cause a delay in obtaining approval or result in the rejection of an
application for regulatory approval.



Regulatory approval, if obtained,
may be made subject to limitations on the indicated uses for which we may market a product. These limitations could adversely affect our potential product revenues and our ability to achieve profitability. Regulatory approval may also require costly
post-marketing follow-up studies. In addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping related to the product will be subject to extensive ongoing regulatory requirements. Furthermore, for
any marketed product, its manufacturer and its manufacturing facilities will be subject to continual review and periodic inspections by the FDA and other regulatory authorities. Failure to comply with applicable regulatory requirements may, among
other things, result in fines, suspensions of regulatory approvals, product recalls, product seizures, operating restrictions and criminal prosecution.



Our ability to commercialize our product candidates successfully will depend in part on the extent to which governmental authorities, private health insurers and
other organizations establish appropriate reimbursement levels relating to any products we may eventually sell.



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Third-party payors are increasingly challenging the prices charged for medical products and services. Also, the
trend toward managed health care in the United States, which could significantly influence the purchase of health care services and products, as well as legislative proposals to reform health care or reduce government insurance programs, may result
in lower prices for any drug products we may eventually sell or exclusion of our drug products from reimbursement programs. The U.S. Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law in December 2003. This law
has only recently been implemented and it is difficult to predict how it will impact the reimbursement of cancer therapies. The cost containment measures that health care payors and providers are instituting and the effect of any health care reform
could adversely affect our potential product revenues and our ability to achieve profitability.



Obtaining and maintaining reimbursement status is time consuming and costly. There is significant uncertainty as to the reimbursement status of newly approved
medical products. Third-party payors may not reimburse for treatments with our drugs or they may delay making the decision to reimburse. Either of these would reduce the commercial value of the drug to us.



In certain foreign markets, including much of Europe, the pricing, and especially the
reimbursement under social security systems, of prescription pharmaceuticals is subject to government control. These governments or related bodies may deny reimbursement status or establish prices for products we may introduce at levels that are too
low to enable us to realize an appropriate return on our investment in product development.



We have no control over our key manufacturers and suppliers compliance with manufacturing regulations and their failure to comply could result in an interruption in the supply of our product candidates.



The manufacturing process of pharmaceutical products is highly
regulated. Our present or future manufacturers and suppliers may not be able to comply with FDA mandated current Good Manufacturing Practices, or cGMP, other FDA regulatory requirements or similar regulatory requirements outside the United States.
Any failure by our third-party manufacturers or suppliers to comply with applicable regulations could result in sanctions being imposed on them (including fines, injunctions and civil penalties), the failure of regulatory authorities to grant
marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecution. Any of these events would likely
cause an interruption in the supply of our product candidate and cost increases.



We are dependent on patents and proprietary technology, both our own and those licensed from others. If we or our licensors fail to adequately protect this intellectual property or if we do not have exclusivity for the marketing of our
products, our ability to commercialize products could suffer.



Our
success depends in part on our ability, and the ability of our licensors, to obtain patent protection for technologies, products and processes, to preserve trade secrets, to defend and enforce rights against infringement and to operate without
infringing the proprietary rights of third parties, in the United States, Europe and elsewhere. The validity and breadth of claims in medical or pharmaceutical technology and biotechnology or life science patents involve complex legal and factual
questions and, therefore, may be highly uncertain. For example, the value of our intellectual property rights depend on whether:



| |  | the inventors of our patents, or those we co-own or license were the first to make the inventions, or the first to file patent applications covering the intellectual property important for
our business;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | we will develop, co-develop, acquire or license additional technologies or product candidates that are patentable;
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | the scope of any patent protection we, the co-owners of our intellectual property rights or our licensors receive will exclude competitors or provide us with competitive advantages;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | any of the patents that have been or may be issued to us, the co-owners of our intellectual property rights or our licensors will provide protection for commercially viable products, or be
held valid if subsequently challenged;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our licensors effectively prosecute, maintain, defend, extend and enforce the patents and patent applications we have licensed;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| |  | patent authorities will grant patents to our competitors or others that restrict our business based on applications they have filed or may file;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we will be able to detect, or, if detected, defend in an effective manner against infringement of any patent we, the co-owners of our intellectual property rights or our licensors receive;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | others claim rights in, or ownership of, the patents and other proprietary rights that we hold or license;
| | - | ----------------------------------------------------------------------------------------------------------



| |  | any patent that we, the co-owners of our intellectual property rights or our licensors receive will be eligible under, and benefit from, any laws or regulations governing patent term
extension;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the patents of others have an adverse effect on our business; or
| | - | ----------------------------------------------------------------



| |  | others have developed or will develop similar technologies, product candidates, products or processes, duplicate any of those, or design around any patents that have been or may be issued to
us, the co-owners of our intellectual property rights or our licensors, particularly in relation to satraplatin and 1D09C3.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We try to protect our proprietary position by generally filing U.S. and foreign patent applications related to those of our proprietary technologies, inventions and
improvements that are important to our business, including those related to the development of our product candidates. Our ability to obtain patents is, however, highly uncertain because, to date, some legal principles remain unresolved and there
has not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the United States and elsewhere. Moreover, the specific content of patents and patent applications that are necessary to support and interpret
patent claims is highly uncertain due to the complex nature of the relevant legal, scientific and factual issues. The policies governing biotechnology patents outside the United States, especially in Germany, are even more uncertain. Changes in
either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.



Patents, if issued, may be challenged, invalidated or circumvented. United States
patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination proceedings. Foreign patents may be subject to opposition or comparable proceedings. Moreover, the Federal Food, Drug,
and Cosmetic Act and FDA regulations and policies provide incentives to manufacturers to challenge patent validity or create modified, non-infringing versions of a drug in order to facilitate the approval of abbreviated new drug applications for
generic substitutes. Such proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference,
reexamination and opposition proceedings may be costly and time-consuming, and even if we were to prevail, would distract management. Although we are not currently facing any threats of these types of legal actions with respect to our product
candidates, the risk of these legal actions increases as our product candidates progress toward commercialization and should they ultimately be approved and commercialized.



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Any patents or patent applications that we own, co-own or license from others may not provide any protection
against competitors. Our pending patent applications, those we may file in the future, or those we have licensed or may license from third parties, may not result in patents being issued. If issued, the patents may not provide us with proprietary
protection or competitive advantages against competitors with similar technology, products or processes. Furthermore, others may independently develop similar technologies, products or processes or duplicate any of those that we have developed.



We depend on third parties, such as patent-annuity payment companies, to
pay the annuity, renewal and other fees required to maintain our patents and patent applications. Non- payment or delay in the payment of these fees is likely to result in irrevocable loss of patents or patent rights important to our business.



We, the co-owners of our intellectual property rights or our
licensors may face difficulties in protecting intellectual property in countries other than the United States, which may diminish the value of our intellectual property in those countries.



The laws of some foreign jurisdictions do not protect intellectual property rights to
the same extent as in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we, the co-owners of our intellectual property rights or licensors
encounter such difficulties in protecting, or are otherwise precluded from effectively protecting, in foreign jurisdictions the intellectual property rights important for our business, the value of these rights may be diminished and we may face
additional competition from others in these jurisdictions.



Many
countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (if, for example, the patent owner has failed to work the invention in that
country, or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which
could materially diminish the value of the patent.



Many of our and our
collaborators research and development employees and/or consultants work in Germany or other European countries and are subject to German employment law or comparable rules in other European jurisdictions. Ideas, developments, discoveries and
inventions made by such employees and consultants are subject to the provisions of the German Act on Employees Inventions (Gesetz über Arbeitnehmererfindungen) or similar European legislation, which regulates the ownership of, and
compensation for, inventions made by employees. For such inventions, we face the risk that disputes can occur between employer and employee, ex-employee, or employers of our consultants pertaining to alleged non-adherence to the provisions of this
act. Even if we, the co-owners of our intellectual property rights or licensors prevailed in any such dispute, such action could result in substantial costs and be a distraction to management. If we fail in such dispute, in addition to paying
substantial money damages, we may lose valuable intellectual property rights.



Claims that we infringe a third partys intellectual property may give rise to burdensome litigation, result in potential liability for damages or stop our development and commercialization efforts.



The pharmaceutical, biotechnology and other life sciences industries are characterized
by the existence of a large number of patents and frequent litigation based upon allegations of patent infringement. The owners or licensees of these and other patents may file one or more injunctive or infringement actions against us or our
collaborators or licensees. Patent litigation can involve complex factual and legal questions, and its outcome is uncertain. Any claim relating to infringement of patents that is successfully asserted against us may result in us paying substantial
money damages. Even if



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we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations.
Furthermore, as a result of a patent infringement suit brought against us or our collaborators or licensees, we or our partners or licensees may be forced to stop or delay developing, manufacturing or selling products that are claimed to infringe a
third partys intellectual property unless that party grants us or our collaborators or licensees rights to use its intellectual property. In these cases, we or our collaborators or licensees may be required to obtain licenses to patents or
proprietary rights of others in order to continue to commercialize our products. However, we or our collaborators or licensees may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable
terms, or at all. Even if our collaborators, licensees or we were able to obtain rights to the third partys intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property.
Ultimately, we or our collaborators or licensees may be unable to commercialize some of our products or may have to discontinue development or use of a technology or product candidate or cease some of our or their business operations as a result of
patent infringement claims, which could severely harm our business.



United States and foreign patents have been issued to third parties in the same fields as some of our technologies and product candidates and in fields that relate to the development and manufacture of our product candidates. We are aware
of an issued patent covering a drug-protein interaction technology similar to our LeadCodetechnology that describes a
biotin based drug-fusion molecule. Biotin is a naturally occurring molecule that binds to certain proteins enabling them to perform their function. There are also numerous patent filings claiming various genetic sequences, such as
protein coding sequences and regulatory sequences that may be useful in our research programs and technologies, including our LeadCodetechnology. Additionally, a large number of patents have been issued with respect to methods of discovering, producing, and other aspects of therapeutic antibodies, and we are aware of issued patents held by third parties that
relate to the production of recombinant antibodies, such as patents covering production in single cells by the independent expression of the two protein chains that make up the antibody, or more generally to the production of recombinant proteins.
We are also aware that a third party has an issued patent relating to treating plasmacytoma/multiple myeloma, Hodgkins lymphoma (also known as Hodgkins disease), non-Hodgkins lymphoma and B cell leukemias by using monoclonal
antibodies that specifically react with certain MHC class II molecules. We have not attempted to obtain licenses to any of these patents. If we decide to obtain licenses to these patents, we cannot guarantee that we would be able to obtain such
licenses on commercially reasonable terms, or at all. Should we not obtain one or more appropriate licenses and infringement claims be brought against us, we may be unable to convince a court that the allegedly infringed patent was invalid or
otherwise unenforceable against our product candidates, research programs or technologies, and we may be prevented from practicing or marketing our product candidates, research programs or technologies in countries in which the patent is in force.



While our product candidates are in clinical trials, and prior to
commercialization, we believe our activities fall within the scope of the exemptions from patent infringement provided by 35 U.S.C. Section 271(e)(1) in the United States, which covers activities related to developing information for submission
to the FDA. As our product candidates progress toward commercialization, the possibility of an infringement claim against us increases. Analogous provisions may not exist or may not exempt from patent infringement those clinical trials we conduct in
other countries.



Our competitive position also depends on trade
secrets and other forms of non-patented intellectual property protection. If we are unable to protect our trade secrets, other companies may be able to compete more effectively against us, and our business could suffer.



We also rely on trade secrets, know-how and technology, which are not protected by
patents, to maintain our competitive position. We try to protect this information by entering into confidentiality



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agreements with parties that have access to it, such as our collaborators, licensees, employees and consultants. Any of these parties may breach these agreements and
disclose our confidential information, or our competitors might learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a
competitor, our ability to generate revenues from our product candidates could be severely damaged.



We may be required to pay substantial money damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of
their former employers or other third parties.



Many of our employees
were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors, or at universities. We and our employees have received information from third parties that such third parties may
believe was received or should be treated under an obligation of confidentiality. Although no claims against us are currently pending, we may in the future be subject to claims that these employees or we have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of their former employers or other third parties. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying substantial money damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or
their work product could delay or prevent our ability to commercialize one or more of our product candidates.



We are subject to significant environmental, health and safety regulation, compliance with which can be expensive.



We are subject to a variety of health, safety and environmental laws and regulations in
the United States, Germany and other countries. These laws and regulations govern, among other things, waste water discharge, air emissions and waste management. We have incurred, and will continue to incur, capital and operating expenditures and
other costs in the ordinary course of our business in complying with these laws and regulations. Because we produce small amounts of experimental compounds and operate laboratory facilities, some risk of environmental liability is inherent in our
business. Additionally, material costs of environmental compliance may arise in the future, increasing the overall costs of regulatory compliance.



Our research activities require access to tissue samples and other biological material. If we lose access to these materials, our ability to discover and develop
new product candidates could be impaired and we may incur substantial additional development costs.



Our research activities require access to normal and diseased human tissue samples, other biological materials and related clinical or other information, which may
be in limited supply. We may not be able to obtain or maintain access to these materials or information on commercially acceptable terms or at all. In addition, government regulations in the United States or Europe could result in restricted access
to, or use of, human or other tissue samples or related information. If we lose access to sufficient numbers or sources of tissue samples, or if tighter restrictions are imposed on our use of the information generated from tissue samples, we may not
be able to conduct our research activities as we have planned and may incur additional development costs.



We may become exposed to costly and damaging product liability claims and may not be able to maintain sufficient product liability insurance to cover claims
against us. Even in the absence of product liability lawsuits, unforeseen adverse side effects could harm sales of our products.



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We face the risk of substantial liability for damages in the event a patient experiences adverse side effects
during clinical trials or after any drugs we may develop are marketed. If any of our products were to cause adverse side effects, substantial losses in excess of our insurance coverage could result, which could negatively impact our financial
condition, results of operations and cash flows. Our products are intended to be used to treat cancer cases, in which the patient and physician may conclude that the therapeutic benefits of the drug outweigh the potential risk of adverse side
effects. Nevertheless, patients who suffer complications may attribute these complications to the drug and, as a consequence, bring product liability actions against us.



Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even
after approval, may exhibit unforeseen adverse side effects. Such side effects could affect the safety profile of the product. Even if these side effects are not so serious as to warrant withdrawing the product from use, they could reduce the
products competitive advantage, especially if alternative products offer comparable therapeutic benefits with less severe potential side effects.



We maintain limited product liability insurance for our product candidates when used in clinical trials. In several countries that have legally mandated amounts of
coverage, we have purchased insurance to meet these requirements, which varies widely from 1.0 million per study in Hungary to
50.0 million in Germany. For other countries, such as the United States, where there is no such legal mandate, our insurance
coverage is limited to $20 million per occurrence and in the aggregate. We expect to obtain more extensive product liability insurance for any products that we may eventually commercialize when it is economical and appropriate to do so, given the
level of premiums and the risk and magnitude of potential liability. We may not be able to obtain insurance on acceptable terms or at all or the amount of insurance we have may not be adequate to cover potential claims or losses. Uninsured losses
would adversely affect our profitability.



We may not be able to
conduct, or contract others to conduct, animal testing in the future, which could harm our research and development activities.



Certain laws and regulations relating to drug development require us to test our product candidates on animals before initiating clinical trials involving humans.
Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these
areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted or delayed.



Risks Related to an Investment in Our Company



The price of our shares and ADSs is highly volatile and could decline significantly.



The market price of our ordinary shares and our ADSs historically
has been, and we expect will continue to be, subject to significant fluctuations over short periods of time. These fluctuations may be due to factors specific to us, to changes in analysts recommendations and earnings estimates, or to factors
affecting the biopharmaceutical industry or the securities markets in general. For example, during the period from January 1, 2005 to December 31, 2005, the price per share of our ordinary shares on XETRA ranged from 7.99 to 11.90.
During the period from January 1, 2005 to December 31, 2005, the price per ADS on the Nasdaq National Market, or Nasdaq, ranged from $10.56 to $15.11. We may experience a material decline in the market price of our shares or ADSs,
regardless of our operating performance.



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Price declines in our shares could result from a variety of factors, including many outside our control. These
factors include:



| |  | adverse results or delays in our clinical trial programs, especially our current Phase 3 registrational trial for satraplatin;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| |  | FDA or other regulatory actions;
| | - | --------------------------------



| |  | failure of any of our product candidates, if approved, to achieve commercial success;
| | - | -------------------------------------------------------------------------------------



| |  | announcements of the introduction of new products by us or our competitors;
| | - | ---------------------------------------------------------------------------



| |  | market conditions in the pharmaceutical and biotechnology sectors;
| | - | ------------------------------------------------------------------



| |  | developments or litigation concerning patents, licenses and other intellectual property rights;
| | - | -----------------------------------------------------------------------------------------------



| |  | litigation or public concern about the safety of our potential products;
| | - | ------------------------------------------------------------------------



| |  | changes in recommendations or earnings estimates by securities analysts;
| | - | ------------------------------------------------------------------------



| |  | actual and anticipated fluctuations in our quarterly operating results;
| | - | -----------------------------------------------------------------------



| |  | deviations in our operating results from the estimates of securities analysts;
| | - | ------------------------------------------------------------------------------



| |  | rumors relating to us or our competitors;
| | - | -----------------------------------------



| |  | departures of key personnel;
| | - | ----------------------------



| |  | changes in third party reimbursement policies; and
| | - | --------------------------------------------------



| |  | developments concerning current or future strategic alliances or acquisitions.
| | - | ------------------------------------------------------------------------------



In the past, following periods of volatility in the market price of a particular companys securities, securities class action litigation has often been
brought against that company. We may become involved in this type of litigation in the future. Litigation of this type is often extremely expensive and diverts managements attention and the companys resources.



We have never paid dividends on our shares, and we do not anticipate paying
dividends in the foreseeable future.



We have never paid dividends on
our shares. Under German corporate law, we currently have no ability to pay dividends because of our past losses. We do not expect to have any annual net income for the foreseeable future. We currently plan to retain our future annual net income, if
any, to fund our product development activities and internal growth. As a result, capital appreciation, if any, of our shares will be your sole potential source of gain for the foreseeable future.



The price of our ADSs and the U.S. dollar value of any dividends will be affected by
fluctuations in the U.S. dollar/euro exchange rate.



Our ADSs trade
in U.S. dollars. Fluctuations in the exchange rate between the euro and the U.S. dollar may affect the market price of the ADSs. This could adversely affect the price at which the ADSs trade on the U.S. securities markets. Additionally, any dividend
we might pay in the future would be denominated in euro. A decline in the value of the euro against the U.S. dollar would reduce the dollar equivalent of any such dividend.



Future sales of our shares in the public market could adversely affect the price of our shares and ADSs.



The market price of our shares and ADSs could drop due to sales of a large number of
our shares in the market or the perception that such sales could occur. These sales could also make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.



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As of December 31, 2005, members of our Supervisory Board and Management Board together held approximately
2.00% of our outstanding shares. Subject to Company policies and applicable law, we and members of our Supervisory Board and our Management Board are free to issue, offer, sell or otherwise dispose of shares.



Rights as a shareholder in a German corporation may differ from rights customary for
a shareholder in a U.S. corporation.



We are organized as a stock
corporation (Aktiengesellschaft) under the laws of Germany. Our shareholders should be aware that the rights of shareholders under German law differ in important respects from those of shareholders in a U.S. corporation. These differences are
described in greater detail in Item 4 of this Annual Report under German Corporate Law.



In addition, as a non-U.S. corporation, we are not subject to some of the provisions of U.S. securities laws that apply to U.S. issuers. We are not subject to the
proxy rules promulgated under Section 14 of the U.S. Securities Exchange Act of 1934, or Exchange Act. Additionally, short-swing profit and recovery provisions under Section 16 of the Exchange Act do not apply to us or the members of our
Management Board and Supervisory Board. Furthermore, as a foreign private issuer, we are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K with the U.S. Securities and Exchange Commission. In accordance with German
law and the rules and regulations promulgated by the Frankfurt Stock Exchange, GPC Biotechs historical practice, however, has been to publish its three-, six- and nine-month interim financial information. We expect to continue this practice,
and to file this information with the U.S. Securities and Exchange Commission in the United States on Form 6-K.



We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.



Depending on various factors, we could be classified, for United States income tax
purposes, as a passive foreign investment company, or PFIC. This characterization could result in adverse U.S. federal income consequences for any U.S. holder of our shares or ADSs. We could be classified as a PFIC for U.S. federal
income tax purposes in any taxable year in which, after taking into account the income and assets of our subsidiary, either:



| |  | at least 75% of our gross income is passive income, or
| | - | ------------------------------------------------------



| |  | at least 50% of the average value of our assets is attributable to assets that produce or are held to produce passive income.
| | - | -----------------------------------------------------------------------------------------------------------------------------



If we are treated as a PFIC for any taxable year, U.S. investors in our shares or ADSs
may be able to make an election to mark-to-market our shares or ADSs each taxable year and recognize ordinary income pursuant to such election based upon increases in the value of our shares or ADSs.



Absent an election described above, a U.S. investor of a PFIC would be subject to
adverse tax consequences, including:



| |  | U.S. federal income tax at ordinary income tax rates in respect of gain derived from a disposition of our shares, as well as some distributions by us;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | interest charges on taxes allocable to prior periods; and
| | - | ---------------------------------------------------------



| |  | no increase in the tax basis for our shares or ADSs to fair market value upon the death of an individual shareholder.
| | - | ---------------------------------------------------------------------------------------------------------------------



We currently believe that we will not be treated as a PFIC for the taxable year ended
December 31, 2005. The determination of whether we are a PFIC is made on an annual basis and will depend on factors such as the composition of our income and assets from time to time as well as our share price. Therefore, it is possible that we
could be classified as a PFIC for any particular year.



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Item 4. Information on the Company



INTRODUCTION



History and Development



The legal and commercial name of our company is GPC Biotech AG. We were
originally formed as a limited liability company (Gesellschaft mit beschränkter HaftungorGmbH) under German law in January 1997. In Feburary 1998, we transformed into a stock corporation (Aktiengesellschaft or AG)
under German law and changed our name to GPC Aktiengesellschaft Genome Pharmaceuticals Corporation. On March 3, 2000, we changed our name to GPC Biotech AG. Our principal executive offices are located at Fraunhoferstrasse 20, D-82152
Martinsried/Munich, Germany and our telephone number is 011 49 89 8565 2600. Our corporate website is located at www.gpc-biotech.com. Our authorized representative in the United States is Brent Hatzis-Schoch, Vice President & General
Counsel, and our agent for service in the United States is our U.S. subsidiary, GPC Biotech Inc., located at 610 Lincoln Street, Waltham, MA 02451.



Our ordinary shares are traded on the Frankfurt Stock Exchange under the symbol GPC and in June 2004, we listed American Depository Shares representing
our ordinary shares on Nasdaq under the symbol GPCB.



We
focus our efforts on oncology drug discovery and development. In March 2000, we acquired Mitotix, Inc., a U.S. drug discovery and development company focused on treatments for cancer and fungal infections. The total purchase price for the
acquisition was approximately 31.2 million, which we paid for with our ordinary shares. After the acquisition, Mitotix, Inc.
changed its name to GPC Biotech Inc.



In September 2002, we licensed
satraplatin, our late stage chemotherapy product candidate for the second-line chemotherapy treatment of HRPC, from Spectrum Pharmaceuticals, Inc.



In March 2005, we acquired substantially all of the assets and hired certain of the discovery scientists of Axxima, a Munich-based biotechnology firm. This
transaction added complementary expertise and capabilities in the area of kinase-based drug discovery.



In December 2005, we entered into a co-development and license agreement for satraplatin with Pharmion. Under the terms of the agreement, Pharmion gained exclusive
commercialization rights for Europe, the Middle East, including Turkey, Australia and New Zealand. We retain all our current rights in the U.S. as well as other key non-European markets, such as Japan.



Capital Expenditures



The following table sets forth our capital expenditures, including purchases under capital lease obligations in fiscal years 2005,
2004 and 2003.



|                                 |  |                               |  |       |  |      
|-------------------------------- |  | ----------------------------- |  | ----- |  | -----
|                                 |  | Fiscal Year endedDecember 31,
|                                 |  | 2005                          |  | 2004  |  | 2003 
|Property, equipment and licenses |  | 4,549                         |  | 1,071 |  | 1,669
|                                 |  |                               |  |       |  |      
|Total                            |  | 4,549                         |  | 1,071 |  | 1,669
|                                 |  |                               |  |       |  |      



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We finance our current capital expenditures out of our cash resources. Of our total capital expenditures in fiscal
years 2005, 2004 and 2003, 17.2%, 29.0%, and 16.2% %, respectively, were invested in the United States.



Business Overview



GPC Biotech is a
biopharmaceutical company with a mission to discover, develop and commercialize new drugs to treat cancer. We have drug candidates in different stages of development. Our drug pipeline is composed of drug candidates developed by our internal
research teams as well as drug candidates that were licensed from other parties. We currently have no revenues from the sale of products.



Our lead product candidate is satraplatin, a platinum-based compound intended for use as a chemotherapy treatment. Platinum-based drugs have been clinically proven
to be one of the most effective classes of anticancer therapies and are used to treat a wide range of cancers. Unlike currently marketed platinum-based drugs, satraplatin is administered orally. In December 2005, enrollment was completed in a Phase
3 registrational trial with satraplatin as a second-line chemotherapy treatment for HRPC. This study, the SPARC trial, enrolled a total of 950 patients at approximately 200 sites in sixteen countries on four continents.



There is currently no approved second-line chemotherapy treatment regimen for patients
who fail first-line chemotherapy treatment for HRPC. We were therefore able to obtain fast-track designation from the FDA for satraplatin in this disease setting and we began the rolling submission of an NDA with the FDA for satraplatin in
combination with prednisone as a second-line chemotherapy treatment for patients with HRPC in December 2005. To begin the rolling NDA process, we submitted to the FDA the chemistry, manufacturing and controls, or CMC, section of the NDA filing. The
rolling submission process enables companies that have been granted fast track designation by the FDA to submit sections of the NDA to the agency as they become available, allowing the review process to begin before the complete dossier has been
submitted. Our goal is to complete the NDA filing by the end of 2006.



Based on clinical data from earlier clinical trials, we believe that satraplatin may have application in a number of cancers. During 2005, we initiated several additional clinical trials exploring satraplatin in various tumor types and as a
combination therapy with other cancer treatments.



In December 2005, we
signed a major co-development and license agreement with Pharmion for satraplatin. Under this collaboration, Pharmion gained exclusive commercialization rights to satraplatin for Europe, the Middle East, including Turkey, Australia and New Zealand.
We retain our current rights to the U.S., as well as other key non-European markets, including Japan.



Our second most advanced product candidate is 1D09C3, a monoclonal antibody that is in a Phase 1 clinical trial and is intended for the treatment of selected
leukemias and lymphomas, including non-Hodgkins lymphoma. A monoclonal antibody is an immune system related protein that binds preferentially to one type of foreign substance, potentially stimulating a biological response. We initiated a
clinical trial for 1D09C3 early in 2005. The aim of this trial is to assess the safety of this drug and to recommend a dose for Phase 2 clinical trials. Furthermore, we have several distinct research programs to discover new anticancer drug
candidates.



In addition to our research and development programs, we
also have an ongoing technology collaboration with ALTANA Pharma pursuant to which we are assisting ALTANA Pharma with its research institute in the United States. This agreement includes a research collaboration as well as a transfer of
technologies. Effective January 2003, we also entered into another collaboration agreement with ALTANA Pharma pursuant to which we licensed LeadCode.



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On March 2, 2005, we entered into an Asset Purchase Agreement for the acquisition of substantially all of the
assets of Axxima, a kinase drug discovery firm based in Munich, Germany, which filed for insolvency in December 2004. Axximas assets were transferred to a newly formed holding company. We purchased the holding company, which, in addition to
substantially all of the assets of Axxima, held a net 8.7 million cash infusion from investors and substantially all of
Axximas patents, patent applications and know-how as well as several early-stage drug discovery programs in the areas of cancer. We purchased this new company from the investors with approximately 1.3 million newly issued shares of GPC
Biotech. At the time of the transaction, we also hired 40 employees of Axxima to further strengthen our own drug discovery capabilities.



In past years, we have funded our operations primarily through the sale of equity securities, payments received under our agreements with ALTANA Pharma and other
pharmaceutical companies, interest earned on investments and other sources of funding. We expect to continue to fund our operations over the next several years primarily through our existing cash resources, future payments from Pharmion and ALTANA
Pharma, interest earned on investments and potential future sales of equity securities. Payments received from our partner, Pharmion, for shared development costs will also offset a portion of future development costs.



Our Strategy



We are focused on oncology because this is an area in which, despite progress in understanding cancer and the resulting development of
new therapies, there is still a lack of effective treatments. Also, due to the relatively short timeframe and low number of patients needed for oncology clinical trials, the costs of clinical development of anticancer drugs are significantly lower
than those for many other diseases. We have assembled a highly experienced team of scientists and executives specialized in the fields of oncology drug discovery, development and commercialization. We believe that the oncology markets rapid
growth and substantial unmet medical need, combined with our focused expertise, position us to compete effectively in the oncology drug market.



Our goals are to discover, develop and commercialize new anticancer drugs. We are pursuing these goals through the following strategies:



| |  | Enhance the commercial value of satraplatin to us.    We believe that we have the internal expertise and the financial resources to conduct our initiated and
additional planned clinical trials for satraplatin. We have partnered with a pharmaceutical firm with development, marketing and sales expertise in Europe and certain other territories. We believe this partnership will help us to maximize the value
of satraplatin to us in these key markets. Additionally, this partner will assist us in funding satraplatins development. For the U.S., our goal is to take the lead in marketing and sales for satraplatin. We do, however, continue to hold open
the possibility of entering into a co-promotion, profit-sharing or other form of strategic alliance for the U.S. market with a pharmaceutical or biotechnology firm to maximize the commercial potential of satraplatin. For other key markets, including
Japan, we expect to enter into (an) additional strategic alliance(s). Clinical trials with satraplatin conducted by others have demonstrated beneficial activity in prostate cancer, as well as in other cancers, such as ovarian cancer and lung cancer,
and have also demonstrated beneficial effects when combined with other chemotherapy drugs or when combined with radiation therapy. As part of our satraplatin development program, we have initiated several studies with satraplatin in addition to the
SPARC registrational trial.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Build a strong portfolio of oncology drugs.    We are using our internal research expertise to help us identify promising new drug discovery
projects and to initiate new drug discovery programs. We have further enhanced our internal discovery capabilities
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | through the acquisition of substantially all of the assets of Axxima Pharmaceuticals and the related hiring of certain of their former employees. To support our
internal research efforts, we seek to leverage our external network of experts in the oncology field to identify and evaluate in-licensing opportunities. This strategy has already proven successful in the in-licensing of satraplatin, and we continue
to evaluate numerous opportunities on an ongoing basis. Additionally, to diversify the inherent risk associated with the development of anticancer drugs, we work on a diverse group of anticancer drug candidates. For example, we seek to diversify our
risk profile by developing product candidates that have known and validated mechanisms of action, such as satraplatin, as well as developing product candidates that have novel mechanisms of action.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Use our internal expertise to find the fastest path to market approval for our product candidates.    When planning our approach for obtaining regulatory
approval for a new anticancer drug candidate, we seek to minimize the time to market and maximize the likelihood of approval. We do this by designing registrational trials targeted at disease settings where no effective treatment alternatives exist.
Additionally, we discuss our clinical trial plans with the relevant regulatory authorities prior to initiating clinical trials to ensure that our trial designs will be acceptable to these regulatory authorities. For our lead product candidate,
satraplatin, we have obtained fast track designation from the FDA, participated in an End-of-Phase 2 Meeting with the FDA and completed a Special Protocol Assessment thereby obtaining a meaningful review of our overall registrational
approach by the FDA. Additionally, we have obtained a Scientific Advice Letter from the EMEA providing the EMEAs perspective on our registrational approach for satraplatin and also have received Additional Scientific Advice from the EMEA in
February 2006 pertaining to the content of the clinical data required for a submission based upon progression-free survival. We expect to take a similar approach for our other product candidates. We have assembled a clinical development team that is
highly experienced in designing and conducting successful clinical trial programs.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Product Pipeline



Cancer is the second leading cause
of death in the United States after cardiovascular disease. The American Cancer Society estimates that in 2006 there will be 1,399,790 new cases of cancer diagnosed and 564,830 deaths attributable to cancer in the United States. According to
GLOBOCAN 2000, in the year 2000, there were a total of 1,296,000 new cases of cancer and 789,000 deaths attributable to cancer in the United Kingdom, Germany, France, Italy and Spain.



Many different approaches are used in treating cancer, including surgery, radiation therapy, drugs or a combination of these
approaches. Drugs used to treat cancer include chemotherapeutics, hormones and immune-based therapies. According to the MattsonJack CancerMetric database, over 1 million cancer patients were treated with anticancer drugs in 2003 in the United
States. According to Reuters Business Insight estimates, the worldwide sales of anticancer drugs totaled over $14 billion in 2002 and are forecast to reach $20 billion in 2008.



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The following table summarizes the development status of our product candidates and research programs:



|                                                     |  |                                                                          |  |                                                
|---------------------------------------------------- |  | ------------------------------------------------------------------------ |  | -----------------------------------------------
|Product Candidate                                    |  | Indication                                                               |  | Development Status                             
|                                                     |  |                                                                         
|Satraplatin                                          |  | Second-line chemotherapy of HRPC                                         |  | Phase 3registrational trialenrollment complete
|                                                     |  |                                                                         
|                                                     |  | Metastatic breast cancer                                                 |  | Phase 2trial on going                         
|                                                     |  |                                                                         
|                                                     |  | Combination with Taxol® in
NSCLC                                         |  | Phase 2trial ongoing                          
|                                                     |  |                                                                         
|                                                     |  | Combination with radiation therapy in non-small cell lung cancer (NSCLC) |  | Phase 1/2trial ongoing                        
|                                                     |  |                                                                         
|                                                     |  | Combination with Taxotere® in
advanced solid tumors                      |  | Phase 1trials ongoing                         
|                                                     |  |                                                                         
|Monoclonal Antibody (1D09C3)                         |  | Relapsed/refractory B-cell lymphomas                                     |  | Phase 1trial ongoing                          
|                                                     |  |                                                                         
|Cell Cycle Inhibitors                                |  | Various refractory cancers                                               |  | Preclinical trialsongoing                     
|                                                     |  |                                                                         
|Multiple Programs Focused on Novel Kinase Inhibitors |  | Various cancers                                                          |  | Researchongoing                               



Satraplatin



Our lead product candidate is satraplatin, a member of the
platinum family of drugs. Platinum-based drugs represent one of the mainstays of modern chemotherapy and are used to treat a wide variety of cancers. We licensed the exclusive commercial rights to satraplatin, including the right to sublicense, in
the field of treating cancer in humans, from Spectrum Pharmaceuticals at the end of the third quarter of 2002. In December 2005, we entered into a co-development and license agreement for satraplatin with Pharmion for Europe, the Middle East,
including Turkey, Australia and New Zealand.



Market
Opportunity.    Three platinum-based drugs are currently marketed in the United States and Europe: carboplatin, cisplatin and oxaliplatin. These platinum-based drugs are used to treat more than 34 different cancers; in
many cases regimens containing a platinum-based drug represent the current standard of care. Another platinum-based drug, which is not currently on the market, is picoplatin. Picoplatin is administered intravenously and has shown activity for HRPC
in a Phase 2 clinical trial. NeoRx has initiated a Phase 2 clinical trial with the intravenous formulation of picoplatin for the treatment of SCLC that is resistant/refractory to cisplatin. Unlike these platinum-based drugs, which are administered
intravenously, satraplatin is administered orally in the form of capsules. Satraplatin has been studied in a variety of adult cancers in clinical trials conducted by others that in total have enrolled over 600 patients, excluding our SPARC trial. In
randomized clinical trials, satraplatin has shown anticancer activity in HRPC and is the only platinum-based compound for which such clinical data have been generated. Additional Phase 2 trials for satraplatin have been completed by others in
ovarian cancer and SCLC. Our goal is to develop satraplatin not only for the treatment of prostate cancer, but also for other cancers that are known to respond to treatment with platinum-based drugs.



Prostate Cancer and Existing Treatment
Regimens.    Prostate cancer is the most common cancer among men and the second leading cause of cancer deaths in men in the United States. Of the 720,280 new cases of cancer that are anticipated in American men in 2006,
the American Cancer Society estimates that 234,460 of those cases will be men diagnosed with prostate cancer. Moreover, of the estimated 291,270 men in the United States who are expected to die of cancer in 2006, 27,350 of those men are expected to
die of prostate cancer. Since the risk of prostate cancer increases with age, the aging of the overall population over the next several decades is expected to further increase the number of prostate cancer patients.



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During the early stages of prostate cancer, when the tumor is still confined within the prostate and adjacent
tissues, treatment may involve surgery, radiation therapy or a combination of the two. Surgery aims at completely removing the tumor from the body. Radiation therapy aims at killing prostate cancer cells, thereby shrinking tumors or preventing
cancer cells from dividing and spreading to remote sites in the body, a process known as metastasis. In many cases, however, the cancer progresses despite these treatments.



Once the cancer spreads outside the prostate gland, hormone ablation therapy is often used to try to control the cancer by limiting
the supply of hormones that this type of cancer needs to grow. Hormone ablation therapy may be accomplished by surgical castration or by chemical castration, which involves the administration of drugs to prevent the production of or to block the
action of testosterone and other male hormones.



While most prostate
cancer patients initially respond to hormone ablation therapy, the vast majority eventually relapse, becoming refractory to hormone treatment, typically after 24 to 30 months of treatment. According to the estimates of Datamonitor plc, approximately
70,000 men with prostate cancer in the United States were hormone refractory in 2002. For these HRPC patients, subsequent treatment involves a limited number of options, including chemotherapy and radiation therapy. Important advancements have been
made in recent years in treating HRPC. In particular, for the first time, clinical trials with Taxotere® (docetaxel) showed that chemotherapy can prolong the survival of patients with HRPC. Taxotere was approved in both the U.S. and Europe in 2004 as a chemotherapy treatment for HRPC.



The increasing use of chemotherapy in prostate cancer is creating a greater need for
additional effective therapeutic options for HRPC patients, especially for second-line chemotherapy treatments because a cure is not expected in HRPC with currently approved first-line chemotherapy treatments, including Taxotere regimens. Enrollment
has completed in a Phase 3 registrational trial evaluating satraplatin as a second-line chemotherapy treatment in HRPC and satraplatin is believed to be the only compound currently in Phase 3 clinical testing for this indication.



History and Prior Clinical Trials of
Satraplatin.    Satraplatin was invented and synthesized by scientists at Johnson Matthey as part of a collaboration with Bristol-Myers Squibb to find new platinum-based chemotherapy drugs. Unlike any of the marketed
platinum-based drugs, satraplatin showed anticancer activity when administered orally.



Between 1992 and 1999, Bristol-Myers Squibb initiated 29 clinical trials of satraplatin in a variety of cancers. A total of 615 patients were enrolled in these trials. Satraplatin demonstrated anticancer activity in various
cancers in these trials, including prostate cancer, ovarian cancer and SCLC. Additionally, satraplatin demonstrated anticancer activity in cancers of the head and neck and NSCLC when given in combination with radiation therapy.



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The following chart summarizes selected clinical studies involving satraplatin that were sponsored by Bristol-Myers
Squibb.



|                                                      |  |                                                                                                                         |  |              
|----------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | -------------
|Indication                                            |  | Clinical Status                                                                                                         |  | DateInitiated
|First-line chemotherapy of HRPC                       |  | 50-patient randomized Phase 3 trial conducted by the European Organization for Research and Treatment of Cancer (EORTC) |  | 1998         
|Second-line chemotherapy of ovarian cancer            |  | Randomized Phase 2 trial                                                                                                |  | 1995         
|First-line chemotherapy of SCLC                       |  | Phase 2 trial                                                                                                           |  | 1994         
|Combination with paclitaxel in various cancers        |  | Phase 1 trial                                                                                                           |  | 1996         
|Combination with radiation therapy in various cancers |  | Phase 1 trial                                                                                                           |  | 1997         
|Combination with etoposide in various cancers         |  | Phase 1 trial                                                                                                           |  | 1994         



The most important of the
clinical trials initiated during this period was a randomized Phase 3 trial comparing outcomes in a group of HRPC patients who received satraplatin plus prednisone to outcomes in another group that received prednisone alone. Bristol-Myers Squibb
initiated this clinical trial in 1998 with the intention of enrolling 380 patients. The trial was conducted by the EORTC. In 1999, Bristol-Myers Squibb terminated its satraplatin program as part of a strategic realignment of its development
portfolio. At that time the EORTC had entered 50 patients into the trial. The EORTC investigators continued to treat these 50 patients until either their cancer progressed or they died. The EORTC investigators reported the results at the 2003 Annual
Meeting of the American Society of Clinical Oncology and the results were published in the peer-reviewed medical journal Oncology in February 2005. The major finding from the trial was a significant prolongation of time during which patients
lived without their cancer progressing (progression-free survival) in the group treated with satraplatin plus prednisone.



The results also showed that a statistically greater proportion of patients treated with satraplatin plus prednisone experienced a decline of more than 50% of
prostate-specific antigen in their blood as compared with pre-treatment levels. The blood of prostate cancer patients usually contains elevated levels of prostate-specific antigen. Many clinicians use this protein in the diagnosis of prostate
cancer, in measuring response to treatment and in monitoring the recurrence and progression of this cancer, although currently this measure is not an accepted endpoint for the conduct of regstrational clinical trials in the U.S. and Europe.



Comparison of the median overall survival of the two groups in this
trial showed a numerical trend favoring the satraplatin plus prednisone group, but this difference was not considered statistically significant. We believe that the inability to show a statistically significant difference in median overall survival
in this trial may be due to the enrollment of only 50 patients instead of the initially planned total of 380. We believe the number of patients was probably too small to yield a significant difference in overall survival between the two treatment
groups. However, it may be that no significant difference would have been observed had this trial been completed as initially planned.



Finally, a review of the clinical laboratory data and the adverse events experienced in both groups of patients in this trial, together with the clinical
observations reported by the trial physicians, suggested that satraplatin plus prednisone was a well tolerated chemotherapy regimen in this setting and warranted further trial in the treatment of HRPC.



Current Clinical Trials.    Shortly after we licensed
satraplatin in 2002, we began discussions with the FDA that culminated in an official End-of-Phase 2 Meeting with the FDA in July 2003. The



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purposes of this meeting included assessing the safety of the drug in earlier trials, evaluating our Phase 3 registrational trial plan, and identifying any additional
information that would be needed to support an NDA. Additionally, we requested a review of our Phase 3 registrational trial protocol under the FDAs Special Protocol Assessment program. The combination of the End-of-Phase 2 Meeting
and the Special Protocol Assessment provided us the opportunity to hold meaningful discussions with the FDA regarding our overall registrational approach. As a result, the FDA confirmed its agreement with us that successful completion of the SPARC
trial will form the primary basis for an efficacy claim for our NDA for satraplatin, if executed flawlessly. This agreement becomes part of the administrative record and may only be changed by mutual agreement of the parties or if the FDA identifies
a substantial scientific issue relevant to safety or efficacy after the trial has begun. The FDA has also granted fast track designation to satraplatin as a second-line chemotherapy treatment for patients with HRPC. The FDAs fast track program
is intended to facilitate the development and expedite the review of drugs that treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs. The fast track designation enables us to file sections of
the NDA on a rolling submission basis, submitting sections as they become available. In December 2005, we began the rolling NDA submission for satraplatin, submitting the CMC section.



We have also received a Scientific Advice Letter in 2004 and Additional Scientific Advice from the EMEA in 2006 relating to our Phase
3 clinical trial. Although the Scientific Advice Letter was not required for the initiation of a Phase 3 clinical trial in Europe, it was helpful because it allowed the EMEA to comment on our overall registrational approach before implementation.
Pharmion now has primary responsibility for regulatory activities and filings for Europe and disclosed that in its 2006 Additional Scientific Advice, the EMEA confirmed that it would accept the final analysis for progression-free survival from the
SPARC trial and the available overall survival data as the basis for an efficacy claim in the submission of a marketing authorization application.



In September 2003, we initiated the SPARC trial. The SPARC trial is a multinational, multicenter, randomized, double-blind Phase 3 registrational trial to test
satraplatin plus prednisone versus a placebo plus prednisone in patients with HRPC whose disease has progressed on first-line chemotherapy. Randomized means that patients are randomly assigned to receive the drug candidate or a placebo.
To encourage participation, we have set the randomization ratio at 2:1 in favor of active treatment. Double-blind means that neither the physician nor the patient knows whether the patient has received the drug candidate or a placebo.
Progressed on first-line chemotherapy means that a patient with HRPC has shown further advancement of their cancer while being treated with a regimen that includes a chemotherapy drug. The SPARC trial is designed to determine the
efficacy and evaluate the safety of satraplatin plus prednisone in slowing the progression of cancer in this patient population. According to the criteria we have discussed with the FDA and the EMEA, the trial was designed to detect a 30% or greater
increase in the period of time required for the progression of disease to occur in the treatment group, as compared with the control group. In December 2005, enrollment completed in the trial, with a total of 950 patients enrolled at approximately
200 clinical centers in sixteen countries on four continents.



During the
course of the SPARC trial an independent data monitoring board, or DMB, established in accordance with guidelines provided by the FDA, meets periodically to review the results of the trial and evaluate the safety and/or efficacy of satraplatin in
the trial population. The DMB makes recommendations to us regarding the continuation, modification or discontinuation of the trial based on its review of safety and efficacy data. To date, the DMB has held three meetingsone in 2004 and two in
2005each focused on a review of safety data from the trial. After each of these meetings, the DMB reported that the design and conduct of the trial remained sound and recommended that the trial continue as planned. The third of these safety
reviews was held in December 2005, based on 592 patients. The DMB has also set a date in late April 2006 to conduct a pre-planned interim efficacy analysis of data from the SPARC trial. There can be no assurances regarding any recommendation by



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the DMB based upon such interim analysis or whether data from such interim analysis would be sufficient to form the basis of a submission for regulatory approval in
the United States or Europe. Full progression-free survival data are expected in the second half of 2006.



We have also initiated a clinical trial using satraplatin in combination with radiation therapy in NSCLC. The purpose of this trial is to explore satraplatins
potential to enhance the efficacy of radiation therapy. Promising clinical results have been observed for satraplatin and other platinum-based drugs administered in combination with radiation therapy. We believe that the oral administration of
satraplatin may provide an important advantage over currently marketed platinum-based drugs when used in combination with radiation therapy. In practice, it has been difficult to provide intravenously administered platinum-based drugs to patients
continuously during the course of radiation therapy due to the need for different safety precautions for the two treatments.



During 2005, we began three additional clinical trials: A Phase 2 trial evaluating satraplatin as a single agent in patients with metastatic breast cancer; a Phase
2 trial evaluating satraplatin in combination with Taxol in patients with NSCLC, and a Phase 1 trial evaluating satraplatin in combination with Taxotere.



Phase 2 trial in patients with metastatic breast cancer.    Breast cancer is the leading cause of cancer-related death among women in
Europe, and in the U.S. it is second only to lung cancer. In 2005 in the U.S., over 210,000 new cases of invasive breast cancer were estimated to have been diagnosed and over 40,000 women were estimated to have died from the disease. Despite
advancements in the treatment of breast cancer, patients with advanced disease often do not respond to existing treatments or will eventually relapse. For example, a major drug for this disease, Herceptin® (trastuzumab), can be used to treat only 20% to 25% of metastatic breast cancer patients. Thus, there
exists a continued need for new and effective treatments. Although platinum drugs have not traditionally been used to treat breast cancer, recent data suggest they may be useful in combination with other treatments in this setting, including with
Taxol or Taxotere, and for certain patients, also with Herceptin. In November 2005, we initiated a Phase 2 trial evaluating satraplatin in patients with metastatic breast cancer who had received no more than one prior chemotherapy regimen. These
data with satraplatin as a single agent could form the basis for additional clinical studies in breast cancer, most likely in combination with other agents.



Trials in combination with taxanes.    There are known synergies between the platinum and taxane families of compounds, and the
combination of a platinum-based compound with a taxane-based drug such as Taxol or Taxotere is used as the current standard of care to treat a variety of cancers. During 2005, we initiated two studies to explore such combinations with satraplatin.



In the summer of 2005, we began a Phase 1 trial evaluating satraplatin
in combination with Taxotere in patients with advanced solid tumors. The primary objectives of this trial are to assess safety, determine maximum tolerated doses and recommend Phase 2 dosage for this combination. Pre-clinical in vitro data
presented in 2005 supported that there is a synergistic effect when prostate cancer cells were treated sequentially with Taxotere and satraplatin. Should the clinical data from the ongoing Phase 1 trial also be supportive, we expect to initiate a
Phase 2 trial with this combination in patients with HRPC.



Lung cancer
is the leading cause of cancer death in the U.S., with an estimated 162,000 deaths expected from the disease in 2006. Over 170,000 new cases are expected to be diagnosed in 2006. The five-year survival rate for lung cancer in the U.S. is only 15%.
Recent statistics for Europe estimated over 375,000 cases newly diagnosed annually of lung cancer and over 345,000 deaths from the disease. NSCLC accounts for over 80% of all lung cancer cases.



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In December 2005, we opened a Phase 2 trial evaluating satraplatin in combination with Taxol as a first-line
therapy in patients with inoperable advanced NSCLC. The primary objective of this trial is to determine the objective response rate of satraplatin in combination with Taxol in this patient population. The Phase 2 trial is building on a Phase 1 trial
conducted by others that evaluated the safety of and recommended the Phase 2 doses for the combination of satraplatin and Taxol.



Platinum-based therapies are widely used to treat patients with advanced NSCLC cancer. We believe that, satraplatin as an oral platinum-based compound, could, if
effective and well tolerated in combination with Taxol and possibly other anticancer agents, become an important new option for treating patients with this disease.



Manufacturing.    We do not currently own or operate manufacturing facilities for the production of
clinical or commercial quantities of satraplatin. Johnson Matthey manufactured the material that we are using in our clinical trials of satraplatin. We have a supply agreement with Johnson Matthey for additional supplies of the active pharmaceutical
ingredient (API) for future clinical trials, as well as for commercial amounts of satraplatin. Johnson Matthey has been a major manufacturer of platinum-based pharmaceuticals for many years.



1D09C3Monoclonal Antibody



Our second most advanced product candidate, 1D09C3, is a monoclonal antibody that we
are developing with the intent of treating selected leukemias and lymphomas. In early 2005, we initiated an open-label Phase 1 clinical trial program for this product candidate. The Phase 1 program is evaluating 1D09C3 in patients with relapsed or
refractory B-cell lymphomas, such as Hodgkins and non-Hodgkins lymphomas, in whom prior standard therapy has failed. The goals of the studies are to determine the maximum tolerated dose, recommend a dose and schedule for subsequent Phase
2 studies and to examine the safety and tolerability of the antibody. Two different dosing schedules are being explored. The Phase 1 clinical program is currently underway at three major cancer centers in Europe.



The European Commission granted orphan drug designation to 1D09C3 in the treatment of
Hodgkins lymphoma in mid-2005 and for the treatment of chronic lymphocytic leukemia (CLL) and multiple myeloma in early 2006. The orphan drug program of the EMEA is designed to promote the development of drugs to treat rare life threatening or
very serious conditions that affect no more than five in every 10,000 people in the EU. The orphan drug designation provides EU market exclusivity for up to ten years for the given indication. Other potential benefits include: a reduction in fees
associated with various aspects of the regulatory process, including the application for marketing approval, and EMEA guidance in preparing a dossier for marketing approval.



1D09C3 has shown anticancer activity in several preclinical tests involving animal models of these cancers. This monoclonal antibody
appears to function through a mechanism of action that we believe is novel and may represent a significant opportunity in treating a variety of cancers.



Market Opportunity.    The initial indication for which we intend to develop 1D09C3 is relapsed and/or refractory B-cell
lymphomas. Lymphomas are a group of cancers that arise from cells in the lymph nodes, bone marrow or spleen and often spread throughout the body. There are two major types of lymphoma: non-Hodgkins lymphoma and Hodgkins disease. The
American Cancer Society estimated that, in 2005, there were more than 56,000 new cases of non-Hodgkins lymphoma and more than 19,000 deaths attributable to non-Hodgkins lymphoma in the United States.



Anticancer drugs currently used to treat non-Hodgkins lymphoma include monoclonal
antibodies and chemotherapy drugs such as doxorubicin. Currently, there are three monoclonal



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antibodies approved for the treatment of non-Hodgkins lymphoma in the United States: Rituxan, Zevalin and Bexxar. Campath is approved for chronic lymphocytic
leukemia. Approximately 50% of patients initially treated with Rituxan, the most widely used of these drugs, fail to respond. Of those that do respond, many relapse and become refractory after several treatment cycles. As a result, there is
currently an unmet medical need for treatment of patients who have failed Rituxan.



Based on our preclinical research, 1D09C3 may also prove useful for the treatment of other cancers, including leukemias and melanoma. These cancers present additional significant unmet medical needs because effective treatment
options are currently limited.



Scientific
Overview.    Lymphomas and leukemias are characterized by uncontrolled proliferation of certain cells of the immune system. Studies in recent years have shown that immune system cells, known as B-cells and T-cells, may
respond to external signals by committing cellular suicide (programmed cell death). This response is thought to play a role in the natural process of regulating immune responses.



Monoclonal antibodies are manufactured antibodies that share characteristics of naturally occurring antibodies. Naturally occurring
antibodies are proteins that are an essential component of the human immune system. They are produced in response to the presence of foreign substances, or antigens, in the body and are extremely specific. Each antibody binds preferentially to one
particular type of antigen presented on a cell and can interfere with that cells activity or cause cell death. Monoclonal antibodies may be used alone or in combination with other anticancer drugs or radiation therapy to attack cancer cells in
several ways.



The aim of our antibody research program was to develop a
monoclonal antibody that binds to MHC class II molecules (immune system-related proteins found on the surface of cells) and that can also induce programmed cell death in selected lymphomas and leukemias. In 1999, we entered into a collaboration with
MorphoSys AG, a German biotechnology company specialized in producing novel monoclonal antibodies based on human genes. We developed our monoclonal antibody product candidate, 1D09C3, from our collaboration with MorphoSys.



1D09C3 is being developed to treat patients with relapsed and/or refractory B-cell
lymphomas. This monoclonal antibody has several characteristics that suggest that it may be suitable for use in cancer patients alone, including that:



| |  | it binds to an antigen (MHC class II molecules) that is different from that targeted by Rituxan, Zevalin and Bexxar, thereby reducing the likelihood of failure after pre-treatment with these
compounds;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | it does not require immune system function, which is frequently compromised in those patients pre-treated with chemotherapy and/or Rituxan; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  | in preclinical animal studies, when combined with Rituxan, it shows greater efficacy than either treatment alone.
| | - | -----------------------------------------------------------------------------------------------------------------



Manufacturing.    We do not currently own or operate manufacturing facilities for the production of
clinical or commercial quantities of 1D09C3. We believe we have obtained a sufficient amount of 1D09C3 from a third party for use in our preclinical and initial and planned clinical trials. We have begun the process of selecting a vendor for
late-stage clinical and commercial supply of 1D09C3.



Other
Research and Development Activities



We have ongoing drug
development and discovery programs that leverage our expertise in kinase inhibitors. Protein kinases represent a large family of proteins that play an important role in



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signaling between and within cells. The inhibition of distinct kinases can thereby modulate various biological processes, some of which are critically important in the
development or progression of cancer. Many of the more than 500 protein kinases encoded by the human genome have been implicated in tumor growth.



One reason that a cell can become cancerous is an uncontrolled growth signal. This signal is frequently sent to the nucleus on a pathway composed of kinases. As a
result, the cell starts to grow and divide in an uncontrolled manner, which can eventually lead to the growth of a tumor. Inhibiting a specific kinase involved in such a pathway, and thereby interrupting the internal tumor cell communication, can be
an effective way to develop a new anticancer treatment. In recent years several new anticancer drugs that act through the inhibition of kinases have been approved.



Our most advanced kinase inhibitors program involves small molecule cell cycle inhibitors. The cell cycle is essential for the
proliferation of cells and its deregulation can lead to the development of cancer. Although no effective cell cycle inhibitor drugs have yet been approved, the cell cycle has been recognized for its importance in cancer development for many years.
We currently have several cell cycle inhibitors in preclinical development. This program is a result of a research project initiated by Mitotix, Inc., a company we acquired in 2000.



In March 2005, we acquired substantially all of the assets of Axxima, a Munich-based biotechnology firm. As part of this acquisition,
a number of highly experienced scientists transferred from Axxima Pharmaceuticals to GPC Biotech. This strategic transaction added important additional expertise and capabilities in the area of kinase-based drug discovery. Axximas signal
transduction biology came out of the laboratory of Dr. Axel Ullrich at the Max-Planck-Institute for Biochemistry, one of the worlds most renowned laboratories in this field. Additionally, Axximas medicinal chemistry team brought
important experience in kinase inhibitor chemistry to our existing discovery infrastructure. The expertise that Axxima employees brought is complementary to our existing internal capabilities and focus of activities. We expect this acquisition to
help support our goal of internally growing our drug pipeline with novel mechanism-based cancer therapies.



From our inception in 1997, we have developed and licensed access to technologies to facilitate drug discovery research. While we initially applied these
technologies in research alliances with pharmaceutical companies, we now apply these technologies mainly to enhance our internal discovery work.



While we are focused on building our pipeline through internal discovery and development efforts, we continue to evaluate potential product licensing candidates.
Our efforts to date have focused on evaluating compounds that have demonstrated anticancer activity in animal models or in clinical trials. For example, in 2002, we licensed satraplatin, our most advanced product candidate.



Commercialization



We do not currently have any sales and only limited marketing capabilities. In order to commercialize any products that are approved
for commercial sale, we must either develop a sales and marketing infrastructure or collaborate with third parties that have sales and marketing experience. We believe that the medical oncology market is readily accessible by a limited sales and
marketing presence due to the limited number and concentration of prescribing physicians.



In December 2005, we signed a major co-development and license agreement with Pharmion for satraplatin. Under this collaboration, Pharmion gained exclusive commercialization rights to satraplatin for Europe, the Middle East,
including Turkey, Australia and New Zealand. We entered into



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this agreement with Pharmion because we believe this partnership will help us to maximize the value of satraplatin to us in Europe. Additionally, this partner will
assist us in funding satraplatins development.



We have retained
our current rights to the U.S., as well as other key non-European markets, including Japan. For the U.S., our goal is to take the lead in marketing and sales. We do, however, continue to hold open the possibility of entering into a co-promotion,
profit-sharing or other form of strategic alliance for the U.S. market with a pharmaceutical or biotechnology firm to maximize the commercial potential of satraplatin. For other key markets, including Japan, we expect to enter into (an) additional
strategic alliance(s).



Sales of any products for which we receive
regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payors in the disease settings in which they are used. Significant uncertainty exists as to the reimbursement status of newly approved
drugs. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of satraplatin. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development.



Intellectual Property



We actively seek, when appropriate, intellectual property protection
for our products, product candidates, technologies and proprietary information that are important to the commercial development of our business. We do this through filing for, prosecuting, maintaining or licensing relevant United States, European
and/or other foreign patents and or trademarks. In addition, we rely upon trade secrets and contractual arrangements to protect proprietary information that may be important to the development of our business.



We aim to file for, prosecute, maintain or license those patents, patent applications
and trademarks that we believe are relevant to the strategic needs of our business, and hence the exact number and scope of issued patents, pending patent applications and/or trademarks to which we have rights at any given time may increase,
decrease or otherwise change in the future.



For example, under our
exclusive sub-license from Spectrum Pharmaceuticals, Inc., we have access to intellectual property owned by Johnson Matthey that is important to our ability to develop and commercialize our product candidate, satraplatin.



We also have various exclusive and non-exclusive rights under certain patents, patent
applications and technologies relevant to the discovery, production, or commercialization of 1D09C3 under our Collaboration and License Agreement with MorphoSys.



Under our Collaborative Research, Development and Marketing Agreement with Bristol-Myers Squibb, we have certain co-exclusive rights
to intellectual property owned by certain third parties relevant to our ability to develop and commercialize certain of our pre-clinical product candidates.



We also have certain exclusive or co-exclusive rights to other patents and patent applications relevant to the technologies we use in our business, other discovery
programs, certain of our pre-clinical product candidates and other areas.



These rights have been licensed or sub-licensed from various academic institutions and pharmaceutical and biopharmaceutical companies.



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On December 31, 2005, GPC Biotech held rights to over 85 issued patents and more than 100 pending patent
applications filed in the United States, Europe, Japan and other key markets. These patents and patent applications are wholly-owned, co-owned or exclusively/co-exclusively licensed by GPC Biotech.



Generally, patents expire 20 years after their earliest nonprovisional filing date.
However, U.S. patents issuing from patent applications filed before June 8, 1995 will expire after the longer of 17 years after issuance or 20 years after the earliest nonprovisional filing date. U.S. patents may also be extended in limited
circumstances by a period representing delay by the United States Patent and Trademark Office, or USPTO, and hence the exact expiry date of currently pending U.S. applications cannot be predicted. The protection of certain patents to the extent they
cover approved non-biological pharmaceutical products may be extended by up to five years under provisions of the Hatch-Waxman Act in the United States and analogous provisions in other countries. See Government
RegulationRegulation in the United StatesDrug Price Competition and Patent Term Restoration Act of 1984. Patents and patent applications also will expire early if appropriate renewal or annuity fees are not paid in a timely manner
to the appropriate patent office or if prosecution actions or responses are not filed with the relevant patent office according to applicable regulations.



Satraplatin.    Our lead product candidate satraplatin is protected by two issued U.S. patents, a patent issued under the European
Patent Convention, or EPC, and a number of patents issued in other national jurisdictions including other EU countries, Japan, Canada and Australia. These patents are owned by Johnson Matthey, and we hold an exclusive sublicense, with the right to
sublicense, under these patents through our Co-development and License Agreement with Spectrum Pharmaceuticals, Inc. in the field of treating cancer in humans. In most jurisdictions, these patents cover the composition of matter and anticancer uses
of various platinum-based compounds, including satraplatin. The two U.S. patents expire in 2008 and 2010, respectively, and in 2009 in most other countries. Under provisions such as the Hatch-Waxman Act in the United States and analogous regulations
in Europe, there are opportunities to extend the patent life of a patent to cover any approved drug product in a given jurisdiction. These regulations provide for the possibility of a patent term extension of up to five years to only one of the U.S.
patents related to satraplatin and a Supplementary Protection Certificate in European countries to extend the patent term in countries of the European Union and certain other European countries, and any appropriate national equivalents in the
European Union, by up to five years. We plan on applying for such extended protection, if possible, for the fullest term and extent appropriate. While we believe that satraplatin will meet the Hatch-Waxman criteria for patent extension, delays in
the completion of our Phase 3 registrational trial or in obtaining regulatory approval may jeopardize our ability to obtain a timely patent extension; in addition there can be no assurance that we will ultimately be granted this type of extension or
an analogous extension for satraplatin in any specific country, or at all.



1D09C3Monoclonal Antibody.    Our product candidate 1D09C3 is covered by a number of patent applications in major market countries, including the United States, Japan, Canada, Australia and those
states contracted to the European Patent Convention at the date of filing, or EPC States. These published patent applications are co-owned by us and MorphoSys and are governed by the terms of our Collaboration and License Agreement with MorphoSys.
Under this agreement, we have exclusive rights to develop and commercialize antibody products covered by such patent applications, including 1D09C3, including in the field of human therapeutic use. These patent applications and resulting patents, if
issued and maintained, would expire in 2021 in most major markets. Through our collaboration with MorphoSys, we have secured certain rights to a number of enabling patents, patent applications and technologies relevant to the discovery, production,
and commercialization of 1D09C3.



We intend to continue using our
experience to pursue and seek patent protection for new developments with respect to compositions, methods of use and other aspects of such developments that may enhance our position in the field of anticancer drugs.



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Patents, if issued, may be challenged, invalidated or circumvented. Thus, any patent that we own, co-own or license
from third parties may not provide adequate protection against competitors. Our pending patent applications, those we may file in the future, or those we may license from third parties may not result in issued patents. Also, patents may not provide
us with adequate proprietary protection or advantages against competitors with similar or competing technologies. In particular, we are aware that a third party has an issued patent relating to treating plasmacytoma/multiple myeloma, Hodgkins
lymphoma (also known as Hodgkins disease), non-Hodgkins lymphoma and B cell leukemias by using monoclonal antibodies which specifically react with certain MHC class II molecules. We are aware that numerous patent applications owned by
third parties have been filed and are currently pending and expect that others may be filed in the future in fields similar to our technologies or product candidates. For example, a large number of patents have been issued with respect to methods of
discovering, producing, and other aspects of therapeutic antibodies. We are aware of issued patents held by third parties that relate to the production of recombinant antibodies, such as patents covering production in single cells by the independent
expression of the two protein chains that make up the antibody, or more generally to the production of recombinant proteins. There are also numerous patent filings claiming various genetic sequences, such as protein coding sequences and regulatory
sequences that may be useful if used in our research programs and technologies, including our LeadCodetechnology. We are also
aware of an issued patent covering a drug-protein interaction technology related to our LeadCodetechnology that describes a
biotin based drug-fusion molecule. Biotin is a naturally occurring molecule that binds to certain proteins enabling them to perform their function. We have not attempted to obtain licenses to any of these patents. Due to these factors
and the inherent uncertainty in conducting patent searches, we may violate third-party patent rights that we have not yet identified, or fully or correctly investigated. As a result of potential conflicts with the proprietary rights of others, we or
our collaborators or licensees may in the future have to prove that we or our collaborators or licensees are not infringing the patent rights of others or be required to obtain one or more licenses to third-party patents. We do not know whether such
a license would be available on commercially reasonable terms, or at all. If we or our collaborators or licensees are unable to secure such licenses, we or our collaborators or licensees may be required by a court to cease further development, use
or commercialization of one or more of our technologies or product candidates.



The technologies we use in our business comprise a complicated set of individual components or techniques, some of which are protected by intellectual property owned by third parties. We have entered into certain licenses to intellectual
property covering particular enabling components or techniques that comprise parts of our technologies. Under the terms of certain of these licenses we will owe milestone and royalty payments to the licensors for the commercialization of the
licensed intellectual property or products derived therefrom. Under such licenses, we are also obliged to grant back rights to improvements and certain other intellectual property to the licensor. In the future, we may be required to take additional
licenses to other intellectual property that is necessary to some of our technologies or products at additional cost to us.



Much of our technology and many of our processes depend upon the knowledge, experience and skills of our scientific and technical personnel. To protect rights to
our trade secrets, proprietary know-how and technology, we require all employees, contractors, consultants, advisors and collaborators, as well as potential collaborators, to enter into confidentiality agreements or other obligations of
confidentiality that prohibit the disclosure of confidential information and require disclosure of all ideas, developments, discoveries and inventions related to our proprietary know-how, trade secrets or technology. Under these agreements, our
employees and most of our consultants are generally obligated to assign to us all rights to such ideas, developments, discoveries and inventions, and to reasonably assist us in any further prosecution of patent applications filed to cover such
inventions. Many of our and our collaborators research and development employees and/or consultants work in Germany or other European countries and are subject to the provisions of the German Act on Employees Inventions (Gesetz über
ArbeitnehmererfindungenArbNErfG) (or similar



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regulation in other European countries), which regulates the ownership of, and compensation for, inventions made by employees and under which their employer, which is
not in all cases GPC Biotech, has first rights to inventions made by them. It is possible, however, that these parties may breach those agreements, and we may not have adequate remedies for any breach. It is also possible that our trade secrets or
unpatentable know-how will otherwise become known or be independently developed by competitors, for which there most likely will be no remedy available to us. Additionally, we or our co-owners or licensors may not have complied, or may not in the
future comply, with the provisions of the ArbNErfG,or similar regulation, and may become subject to disputes relating to alleged non-adherence to the provisions of the ArbNErfG or such similar regulation.



Some of our advisors and consultants are currently employed by universities or other
commercial entities. Most of these individuals are parties to agreements pursuant to which some of the work product created by these individuals belongs to their respective employers. While we and these individuals try to maintain records that make
it clear that the work these individuals do for us is not subject to their agreements with their employer, it is always possible that an employer such as a university will assert an ownership claim to the work of one or more of these individuals.



Trademarks



We own rights in the following trademarks: GPC Biotech, the GPC Biotech design, the globe design, and a number of other trademarks
related to our current and past technologies or business areas. All other trademarks or tradenames referred to in this annual report are the property of their respective owners. We also have rights to a number of trademarks and trademark
applications in a variety of jurisdictions, including the United States and the European Union, that represent potential brand names for our future commercial drug-products including satraplatin. If we wish to market satraplatin in the United States
under a proprietary brand name, we are required to use a name that is acceptable to the FDA, and also to regulatory authorities in other territories where we may wish to market satraplatin under such name. We may be unable to receive such acceptance
for our desired brand name from one of more regulatory authorities, including the FDA. This can lead to a delay in launch or first commercial sale of satraplatin, or the need to use a different brand name, or use of the generic name, in one or more
territories or markets. Furthermore, although we conduct trademark availability and clearance analysis for our potential brand names in a number of key jurisdictions, we may be ultimately unable to register our desired brand name as a trademark or
third parties may believe our brand name infringes their own trademark rights. Such situations or actions by third parties could lead to a delay, change or an injunction preventing the sale of satraplatin under our desired brand name in one or more
territories or markets, including the United States. We believe that these risks are higher in the European market, since the European Union usually requires a single brand name for the entire European Union. With 25 separate Member States and
approximately 20 different languages comprising the EU, the challenges to obtaining an acceptable brand name and trademark for all such states are substantial, and we or our marketing partner, Pharmion, may have to delay or make changes to our
marketing plans in the European market, or other markets, because of such risks.



Competition



We operate in the highly competitive segment
of the pharmaceutical market composed of pharmaceutical and biotechnology companies that research, develop and commercialize products designed to treat cancer. Many of our competitors have significantly greater financial, manufacturing, marketing
and product development resources than we do. Large pharmaceutical companies in particular have extensive experience in clinical testing and in obtaining regulatory approval for drugs. These companies also have significantly greater research
capabilities than we do. In addition, many universities and private and public research institutes are active in cancer research, some in direct



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competition with us. We also must compete with these organizations to recruit scientists and clinical development personnel.



Satraplatin.    If satraplatin is approved and
commercialized, it will face significant competition. Competition for satraplatin may include other drugs either marketed or being developed for prostate cancer, as well as other platinum-based compounds and other chemotherapy drugs for other
cancers.



In the prostate cancer market, currently approved drugs include
Emcyt (Pfizer, Inc.), Novantrone (OSI Pharmaceuticals, Inc./Serono S.A.), Quadramet (Schering AG/CYTOGEN Corporation), Metastron (GE Healthcare/Medi-Physics, Inc.) and Taxotere (Sanofi-Aventis S.A.). Novantrone and Quadramet are injectable
pharmaceuticals approved for use in treating bone pain in cancer patients, and Emcyt is an oral drug used to relieve symptoms of advanced prostate cancer. The most recently approved of these prostate cancer drugs, Taxotere, is an injectable
pharmaceutical that is approved in the United States and Europe, in combination with prednisone, for the treatment of patients with advanced prostate cancer. Taxotere has been shown to prolong survival of patients with HRPC.



In addition to the drugs mentioned above, a Phase 2 clinical trial of Alimta (Eli Lilly
and Company), has recently been initiated for second-line therapy for HRPC patients. Other examples of drugs in development for both advanced HRPC and earlier stages of prostate cancer, which may compete with satraplatin are calcitriol (Novacea
Inc.), Provenge (Dendreon Corporation), ixabepilone (Bristol-Myers Squibb Company), Avastin (Genentech), Velcade (Millenium Pharmaceuticals Inc./Johnson & Johnson Pharmaceutical Research & Development, LLC), and Nexavar (Onyx
Pharmaceuticals, Inc./Bayer Pharmaceuticals Corporation).



There are
currently three marketed platinum-based drugs in the United States and in Europe. These are cisplatin, carboplatin and oxaliplatin. All three agents are administered intravenously and are not indicated for the treatment of prostate cancer. In
addition to these, there are other platinum-based compounds approved and/or marketed in Asian markets such as lobaplatin (China), nedaplatin (Japan) and eptaplatin (South Korea). These drugs are not approved, however, for the treatment of prostate
cancer. All three of these are also administered intravenously.



Another
platinum-based drug, which is not currently on the market, is Picoplatin. Picoplatin is administered intravenously and has shown activity for HRPC in a Phase 2 clinical trial. NeoRx has initiated a Phase 2 trial with the intravenous formulation of
picoplatin for the treatment of SCLC that is resistant/refractory to cisplatin. If picoplatin does show efficacy in the clinic against disease that is resistant/refractory to cisplatin and if it is eventually approved for marketing, it could be a
significant competitor to satraplatin. There are no reported clinical trials for an oral formulation of picoplatin.



Satraplatin could also be developed for the treatment of other cancers, either as a single agent or in combination with radiation therapy or other drugs. In these
other clinical settings, it will also face competition from a variety of other anticancer drugs.



1D09C3Monoclonal Antibody.    If 1D09C3 is approved and commercialized, it will face significant competition. Currently
marketed antibodies for the treatment of non-Hodgkins lymphoma are Rituxan (Biogen Idec, Inc./Genentech, Inc./Roche Holdings AG), Zevalin (Biogen Idec, Inc./Schering AG) and Bexxar (GlaxoSmithKline). Campath (Berlex Laboratories) is approved
for chronic lymphocytic leukemia. In addition, there are a number of other antibodies and other drugs in development for the treatment of lymphoma and leukemia.



1D09C3 could also be developed for the treatment of leukemias and melanoma. There is, and will continue to be, significant competition in these markets from both
large molecule drugs (antibodies) and small molecule drugs.



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Government Regulation



Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture and marketing of
pharmaceutical products and in ongoing research and development activities. All of our products will require regulatory approval by governmental agencies prior to commercialization. In particular, pharmaceuticals are subject to rigorous preclinical
testing and clinical trials and other pre-marketing approval requirements by the FDA and regulatory authorities in other countries.



Regulation in the United States



In the United States, drugs are subject to regulation by the FDA. The Federal Food, Drug, and Cosmetic Act and other federal and state statutes and regulations
govern, among other things, the research, development, testing, safety, effectiveness, manufacture, quality control, storage, record keeping, labeling, promotion, marketing and distribution of pharmaceutical products. The failure to comply with the
applicable regulatory requirements may subject a company to a variety of administrative or judicially imposed sanctions and/or the inability to obtain or maintain required approvals or to market approved drug products.



In addition, the lengthy process of seeking required approvals and the continuing need
for compliance with applicable statutes and regulations require the expenditure of substantial resources. Regulatory approval, when and if obtained for any of our products, may be limited in scope, which may significantly limit the indicated uses
for which our products may be marketed. Furthermore, approved drugs and manufacturers are subject to ongoing review and discovery of previously unknown problems that may result in restrictions on their manufacture, sale or use or in their withdrawal
from the market.



The steps ordinarily required before a new drug product
may be marketed in the United States include preclinical laboratory tests, animal tests and formulation studies, the submission to the FDA of a notice of claimed exemption for an investigational new drug, or IND, which must become effective before
clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. The following paragraphs provide a general overview of the
approval process for a new drug.



Preclinical
Testing.    Preclinical tests include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals. The results of preclinical tests, together with
manufacturing information and analytical data, are submitted as part of an IND application to the FDA.



Investigational new drug application.    If a company wants to test a new drug in human patients, an IND must be prepared and
filed with the FDA to request FDA authorization to begin human testing of the drug. The IND application automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions
about adequacy of the preclinical studies, the preclinical product characterization and/or the proposed conduct of the clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the
IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The submission of an IND may not result in FDA authorization to commence a clinical trial. A separate supplemental submission to an existing IND must
also be made for each successive clinical trial conducted during product development, and the FDA must review each supplemental IND before each clinical trial can begin. Furthermore, an independent institutional review board, or IRB, for each
medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center, and the IRB must monitor the trial until completed. The FDA, the IRB, or the sponsor may suspend a
clinical trial at any time on various



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grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive Good Clinical
Practice, or GCP, regulations and regulations for obtaining informed consent from the trial subjects.



Clinical Trials.    Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases,
Phases 1, 2 and 3, with Phase 4 studies conducted after marketing approval. Phase 4 trials are generally required for products that receive accelerated approval. These phases may be compressed, may overlap or may be omitted in some circumstances.



| |  | Phase 1 Clinical Trials:    After an IND becomes effective, Phase 1 human clinical trials can begin. These studies are initially conducted in a limited
population to evaluate a drug candidates safety profile, and the range of safe dosages that can be administered to the patient, including the maximum tolerated dose that can be given to a patient with the target disease. Phase 1 studies also
determine how a drug candidate is absorbed, distributed, metabolized and excreted by the body, and its duration of action. In some cases, particularly in cancer trials, a sponsor may decide to run what is referred to as a Phase 1b
evaluation, which is a second safety-focused Phase 1 clinical trial typically designed to evaluate the impact of the drug candidate in combination with currently approved drugs.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Phase 2 Clinical Trials:    Studies are generally conducted in a limited patient population to identify possible adverse effects and safety risks, to
determine the efficacy of the drug candidate for specific targeted indications and to determine dose tolerance and optimal dosage. Phase 2 clinical trials of cancer drugs typically are designed to evaluate the potential effectiveness of the drug on
patients with specific types and stages of cancer and to further ascertain the safety of the drug at the dosage given in a larger patient population. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to
beginning larger and more expensive Phase 3 clinical trials. In some cases, a sponsor may decide to run what is referred to as a Phase 2b evaluation, which is a second, confirmatory Phase 2 clinical trial that could, if positive and
accepted by the FDA, serve as a registrational clinical trial in the approval of a drug candidate.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Phase 3 Clinical Trials:    These are commonly referred to as registrational (or pivotal) studies, and are undertaken when Phase 2 clinical trials suggest
that a dose range of the drug candidate is effective and has an acceptable safety profile. In Phase 3 clinical trials, the drug is usually tested in a controlled randomized trial comparing the investigational new drug to an approved form of therapy
in an expanded and well defined patient population and at multiple clinical sites. The goal of these studies is to obtain definitive statistical evidence of safety and efficacy of the investigational new drug regimen as compared to an approved
standard treatment in defined patient populations with a given disease and stage of illness.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In the case of products for life-threatening diseases such as cancer, the initial human testing is often conducted in patients with the target disease rather than
in healthy volunteers. These studies may provide initial evidence of efficacy traditionally obtained in Phase 2 clinical trials, and so these trials are frequently referred to as Phase 1/2 trials.



In addition, a company may hold an End-of-Phase 2 Meeting with the FDA to
assess the safety of the drug regimen to be tested in the Phase 3 clinical trial, in part to evaluate the Phase 3 plan, and identifying any additional information that will be needed to support a new drug application. If the Phase 3 clinical trials
had been the subject of discussion at an End-of-Phase 2 Meeting, the company is eligible for a Special Protocol Assessment, or SPA by the FDA, a process by which the FDA must evaluate within 45 days protocols and issues relating to the
protocols to assess whether they are



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adequate to meet scientific and regulatory requirements identified by the sponsor. The satraplatin Phase 3 registrational trial protocol has completed both the
End-of-Phase 2 Meeting and this SPA process.



Success in
early stage clinical trials does not necessarily assure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be subject to alternative interpretations that could delay, limit or even prevent
regulatory approval.



New Drug
Application.    After successful completion of the required clinical testing of a drug candidate, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin
in the United States. The NDA must include the results of extensive clinical and other testing and a compilation of data relating to the products pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA
is substantial. Under federal law, the submission of NDAs is additionally subject to substantial application user fees, currently $767,400, and the manufacturer and/or sponsor under an approved NDA are also subject to annual product and
establishment user fees, currently $42,130 per product and $264,000 per establishment. These fees are typically increased annually.



The FDA has 60 days from its receipt of a complete NDA to determine whether the application will be accepted for filing based on the agencys threshold
determination that the NDA is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the Prescription Drug User Fee Act, or PDUFA, the FDA has agreed to
specific performance goals in the review of NDAs. Most such applications for non-priority drug products are reviewed within ten months. The review process is often significantly extended by FDA requests for additional information or clarification
regarding information already provided in the submission. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes
clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee.



If FDA evaluations of the NDA and the manufacturing facilities are favorable, the FDA
may issue an approval letter, or, in some cases, an approvable letter followed by an approval letter. An approvable letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA. If and
when those conditions have been met to the FDAs satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a
condition of NDA approval, the FDA may require post-approval testing and surveillance to monitor the drugs safety or efficacy and may impose other conditions, including labeling restrictions which can materially impact the potential market and
profitability of the drug. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.



If the FDAs evaluation of the NDA submission or manufacturing facilities is not
favorable, the FDA may refuse to approve the NDA or issue a not approvable letter. A not approvable letter outlines the deficiencies in the submission and often requires additional testing or information in order for the FDA to
reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. With limited exceptions, the FDA may withhold approval of an
NDA regardless of prior advice it may have provided or commitments it may have made to the sponsor.



Fast Track Designation.    The FDAs fast track program is intended to facilitate the development and to expedite the review
of drugs that are intended for the treatment of a serious or life-



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threatening condition for which there is no effective treatment and that demonstrate the potential to address unmet medical needs for the condition. Under the fast
track program, the sponsor of a new drug candidate may request the FDA to designate the drug candidate for a specific indication as a fast track drug concurrent with or after the filing of the IND for the drug candidate. The FDA must determine
whether the drug candidate qualifies for fast track designation within 60 days of receipt of the sponsors request.



If fast track designation is obtained, the FDA may initiate review of sections of an NDA before the application is complete. This rolling review is available if the
applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the time period specified in the PDUFA, which governs the time period goals the FDA has
committed to reviewing an application, does not begin until the complete application is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging
in the clinical trial process.



In some cases, a fast track designated
drug candidate may also qualify for one or more of the following programs:



| |  | Priority Review.    Under FDA policies, a drug candidate is eligible for priority review, or review within a six-month time frame from the time a complete
NDA is accepted for filing, if the drug candidate provides a significant improvement compared to marketed drugs in the treatment, diagnosis or prevention of a disease. A fast track designated drug candidate would ordinarily meet the FDAs
criteria for priority review. We cannot guarantee any of our drug candidates will receive a priority review designation or, if a priority designation is received, that review or approval will be faster than conventional FDA procedures, or that the
FDA will ultimately grant drug approval.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Accelerated Approval.    Under the FDAs accelerated approval regulations, the FDA is authorized to approve drug candidates that have been studied for
their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments based upon either a surrogate endpoint that is reasonably likely to predict
clinical benefit or on the basis of an effect on a clinical endpoint other than patient survival. In clinical trials, surrogate endpoints are alternative measurements of the symptoms of a disease or condition that are substituted for measurements of
observable clinical symptoms. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to validate the surrogate endpoint or confirm
the effect on the clinical endpoint. Failure to conduct required post-approval studies, or to validate a surrogate endpoint or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw the drug from the market on an
expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Although we have obtained a fast track designation from the FDA for our development of satraplatin to treat HRPC patients who have failed prior treatment with
chemotherapy, we cannot guarantee a faster development process, review process or approval compared to conventional FDA procedures. Based upon an agreement reached with the FDA in 2005, the primary endpoint of the Phase 3 registrational trial for
accelerated approval by the FDA will be progression-free survival. Although satraplatin is eligible for accelerated approval by the FDA, the FDA may not grant an accelerated approval if it concludes that the progression-free survival data and
available overall survival data do not demonstrate that satraplatin provides a meaningful therapeutic benefit to patients over existing treatments or that the data are otherwise inadequate to support the granting of an accelerated approval due to
weaknesses, inconsistencies or differences in the data with respect to data subsets or subpopulations in the treatment group. Our strategy and timing for seeking regulatory approval of this drug may change depending on the results of our studies.



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Orphan Drug Designation.    Orphan drug designation is designed to encourage
manufacturers to develop drugs intended for a rare disease or condition. A rare disease or condition is statutorily defined as one affecting less than 200,000 individuals in the United States, or one that affects more than 200,000 individuals in the
United States and for which there is no reasonable expectation that the cost of developing and making available the drug for the disease or condition will be recovered from sales of the drug in the United States. Orphan drug designation qualifies a
company for tax credits and marketing exclusivity for seven years following the date of the drugs marketing approval if granted by the FDA. An application for designation as an orphan product can be made any time prior to the filing of an
application for approval to market the product.A drug becomes an orphan when it receives orphan designation from the Office of Orphan Products Development, or OOPD, at the FDA based on acceptable confidential requests made under
the regulatory provisions. The drug must then go through the new drug approval process like any other drug. Orphan drug designations are decided solely by the OOPD staff, but the OOPD occasionally will request opinions from the Center for Drug
Evaluation and Research, especially when dealing with issues such as the appropriateness of the requested indication or the scientific rationale described by the sponsor.



A sponsor may request orphan drug designation of a previously unapproved drug, or of a new orphan indication for an already marketed
drug. In addition, a sponsor of a drug that is otherwise the same drug as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent drug for the same rare disease or condition if it can present a plausible
hypothesis that its drug may be clinically superior to the first drug. More than one sponsor may receive orphan drug designation for the same drug for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a
complete request for designation.



The period of exclusivity begins on
the date that the marketing application is approved by the FDA and applies only to the indication for which the drug has been designated. The FDA could approve a second application for the same drug for a different use or a second application for a
clinically superior version of the drug for the same use. The FDA cannot, however, approve the same drug made by another manufacturer for the same indication during the marketing exclusivity period unless it has the consent of the sponsor or the
sponsor is unable to provide sufficient quantities.



Drug Price
Competition and Patent Term Restoration Act of 1984



The Drug
Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, established a regulatory framework designed to balance the incentives for innovative drug research with the opportunities for market entry of generic
manufacturers. In order to achieve this balance, the Hatch-Waxman Act provided for the restoration of patent terms based on the regulatory review period of a drug product, and data exclusivity periods following the FDA approval of an NDA, while
allowing for the submission of simplified drug applications by generic manufacturers. The simplified drug applications created by the Hatch-Waxman Act include two kinds of applications: an abbreviated new drug application, or ANDA, which can rely on
FDAs previous finding of safety and effectiveness for the referenced innovator drug product, and a new drug application for which the sponsor must submit full reports of clinical studies, some of which the sponsor does not own or have a legal
right of reference (also known as a Section 505(b)(2) application after its authorizing statutory provision). The patent and exclusivity status of the innovator drug product has implications for the review and approval of both ANDAs and
Section 505(b)(2) applications.



A key element of the Hatch-Waxman
Act is the extension of the life of a patent to compensate the innovator drug company for marketing time lost while developing the product and awaiting regulatory approval. The Act added Section 156 to the Patent Act permitting patent term
extensions for patents on products (or processes for making or using the same) including, but not limited to, drug products used to treat humans. The Hatch-Waxman Act allows only partial recovery of the patent term lost to regulatory approval
requirements. In addition, the statute imposes caps on term extension. The term of the patent eligible for extension equals one half of the IND testing phase and the full NDA



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review phase of testing required under the Federal Food, Drug, and Cosmetic Act. The IND testing phase is measured as the time between the effective date of an IND and
the date the FDA receives the NDA; the NDA review phase is the time between the FDA receives the NDA and approval of the NDA. However, any testing conducted prior to patent issuance is not considered for patent extension. The maximum total patent
term remaining after term extension is capped at fourteen years. Similarly, absolute caps limit the duration of term extension to five years. Furthermore, a patent is only eligible for one term extension. This patent term extension is only available
for the first commercial marketing of a given active ingredient. In addition, the product must have been subject to regulatory review before its commercial marketing or use, and the resulting permission for commercial marketing or use must be the
first granted. As a practical consequence generally, only one patent may be extended per approved product. Also, the original patent must still be in force when the application for term extension is filed, and the application must be filed by the
patent owner of record or its agent. The application for patent term extension is subject to approval by the USPTO. The FDA, however, determines the length of the products regulatory review period at the request of the USPTO. In some
instances, the term of the patent for which a patent term extension is being requested may expire before such an extension is granted.



The Hatch-Waxman Act also provides for data exclusivity for the data demonstrating safety and efficacy of a drug product as submitted in an NDA: five-year new
chemical entity, or NCE, exclusivity and three-year new clinical trial exclusivity. Five-year NCE data exclusivity is granted to those drugs for which the active ingredient is an active moiety (i.e., the molecule or ion responsible for
physiological or pharmacological action, excluding appended portions that would cause the drug to be an ester, salt, or other noncovalent derivative of the molecule) not previously approved by the FDA. Five-year NCE data exclusivity prohibits the
FDA from accepting an ANDA or Section 505(b)(2) application for a drug product containing the same active moiety for a five-year period beginning from the date of approval of the NDA. The only exception to this prohibition on the FDAs
acceptance of an ANDA or Section 505(b)(2) application is if a generic competitor challenges patents listed in the Orange Book for the drug product at the end of four years. The five-year exclusivity provision, however, does not prohibit the
FDA from accepting another full NDA, for example from a competitor, if the sponsor of the second application has done all the work itself. The FDA can accept the second application, review it, and approve it; NCE exclusivity only prohibits the
agency from accepting a Section 505(b)(2) application or an ANDA.



The Hatch-Waxman Act requires an applicant for an ANDA to submit a certification for each patent listed in the Orange Book. This certification requirement also extends to Section 505(b)(2) applications. One of four certifications must
be made: 1) that the drug has not been patented; 2) that the patent has already expired; 3) the date on which the patent will expire, and that the generic drug will not go on the market until that date passes; and 4) that the patent is not infringed
or is invalid. Those certifications are now referred to as paragraph I, II, III, or IV certifications. Whereas the first three certifications are relatively straightforward, the paragraph IV certification presents added requirements.



When an ANDA contains a paragraph IV certification, the applicant is required to notify
the innovator company that it has filed the ANDA with the FDA, and describe the reasons it believes the patent will not be infringed, is invalid, or is unenforceable. The only exception to this rule is if a company is not seeking approval for one of
the drugs uses. In that case, an applicant may submit a Section 8 statement that the company is not seeking approval for a particular use. Once the innovator company receives notice that a generic application has been filed and its
patent is being challenged, the innovator drug company has 45 days in which to file a lawsuit claiming patent infringement based on the generic drug companys assertion about the characteristics of its proposed product. The filing of a lawsuit
as a result of the paragraph IV notice has a substantial effect on the time of approval of the ANDA or 505(b)(2) application. If a lawsuit is brought by the innovator drug company, the FDAs final



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approval is stayed for 30 months. If the patent court determines that the patent would be infringed by the product proposed in the ANDA or 505(b)(2) application, the
FDA will not approve the application until the patent expires. If the court decides that the patent will not be infringed, or is invalid, the FDA may approve the generic application when that decision occurs. The FDA may approve the application at
the thirty-month date, even if the litigation is ongoing. If litigation is pending and the agency approves an ANDA at the end of the 30-month period, most generic drug companies seem unwilling to risk liability for damages by bringing a generic drug
product onto the market before the patent litigation is resolved. A generic applicant who is the first to challenge a listed patent using a paragraph IV certification is granted a 180-day exclusivity period with respect to other generic applicants.
This exclusivity period provides generic applicants with an incentive by which to challenge listed patents for the innovator drug product.



Under the provisions of the recently enacted Medicare Prescription Drug Improvement and Modernization Act of 2003, the patent owner and the NDA holder have the
opportunity to trigger only a single 30-month stay per abbreviated new drug application or Section 505(b)(2) application.



Three-year clinical trial data exclusivity is granted for certain changes in a drug product, for which the NDA or supplement contains reports of new clinical
studies in humans conducted by the sponsor that are essential to approval. This data exclusivity covers only the change in the product supported by the new clinical studies. If there are other indications not covered by any patent or exclusivity,
and available for competition, generic drugs can be approved for those indications. A grant of three years of data exclusivity to a drug product means the FDA cannot approve a Section 505(b)(2) application or an ANDA for the same product for
three years. Unlike the five-year data exclusivity, the agency can accept such an application and review it during this time period. Like NCE data exclusivity, this data exclusivity will not bar approval of a full NDA where the applicant has done
the work to support the same change for the drug product. Data exclusivities are also published in the Orange Book.



Post-Marketing Studies.    As a condition of NDA approval, the FDA may require post-marketing Phase 4 clinical trials
to confirm that the drug is safe and effective for its intended uses. Where drugs are approved under accelerated approval regulations or the FDA otherwise requests, additional studies will likely be required to document a clinical benefit and
monitor the long-term effects of the therapy.



Other Regulatory
Requirements.    Any products we manufacture or distribute under FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with
the products. Drug manufacturers and their subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced inspections by the FDA and state agencies for cGMPs, which impose
procedural and documentation requirements upon us and any third-party manufacturers we utilize. Failure to comply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning
letters, suspension of manufacturing, seizure of product, injunctive action or possible civil penalties. We cannot be certain that we or our present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations
and other ongoing FDA regulatory requirements. If our present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or
withdraw approval of the NDA for that drug.



FDA Regulation of
Post-Approval Marketing and Promotion.    The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion,
industry-sponsored scientific and educational activities and promotional activities involving the internet. A company can make only those claims



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relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective
advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the drugs labeling and that differ from those tested by us and approved by the FDA. Such off-label uses
are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA
does, however, impose stringent restrictions on manufacturers communications regarding off-label uses.



From time to time, including presently, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the
approval, manufacturing and marketing of drug products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict
whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, or what the impact of such changes, if any, may be.



Regulation in the European Union



Clinical trials in Europe proceed in much the same manner as they do in the United States, requiring Phase 1, 2, and 3 trials, as well as Phase 4 trials that take
place after market approval in order to gather data on an approved product.



The Clinical Trials Directive establishes a system for the approval of clinical trials in the EU, which had to be enacted through national legislation of the Member States of the EU by May 1, 2004. Similar to the IND system in the
United States, under this new system, approval must be obtained from the national regulatory agency of an EU Member State in which the trial is planned to be conducted. For this clinical trial application, an Investigational Medicinal Product
Dossier must be submitted. While the Clinical Trial Directive permits a maximum review period of 60 days, this period is shorter in some Member States. In Germany for example, for most drugs, the national agency has 30 days to raise questions about
the application. Approval is deemed to be given if notice of objection is not given within the relevant time limit, but for certain products, including biotechnology compounds such as monoclonal antibodies, written approval may be required under the
national rules, and for other types of products, such as gene and cell therapy, written approval is always needed. In addition, approval must also be obtained from the responsible ethics committees (equivalent to the IRB in the United States).



Drug approval in the Member States of the European Union generally
proceeds under one of three approval procedures: a centralized approval procedure, a decentralized procedure, and a so-called mutual recognition procedure. The centralized approval procedure is mandatory for biotechnology products and certain other
high-technology products, such as new cancer drugs. The London-based EMEA and the European Commission in Brussels govern the centralized drug registration and approval process. Under this centralized procedure, an approval of a new drug application
by the European Commission allows a company to market its drug product in all Member States of the European Union, without having to obtain separate approvals from each Member State. However, marketing remains subject to national pricing and
reimbursement rules from each Member State that often delay marketing and can sometimes effectively prevent it.



In contrast, a company may pursue a decentralized procedure or a mutual recognition procedure to obtain mutual recognition of a new drug assessment by the Member
States. Under the mutual recognition procedure, an applicant can go directly to a national marketing authority to obtain permission to market its product in the Member State and then seek to have other Member States accept the marketing approval of
the first Member State. Under the decentralized procedure, which is



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very similar to the mutual recognition procedure, an applicant can go simultaneously to several national marketing authorities to obtain permission to market its
product in the Member State and select the national authority that will take the lead for the scientific assessment of the product. National pricing and reimbursement rules will also apply to companies following the decentralized or mutual
recognition procedure, and therefore marketing delays may occur.



Under
the centralized approval procedure, the EMEAs Committee for Medicinal Products for Human Use, composed primarily of experts nominated by each Member States national marketing authority, serves as the scientific committee that renders
opinions about the safety, efficacy, and quality of human drug products. Each Member State of the European Union has two members on the committee.



Once an application is submitted to the EMEA, the EMEA ensures that the application is complete, and then selects two of its members, known as rapporteurs, to
perform independent scientific evaluations of the safety, efficacy, and quality of the drug product candidate. The rapporteurs can draw on two sources of European Union-wide scientific expertise in forming their review teamsexperts from the
national marketing authorities of Member States and any of over 1,000 outside experts located at universities and institutions throughout Europe. Once the rapporteurs have completed their respective evaluations, they present the case to the EMEA
Committee, which then must render an opinion within 210 days after the application was submitted (subject to certain administrative delays). However, for drugs that are of major interest for public health, the applicant may request an accelerated
assessment. If granted, such request reduces the deadline from 210 to 150 days. The 210-day deadline may also be postponed when the reviewers request additional information from the applicant and under new rules, further extensions are possible. If
the EMEA Committee opinion is favorable, it is transferred to the applicant, all Member States, and the European Commission. The European Commission uses the EMEA Committees opinion to prepare a draft decision. This draft decision is then
finalized in cooperation with the Standing Committee (composed of representatives of the Member States), which generally agrees to the draft.



Products approved via the centralized registration procedure receive a regulatory data protection of ten years. For products approved via the decentralized or
mutual recognition procedure, data exclusivity ranges from six to ten years (or six years but limited to patent life) in individual Member States. However, new, harmonized data exclusivity periods have been adopted, which will apply to products for
which applications for approval have been filed on and after November 20, 2005, for products to be approved under the centralized procedure, and on and after October 30, 2005, for products to be approved under the decentralized or mutual
recognition procedure. These products will benefit from a two-tier regulatory protection. A third party may only reference the preclinical and clinical data of the originator after eight years (eight years data exclusivity), and can only market a
generic version after ten years have lapsed (two years of marketing protection). The protection period of eight plus two years can be extended by another year in case of a new therapeutic indication that is of significant benefit. If satraplatin is
approved in the European Union, it will be covered by the new rules.



A
drug may also qualify for an orphan medicinal product, or OMP, designation in the European Union. An application for designation as an OMP must be submitted prior to submission of an application for marketing approval. OMP designation qualifies a
drug for up to ten years of market exclusivity once the drug is approved. OMP designations are issued by the European Commission, acting on the advice of an expert committee, with representatives of the Member States, patient organizations, and
other interests. OMP designation will be granted if the product meets either of two tests: one based on prevalence criteria (the disease or condition must affect no more than five per 10,000 persons in the European Union); and the other based on a
determination that it would be infeasible economically to develop the product without orphan drug incentives. The second condition allows the OMP designation to be given to products for diseases for which treatments are not likely to



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be commercially viable. In addition, it must be shown that there is no satisfactory authorized method for diagnosis, prevention or treatment of the respective disease
in the European Union. However, if a medicinal product is deemed orphan and if there is a satisfactory alternative already approved in a European Member State, then the product is eligible for an OMP designation if it is of significant benefit to
patients. During the development and regulatory review phase, the orphan drug status can be lost if the designation criteria are not met anymore, for instance because a new treatment for the disease in question is approved.



Although orphan drug exclusivity in the EU is initially granted for ten years, at the
end of the fifth year, any Member State can initiate proceedings to restrict that period to six years if it believes that the criteria for orphan designation no longer apply (e.g., because the prevalence of the disease has increased or the
manufacturer is earning a sufficient profit not to maintain the exclusivity). This possibility has not yet been tested. In addition, competitive products can be approved during the marketing exclusivity period, for example, if they are not
similar to the original product or are safer, more effective, or otherwise clinically superior to it.



Regulation in Other Countries



Approval of a product by comparable regulatory authorities may be necessary in foreign countries prior to the commencement of marketing of the product in those
countries, whether or not FDA or EMEA approval has been obtained. The approval procedure varies among countries and can involve requirements for additional testing. The time required may differ from that required for FDA or EMEA approval. Although
there are some procedures for unified filings for some European countries with the sponsorship of the country that first granted marketing approval, in general each country has its own procedures and requirements, many of which are time consuming
and expensive. Thus, there can be substantial delays in obtaining required approvals from foreign regulatory authorities after the relevant applications are filed. Several years ago, representatives of the regulators in the United States, the
European Union and Japan launched the International Conference on Harmonization (ICH), a collaborative effort with the goal of streamlining the development and registration of medicinal products by harmonizing the applicable procedures
in the three regions. For the foreseeable future, however, we will have to seek separate approval in each region.



German Corporate Law



We are a German stock corporation and subject to German law, which may differ from the law governing U.S. public companies in certain key areas described below:



All public offers for the acquisition of shares, securities comparable
to shares and certificates representing shares, such as ADSs, as well as bids for other types of securities representing the right to acquire shares, securities comparable to shares and certificates representing shares are subject to the provisions
of German takeover laws. In particular, the creation or transfer, directly or indirectly, of 30% or more of the voting rights in a public German corporation generally triggers the obligation to launch a mandatory bid for all outstanding shares in
that German corporation.



Under German law, certain important
resolutions, such as resolutions relating to changes in the articles of association of a German corporation, any increases or decreases in a German corporations share capital, the issuance of convertible bonds or bonds with warrants attached
and the dissolution of the German corporation apart from insolvency and certain other proceedings, require a 75% majority of the votes present or represented at the shareholders meeting. Therefore, the holder or holders of a blocking minority
of 25% or, depending on the attendance level at the shareholders meeting, the holder or holders of a smaller percentage of the shares in a German corporation may be able to block any such votes, possibly to the detriment of the German
corporation and the other shareholders.



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As a general rule under German corporate law, until the amendments to, among others, the German Stock Corporation
Act came into effect on November 1, 2005 as a result of the Law on Enterprise Integrity and the Modernization of Avoidance Rules (Gesetz zur Unternehmensintegrität und Modernisierung des Anfechtungsrechts), shareholders had no
direct recourse against the members of the management board or supervisory board of a German corporation in the event that it is alleged they have breached their duty of loyalty and care to the German corporation. Effective November 1, 2005,
however, shareholders holding at least 1% of the share capital or a portion of the share capital of at least 100,000 in a German
stock corporation may now petition the competent district court (Landgericht) to admit damages claims directly against the members of the management board or supervisory board of a German corporation to be brought by the shareholders in the
event of any alleged breaches of duty. As part of this claim admission process (Klagezulassungsverfahren), shareholders wishing to bring claims directly against the board members of a German corporation must submit proof to the competent
court that (1) they have acquired their shares before they were deemed to have learned, due to public disclosure, of the alleged breach of duty of loyalty and care, (2) the shareholders had requested the German stock corporation in vain to
file the relevant claim itself, (3) there are facts that justify the suspicion that the German stock corporation has suffered damages as a result of dishonesty (Unredlichkeit) or gross violations (grober Verstoß) of the law
or the corporations articles of association and (4) there are no predominant interests of the stock corporation that would prohibit the bringing of any damages claim. In addition, once the competent court has admitted the claim to be
brought by shareholders, any such claim may only be brought within three months of the relevant court decision and only if the shareholders have again requested the German stock corporation in vain to file the relevant claim. Also, note that the
German corporation may, at any time, not only file the relevant claim itself (thus making the shareholders claim (retroactively) impermissible) but may also assume a pending claim initially brought by shareholders at its then current stage.



Our Subsidiary



The following table presents selected information relating to our sole subsidiary as of December 31, 2005 (in thousands of , except for share of capital).



|                                                                             |  |                        |  |             |  |                |   |  |        |  |                 |   |  |                     
|---------------------------------------------------------------------------- |  | ---------------------- |  | ----------- |  | -------------- | - |  | ------ |  | --------------- | - |  | --------------------
|Name and location of the entity                                              |  | PrimaryActivity        |  | CommonStock |  | ShareofCapital |   |  | Equity |  | Netincome(loss) |   |  | Liabilitiesowed byus
|GPC Biotech Inc., Waltham, Massachusetts, USA and Princeton, New Jersey, USA |  | researchanddevelopment |  | 25,722      |  | 100            | % |  | 8,379  |  | (16,866         | ) |  | 8,601               



Hazardous Materials



Our research and development processes involve the controlled use of hazardous
materials, chemicals and radioactive materials and produce waste products. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We
do not expect the cost of complying with these laws and regulations to be material.



Facilities



Our headquarters are located in
Martinsried/Planegg, Germany. We lease approximately 5,700 square meters (62,700 square feet) in this facility, in which we house our corporate offices and laboratories under an operating lease expiring May 31, 2015. This lease extends
automatically on May 31st of each year thereafter for one additional year unless terminated by either party with twelve



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months notice. Additionally, beginning as of November 30, 2009, we may terminate the lease on six months notice. We lease approximately 16,000 square feet
(approximately 1,450 square meters) of office space in a facility in Princeton, New Jersey under an operating lease expiring on August 1, 2010. We also lease 85,430 square feet (7,937 square meters) of office and laboratory space located in
Waltham, Massachusetts under an operating lease expiring in 2011 with an option to extend the lease for two consecutive five-year periods. We are investigating office space expansion opportunities to support our development requirements beyond 2006.
We believe that suitable alternative or additional space will be available in the future on commercially reasonable terms as needed.



In 2002, we entered into a sublease agreement with ALTANA Pharma pursuant to which ALTANA Pharma subleased space at our Waltham facility through June 30, 2007,
with a restricted option for one additional year. As of December 31, 2005, the amount of space subject to the sublease agreement was 23,500 square feet. On April 15, 2005 we also entered into a sublease agreement with BG Medicine, Inc. for
space at our Waltham facility. BG Medicine subleases 10,000 square feet of office space and 11,500 square feet of laboratory space through July 1, 2008 with an option for renewal for one additional year.



Item 5. Operating and Financial Review and Prospects



You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes to our financial statements included elsewhere in this
annual report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions and you should refer to our description of the treatment of such statements and how to identify them in Forward-Looking
Statements in the beginning of this annual report. As a result of many factors, including those set forth under the section entitled Risk Factors and elsewhere in this annual report, our actual results may differ materially from
those anticipated in these forward-looking statements.



Overview of Business



GPC Biotech is a biopharmaceutical company with a mission to
discover, develop and commercialize new drugs to treat cancer. We have drug candidates in different stages of development. Our drug pipeline is composed of drug candidates developed by our internal research teams as well as drug candidates that were
licensed from other parties. We currently have no revenues from the sale of products.



Our lead product candidate is satraplatin, a platinum-based compound intended for use as a chemotherapy treatment. Platinum-based drugs have been clinically proven to be one of the most effective classes of anticancer therapies
and are used to treat a wide range of cancers. Unlike currently marketed platinum-based drugs, satraplatin is administered orally. In December 2005, enrollment was completed in a Phase 3 registrational trial with satraplatin as a second-line
chemotherapy treatment for HRPC. This study, the SPARC trial, enrolled a total of 950 patients at approximately 200 sites in sixteen countries on four continents.



There is currently no approved second-line chemotherapy treatment regimen for patients who fail first-line chemotherapy treatment for
HRPC. We were therefore able to obtain fast-track designation from the FDA for satraplatin in this disease setting and we began the rolling submission of an NDA with the FDA for satraplatin in combination with prednisone as a second-line
chemotherapy treatment for patients with HRPC in December 2005. To begin the rolling NDA process, we submitted to the FDA the CMC section of the NDA filing. The rolling submission process enables companies that have been granted fast track
designation by the FDA to submit sections of the NDA to the agency as they become available, allowing the review process to begin before the complete dossier has been submitted. Our goal is to complete the NDA filing by the end of 2006.



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Based on clinical data from earlier clinical trials, we believe that satraplatin may have application in a number
of cancers. During 2005, we opened for accrual several additional clinical trials exploring satraplatin in various tumor types and as a combination therapy with other cancer treatments.



In December 2005, we signed a major co-development and license agreement with Pharmion for satraplatin. Under this collaboration,
Pharmion gained exclusive commercialization rights to satraplatin for Europe, the Middle East, including Turkey, Australia and New Zealand. We retain our current rights to the U.S., as well as other key non-European markets, including Japan.



Our second most advanced product candidate is 1D09C3, a monoclonal
antibody that is in a Phase 1 clinical trial and is intended for the treatment of selected leukemias and lymphomas, including non-Hodgkins lymphoma. A monoclonal antibody is an immune system related protein that binds preferentially to one
type of foreign substance, potentially stimulating a biological response. We initiated a clinical trial for 1D09C3 early in 2005. The aim of this trial is to assess the safety of this drug and to recommend a dose for Phase 2 clinical trials.
Furthermore, we have several distinct research programs to discover new anticancer drug candidates.



In addition to our research and development programs, we also have an ongoing technology collaboration with ALTANA Pharma pursuant to which we are assisting ALTANA
Pharma with its research institute in the United States. This agreement includes a research collaboration as well as a transfer of technologies. Effective January 2003, we also entered into another collaboration agreement with ALTANA Pharma pursuant
to which we licensed LeadCode. ALTANA Pharma is a related party to GPC Biotech (See Major Shareholders and Related Party Transactions in Item 7 of this annual report.)



On March 2, 2005, we entered into an Asset Purchase Agreement for the acquisition
of substantially all of the assets of Axxima, a kinase drug discovery firm based in Munich, Germany, which filed for insolvency in December 2004. Axximas assets were transferred to a newly formed holding company. We purchased the holding
company, which, in addition to substantially all of the assets of Axxima, held a net 8.7 million cash infusion from investors and
substantially all of Axximas patents, patent applications and know-how as well as several early-stage drug discovery programs in the areas of cancer. We purchased this new company from the investors with approximately 1.3 million newly
issued shares of GPC Biotech. At the time of the transaction, we also hired 40 employees of Axxima to further strengthen our own drug discovery capabilities.



In past years, we have funded our operations primarily through the issuance of equity securities, payments received under our agreements with ALTANA Pharma and
other pharmaceutical companies, interest earned on investments and other sources of funding. We expect to continue to fund our operations over the next several years primarily through our existing cash resources, future payments from Pharmion and
ALTANA Pharma, interest earned on investments and potential future sales of equity securities. Payments received from our partner, Pharmion, for shared development costs will also offset a portion of future development costs.



At December 31, 2005, we held 30.6 million of cash and cash equivalents and 63.0
million of short-term investments and marketable securities. In addition, we also had 1.6 million in restricted cash at that date.



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Overview of 2005 Results



During 2005, we furthered the development of satraplatin in the SPARC trial and initiated additional exploratory trials. In early 2005, we also initiated an
open-label Phase 1 clinical trial with our second most advanced product candidate, 1D09C3.



| |  |  | Research and development expense increased 39%.
| | - |  | -----------------------------------------------



| |  |  | Enrollment completed for SPARC trial for a total of 950 patients in approximately 200 locations in sixteen countries on four continents
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Three additional clinical trials for satraplatin were initiated:
| | - |  | ----------------------------------------------------------------

| |  |  | a Phase 2 trial evaluating satraplatin as a single agent in patients with metastatic breast cancer;
| | - |  | ---------------------------------------------------------------------------------------------------

| |  |  | a Phase 2 trial evaluating satraplatin in combination with Taxol in patients with NSCLC; and
| | - |  | --------------------------------------------------------------------------------------------

| |  |  | a Phase 1 trial evaluating satraplatin in combination with Taxotere.
| | - |  | --------------------------------------------------------------------

| |  |  | A Phase 1 trial began for 1D09C3 at three major cancer centers in Europe.
| | - |  | -------------------------------------------------------------------------

| |  |  | Research and development employees increased 38% during the year due in part to the hiring of 40 new employees from Axxima at the time of the transaction.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revenue decreased 26%.
| | - |  | ----------------------



| |  |  | Revenue from our ongoing collaboration with ALTANA Pharma decreased as expected in accordance with the collaboration plan.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash resources decreased 28.8 million
| | - |  | --------------------------------------



| |  |  | 42.8 million used in operations and 4.5 million invested in property and equipment were partially offset by proceeds of 10.4 million acquired in the Axxima acquisition;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Other offsetting items were 1.0 million decrease in restricted cash and
1.4 million favorable exchange rate effects.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



Results of Operations and Related Information



This section contains a discussion and analysis of revenue, research and development and general and administrative expenses and other information relevant to an
understanding of 2005 results of operations. This discussion and analysis compares 2005 results to 2004, and 2004 results to 2003. Each of those discussions focuses on consolidated results. We operate in only one business segment.



Analysis of Revenues



All of our product candidates are currently in development, and we therefore do not
expect to generate any direct revenues from drug product sales for at least the next year or two, if at all. For satraplatin, we estimate that we may be able to receive marketing approval in the United States in 2007. However, depending on the
results of the SPARC trial, marketing approval may be achieved significantly later than 2007, if at all. With respect to our other product candidates, we are currently unable to determine the period, if any, during which we will be able to generate
revenue from them given the early stage of their current development and the uncertainties associated with drug development in general. Any delay in obtaining or failure to obtain regulatory approval for satraplatin will materially adversely affect
our ability to generate revenues from drug sales in the next several years.



A substantial portion of our historical and substantially all of our current revenues are generated from our alliance with ALTANA Pharma. ALTANA Pharma accounted for 97% of our total



55



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##### Table of Contents

revenues in 2005, 99% of our total revenues in 2004 and 94% of our total revenues in 2003. However, committed revenues from the collaboration and license agreement and
the LeadCodeagreement with ALTANA Pharma will decrease significantly as the collaboration terms of those agreements approach
their expiration in mid-2007.



In the future, we will increasingly depend
on our collaboration with Pharmion for a significant portion of our revenues. In 2006, we will start recording co-development revenues from our co-development and license agreement with Pharmion. Revenues from this agreement will include
reimbursement of shared development costs, amortization of payments received as well as milestone payments upon the achievement of regulatory approval events.



2005 vs. 2004



Revenues for the year ended December 31, 2005 decreased by approximately 26%, to 9.3 million, from 12.6 million for the year ended December 31, 2004. The
following table summarizes our revenues for the years ended December 31, 2005 and 2004 (in millions of , except % change):



|                                                                  |  |      |  |      |  |        |   |  |          |   
|----------------------------------------------------------------- |  | ---- |  | ---- |  | ------ | - |  | -------- | --
|                                                                  |  | 2005 |  | 2004 |  | Change |   |  | % Change |   
|Amortization of deferred upfront payments and annual license fees |  | 6.2  |  | 6.0  |  | 0.2    |   |  | 3.3      | % 
|FTE Services                                                      |  | 1.1  |  | 3.6  |  | (2.5   | ) |  | (69.4    | )%
|Milestones                                                        |  | 2.0  |  | 3.0  |  | (1.0   | ) |  | (33.3    | )%
|                                                                  |  |      |  |      |  |        |   |  |          |   
|Total                                                             |  | 9.3  |  | 12.6 |  | (3.3   | ) |  | (26.2    | )%
|                                                                  |  |      |  |      |  |        |   |  |          |   



The decrease in total revenues
reflects the general trend of continued shift of focus toward drug development and away from revenue-generating technology collaborations. We expect further decreases in revenue from technology collaboration agreements as our current arrangements
expire.



Fees for development activities (Full Time Equivalent, or FTE
services) decreased 69.4% as fewer resources were utilized in a research collaboration in 2005. This decrease is in accordance with the research plan set forth at the initiation of the research collaboration. The establishment term expires in June
2007.



Milestone revenues decreased 33.3% during 2005. This decrease is
due to the timing of the achievement of milestones in our on-going ALTANA Pharma arrangements.



2004 vs. 2003



Revenues for the year ended
December 31, 2004 decreased by approximately 41.7%, to 12.6 million, from 21.6 million for the year ended December 31, 2003. The following table summarizes our revenues for the years ended December 31, 2004 and 2003 (in millions of
, except % change):



|                                                                  |  |      |  |      |  |        |   |  |          |   
|----------------------------------------------------------------- |  | ---- |  | ---- |  | ------ | - |  | -------- | --
|                                                                  |  | 2004 |  | 2003 |  | Change |   |  | % Change |   
|Amortization of deferred upfront payments and annual license fees |  | 6.0  |  | 8.1  |  | (2.1   | ) |  | (25.9    | )%
|FTE Services                                                      |  | 3.6  |  | 8.1  |  | (4.5   | ) |  | (55.6    | )%
|Milestones                                                        |  | 3.0  |  | 4.6  |  | (1.6   | ) |  | (34.8    | )%
|Grant revenue                                                     |  | 0.0  |  | 0.8  |  | (0.8   | ) |  | (100.0   | )%
|                                                                  |  |      |  |      |  |        |   |  |          |   
|Total                                                             |  | 12.6 |  | 21.6 |  | (9.0   | ) |  | (41.7    | )%
|                                                                  |  |      |  |      |  |        |   |  |          |   



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The decrease in revenues of 41.7 % in 2004 compared to 2003 is attributable to the general trend of continued
shift of focus to drug development activities. As research arrangements expired, no new collaboration arrangements were entered into to offset the drop in revenue. Furthermore, our research arrangement with ALTANA Pharma contained planned decreases
in the utilization of our resources.



During 2004, amortization of
deferred upfront payments and annual license fees decreased 1.7 million due to the expiration of a license agreement and foreign
currency effects of 0.6 million. These decreases were offset by an increase of 0.2 million attributable to the ALTANA Pharma LeadCode license, which was in effect for a full year in 2004 compared to a partial year in 2003.



During 2004, revenues from the sale of FTE services to collaboration partners decreased
55.6% from 8.1 million in 2003 to 3.6 million in 2004. A decrease of 3.4 million, or 42.0%, related to the completion of collaborations in
2003. A decrease of 1.4 million, or 17.3%, related to a planned decrease in the number of FTEs in the ALTANA Pharma Research
Institute collaboration.



Milestone revenues decreased during 2004 to
3.0 million from 4.6 million in 2004, a decrease of 1.6 million or 34.8%. A decrease of 1.3 million was due to the differences in the timing of the achievement of milestones in our on-going ALTANA Pharma arrangements. An additional decrease of 0.3 million was attributable to milestones achieved in 2003 in connection with an agreement that ended in 2003.



We received no revenues from grants in 2004, compared to 0.8 million in 2003.



Analysis of Operating Loss



Research and Development Expenses



We incur development expenses related to our clinical and preclinical drug development programs. We also incur research expenses associated with both partnered and
unpartnered research and discovery activities, as well as the development and maintenance of our drug discovery technologies.



The following table summarizes the costs of significant projects and reconciling items to arrive at total research and development expenses for the periods shown
(in thousands of ):



|                                                                                              |  |                         |  |        |  |       
|--------------------------------------------------------------------------------------------- |  | ----------------------- |  | ------ |  | ------
|                                                                                              |  | Year ended December 31,
|                                                                                              |  | 2005                    |  | 2004   |  | 2003  
|Project Costs:                                                                                |  |                         |  |        |  |       
|Satraplatin                                                                                   |  | 23,087                  |  | 14,907 |  | 9,819 
|1D09C3                                                                                        |  | 1,660                   |  | 3,092  |  | 1,401 
|Cost of performing research and development for others                                        |  | 910                     |  | 1,371  |  | 3,565 
|Other projects                                                                                |  | 8,475                   |  | 5,196  |  | 5,723 
|                                                                                              |  |                         |  |        |  |       
|Total project cost                                                                            |  | 34,132                  |  | 24,566 |  | 20,508
|Other costs to arrive at total research and development expenses: Benefits and other salaries |  | 7,419                   |  | 6,445  |  | 6,466 
|Stock-based compensation                                                                      |  | 3,259                   |  | 1,982  |  | 1,290 
|Building and facilities                                                                       |  | 3,468                   |  | 3,882  |  | 4,060 
|Depreciation                                                                                  |  | 3,350                   |  | 1,253  |  | 1,361 
|Intellectual property expenses                                                                |  | 593                     |  | 891    |  | 845   
|Other expenses                                                                                |  | 3,463                   |  | 936    |  | 3,005 
|                                                                                              |  |                         |  |        |  |       
|Total research and development expenses                                                       |  | 55,684                  |  | 39,955 |  | 37,535
|                                                                                              |  |                         |  |        |  |       



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Project costs shown in the table above include direct project costs plus the salaries of the employees who directly
charged time to the project and do not include overhead and other unallocated costs. Salaries do not include an allocation of benefits or stock-based compensation costs. Other salaries relate to departmental salaries not directly allocated to a
project.



Satraplatin project expenses accounted for the largest portion
of research and development expenses during 2005, 2004 and 2003. We expect that satraplatin project expenses will continue to be the largest portion of research and development expenses over the next few years. Under our co-development and license
agreement with Pharmion, future development costs will be shared thereby offsetting future satraplatin development expense with co-development revenue. As we continue our clinical trial of satraplatin and advance the development of our other product
candidates, we expect to incur higher levels of research and development expenses in future periods. This future increase might also result, among other things, from milestone payments for satraplatin upon the acceptance of an NDA filing and the
European equivalent and the first approval of commercial sales in the United States and Europe for a total of $15.0 million. Additionally, an approval of an NDA filing or the European equivalent will trigger payments under certain compensation
arrangements.



2005 vs. 2004



Research and development expenses were 55.7 million for the year ended December 31, 2005, compared with 40.0 million for the year ended December 31, 2004, an increase of 15.7 million or 39.3%. Included in
research and development expenses are satraplatin project costs of 23.1 million and 14.9 million for the years ended December 31, 2005 and 2004. The following table summarizes the changes in research and development expenses for the years ending
December 31, 2005 and 2004 (in millions of , except % change):



|                                                         |  |      |  |      |  |        |   |  |          |   
|-------------------------------------------------------- |  | ---- |  | ---- |  | ------ | - |  | -------- | --
|                                                         |  | 2005 |  | 2004 |  | Change |   |  | % Change |   
|Employee compensation including stock-based compensation |  | 18.0 |  | 13.7 |  | 4.3    |   |  | 31.4     | % 
|Clinical trials contract research organization           |  | 15.8 |  | 7.7  |  | 8.1    |   |  | 105.2    | % 
|External research and development                        |  | 5.9  |  | 6.3  |  | (0.4   | ) |  | (6.3     | )%
|Pre-clinical and clinical supplies                       |  | 1.3  |  | 1.5  |  | (0.2   | ) |  | (13.3    | )%
|Raw materials and consumables                            |  | 2.0  |  | 1.3  |  | 0.7    |   |  | 53.8     | % 
|Licensing and intellectual property                      |  | 1.9  |  | 1.4  |  | 0.5    |   |  | 35.7     | % 
|Facilities                                               |  | 3.5  |  | 3.9  |  | (0.4   | ) |  | (10.3    | )%
|Depreciation                                             |  | 3.4  |  | 1.3  |  | 2.1    |   |  | 161.5    | % 
|Other                                                    |  | 3.9  |  | 2.9  |  | 1.0    |   |  | 34.5     | % 
|                                                         |  |      | 
|Total research and development                           |  | 55.7 |  | 40.0 |  | 15.7   |   |  | 39.3     | % 
|                                                         |  |      | 



Satraplatin development
activities continue to be the primary driver for increases in research and development expenses. We maintain contracts with clinical trials contract research organizations who conduct clinical trials for satraplatin. Clinical trials contract
research organization expenses increased 105.2% during 2005 as enrollment grew in our SPARC trial and the trial progressed.



Primarily as the result of hiring 40 employees from Axxima immediately upon closing of the transaction in March 2005, employee compensation, including stock-based
compensation costs allocated to research and development, increased 31.4%, or 4.3 million, in 2005 compared to 2004. Salaries and
payroll costs increased 2.9 million. Compensation costs for stock-based compensation increased 1.3 million in 2005. This increase resulted from the recognition of compensation of stock-based issuances granted in the fall of 2004. The aggregate value of
2004 stock-based compensation grants was higher than in other years and, since expense is recognized over the vesting period of four years, part of that higher value was expensed during 2005.



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Depreciation expense increased 2.1 million in 2005 compared to 2004. This increase was primarily due to the acquisition of substantially all of the assets from Axxima in the first quarter of 2005. Many of the assets identified in the
acquisition were laboratory leasehold improvements and were depreciated over the remaining life of the lease. The lease was terminated in 2005 and was not renewed. Deprecation expense in 2006 is expected to be lower due to these assets being fully
depreciated.



2004 vs. 2003



Research and development expenses were 40.0 million for the year ended December 31, 2004, compared with 37.7 million for the year ended December 31, 2003, an increase of 2.3 million or 6.1%. Included in
research and development expenses are satraplatin project costs of 14.9 million and 9.8 million for the years ended December 31, 2004 and 2003. The following table summarizes the changes in research and development expenses for the years ending
December 31, 2004 and 2003 (in millions of , except % change):



|                                                         |  |      |  |      |  |        |   |  |          |   
|-------------------------------------------------------- |  | ---- |  | ---- |  | ------ | - |  | -------- | --
|                                                         |  | 2004 |  | 2003 |  | Change |   |  | % Change |   
|Employee compensation including stock-based compensation |  | 13.7 |  | 15.1 |  | (1.4   | ) |  | (9.3     | )%
|Clinical trials contract research organization           |  | 7.7  |  | 3.2  |  | 4.5    |   |  | 140.6    | % 
|External research and development                        |  | 6.3  |  | 3.7  |  | 2.6    |   |  | 70.3     | % 
|Pre-clinical and clinical supplies                       |  | 1.5  |  | 2.6  |  | (1.1   | ) |  | (42.3    | )%
|Raw materials and consumables                            |  | 1.3  |  | 2.0  |  | (0.7   | ) |  | (35.0    | )%
|Licensing and intellectual property                      |  | 1.4  |  | 2.7  |  | (1.3   | ) |  | (48.1    | )%
|Facilities                                               |  | 3.9  |  | 4.1  |  | (0.2   | ) |  | (4.9     | )%
|Depreciation                                             |  | 1.3  |  | 1.4  |  | (0.1   | ) |  | (7.1     | )%
|Other                                                    |  | 2.9  |  | 2.9  |  |       |   |  | 0.0      | % 
|                                                         |  |      | 
|Total research and development                           |  | 40.0 |  | 37.7 |  | 2.3    |   |  | 6.1      | % 
|                                                         |  |      | 



In 2003, we entered into several
agreements with two contract research organizations to perform clinical trials for satraplatin. In 2004, the expense related to these agreements increased 4.5 million or 140.6% in 2004 compared to 2003. This increase is due to a larger number of patients enrolled in clinical trials and more sites opened.



The costs for external research and development increased 2.6 million or 70.3% in 2004 compared to 2003. An increase of 0.9 million related
to the achievement of milestones in our monoclonal antibody (1D09C3) project and an additional increase of 1.3 million in
preclinical development costs on this project.



Employee compensation,
including stock-based compensation costs allocated to research and development, decreased by 1.4 million in 2004 compared to 2003.
Salaries and payroll costs decreased by 2.0 million in 2004 as a result of a restructuring in October 2003, in which our workforce
was reduced by approximately 21%. Additional decreases were due to favorable changes in the U.S. dollar-euro exchange rate on our U.S. dollar-based payroll costs. Compensation expense related to stock options and convertible bonds increased in 2004
by 0.6.



We incurred licensing and intellectual property expenses of 1.4 million in 2004 compared to 2.7 million in 2003, a decrease of 1.3 million. Of this decrease, 0.9 million is
attributable to licensing costs of satraplatin in 2003. No such costs were incurred in 2004.



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Costs of preclinical and clinical supplies decreased from 2.6 million in 2003 to 1.5 million in 2004, a
decrease of 1.1 million. This decrease was attributable to higher expenses in 2003 for the contract manufacturing of antibodies for
our monoclonal antibody drug development program in preparation for clinical testing. These expenses were mostly incurred in 2003 and 2002 and none were incurred in 2004.



General and Administrative Expenses



General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including finance, business development,
strategic marketing, investor relations, legal, information technology and human resources. Other significant costs in this category include facilities costs and professional fees for accounting and legal services, travel, insurance premiums and
depreciation. We anticipate increases in expenses relating to insurance, legal and accounting services, investor relations and other internal resource requirements arising from additional compliance and reporting obligations imposed by Nasdaq and
the U.S. federal securities laws.



2005 vs. 2004



The following table summarizes the changes in general and administrative expenses for
the years ended December 31, 2005 and 2004 (in millions of , except % change):



|                                                         |  |      |  |      |  |        |   |  |          |   
|-------------------------------------------------------- |  | ---- |  | ---- |  | ------ | - |  | -------- | --
|                                                         |  | 2005 |  | 2004 |  | Change |   |  | % Change |   
|Employee compensation including stock-based compensation |  | 10.5 |  | 7.7  |  | 2.8    |   |  | 36.4     | % 
|Facilities                                               |  | 4.4  |  | 1.6  |  | 2.8    |   |  | 175.0    | % 
|Depreciation                                             |  | 0.3  |  | 0.4  |  | (0.1   | ) |  | (25.0    | )%
|Other                                                    |  | 5.4  |  | 3.5  |  | 1.9    |   |  | 54.3     | % 
|                                                         |  |      | 
|Total general and administrative expenses                |  | 20.6 |  | 13.2 |  | 7.4    |   |  | 56.1     | % 
|                                                         |  |      | 



General and administrative
salaries and payroll costs increased 2.8 million, of which an increase of 1.8 million is attributed to stock-based compensation. This increase resulted from the recognition of compensation of stock-based issuances granted in the fall of 2004.
The aggregate value of 2004 stock-based compensation grants was higher than in other years and, since expense is recognized over the vesting period of four years, part of that higher value was expensed during 2005. Partly as the result of adding new
full-time employees in the general and administrative area, salaries and payroll costs increased 1.0 million in 2005.



Facilities expenses increased 2.8 million in 2005 as the result of the recognition of loss on a sublease contract. The loss represents the present value of the projected shortfall between our rent
obligation under the lease and the rental income to be received over the term of the sublease. Since the loss that was recognized related to the remaining term of the sub-lease, no additional losses from the sublease are expected to be incurred
other than the periodic accretion of the present value of the loss accrual.



Other general and administrative expenses increased 1.9 million to 5.4 million in 2005. This increase results from ongoing compliance costs, namely insurance and consulting costs, related to our listing on Nasdaq. Other increases result
from legal fees related to business development and other corporate activities during 2005.



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##### Table of Contents

2004 vs. 2003



The following table summarizes the changes in general and administrative expenses for the years ended December 31, 2004 and 2003 (in millions of , except % change):



|                                                         |  |      |  |      |  |        |   |  |          |   
|-------------------------------------------------------- |  | ---- |  | ---- |  | ------ | - |  | -------- | --
|                                                         |  | 2004 |  | 2003 |  | Change |   |  | % Change |   
|Employee compensation including stock-based compensation |  | 7.7  |  | 6.8  |  | 0.9    |   |  | 13.2     | % 
|Facilities                                               |  | 1.6  |  | 1.4  |  | 0.2    |   |  | 14.3     | % 
|Depreciation                                             |  | 0.4  |  | 0.5  |  | (0.1   | ) |  | (20.0    | )%
|Other                                                    |  | 3.5  |  | 2.8  |  | 0.7    |   |  | 25.0     | % 
|                                                         |  |      | 
|Total general and administrative expenses                |  | 13.2 |  | 11.5 |  | 1.7    |   |  | 14.8     | % 
|                                                         |  |      | 



Employee compensation, including
stock-based compensation costs, increased 0.9 million or 13.2% from 6.8 million in 2003 to 7.7 million in 2004. Part of
the increase was from higher stock option and convertible bonds compensation costs due to an increase in the number and value of stock options and convertible bonds granted in 2004. The remaining increase in employee compensation was due to success
payments related to the Nasdaq listing in June 2004.



Other general and
administrative expenses increased 0.7 million from 2.8 million in 2003 to 3.5 million in 2004. This increase results mainly from higher
insurance premiums of 0.6 million such as for directors and officers insurance, which was purchased in connection with our Nasdaq
listing in June 2004.



Other Statement of Operations Commentary



In-Process Research and Development and Amortization of
Intangible Assets



As described in Item 18, Note 5 to the
Consolidated Financial Statements, we acquired substantially all of the assets of Axxima Pharmaceuticals AG. The aggregate purchase price of the assets was 13.1 million of which 0.7 million was assigned to in-process research and development. In
accordance with FASB Interpretation No. 4, Applicability of SFAS No. 2 to Business Combinations Accounted for by the Purchase Method, the in-process research and development was expensed at the date of acquisition.



Amortization of intangible assets primarily includes the amortization of the following
intangible assets:



| |  |  | Intangible assets identified in a business combination with Mitotix, Inc. in 2000,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Intangible assets identified in an acquisition of assets from Axxima on March 2, 2005,
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Technology license purchased and used in various research programs and sublicensed to a third party.
| | - |  | ----------------------------------------------------------------------------------------------------



The estimated amortization expense for intangibles for the next five years is as follows (in million ):



|                                |  |    
|------------------------------- |  | ---
|For the year ended December 31, |  |    
|2006                            |  | 0.6
|2007                            |  | 0.3
|2008                            |  | 0.1
|2009                            |  | 0.1
|2010                            |  | 0.0



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##### Table of Contents

Stock-based Compensation



Stock Options and Convertible Bonds



Stock option plans and convertible bonds are accounted for in accordance with the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation.Convertible bonds, in addition to stock options, are issued as compensation to members of the Management Board and senior management. The fair value of options and convertible bonds granted is established as of the date of
grant and recognized as compensation expense over the vesting period of the option or convertible bond. Compensation cost for stock options and convertible bonds is included in research and development expenses and general and administrative
expenses in the statements of operations.



The following table summarizes
the aggregate grant date fair value of stock-based compensation granted during 2005, 2004 and 2003 (in million ):



|                                                                |  |      |  |      |  |     
|--------------------------------------------------------------- |  | ---- |  | ---- |  | ----
|                                                                |  | 2005 |  | 2004 |  | 2003
|Stock options                                                   |  | 4.4  |  | 6.5  |  | 1.5 
|Convertible bonds                                               |  | 1.8  |  | 5.5  |  | 0.6 
|                                                                |  |     
|Total grant date fair value of stock based compensation granted |  | 6.2  |  | 12.0 |  | 2.1 
|                                                                |  |     



During 2004, the aggregate grant
date fair value of stock-based compensation granted was higher than in 2005 and 2003 due to an increase in both the number and the value of the compensation given.



The following table summarizes the allocation of stock-based compensation expense in the statement of operations during 2005, 2004 and
2003 (in million ):



|                                       |  |      |  |      |  |     
|-------------------------------------- |  | ---- |  | ---- |  | ----
|                                       |  | 2005 |  | 2004 |  | 2003
|Research and development expense       |  | 3.3  |  | 1.9  |  | 1.3 
|General and administrative expense     |  | 3.4  |  | 1.6  |  | 1.2 
|                                       |  |     
|Total stock-based compensation expense |  | 6.7  |  | 3.5  |  | 2.5 
|                                       |  |     



The fair value of stock-based
compensation is amortized to expense using graded vesting. Graded vesting amortizes a larger portion of compensation expense to the earlier years of the vesting period. The increase in stock-based compensation expense in 2005 is due to the graded
vesting of stock-based compensation granted in the fall of 2004, which was significantly higher than in other years.



Stock Appreciation Rights



During 2004 and 2005, we issued stock appreciation rights, or SARs, to members of the Supervisory Board and to certain members of the senior management team. The
SARs vest upon the marketing approval of satraplatin in the United States or the European Union or both and will be settled in cash.



SARs are accounted for as liability awards under SFAS No. 123. Compensation expense for SARs, if any, will be accrued and recognized based on the intrinsic
value at each balance sheet date as the difference between the stock price on the balance sheet date and the stock price on the date of grant. Compensation expense for SARs that contain vesting terms that are dependent on the achievement of certain
events will be accrued and recognized at each balance sheet date following the achievement of that event. Compensation expense recorded will be equal to the amount of cash ultimately paid to settle the SARs. As of December 31, 2005, no
compensation expense related to SARs has been recorded.



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In periods beginning after December 31, 2005, we will adopt SFAS 123R, Share-Based Payment.
Under SFAS 123R SARs will continue to be accounted for as liability awards however the timing of the recognition award expense will be different than before the adoption. The ultimate compensation cost for SARs, if any, will be the same after the
adoption SFAS 123R as before the adoption.



The following table provides
a sensitivity analysis of the compensation expense from SARs. The numbers in the table represent the costs that would be incurred from the occurrence of the vesting event at the stock price indicated in the column (in million , except stock price):



|                                                        |  |                                          |  |         |  |         |  |         |  |        
|------------------------------------------------------- |  | ---------------------------------------- |  | ------- |  | ------- |  | ------- |  | -------
|Vesting Event                                           |  | Stock price when vesting event occurs(1)
|Marketing approval:                                     |  |  10.00                                  |  |  15.00 |  |  20.00 |  |  25.00 |  |  30.00
|                                                        |  |                                          |  |         |  |         |  |         |  |        
|In U.S.                                                 |  | 0.00                                     |  | 1.01    |  | 2.26    |  | 3.51    |  | 4.76   
|In European Union                                       |  | 0.00                                     |  | 0.50    |  | 1.13    |  | 1.75    |  | 2.38   
|In first of U.S. or European Union                      |  | 0.00                                     |  | 0.41    |  | 0.84    |  | 1.27    |  | 1.71   
|In both U.S and European Union                          |  | 0.08                                     |  | 0.98    |  | 1.91    |  | 2.84    |  | 3.77   
|                                                        |  |                                         
|Total expense assuming occurrence of all vesting events |  | 0.08                                     |  | 2.90    |  | 6.14    |  | 9.37    |  | 12.62  
|                                                        |  |                                         

---

|(1) | Each incremental increase of 1 in stock price above 30.00 would result in approximately 0.65 million in additional compensation expense.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



Other Income (Expense), net



A significant
portion of other income and expense relates to foreign currency gains and losses on accounts receivable, accounts payable and cash. Strengthening of the U.S. dollar against the euro resulted in foreign currency gains of 2.4 million in 2005. Conversely, in 2004 the U.S. dollar weakened against the euro resulting in foreign currency losses of (1.7) million during that period.



Foreign Currency



Our revenues and expenses are primarily denominated in both euro and U.S. dollar. We publish our consolidated financial statements in euro. Fluctuations in exchange
rate between the euro and the U.S. dollar affects the reported euro amount of U.S. dollar transactions. A depreciation of the U.S. dollar against the euro decreases the euro reported amounts of revenues and expenses that are denominated in U.S.
dollar and vice versa. These expenses primarily consist of all of the expenses incurred by our subsidiary, GPC Biotech Inc., and to a lesser extent some external research and development expenses and legal expenses incurred by GPC Biotech AG.



The following table summarizes the exchange rate as of the end of the
three most recent years:



|                  |  |                           |     
|----------------- |  | ------------------------- | ----
|As of:            |  | U.S. dollars for one euro
|December 31, 2003 |  | $                         | 1.26
|December 31, 2004 |  | $                         | 1.36
|December 31, 2005 |  | $                         | 1.18



After several periods of the U.S. dollar
depreciating against the euro, the U.S. dollar appreciated against the euro during 2005. Any substantial future appreciation of the U.S. dollar against the euro will have the effect of increasing the euro reported expenses that are denominated in
U.S. dollar.



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Liquidity and Capital Resources



Our cash, cash equivalents and marketable securities and short-term investments totaled 93.6 million, and our restricted cash totaled 1.6 million, at December 31, 2005.
We invest our cash in investments that have relatively short maturities and that are placed with highly rated issuers. Marketable securities and short-term investments include bonds from corporate issuers. As a general policy, we do not invest in
equity securities for cash management purposes. Any equity securities we own were acquired as part of licensing agreements.



We have historically financed our operations primarily through the issuance of equity securities, cash payments (including licensing fees) from several
collaboration partners, interest earned on investments, government grants, capital lease financings and long-term debt.



The following table summarizes our sources of funding over the last five years (in thousands of ):



|     |  |                                      |  |                                            |  |                            |  |                              |  |                             |  |       
|---- |  | ------------------------------------ |  | ------------------------------------------ |  | -------------------------- |  | ---------------------------- |  | --------------------------- |  | ------
|Year |  | From the issuance ofequitysecurities |  | From cashpaymentsfromcollaborationpartners |  | From interestoninvestments |  | Fromconvertiblebondissuances |  | Othersources offinancing(1) |  | Total 
|2005 |  | 10,929                               |  | 7,501                                      |  | 3,558                      |  | 580                          |  |                            |  | 22,568
|2004 |  | 80,014                               |  | 9,348                                      |  | 1,966                      |  | 935                          |  |                            |  | 92,263
|2003 |  | 292                                  |  | 16,383                                     |  | 3,276                      |  | 517                          |  | 807                         |  | 21,275
|2002 |  | 290                                  |  | 15,814                                     |  | 3,866                      |  | 281                          |  | 1,915                       |  | 22,166
|2001 |  | 35,765                               |  | 30,171                                     |  | 5,076                      |  |                             |  | 1,925                       |  | 72,937

---

|(1) | Other sources of financing include capital lease financings, issuance of long-term debt and funds received from governmental grants.
|--- | ------------------------------------------------------------------------------------------------------------------------------------



With the signing of the co-development and license agreement with Pharmion on
December 19, 2005, additional sources of funding were established. Qualifying development expenses related to satraplatin will be shared with Pharmion, which will result in co-development revenues and cash inflows in 2006 and beyond. We are
also eligible to receive up to an additional $210 million in total payments based upon the achievement of regulatory and sales milestones, in addition to significant royalties on net sales.



It is important to note that the following transactions took place after
December 31, 2005 and yielded cash inflows totaling 67.5 million:



| |  |  | Accounts receivable from Pharmion were collected in the amount of $37.1 million (31.3 million).
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | Proceeds of 36.2 million were received from the sale of 2.86 million
newly issued ordinary shares in a private placement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



Capital resources derived from cash payments from collaboration partners have declined over the last five years. This decline is the result of not entering into significant new collaboration agreements in recent years and the completion of
several collaboration agreements. This decline reflects our change in emphasis to drug development from technology and collaboration activities in recent years. We expect this trend to continue.



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A large portion of the capital resources used to fund operations has been derived from the issuance of shares in
various significant equity transactions. As of December 31, 2005, our shareholders have authorized the future issuance of 23,628,873 ordinary shares for specific purposes. The following table summarizes the ordinary shares authorized to be
issued for different purposes:



|                                            |  |                  
|------------------------------------------- |  | -----------------
|                                            |  | As ofDecember 31,
|                                            |  | 2005             
|Shares issued and outstanding               |  | 30,151,757       
|Authorized shares for the purpose of:       |  |                  
|Exercise of stock options                   |  | 4,798,409        
|Exercise of convertible bonds               |  | 2,707,527        
|Potential merger and acquisition activities |  | 10,122,937       
|Potential convertible debt issuances        |  | 6,000,000        
|                                            |  |                  
|Total shares authorized                     |  | 53,780,630       
|                                            |  |                  



The following table summarizes
selected information from our consolidated statements of cash flows for 2005, 2004 and 2003 (in million ):



|                                                                               |  |       |   |  |       |   |  |       |  
|------------------------------------------------------------------------------ |  | ----- | - |  | ----- | - |  | ----- | -
|Selected Cashflow Information                                                  |  | 2005  |   |  | 2004  |   |  | 2003  |  
|Operating activities                                                           |  |       |   |  |       |   |  |       |  
|Net Loss                                                                       |  | (62.2 | ) |  | (39.9 | ) |  | (26.8 | )
|Adjustments to net loss                                                        |  | 19.4  |   |  | 2.1   |   |  | 3.8   |  
|                                                                               |  |       |  
|Net cash used in operating activities                                          |  | (42.8 | ) |  | (37.8 | ) |  | (23.0 | )
|Investing activities                                                           |  |       |   |  |       |   |  |       |  
|Purchases of property, equipment and licenses                                  |  | (4.5  | ) |  | (1.0  | ) |  | (1.7  | )
|Proceeds from sale of property and equipment                                   |  | 0.2   |   |  |      |   |  |      |  
|Net proceeds (purchases of) marketable securities and short-term investments   |  | 4.3   |   |  | (16.0 | ) |  | 20.4  |  
|                                                                               |  |       |  
|Net cash (used in) provided by investing activities                            |  |      |   |  | (17.0 | ) |  | 18.7  |  
|Financing activities                                                           |  |       |   |  |       |   |  |       |  
|Proceeds from shares issued:                                                   |  |       |   |  |       |   |  |       |  
|Asset acquisition                                                              |  | 10.4  |   |  |      |   |  |      |  
|Global equity offering                                                         |  |      |   |  | 78.0  |   |  |      |  
|Exercises of stock-based compensation                                          |  | 0.5   |   |  | 2.0   |   |  | 0.1   |  
|Other financing activities                                                     |  | 0.6   |   |  | (0.3  | ) |  | (0.1  | )
|                                                                               |  |       |  
|Net cash provided by financing activities                                      |  | 11.5  |   |  | 79.7  |   |  |      |  
|Net (decrease) increase in cash                                                |  | (28.9 | ) |  | 24.5  |   |  | (5.0  | )
|Cash and cash equivalents at end of year                                       |  | 30.6  |   |  | 59.4  |   |  | 34.9  |  
|Marketable securities and short-term investments at end of year                |  | 63.1  |   |  | 69.2  |   |  | 54.2  |  
|                                                                               |  |       |  
|Total cash, cash equivalents, marketable securities and short-term investments |  | 93.7  |   |  | 128.6 |   |  | 89.1  |  
|                                                                               |  |       |  



We continue to report
significant cash used in operations. Significant adjustments to net loss to derive net cash used in operations are non-cash depreciation and amortization, non-cash compensation expense for stock options and convertible bonds and changes in accounts
payable, other current and non-current assets, deferred revenue and other liabilities and accrued expenses. In 2005, we had a significant change in accounts receivable and deferred revenue due to the signing of the co-development and license
agreement with Pharmion.



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Investing activities are comprised of investments in property, equipment and licenses and purchasing and selling of
marketable securities and short-term investments. In 2005, investments in property and equipment increased due to the purchase of substantially all of the assets of Axxima.



Financing activities are primarily comprised of the issuance of shares for various reasons and, in previous years, principle payments
on long-term debt and capital leases. In 2005, cash provided by financing activities was derived primarily from cash received by issuing shares in the acquisition of assets from Axxima. In 2004, cash provided by financing activities was derived from
a global equity offering of 7.16 million shares in Europe and the U.S., which yielded 78.0 million, net of costs of
transaction. The exercise of stock options and convertible bonds provided cash in the amount of 0.5 million, 2.0 million and 0.1
million in the years 2005, 2004 and 2003, respectively.



We expect to
incur substantial costs as we continue to expand our discovery programs and development activities. We expect to incur significant development expenses to complete our Phase 3 registrational trial for satraplatin as well as for additional trials
with satraplatin. We further expect to incur significant development expenses to initiate new and complete current clinical trials for our monoclonal antibody product candidate.



We believe that our existing cash resources, future payments we expect to receive from Pharmion, ALTANA Pharma and other collaboration
partners and interest earned on investments will be sufficient to meet our projected operating requirements for at least the next 18 months. If, at anytime, our ability to internally finance our research programs changes, we may decide to reduce
research and development expenses by delaying, discontinuing or reducing our funding of development of one or more product candidates. Alternatively, we might raise funds through public or private financings, collaborations or other arrangements. We
can give no assurances that the funding, if needed, will be available on attractive terms, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants.
Similarly, financing obtained through future co-development or co-marketing arrangements may require us to forego certain commercial rights to, and revenues from, current or potential product candidates. Our failure to raise capital as and when
needed could have a negative impact on our business, financial condition, operating results and ability to pursue our business strategy.



Contractual Obligations



Set forth below is a description of our contractual obligations as of December 31, 2005 (in thousand ):



|                        |  |                        |  |                |  |            |  |            |  |                
|----------------------- |  | ---------------------- |  | -------------- |  | ---------- |  | ---------- |  | ---------------
|                        |  | Payments due by period
|Contractual Obligations |  | Total                  |  | Lessthan 1year |  | 1  3years |  | 3  5years |  | Morethan 5years
|Operating leases        |  | 26,459                 |  | 5,120          |  | 10,372     |  | 9,597      |  | 1,370          
|Convertible bonds       |  | 2,334                  |  | 33             |  |           |  |           |  | 2,301          
|Research obligations    |  | 548                    |  | 274            |  | 274        |  |           |  |               
|                        |  |                        |  |                |  |            |  |            |  |                
|Total                   |  | 29,341                 |  | 5,427          |  | 10,646     |  | 9,597      |  | 3,671          
|                        |  |                        |  |                |  |            |  |            |  |                



Our long-term commitments under
operating leases shown above consist of payments relating to our facility leases in Munich, Germany, Waltham, Massachusetts and Princeton, New Jersey. They all expire at various times through 2015. The amounts shown represent cash payments to
lessors. One lease calls for future incremental increases in rental payments in 2008. This increase is included in the table above; however the rent expense is accounted for on a straight-line basis in accordance with U.S. GAAP. Payments for
facility leases are offset by payments received from sublessors. As of December 31, 2005, the aggregate future minimum rentals to be received under non-cancelable subleases with ALTANA Pharma and another company were approximately 2.6 million.



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The contractual obligations table does not include amounts for milestone payments to various collaboration partners
resulting from the achievement of defined contractual milestones, as the payments are contingent on the achievement of defined contractual milestones.



The contractual obligations table does not include amounts for stock-based compensation that are contingent on achievements of certain events. During 2005 and 2004
we issued SARs to Supervisory Board Members and to certain members of the senior management team. See the discussion of SARs in the section Results of Operations, above.



Off-Balance Sheet Transactions



As of December 31, 2005, 2004 and 2003, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we are not engaged in
trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had been engaged in these relationships. We do not have relationships or
transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.



German Tax Treatment of Loss Carry-Forwards



We have significant tax loss carry-forwards. Please refer to page F-25 in our financial statements included in this annual report for a detailed description of
income taxes. Under current German tax law, a corporation is generally permitted to set-off loss carry-forwards (Verlustvorträge) against annual taxable income up to 1 million. The remaining loss carry-forwards can be set-off against up to 60% of the taxable income of the individual tax assessment period. Any set-off against loss
carry-forwards requires that the offsetting entity is economically identical with the loss-incurring entity. According to the German Corporate Income Tax Act (Körperschaftsteuergesetz), the offsetting entity would not be economically
identical to the loss-incurring entity if:



| |  |  | at any time more than fifty percent (in aggregate) of the shares in a corporation are transferred, which, according to the German tax authorities, includes the subscription of new shares
issued in the course of a capital increase to new shareholders, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | predominantly new assets are injected into such corporation within a period of five years thereafter.
| | - |  | -----------------------------------------------------------------------------------------------------



Any loss carry-forwards existing at the time these two conditions occur will no longer be available for set-off against any of the corporations
current and future taxable income. Thereafter, a corporation would generally be permitted to set-off only newly incurred losses against 1 million per year of its taxable income of the following years. The remaining loss carry-forwards can be set-off against up to 60% of the taxable income of the individual tax assessment period.



The German tax authorities currently perform an audit of income tax for the years 1999
through 2003.



At December 31, 2005, 2004 and 2003, we had deferred
tax assets representing the benefit of accumulated tax net operating loss carry-forwards. We have provided a full valuation allowance on our deferred tax assets because we believe it is more likely than not that our deferred tax assets will not be
realized.



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Critical Accounting Policies



The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. We
review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this annual report, we believe the following accounting policies to be
critical to the judgments and estimates used in the preparation of our consolidated financial statements.



Revenue Recognition



We recognize revenue in accordance with Securities and Exchange Commission (SEC) Staff Accounting Bulletin, or SAB, No. 104, Revenue Recognition.SAB
No. 104 requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence that an arrangement exists; (ii) delivery has occurred or services rendered; (iii) the fee is fixed and determinable; and
(iv) collectibility is reasonably assured. Determination of whether these criteria have been met are based on managements judgments regarding the fixed nature of the fee charged for research performed and milestones met, and the
collectibility of those fees. Should changes in conditions cause management to determine that these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected.



Some agreements that we may enter into contain multiple deliverables. We account for
multi-element arrangements in accordance with FASB Emerging Issues Task Force (EITF) Issue No. 00-21 Revenue Arrangements with Multiple Deliverables. Accordingly, arrangements that may involve the delivery or performance of
multiple products, services and/or rights to use assets are divided into separate units of accounting based on certain criteria. Consideration is allocated to the different units of accounting based on their fair values. Revenue recognition is
considered separately for each accounting unit when all criteria of SAB 104 have been met.



Our revenues consist of fees earned from co-development and license agreements, research and development collaboration agreements, and grant revenues. Revenues from co-development and license agreements and from research and
development collaboration agreements generally consist of licensing fees and/or technology access fees, reimbursement fees, payments from a partner for shared development costs, fees for research and development support, as well as milestone and
royalty payments. Revenues from grants generally consist of reimbursements of a portion of expenses incurred in performing research in specified projects.



We generally receive re-imbursement fees upfront upon signing of a co-development and license agreement. We also receive non-refundable licensing and technology
access and initiation fees upfront upon signing of a research and collaboration agreement. In addition, we generally receive fixed non-refundable annual licensing fees upfront each year for the duration of the licence agreement. In accordance with
Staff Accounting Bulletin No. 104, Revenue Recognition,all fees received or to be received under these arrangements are recognized on a straight-line basis over the term of the agreements, as this is the period over which the license is
granted or we are substantially and continually involved.



Payments for
co-development activities are received under a co-development arrangement whereby certain drug candidate development costs are shared with a partner. Co-development



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revenues are derived from a negotiated, fixed-percentage of certain costs incurred in the joint development and commercialization activities of the licensed drug
program. Co-development revenues are recognized as qualified development costs are incurred and are included in collaboration revenues in the consolidated statement of operations. Any amounts received prior to incurrence of qualified development
costs are deferred until such costs are incurred.



Fees for development
activities performed by drug development employees are received from co-development partners for work directly related to the development of a licensed product or other activities contemplated under the co-development and license agreement. Fees for
research support performed by research scientists are received from collaboration partners for research services performed under the agreements. Fees are generally stated at a yearly flat fee rate per development employee or per research scientist.
We recognize fees for development activities and research support revenue as the work and the services are performed. Amounts received in advance of services performed are recorded as deferred revenue until earned.



Milestone revenues are derived from the achievement of predetermined goals, which are
defined in the collaboration agreements. These milestones are subject to significant contingencies and therefore, the related contingent revenue is not realized until the milestone has been reached and customer acceptance has been obtained. Payments
received that relate to the achievement of substantive milestones that were contingent at the outset of the arrangement are recorded as revenue when the milestones are achieved. The reaching of a milestone is evidenced by a milestone confirmation
letter that is signed and dated by both parties. In the absence of such milestone confirmation, no milestone revenue is recognized.



Royalty revenues generally result from sales of products based on research performed under the collaboration agreements. Royalties are based on the volume of
product sold and are recognized as revenue upon notification of sales from the collaboration partner. We have not yet received or recognized any royalty revenue payments from any of our past or current co-development or collaborative agreements.



Grant revenues from governmental agencies for the support of specific
research and development projects are recorded as revenue to the extent the related expenses have been incurred and research is performed. The grant agreements consist of a budget that specifies the amount and nature of expenses allowed under the
agreement for the entire grant term. Expenses incurred under the grants are calculated according to agreed-upon terms on a quarterly basis, filed with the grant partner, and recorded as revenue. The grant partner makes payments to us based on these
calculations. The calculation of the amount and nature of the expenses incurred under the grants involves the judgment of management. We recognize grant revenues based on estimated calculations of expenses incurred under the grants. If these
estimated calculations change, then we will adjust grant revenues in the subsequent period. We believe that our calculations are based on the agreed-upon terms as stated in the grant agreements. However, the grant partner has the right to audit our
calculations. If the grant partner disagrees with our calculations, then the amount of grant revenue recognized could change. Our calculations have not historically been challenged by the grant partner, and we do not anticipate any subsequent
changes in our revenues.



Accrued Expenses



As part of the process of preparing our financial statements, we are required to
estimate certain expenses and make appropriate accruals based on these estimates. This process involves identifying services that third parties have performed on our behalf, and estimating the level of services performed and the associated cost
incurred for these services as of each balance sheet date in our financial statements. Examples of estimated accrued expenses include contract service fees, such as



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amounts paid to contract research organizations, professional service fees, such as amounts paid to attorneys and accountants and investigators in conjunction with
preclinical and clinical trials, and fees paid to contract manufacturers in conjunction with the production of materials related to our product candidates. In connection with these service fees, our estimates are affected by our understanding of the
status and timing of services provided relative to the actual level of services performed by the service providers. In the event that we under- or over-estimate the level of services or the costs of such services, our reported expenses for a
reporting period could be overstated or understated. The date on which certain services commence, the level of services performed on or before a given date, and the cost of services are often subject to our judgment. We make these judgments based
upon the facts and circumstances known to us at the date of the Financial Statements.



In connection with our internal research and development programs, we may incur milestone payments to other parties. As our product candidates have not received regulatory approval, we expense milestone payments when we incur
the liability, which is when the milestones are achieved.



Stock-Based
Compensation



We grant stock options to our Management Board, senior
management, and to employees. In the past we have also granted stock options to consultants. Under the terms of our stock option plans, options are exercisable within ten years of the date of grant, subject to an initial two-year non-exercise period
as required by German law. The exercise price equals the average of the market price of our ordinary bearer shares over a five-day period prior to the date of grant. We account for our stock option plans in accordance with the provisions of SFAS
No. 123, Accounting for Stock-Based Compensation.SFAS No. 123 defines a fair value based method of accounting for an employee stock option or similar equity investment. We determine the fair value of the
options we grant using an option pricing model and recognize this as compensation expense as a charge to operations over the relevant vesting period of the options, which is generally four years. The expense is recognized on a graded vesting basis
as opposed to a straight-line basis. Graded vesting results from portions of the grant vesting at different times. Our options vest at 25% each over four years. This means that one quarter vests over year one, one quarter over years one and two, one
quarter over years one, two and three, and the last quarter over years one, two, three and four. As such, the amortized compensation expense is higher in the first years than in the later years.



We grant convertible bonds to Management Board and senior management. In the past, we
have also granted convertible bonds to our Supervisory Board. The fair value of our convertible bonds is calculated using the same vesting schedule and assumptions as those used for our stock options, and is recognized as compensation expense over
the relevant vesting period of the convertible bonds, generally up to four years.



Compensation expense is determined by multiplying the number of options and convertible bonds granted times the fair value of each option or convertible bond. We calculate the fair value of options as of the date of grant and do not make
any adjustments for subsequent changes in share price or volatility. To determine the fair value, an option pricing model requires management to make estimates regarding the inputs of the model, namely for share price volatility, risk-free interest
rate, future dividends paid by us and life of the option or convertible bond. We estimate share price volatility based on actual historical share prices over the estimated life of the option. We revise the estimate of the share price volatility at
the beginning of each year and use the same volatility for all options and convertible bonds issued during the year, unless the market for our shares fluctuates significantly during a period, in which case the calculation is updated quarterly. The
risk-free interest rate used in the calculation is the interest on debt issued by the German government with a maturity similar to the estimated life of the stock options or convertible bonds. We estimate that we will not pay dividends in the
foreseeable future. We estimate the life of the option and convertible bonds to be equal to the



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vesting period of the option or convertible bond. Any changes in estimates of volatility, risk-free interest rate, future dividends and life of the options and
convertible bonds would result in increases or decreases in the amount of compensation expense recognized.



We grant stock-based compensation with performance conditions in the form of SARs and convertible bonds. The SARs with performance conditions vest upon the
marketing approval of satraplatin and will be settled in cash. As such, they are accounted for as liability instruments. Compensation expense for SARs, if any, will be accrued and recognized based on the intrinsic value at each balance sheet date
beginning after the marketing approval of satraplatin as the difference between the stock price on the balance sheet date and the stock price on the date of grant. Compensation expense will be recorded when the performance conditions are met and
will be equal to the amount of cash ultimately paid to settle the SARs.



Impairment of Long-Lived Assets



Our long-lived assets at
December 31, 2005 consist of intangible assets such as licenses and acquired patents purchased in connection with our acquisition of the assets of Axxima and the acquisition of Mitotix, Inc. in a transaction accounted for under the purchase
method and fixed assets such as laboratory equipment, computer and other office equipment, furniture and fixtures, and leasehold improvements. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets,we review long-lived assets for impairment when impairment indicators exist and, if necessary, recognize an impairment charge equal to the difference between the carrying amount of the asset and the fair value as determined by
discounted cash flows.



Indicators that result in reviewing our
long-lived assets for impairment are, among others, termination of research programs, restructuring programs, equipment obsolescence, idle equipment, or vacating of facilities. During the fourth quarter of 2003, we reviewed our patents for
impairment, as management decided during 2003 to discontinue additional programs, and also obtained additional information regarding the probability of success of the remaining program. An impairment charge of 1.2 million was recorded at December 31, 2003, based on the updated discounted cash flow analysis. For the year ended December 31, 2005 and 2004, we
updated our discounted cash flow analysis resulting in no impairment expense for these periods.



The fair value of the patent portfolio is calculated using the relief-from-royalty approach. This approach estimates the royalty that we would have to pay if we had
to license our patents from a third party. Our fair value model uses inputs and assumptions to calculate the fair value of the patent portfolio based on discounted cash flows. As with all estimations of fair value, the estimation of fair value of
the patent portfolio involves significant judgments of management. Our fair value model uses the following inputs: identified research programs, estimated revenues of each program, probabilities of success of each program, implied royalty rates and
risk-adjusted discount factor. The estimated cash flows of each program are adjusted for the probability of success of the program. An implied royalty rate is applied to the probability adjusted cash flows to arrive at the implied royalties. The
implied royalties are discounted at a risk-adjusted rate of return.



Program revenues are one of the most subjective of the assumptions used in the discounted cash flows analysis. This assumption requires us to forecast the peak sales expected to be achieved through sales of our product. We have estimated
revenues based on market research performed, which provided a range of peak sales related to this type of technology. We have used this market data, and our internal projections, to arrive at a peak sales number that we believe reasonable. Actual
peak sales could differ significantly, resulting in a different fair value for our patent portfolio.



The probability of success of each program is based on the most recent scientific information available to management regarding the progress of the program at a
given point in time. Programs are



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continually evaluated for their viabilities and whether our resources will continue to be used in pursuing the programs. Several programs were discontinued during 2002
and 2003, while others were reevaluated in terms of their probabilities. As of December 31, 2005, only one program acquired as part of the Mitotix, Inc. acquisition, our cell cycle inhibitor program, is still being pursued. The remaining
programs have been discontinued. These factors were incorporated into the discounted cash flow analysis.



Royalty rates are based on actual royalty rates stated in our license and/or collaboration agreements with collaboration partners. The rates used in the discounted
cash flow analysis take into consideration the similarities of the technology.



The risk-adjusted discount factor considers the risk free rate, the cost of equity, the cost of debt, and a market risk. The rate used to discount the cash flows takes into consideration the risks identified and already adjusted for in the
royalty rate and the probability rate. We have used a risk-adjusted discount rate of 20%, which is specific to us, but which is based on comparable rates and data used by other biotechnology companies.



The inputs of the model, including the program revenues, probability of success of the
programs, implied royalty rates and the risk-adjusted discount rate, are highly subjective, and their estimation involves significant judgment of management as to the amounts and timing of the revenues. We have selected values for these inputs that
we believe to be fair and supportable. Changes in these estimates would result in a change in the estimated fair value of the intangible assets and thus a change in the impairment charge recognized.



Recent Accounting Pronouncement



On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised
2004) (SFAS No. 123(R)), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion
No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Under SFAS No. 123R, companies must calculate and record in the statement of operations
the cost of equity instruments, such as stock options or restricted stock, awarded to employees for services received. The cost of instruments is to be measured based on the fair value of the instruments on the date they are granted (with certain
exceptions) and is required to be recognized over the period during which the employees are required to provide services in exchange for the equity instruments. SFAS No. 123R is effective in the first annual reporting period beginning after
June 15, 2005, and will thus be adopted by us in our first calendar quarter of 2006.



SFAS No. 123R provides two alternatives for adoption: (1) a modified prospective method in which compensation cost is recognized for all awards granted subsequent to the effective date of this statement as
well as the for the unvested portion of awards outstanding as of the effective date and (2) a modified retrospective method which follows the approach in the modified prospective method, but also permits entities to
restate prior periods to reflect compensation costs calculated under SFAS No. 123 for pro forma amounts disclosure. We plan to adopt SFAS No. 123R using the modified prospective method.



On March 30, 2005, the SEC released Staff Accounting Bulletin No. 107,
Share Based Payments, (SAB 107), which expresses the views of the SEC staff regarding the application of SFAS No. 123R.



We are in the process of quantifying the total impact that the adoption of SFAS No. 123R will have on our first quarter 2006 consolidated financial statements.



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In Item 18, pages F-12 and F-13 of the Consolidated Financial Statements, we disclose other new accounting
standards; however we do not consider them to have a material impact on our financial statements upon adoption.



Item 6. Directors, Senior Management and Employees



Overview



In accordance with the German Stock Corporation
Act (Aktiengesetz), we have two separate boards of directors. These are the Vorstand, or Management Board, and the Aufsichtsrat, or Supervisory Board. The two boards are separate, and generally no individual may simultaneously
be a member of both boards.



The Management Board is responsible for the
day-to-day management of our business in accordance with applicable law, our Articles of Association (Satzung) and the internal rules of procedure (Geschäftsordnung) adopted for it by the Supervisory Board. The Management Board
represents GPC Biotech in its dealings with third parties. The principal function of the Supervisory Board is to supervise the Management Board. It is also responsible for appointing and removing the members of the Management Board and representing
GPC Biotech in connection with transactions between a member of the Management Board and the company. The Supervisory Board is not itself permitted to make management decisions, but, in accordance with German law and in addition to its statutory
responsibilities, our Supervisory Board has determined that the following matters, among others, require its prior consent: (1) the conclusion, amendment and termination of license, know-how, patent and collaboration agreements above specified
thresholds, (2) the acquisition, sale and encumbrance of real property, (3) the commencement, acquisition, discontinuance and sale of businesses, business units or branch offices, (4) the granting of guarantees, securities and other
collateral (other than product warranties/guarantees) above a specified threshold, (5) our fiscal and financial planning and budgeting, (6) the granting and termination of profit participation rights, and (7) the purchase and sale of
equity interest.



The members of both the Management Board and the
Supervisory Board are solely responsible for and manage their own areas of competency (Kompetenztrennung); therefore, neither board may make decisions that are the responsibility of the other board pursuant to applicable law, our Articles of
Association or the internal rules of procedure. Members of both boards owe a duty of loyalty and care to GPC Biotech. In exercising their duties, the applicable standard of care is that of a diligent and prudent businessperson. Members of both
boards must take into account a broad range of considerations when making decisions, including the interests of GPC Biotech and its shareholders as well as those of employees and creditors.



Our Supervisory Board has comprehensive monitoring functions. To ensure that these
functions are carried out properly, our Management Board must, among other things, regularly report to the Supervisory Board with regard to current business operations and future business planning (including financial, investment and personnel
planning). The Supervisory Board may, at any time, request special reports regarding the affairs of GPC Biotech, the legal or business relations of GPC Biotech and our subsidiaries and the affairs of any of our subsidiaries to the extent that the
affairs of such subsidiary may have a significant impact on GPC Biotech.



The Management Board is required to ensure that adequate risk management and internal monitoring systems exist within the company to detect risks relating to our business activities at the earliest stage possible.



For a discussion of potential recourse of shareholders against our members of the
Management Board or the Supervisory Board please refer to our discussion of German Corporate Law in Item 4. of this annual report.



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Supervisory Board



Our Supervisory Board generally consists of six members, all of whom are elected by our shareholders in our annual general meeting in accordance with the provisions
of the German Stock Corporation Act. Unless otherwise determined by our shareholders, under our Articles of Association, the term of a Supervisory Board member expires at the end of the annual general meeting in which the shareholders discharge the
Supervisory Board member from liability in respect of the second fiscal year following the year in which the member was elected. The term of office of a member of our Supervisory Board ends at the annual general meeting after he or she has attained
the age of 75. None of the present members of our Supervisory Board will turn 75 during their current terms.



Any member so elected by our shareholders may be removed by a majority of three quarters of the votes cast by the shareholders in a general meeting. In addition,
any member of the Supervisory Board may, at any time, resign by written notice to the Management Board. According to our Articles of Association and the internal rules of procedure of the Supervisory Board, the Supervisory Board has a quorum when
all members were invited or requested to participate in a decision and a majority, but in no event less than three, of the members of the Supervisory Board participated. Unless not required by law or by the Articles of Association of GPC Biotech,
resolutions of the Supervisory Board are passed by simple majority of the votes cast. In the case of a deadlock, the Chairman of the Supervisory Board, or in his absence, the Vice Chairman, has the deciding vote. The Supervisory Board meets at least
twice each half-year.



The following table shows the current members of
the Supervisory Board, the years in which they were first elected, the end of their current terms and their principal occupations.



|                                         |  |                   |  |               |  |                                                                                                
|---------------------------------------- |  | ----------------- |  | ------------- |  | -----------------------------------------------------------------------------------------------
|Name                                     |  | Year firstelected |  | End ofterm(1) |  | Principal occupation                                                                           
|Jürgen Drews, M.D., Ph.D. (Chairman)(72) |  | 1998              |  | 2007          |  | Consultant of Bear Stearns Health Innoventure Fund LLC                                         
|Michael Lytton, J.D. (Vice Chairman)(48) |  | 2001              |  | 2006          |  | General partner of Oxford Bioscience Partners                                                  
|Metin Colpan, Ph.D.(50)                  |  | 1998              |  | 2007          |  | Founder and member of the supervisory board of Qiagen N.V.                                     
|Prabhavathi B. Fernandes, Ph.D.(56)      |  | 2003              |  | 2007          |  | President and chief executive officer of Cempra Pharmaceuticals Inc.                           
|Peter Preuss(62)                         |  | 2001              |  | 2006          |  | President of Preuss Foundation for Brain Tumor Research; Regent of the University of California
|                                         |  |                   | 
|James M. Frates(38)                      |  | 2004              |  | 2006          |  | Chief Financial Officer, Vice President and Treasurer of Alkermes, Inc.                        

---

|(1) | Term ends upon the adjournment of the annual general meeting held in the year indicated.
|--- | ----------------------------------------------------------------------------------------



The members of our Supervisory Board may be contacted at the German address of GPC Biotech. The Supervisory Board has determined that
all of its current members are independent pursuant to the criteria contained in Nasdaq Rule 4200.



Jürgen Drews.    Chairman of the Supervisory Board since 2001. Dr. Drews was a Managing Partner at Bear Stearns Health
Innoventures until September 2004 and is now acting as a consultant to that firm. Previously, he was the President of Global Research at Hoffmann-La Roche and a former member of the Board of Directors and a Partner of BIOMEDICINE, International
Biomedicine Management Partners. He previously served as the Chairman of EuropaBio, the European Association



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for Bioindustries, which has more than 500 individual member companies. Dr. Drews was Chairman of the Board of Genaissance Pharmaceuticals, New Haven, CT until
October 2005 and served on the boards of several biotech companies worldwide, including TeGenero, Würzburg, Germany (until July 2005). Currently he is a board member at Human Genome Sciences, Rockville, MD and MorphoSys AG, Munich, Germany.



Michael Lytton.    Vice Chairman of
the Supervisory Board since January 2004. Mr. Lytton has been a General Partner at Oxford Bioscience Partners since January 2001. Previously, he was Partner, Chairman of the Technology Group and member of the Executive Committee of
Palmer & Dodge LLP. In this capacity, he advised GPC Biotech for several years. Mr. Lytton is a graduate of Princeton University and recipient of a Fulbright Scholarship for study at the University of London. He received an M.Sc. in
Epidemiology and Medical Statistics from the London School of Hygiene and Tropical Medicine and his J.D. from Harvard Law School. Mr. Lytton also serves on the boards of several companies worldwide, including Acambis, Cambridge, UK, Alantos
Pharmaceuticals, Cambridge, MA, Santhera Pharmaceuticals, Basel, Switzerland, Rib-X Pharmaceuticals, New Haven, CT, VaxInnate Corporation, Cranbury, NJ, Enanta Pharmaceuticals, Watertown, MA and Decision Biomarkers, Waltham, MA.



Metin Colpan.    Dr. Colpan is co-founder of
Qiagen N.V. and served as Qiagen N.V.s Chief Executive Officer and President from 1985 through 2003. Qiagen N.V. has been listed on Nasdaq since 1996 and on the Frankfurt Stock Exchange since 1997. He obtained his Ph.D. and M.Sc. in Organic
Chemistry and Chemical Engineering from the Darmstadt Institute of Technology, Darmstadt, Germany, in 1983. Prior to founding Qiagen N.V., Dr. Colpan was an Assistant Investigator at the Institute for Biophysics at the University of
Düsseldorf, Germany. Dr. Colpan has a wide range of experience in separation techniques, particularly in the separation and purification of nucleic acids, and has filed many patents in the field. Dr. Colpan serves on the boards of
several biotechnology companies worldwide, including GenPat77 Pharmacogenetics AG, Berlin (since March 2005), Ingenium Pharmaceuticals AG, Munich, Germany, and MorphoSys AG, Munich, Germany. He is also a member of the board of Qiagen N.V., Venlo,
The Netherlands. In addition, he is a consultant for the federal and state governments of Germany.



Prabhavathi B. Fernandes.    Dr. Fernandes has been President and Chief Executive Officer of Cempra Pharmaceuticals, Inc.
since January 2006. She was President and Chief Executive Officer of DarPharma until December 2005. Dr. Fernandes has over 25 years of experience in drug discovery and development, having held leadership positions at several biotechnology and
pharmaceutical companies. During these years she was directly involved in the development of many drugs, of which four have been approved and one had many years of sales in the billions of dollars. She has also served as Chief Executive Officer of
Ricerca Biosciences LLC, and founder and Chief Executive Officer of Small Molecule Therapeutics. Prior to founding Small Molecule Therapeutics, Dr. Fernandes worked for many years at major pharmaceutical companies, including as Vice President
Biomolecular Screening Drug Discovery at Bristol-Myers Squibb, Pharmaceutical Research Institute. She also worked for Abbott Laboratories and The Squibb Institute for Medical Research. Dr. Fernandes served on the U.S. Congressional Panel for
Assessment of Impact of Antibiotic Resistant Bacteria and on the American Society for Microbiology Advisory Panel for Antibiotic Resistance. She was awarded a post-doctoral fellowship to Fox Chase Cancer Center from the National Institutes of Health
and received her Ph.D. in Microbiology from Thomas Jefferson University, Philadelphia, PA. Dr. Fernandes has authored numerous publications and has received many awards for her achievements. She serves on the editorial board of six journals as
well as on the board of Biosomes, Inc., Wilmington, DE (since January 2006); the advisory board of Optimer Pharmaceuticals, Inc., San Diego, CA; the board of NAEJA Pharmaceutical, Inc., Edmonton, Alberta Canada; and as an industry advisor to TVM
Capital, Boston, MA and Munich, Germany.



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James M. Frates.    James Frates is the Chief Financial Officer and directs the
Finance and Corporate Communications departments at Alkermes, Inc., a pharmaceutical company based in Cambridge, Massachusetts. He was previously a Vice President in charge of the East Coast Life Sciences Practice at Robertson Stephens &
Company, Inc. He has also worked in health care investment banking at Morgan Stanley & Company, Inc. Mr. Frates serves as a national chairperson of the Association of Bioscience Financial Officers. Mr. Frates received a B.A. in
government from Harvard College and an M.B.A. from Harvard Graduate School of Business Administration.



Peter Preuss.    Peter Preuss is President and founder of the Preuss Foundation for Brain Tumor Research, and is currently serving
a twelve-year term as a Regent of the University of California. He is a former member of the Advisory Committee to the Director of the National Institutes of Health. Mr. Preuss was founder and Chief Executive Officer of Integrated Software
Systems Corporation, one of the worlds first software companies. His extensive business expertise and experience has been recognized by numerous awards, honors and memberships in Honorary Societies. In 2004, Mr. Preuss received the
Woodrow Wilson award for public service. He has been on the boards of various biotech and high-tech companies, both public and private, including the board of Overland Storage, Inc., San Diego, CA (until November 2005). Mr. Preuss holds an
advanced degree in mathematics from the University of California, San Diego, CA.



Management Board



Our Management Board currently consists
of four members. The Supervisory Board determines the size of the Management Board. Members of the Management Board are appointed by the Supervisory Board for a maximum term of five years and are eligible for reappointment or extension after the
completion of their term in office. Under certain circumstances, such as a serious breach of duty or a vote of no confidence by the shareholders in an annual meeting, a member of the Management Board may be removed from office by the Supervisory
Board prior to the expiration of his or her term. Furthermore, the term of office of a Management Board member ends three months after he or she has attained the age of 65.



Under our Articles of Association, if the Management Board consists of only one member, GPC Biotech is legally represented by that
sole member. If the Management Board consists of two or more members, GPC Biotech is legally represented by two members of the Management Board acting together, or by one member of the Management Board together with a person possessing a special
power of attorney authorizing him or her to legally represent GPC Biotech (Prokura). The Supervisory Board may additionally authorize any member of our Management Board to legally represent GPC Biotech alone. To date, none of the members of
our Management Board have been so authorized.



A member of the Management
Board may not deal with, or vote on, matters relating to proposals, arrangements or contractual agreements between himself or herself and GPC Biotech and may be liable to us if he or she has a material interest in any contractual agreement between
GPC Biotech and a third party which was not disclosed to, and approved by, the Supervisory Board.



If not otherwise required by law, the Management Board makes decisions by a simple majority of the votes cast. In case of deadlock, the resolution is not adopted.



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The following table shows the members of the Management Board, their ages, current areas of responsibility, the
years in which they were initially appointed, the end of their current terms and membership in statutory supervisory boards in Germany or abroad.



|                                     |  |                     |  |            |  |                                                                                                   |  |                                                                                                              
|------------------------------------ |  | ------------------- |  | ---------- |  | ------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------
|Name (age)                           |  | Year firstappointed |  | End ofterm |  | Responsibility                                                                                    |  | Other boardmemberships                                                                                       
|Bernd R. Seizinger, M.D., Ph.D. (49) |  | 1998                |  | 6/2008     |  | Chief Executive Officer                                                                           |  | ALTANAPharma AG,BioXell SpA andSantheraPharmaceuticalsAG                                                     
|                                     |  |                     |  |           
|Elmar Maier, Ph.D. (40)              |  | 1998                |  | 2/2008     |  | Senior Vice President Business Development and Chief Operating Officer (Munich, Germany)          |  | GATC BiotechAG                                                                                               
|                                     |  |                     |  |           
|Mirko Scherer, Ph.D. (37)            |  | 1999                |  | 8/2007     |  | Senior Vice President and Chief Financial Officer                                                 |  | Member of theBörsenrat of theFrankfurt StockExchange,member of thefoundationStichtingPreferenteAandelenQIAGEN
|                                     |  |                     |  |           
|Sebastian Meier-Ewert, Ph.D. (37)    |  | 1998                |  | 2/2008     |  | Senior Vice President, Chief Scientific Officer and Chief Operating Officer (Waltham/ Boston, MA) |  | ImmaticsBiotechnologiesGmbH                                                                                  



The members of our Management
Board may be contacted at the German address of GPC Biotech.



Bernd
R. Seizinger, M.D., Ph.D.Chief Executive Officer. Bernd R. Seizinger, M.D., Ph.D., has been Chief Executive Officer of GPC Biotech since 1998. He joined GPC Biotech from Genome Therapeutics Corporation (now Oscient
Pharmaceuticals Corporation) of Waltham, Massachusetts, where he was Executive Vice President and Chief Scientific Officer (19961998). From 1992 to 1996, Dr. Seizinger was at Bristol-Myers Squibb Pharmaceutical Research Institute in
Princeton, New Jersey, where he held the posts of Vice President of Oncology Drug Discovery and, in parallel, Vice President of Corporate and Academic Alliances. From 1984 to 1992, Dr. Seizinger was at Harvard Medical School and Massachusetts
General Hospital, where he served both as Associate Professor of Neuroscience at Harvard Medical School and Associate Geneticist and Director of the Molecular Neuro-Oncology Laboratory at Massachusetts General Hospital. Dr. Seizinger also held
a visiting professorship at the Department of Molecular Biology at Princeton University. He was awarded his M.D. from the Ludwig Maximilians University and his Ph.D. from the Max Planck Institute of Psychiatry, both in Munich. He is the recipient of
a number of scientific awards and has authored over 100 scientific publications. He is a member of the Supervisory Boards of ALTANA Pharma AG, BioXell SpA and Santhera Pharmaceuticals AG.



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Mirko Scherer, Ph.D.    Senior Vice President and Chief Financial Officer. Mirko
Scherer, Ph.D., co-founder of GPC Biotech AG, serves the Company as Senior Vice President and Chief Financial Officer. Previously, Dr. Scherer worked for The Boston Consulting Group in Munich, where he was a management consultant to several
industries, including banking. He graduated with a degree in business administration from the University of Mannheim in Germany and obtained his MBA from the Harvard University Graduate School of Business Administration. Dr. Scherer received
his Ph.D. in finance from the European Business School in Oestrich-Winkel in Germany. Dr. Scherer is a member of the Börsenrat (Exchange Council) of the Frankfurt Stock Exchange. He is also a member of the foundation Stichting Preferente
Aandelen QIAGEN, located in Venlo, The Netherlands.



Elmar Maier,
Ph.D.Senior Vice President, Business Development and Chief Operating Officer (Martinsried/Munich, Germany). Elmar Maier, Ph.D., co-founder of GPC Biotech AG, serves the Company as Senior Vice President, Business
Development. He is also Chief Operating Officer of the Martinsried facility. Dr. Maier has successfully negotiated multiple pharmaceutical and biotech alliances. Previously, Dr. Maier ran a consulting firm commercializing biotech know-how.
He was also Department and Project Manager at the Max Planck Institute for Molecular Genetics in Berlin, where he arranged collaborations with pharmaceutical and biotech companies. Dr. Maier has received numerous awards, including fellowships
for his research in the field of genomics technologies at the Imperial Cancer Research Fund in London. Dr. Maier holds a degree in chemistry and obtained his Ph.D. in biology from the University of Konstanz in Germany. He is a member of the
Supervisory Board of GATC Biotech AG.



Sebastian Meier-Ewert
Ph.D.    Senior Vice President, Chief Scientific Officer and Chief Operating Officer (Waltham, Mass., USA). Sebastian Meier-Ewert, Ph.D., co-founder of GPC Biotech AG, serves as the Companys Senior Vice President
and Chief Scientific Officer. He is also Chief Operating Officer of the Waltham facility. Prior to co-founding GPC Biotech, Dr. Meier-Ewert established and led a team of scientists working on gene expression analysis and bioinformatics at the
Max Planck Institute for Molecular Genetics in Berlin. He also co-founded a consulting firm specializing in biotechnology know-how and technologies. Dr. Meier-Ewert studied biochemistry at University College, London. He completed his
postgraduate training at the Imperial Cancer Research Fund in London and received his Ph.D. from the University of London. He is the recipient of several awards and author of more than 30 publications. Dr. Meier-Ewert is a member of the
Supervisory Board of Immatics Biotechnologies GmbH.



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Management Team



Our Management Board is supported by a highly qualified and internationally experienced management team. Certain of the members of the management team, Mssrs. Hamm,
Hatzis-Schoch, Richard, Rozencweig and Shah, together with the Management Board form our Executive Committee, which assists the Management Board in key management decisions.



|                                    |  |                                                                                                                    
|----------------------------------- |  | -------------------------------------------------------------------------------------------------------------------
|Name (age)                          |  | Position                                                                                                           
|David R. Bancroft, Ph.D. (38)       |  | Vice President Intellectual Property                                                                               
|Colin Freund (36)                   |  | Vice President Business Development (U.S.)                                                                         
|Gregory H. Hamm (55)                |  | Vice President Corporate Integration, Vice President Bioinformatics and Information Technology, Site Head Princeton
|Brent Hatzis-Schoch, J.D. (41)      |  | Vice President and General Counsel                                                                                 
|Torsten Hombeck, Ph.D. (36)         |  | Vice President Finance                                                                                             
|Nikolai Kley, Ph.D. (44)            |  | Vice President Research, Waltham                                                                                   
|Arthur Kluge, Ph.D. (62)            |  | Vice President Drug Discovery                                                                                      
|Thomas J. McKearn, M.D., Ph.D. (57) |  | Vice President Medical Affairs                                                                                     
|Edward F. McNiff, Ph.D. (53)        |  | Vice President Pharmaceutical Development                                                                          
|Michael E. Petrone, M.D. (55)       |  | Vice President Clinical Operations                                                                                 
|John P. Richard (48)                |  | Senior Business Advisor                                                                                            
|Marcel Rozencweig, M.D. (60)        |  | Senior Vice President Drug Development                                                                             
|Hemanshu Shah, Ph.D. (45)           |  | Vice President Commercial Operations                                                                               



David R.
Bancroft.    Co-founder of GPC Biotech and Vice President Intellectual Property. Prior to co-founding GPC Biotech in 1997, Dr. Bancroft was responsible for development and implementation of new automated technologies
at the Max Planck Institute for Molecular Genetics in Berlin, Germany. His previous research positions include those at the Imperial Cancer Research Fund, London, UK, and at Trinity College, Dublin, Ireland, as a Royal Society European Visiting
Fellow. Dr. Bancroft was awarded a Ph.D. in Molecular Population Genetics from the University of Cambridge, UK, for his research within a large-scale and multidisciplinary project. Dr. Bancroft is an inventor on several patents and patent
applications in the fields of molecular biology and automation.



Colin Freund.    Vice President Business Development (U.S.). Prior to joining GPC Biotech in 2002, he held the position of Vice President Business Development at Double Twist, Inc., Oakland, CA, where he
was responsible for creating alliances with a variety of genomics and proteomics companies. Prior to joining Double Twist, Mr. Freund was a project manager at the Boston Consulting Group, San Francisco, CA, and London, UK, where he managed
assignments in the healthcare and high technology practice areas. Mr. Freund received his BA in Economics and Management Studies from the University of Cambridge, UK, and his MBA from Stanford University, CA.



Gregory H. Hamm.    Vice President, Corporate
Integration, Vice President, Bioinformatics and Information Technology, Site Head (Princeton, N.J., USA). Gregory H. Hamm joined GPC Biotech in 1999 as Vice President, Bioinformatics and Information Technology, as well as Site Head of the Princeton
facility. In 2001, Mr. Hamm was also appointed Vice President, Corporate Integration, which includes responsibility for Human Resources worldwide. Mr. Hamm was previously Vice President, Bioinformatics, at Genome Therapeutics Corporation
(now Oscient Pharmaceuticals Corporation), where he was responsible for all computational aspects of the companys scientific programs, including its work on the Human Genome Project. Before 1995, Mr. Hamm was Director of the Molecular
Biology Computing Laboratory at Rutgers University (U.S.). Earlier he was the founder and manager of the EMBL Data Library and Head of Computing at the European Molecular Biology Laboratory (EMBL) in Heidelberg (Germany).



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Brent Hatzis-Schoch.    Vice President and General Counsel.
Mr. Hatzis-Schoch joined GPC Biotech in 2003. Prior to joining GPC Biotech, Mr. Hatzis-Schoch was Associate General Counsel for Global Research & Development at Pharmacia Corporation, where he earlier held various senior legal
positions in the transactional and international areas. Previously, he had been European legal counsel to Baxter Healthcare, based in Brussels, Belgium. He also spent several years in private practice in the United States and Germany.
Mr. Hatzis-Schoch received his law degree from George Washington University, Washington D.C.



Torsten Hombeck.    Vice President Finance. Dr. Hombeck joined GPC Biotech in 1999 as Director Finance. He previously held
positions in the area of Corporate Finance and Controlling at Beiersdorf AG, Hamburg, Germany, where he was responsible for South America. Dr. Hombeck graduated with a Degree in Business Administration from the European Business School in
Oestrich-Winkel, Germany, where he also received his Ph.D. in Finance.



Nikolai Kley.    Vice President Research, Waltham. Prior to joining GPC Biotech in 1999, Dr. Kley held positions as Director and Vice President Functional Genomics at Genome Therapeutics Corporation
(now Oscient Pharmaceuticals Corporation), Waltham/Boston, MA. While there, he was instrumental in establishing numerous functional technology platforms and research programs, including a collaborative oncology program with Princeton University,
Princeton, New Jersey. Prior to 1997, Dr. Kley held posts as Senior Scientist and Group Leader/Principal Scientist within Oncology Drug Discovery at Bristol-Myers Squibb Company, Pharmaceutical Research Institute. He also spent several years at
Harvard Medical School and the Massachusetts General Hospital, Boston, MA, working in the fields of cancer genetics and biology. Dr. Kley retains his adjunct faculty position as Research Professor at the Department of Molecular Biology at
Princeton University.



Arthur
Kluge.    Vice President Drug Discovery. Prior to joining GPC Biotech in 2000, Dr. Kluge served as Vice President Drug Discovery at Mitotix Inc. since 1996, prior to which he had held the post of Vice President
Chemistry at Cubist Pharmaceuticals. He has also worked at Syntex Research in Palo Alto, CA, where he served as Vice President and Director of the Institute of Organic Chemistry, with responsibility for the direction of a multinational drug
discovery and development group. Dr. Kluge brings over 25 years of management experience in the pharmaceutical industry to GPC Biotech and is the inventor of two currently marketed drugs: Toradol(ketoroalc) and Cattlyst(laidlomycin
propionate). Dr. Kluge received his BA in chemistry from Park College, his MS and Ph.D. from the University of Massachusetts and his MBA from the University of Santa Clara, CA.



Thomas J. McKearn.    Vice President Medical Affairs. Dr. McKearn is responsible for the design
and implementation of our clinical and regulatory development strategy for new lead candidates as they enter development through eventual registration and commercialization. His responsibilities include oversight of all clinical study protocols,
selection of investigators, and the review and analysis of study results. His position also serves as the primary point of contact with worldwide regulatory agencies and health authorities. Furthermore, Dr. McKearn plays a key role in our
compound in-licensing strategy. Prior to joining GPC Biotech in 2002, Dr. McKearn held several executive positions both in biotech and in the pharmaceutical industry. He was a founder and Chief Executive Officer of Cytogen Corporation. His most
recent position was Executive Director Strategic Science & Medicine at Bristol-Myers Squibb Company, Pharmaceutical Research Institute.



Edward F. McNiff.    Vice President Pharmaceutical Development. Prior to joining GPC Biotech in 2002, Dr. McNiff held several
positions at Bristol-Myers Squibb Company. His most recent position was Vice President Analytical Research and Development at Bristol-Myers Squibb Company, Pharmaceutical Research Institute, supporting pharmaceutical development activities spanning
the identification of new drug candidates through registration, launch and life-cycle activities. Dr. McNiff is responsible for the design and implementation of our pharmaceuticals development strategy for new



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lead candidates as they enter development through eventual registration and commercialization. These responsibilities include analytical and process chemistry, dosage
form development, quality assurance, metabolism and pharmacokinetics.



Michael E. Petrone.    Vice President Clinical Operations. Dr. Petrone is responsible for project planning and clinical outsourcing. He has more than ten years of experience in the pharmaceutical and
biotechnology industry in the areas of strategic planning, product development, and clinical research from the initiation of clinical trials to marketing approval. Dr. Petrone has extensive expertise and leadership in new drug development and
clinical research organization management. Prior to joining GPC Biotech in 2002, he was with Roberts Pharmaceutical Corporation as Vice President Clinical Research and Medical Affairs, and more recently with Genaera Corporation as Vice President
Clinical Research.



John P.
Richard.    Senior Business Advisor. John Richard joined GPC Biotech in 1999. Previously, he was Executive Vice President, Business Development at SEQUUS Pharmaceuticals, where he was responsible for negotiating the
acquisition of SEQUUS by ALZA Corporation in 1999. Prior to SEQUUS, Mr. Richard headed business development for Vivus and Genome Therapeutics Corporation (now Oscient Pharmaceuticals Corporation), where he was responsible for establishing
numerous pharmaceutical alliances. He was also co-founder and original Chief Executive Officer of IMPATH Inc. Mr. Richard currently serves on the Board of Directors of Altus Pharmaceuticals Inc., Targacept, Inc., Metastix Inc., and Zygogen, LLC
and is a partner with Georgia Venture Partners. Mr. Richard received his MBA from Harvard Business School and his B.S. from Stanford University.



Marcel Rozencweig.    Senior Vice President Drug Development. Marcel Rozencweig, M.D. joined GPC Biotech in 2001. He previously
worked for Bristol-Myers Squibb for 18 years, where he held several senior leadership positions in drug development and strategic planning, including Vice President, Oncology, Infectious Diseases and Immunology Clinical Research; and Vice President,
Strategic Planning and Portfolio Management. Dr. Rozencweig is a world-renowned expert in oncology drug development. His many achievements include significant contributions leading to the FDA approval of 11 drugs, mostly anticancer treatments,
including the blockbusters Taxol® and Paraplatin® (carboplatin). Dr. Rozencweig is an Adjunct Associate Professor of Medicine at New York University and
has authored or co-authored more than 200 scientific publications.



Hemanshu Shah.    Vice President Commercial Operations. Dr. Shah joined GPC Biotech in 2003. Previously, he was Global Commercial Leader for Zarnestra and Procrit in the Oncology Global Marketing Group
at Johnson & Johnson. Prior to joining Johnson & Johnson, he was Director of Marketing for Bristol-Myers Squibb Oncology with significant responsibility for marketing oncology products including Taxol, Paraplatin and Ifosfamide.
Dr. Shahs earlier experience at Bristol-Myers Squibb included various positions in Business Development, and Research & Development. Dr. Shah received his Ph.D. in Pharmaceutical Sciences from Rutgers University, and his MBA
from SUNY Buffalo, NY.



None of the above members of our Management
Board, Supervisory Board or management team have any family relationship with any other member of the Management Board, Supervisory Board or management team. None of the above members of the Management Board, Supervisory Board or management team
were appointed pursuant to an agreement or understanding between such member of the Management Board, Supervisory Board or management team and any third party.



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Compensation of Management Board and Supervisory Board Members



Compensation of Members of the Management Board



We have entered into service agreements with all current members of our Management Board. These agreements generally provide for a
base salary and an annual bonus. For a discussion of the stock option and similar plans in which the members of our Management Board participate, see Equity-Based Plans. In addition to these fixed and variable remuneration
components, under the terms of their service agreements, the members of our Management Board are entitled to specific insurance benefits (including accident and D&O insurance) and reimbursement of necessary and reasonable disbursements. In the
event of a change in control and termination of employment within a specified period thereof, each member of our Management Board is entitled to severance benefits in the amount of 175 percent (250 percent in the case of the Chairman of our
Management Board) of the sum of their respective highest annual salary on or after the date of the change in control and the average of their respective last two annual bonuses received prior to the change in control. In addition, subject to the
term of the stock options and convertible bonds under the terms and conditions of the relevant plan or program (see Equity Based Plans), stock options and convertible bonds granted to the members of our Management Board may no
longer be terminated upon a change in control. A change in control will have occurred if, as a result of any takeover, exchange or other transfer, a single shareholder or a group of shareholders acting in concert acquires more than 50 percent of the
outstanding voting rights in GPC Biotech or, if as a result of a merger or reverse merger the shareholders of GPC Biotech prior to the effective date of such transaction cease to own more than 50 percent of the outstanding voting shares in the
merged entity. Furthermore, Dr. Seizinger, the Chairman of our Management Board, is entitled to severance benefits in the amount of 200 percent of the sum of his last annual salary and the average of his last two annual bonuses in the event
that our Supervisory Board determines to terminate his appointment as Chairman of the Management Board and not to extend his service agreement beyond June 2008. The other members of our Management Board are entitled to severance benefits in the
amount of 100 percent of their respective last annual salaries in the event that our Supervisory Board determines not to renew their respective service agreements beyond their current term.



We believe that the service agreements between GPC Biotech and the members of our
Management Board provide for payments and benefits (including upon termination of employment) that are in line with customary market practices.



2005 Summary Compensation Table



|                                |  |                     |     |                       |              |                       |                  |  |                         |  |        |    
|------------------------------- |  | ------------------- | --- | --------------------- | ------------ | --------------------- | ---------------- |  | ----------------------- |  | ------ | ---
|                                |  | Annual Compensation |     | Long-TermCompensation |              | All OtherCompensation |                 
|                                |  | Salary()           |     |                       | CashBonus() |                       | StockOptions (#) |  | Convertible Bonds(#)(2) | 
|Bernd R. Seizinger, M.D., Ph.D. |  | 469,907             | (3) |                       | 271,414      |                       |                 |  | 170,000                 |  | 28,906 | (1)
|Elmar Maier, Ph.D.              |  | 272,959             |     |                       | 182,000      |                       |                 |  | 100,000                 |  |       |    
|Sebastian Meier-Ewert, Ph.D.    |  | 298,784             |     |                       | 118,000      |                       |                 |  | 100,000                 |  |       |    
|Mirko Scherer, Ph.D.            |  | 292,429             |     |                       | 111,000      |                       |                 |  | 100,000                 |  |       |    
|                                |  |                     |     |                       |              |                       |                  |  |                         |  |        |    
|Total                           |  | 1,334,079           |     |                       | 682,414      |                       |                 |  | 470,000                 |  | 28,906 |    

---

|(1) | This amount represents a double household allowance.
|--- | ----------------------------------------------------

|(2) | Each convertible bond entitles the holder thereof to purchase one ordinary bearer share, subject to adjustment in the event of changes to our capitalization.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes $250,305 which has been converted into euro at the US$/euro exchange rate of $1.00 = 0.8030 (average exchange rate during fiscal year 2005).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



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Compensation of Members of the Supervisory Board



Our Articles of Association provide that the annual compensation for each Supervisory
Board member be fixed by our shareholders in annual general meetings. At our annual general meeting on August 31, 2004, our shareholders resolved that the Chairman of our Supervisory Board receive an annual fixed remuneration of 35,000 in cash, that the Vice Chairman receive an annual fixed remuneration of 25,000 in cash and that all other members of our Supervisory Board receive an annual fixed remuneration of 15,000 in cash.



Members of our Supervisory Board who serve on Supervisory Board committees receive cash-based remuneration in addition to their annual fixed remuneration as
follows: for activity as chairman of one or more committees (other than the Audit Committee), a member of the Supervisory Board receives an additional 5,000 (plus any value added tax on such amount) annually, and, for activity as a member of a committee (other than the Audit Committee), a member of the Supervisory Board receives an additional 2,500 (plus any value added tax on such amount) annually. The chairman of the Audit Committee receives an additional 10,000 (plus any value added tax on such amount) annually and the other members of the Audit Committee each receive an additional 5,000 (plus any value added tax on such amount) annually. The members of the Audit Committee do not receive any additional cash-based remuneration for their service on
any other committee.



At our annual general meeting on June 8, 2005,
our shareholders also resolved to provide a one-time grant of long-term performance-based variable remuneration in the form of stock appreciation rights to each member of the Supervisory Board. The grants of stock appreciation rights were issued as
of July 1, 2005 and are in addition to the annual cash remuneration described above. Dr. Drews, as the Chairman of the Supervisory Board, and Mr. Lytton, as the Vice Chairman of the Supervisory Board, received grants of 15,000 and
11,250 stock appreciation rights, respectively. Each member of the Supervisory Board received grants of 7,500 stock appreciation rights. In addition, each member of the Supervisory Board (including the Chairman of the Supervisory Board) who serves
as the chairman of one or more Supervisory Board committees (other than the Audit Committee) received a grant of 5,000 stock appreciation rights. Furthermore, each member of the Supervisory Board, but excluding those members who are members of the
Audit Committee, received grants of 2,500 stock appreciation rights in compensation for their service on one or more committees. The chairman and members of the Audit Committee received grants of 7,500 and 3,750 stock appreciation rights,
respectively. The members of the Audit Committee do not receive any additional stock appreciation rights for their service on any other committee.



Each stock appreciation right represents the right to receive an amount in cash equal to the difference (if any) between the basic price of the stock appreciation
right and the exercise price of the stock appreciation right after the completion of a specified holding period. The basic price of each stock appreciation right is 9.03, which is equal to the average closing price of our ordinary bearer shares at the XETRA closing auction of the Frankfurt stock exchange for the five trading days preceding, and the five trading days
after, the issue date, which was July 1, 2005. The exercise price will be the average closing price of our ordinary bearer shares at the XETRA closing auction of the Frankfurt stock exchange for the 60 trading days following the end of the
holding period. The holding period of the stock appreciation rights began on the issue date and will generally end with the marketing approval of satraplatin by the FDA and the European Commission (both approvals need to have been granted). Any
payments with respect to the stock appreciation rights are due within 100 calendar days after the end of the holding period.



The members of the Supervisory Board will receive the full cash payment with respect to their stock appreciation rights only if they are still members of the
Supervisory Board and/or the respective committee at the end of the holding period. If a member leaves the Supervisory Board and/or the respective committee before the end of the holding period, the member will receive only a pro-rated



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cash payment, based on the length of the term of service on the Supervisory Board and/or membership on the committee, with respect to his or her stock appreciation
rights. In the case of a change in control of GPC Biotech, as defined in the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz), the holding period will end on the acquisition date. In this case, the
60 trading days directly preceding the acquisition date will be used to determine the exercise price. Transfer of the stock appreciation rights, including assignment, sale, pledge, grant of sub-rights or the foundation of a trust, is not permissible
and will result in a forfeiture of the stock appreciation rights. Any transaction that bears financial comparison with a sale of the stock appreciation rights is not permissible and will also lead to a forfeiture of the stock appreciation rights.



Furthermore, we reimburse our Supervisory Board members for
out-of-pocket expenses incurred in connection with their services and, to the extent applicable, any value added tax on this compensation.



We have no contracts with any of our Supervisory Board members that would provide for benefits upon termination of service on the Supervisory Board.



2005 Summary Compensation Table



|                                   |  |            |  |                                
|---------------------------------- |  | ---------- |  | -------------------------------
|Name                               |  | Salary () |  | Stockappreciationrights(number)
|Jürgen Drews, M.D., Ph.D.(1)(4)(7) |  | 42,500     |  | 20,000                         
|Michael Lytton, J.D.(2)(3)(4)(5)   |  | 30,000     |  | 15,000                         
|Metin Colpan, Ph.D.(5)(8)          |  | 20,000     |  | 11,250                         
|Prabhavathi B. Fernandes, Ph.D.(9) |  | 20,000     |  | 12,500                         
|James M. Frates(6)(8)              |  | 25,000     |  | 15,000                         
|Peter Preuss(3)(10)                |  | 22,500     |  | 12,500                         
|                                   |  |            |  |                                
|Total                              |  | 160,000    |  | 86,250                         

---

|(1) | Chairman of the Supervisory Board.
|--- | ----------------------------------

|(2) | Vice Chairman of the Supervisory Board.
|--- | ---------------------------------------

|(3) | Member of the Compensation Committee.
|--- | -------------------------------------

|(4) | Member of the Finance Committee.
|--- | --------------------------------

|(5) | Member of the Audit Committee.
|--- | ------------------------------

|(6) | Chairman of the Audit Committee.
|--- | --------------------------------

|(7) | Chairman of the Compensation Committee.
|--- | ---------------------------------------

|(8) | Member of the Corporate Governance & Nominations Committee.
|--- | -----------------------------------------------------------

|(9) | Chairman of the Finance Committee.
|--- | ----------------------------------

|(10) | Chairman of the Corporate Governance & Nominations Committee.
|---- | -------------------------------------------------------------



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Equity-Based Plans



As of December 31, 2005, a total of 3,947,653 stock options and convertible bonds were issued and outstanding to purchase our
ordinary bearer shares to members of our Management Board and a total of 149,000 stock options and convertible bonds to the members of our Supervisory Board. The following tables set forth all option and convertible bond grants to our Management
Board as well as to our Supervisory Board by year of grant.



Supervisory Board Members:



|           |  |                                                           |  |                 |  |                   |  |                   |    
|---------- |  | --------------------------------------------------------- |  | --------------- |  | ----------------- |  | ----------------- | ---
|Grant year |  | Options/convertible bonds issued and outstanding (number) |  | Conversion rate |  | Exercise price() |  | Term life (years) |    
|2000       |  | 20,000                                                    |  | 1:1             |  | 17.89             |  | 10                |    
|2001       |  | 32,500                                                    |  | 1:1             |  | 9.55              |  | 5                 | (1)
|           |  | 10,000                                                    |  | 1:1             |  | 16.38             |  | 10                |    
|2002       |  |                                                          |  |                |  |                  |  |                  |    
|2003       |  | 86,500                                                    |  | 1:1             |  | 5.77              |  | 5                 | (2)
|2004       |  |                                                          |  |                |  |                  |  |                  |    
|2005       |  |                                                          |  |                |  |                  |  |                  |    
|           |  |                                                           |  |                 |  |                   |  |                   |    
|Total      |  | 149,000                                                   |  |                 |  |                   |  |                   |    

---

|(1) | As of the date of the resignation as a member of the Supervisory Board, not exceeding one year.
|--- | -----------------------------------------------------------------------------------------------

|(2) | As of the date of the resignation as a member of the Supervisory Board, not exceeding two years.
|--- | ------------------------------------------------------------------------------------------------



Management Board Members:



|           |  |                                                          |     |  |                 |  |                   |  |                  
|---------- |  | -------------------------------------------------------- | --- |  | --------------- |  | ----------------- |  | -----------------
|Grant year |  | Options/convertible bonds issued and outstanding(number) |     |  | Conversion rate |  | Exercise price() |  | Term life (years)
|1998       |  | 358,303                                                  | (1) |  | 1:1             |  | 1.16              |  | 10               
|1999       |  | 49,490                                                   | (1) |  | 1:1             |  | 1.16              |  | 10               
|           |  | 111,360                                                  | (1) |  | 1:1             |  | 3.98              |  | 10               
|2000       |  | 306,000                                                  |     |  | 1:1             |  | 6.62              |  | 10               
|           |  | 530,000                                                  |     |  | 1:1             |  | 17.89             |  | 10               
|2001       |  | 250,000                                                  |     |  | 1:1             |  | 9.69              |  | 10               
|           |  | 50,000                                                   |     |  | 1:1             |  | 13.34             |  | 10               
|2002       |  | 100,000                                                  |     |  | 1:1             |  | 5.24              |  | 10               
|           |  | 215,000                                                  |     |  | 1:1             |  | 4.36              |  | 10               
|2003       |  | 125,000                                                  |     |  | 1:1             |  | 2.70              |  | 10               
|           |  | 48,574                                                   |     |  | 1:1             |  | 4.87              |  | 10               
|           |  | 143,926                                                  |     |  | 1:1             |  | 4.96              |  | 10               
|2004       |  | 600,000                                                  |     |  | 1.1             |  | 9.33              |  | 10               
|           |  | 590,000                                                  |     |  | 1:1             |  | 10.90             |  | 10               
|2005       |  | 470,000                                                  |     |  | 1:1             |  | 10.38             |  | 10               
|           |  |                                                          |     |  |                 |  |                   |  |                  
|Total      |  | 3,947,653                                                |     |  |                 |  |                   |  |                  

---

|(1) | A total of 705,280 stock options initially granted to Dr. Seizinger in 1998 and 1999 were transferred by him to a financial institution in connection
with cash settled share option
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | agreements dated July and December 2001, respectively. Upon any exercise by him of the options granted in the agreement of July 2001, Dr. Seizinger will receive
cash, not shares, from the financial institution. On any exercise by him of the options in the agreement of December 2001, Dr. Seizinger will, provided that he has paid to the financial institution the amounts required by the agreement and that
certain other conditions are satisfied, be entitled to receive cash, not shares, from the financial institution. In 2004, Dr. Seizinger exercised 120,000 of these options, which are not included in this table. In 2005, Dr. Seizinger sold
66,127 cash settled shares that are not included in this table.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have established the following equity compensation plans for members of our Management Board, executives of our U.S. subsidiary and selected employees of GPC Biotech as well as consultants and members of our Supervisory Board:



German Equity-Based Plans



2005 Stock Option Plan, 2004 Stock Option Plan, 2002 Stock Option Plan, 2001 Stock
Option Plan and 2000 Stock Option Plan



Under the 2005 Stock Option
Plan, employees of GPC Biotech and affiliated subsidiary companies (nachgeordnete verbundene Unternehmen) in Germany and abroad are eligible to acquire our ordinary shares pursuant to stock options. Under the 2004 Stock Option Plan, the
members of the management bodies and executives (Führungskräfte) of GPC Biotech and its affiliated subsidiary companies in Germany and abroad are eligible to acquire our ordinary shares pursuant to stock options. Under the 2002
Stock Option Plan, the members of our Management Board and selected employees of GPC Biotech are eligible to acquire our ordinary shares pursuant to stock options. Under the 2001 Stock Option Plan, selected employees of GPC Biotech, members of our
Management Board and members of the management bodies of our affiliates (verbundene Unternehmen) are eligible to acquire our ordinary shares pursuant to stock options. Under the 2000 Stock Option Plan, selected employees of GPC Biotech,
members of our Management Board, members of the management bodies of our affiliates as well as members of the Supervisory Board and consultants are eligible to acquire our ordinary shares pursuant to stock options.



Stock options may be granted under the plans at an exercise price determined on the
basis of the average closing price for our ordinary shares as quoted in the XETRA closing auction on the Frankfurt Stock Exchange during the last five stock exchange trading days prior to the date of grant. In addition, under the 2000 Stock Option
Plan, the exercise price for the stock options granted to optionees under this plan prior to our initial public offering in 2000, was determined on the basis of the fair market value of our shares. The exercise price is subject to adjustment upon
changes in our capitalization and must at all times be at least equal to the notional nominal value (the amount attributable to each of our ordinary shares) of our ordinary shares (currently 1.00 per ordinary share). The Management Board, and, to the extent that our Management Board is concerned, the Supervisory Board, selects the eligible persons to whom
options will be granted and determines the grant date, amounts, exercise price, vesting periods and other relevant terms of the stock option grants (including acceleration provisions) in accordance with the provisions of the respective plans. The
details of any grants of stock options to members of our Supervisory Board under the terms of the 2000 Stock Option Plan were approved by our shareholders.



A stock option granted under the 2005 Option Plan, the 2004 Stock Option Plan, the 2002 Stock Option Plan, the 2001 Stock Option Plan or the 2000 Stock Option Plan
may not be exercised until the occurrence of each of the following events: (i) the stock option satisfies a two-year waiting requirement (measured from the date of grant) and (ii) the stock option vests. A stock option granted under the 2002 Stock
Option Plan, the 2001 Stock Option Plan or the 2000 Stock Option Plan may not



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be exercised until the price of our ordinary bearer shares exceeds the exercise price of the stock option on five successive stock exchange trading days (10 days in
the case of the 2000 Stock Option Plan) within one month prior to exercise by a certain percentage (which percentage is ten percent for the first year after the expiration of the two-year waiting period and is increased by five percent for each year
thereafter). A stock option granted under the 2005 Stock Option Plan and the 2004 Stock Option Plan may not be exercised until the price of our shares develops better than reference index, which is the Prime IG Biotechnology Index of the Frankfurt
Stock Exchange. In addition, pursuant to the 2005 Option Plan, the 2004 Stock Option Plan, the 2002 Stock Option Plan and the 2001 Stock Option Plan, a stock option may only be exercised within a period of six weeks after publication of our
quarterly reports or annual financial statements, and may not be exercised during a subscription rights offering by GPC Biotech prior to the commencement of ex subscription rights trading on the Frankfurt Stock Exchange and during the
period from December 24 to December 31 of each calendar year. Furthermore, pursuant to the 2000 Stock Option Plan, a stock option may only be exercised during four designated exercise periods lasting one month each that begin on the third bank
working day after publication of our quarterly reports; and stock options may not be exercised during a subscription rights offering by GPC Biotech prior to the commencement of ex subscription rights trading on the Frankfurt Stock
Exchange.



In the event of the termination of service of an optionee, the
unvested portion of any stock option grant is generally forfeited, and the vested and exercisable portion is terminated (i) six months after a termination of service due to the death of the optionee in the case of the 2005 Stock Option Plan and the
2004 Stock Option Plan and 130 business days in case of the 2002 Stock Option Plan, the 2001 Stock Option Plan or the 2000 Stock Option Plan or (ii) three months after termination of employment for any other reason in the case of the 2004 Stock
Option Plan and the 2005 Stock Option Plan (90 business days in the case of the 2002 Stock Option Plan and 30 business days in the case of the 2002 Stock Option Plan, the 2001 Stock Option Plan and the 2000 Stock Option Plan). In extraordinary
circumstances (such as maternity leave, permanent disability or early retirement and similar circumstances), our Management Board, and, to the extent that our Management Board is concerned, the Supervisory Board, may abstain from terminating the
stock option grants.



Notwithstanding the foregoing, a stock option may
not be exercised following the expiration of its term, which under the plans cannot exceed ten years from the date of grant. A stock option is generally not transferable during the life of the optionee, but is inheritable upon the death of the
optionee.



In the event of our merger with or into another entity
(Verschmelzung), a change in our legal form (Umwandlung), a change in the notional nominal value of our ordinary shares and similar measures leading to the cancellation or conversion of the shares underlying the stock options, each
outstanding stock option will be substituted by the right to purchase at the exercise price a specific number of shares or other interests (calculated on the basis of the fair market value of our ordinary bearer shares at the time of any such
change) substituting our ordinary shares.



Our Management Board, together
with our Supervisory Board, and, to the extent that our Management Board is concerned, the Supervisory Board alone, may determine that, in lieu of the issuance of new shares out of the specifically created conditional capital, shares acquired by GPC
Biotech through market purchases or otherwise in accordance with applicable German stock corporation law may be issued to optionees upon exercise of the stock options. In respect of the 2000 Stock Option Plan, our Management Board, together with our
Supervisory Board, and, to the extent that our Management Board is concerned, the Supervisory Board alone, may additionally determine that, in lieu of the issuance of new ordinary shares out of the specifically created authorized and conditional
capitals, new ordinary shares issued out of additional authorized or conditional capitals may be issued to optionees upon exercise of the stock options or that stock options may be settled in cash.



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1999 and 1997 Stock Option Plans



Under the 1999 and 1997 Stock Option Plans, the members of our Management Board and Supervisory Board as well as selected employees
and consultants are eligible to acquire our ordinary shares pursuant to stock options.



The terms of the 1999 and 1997 Stock Option Plans are substantially similar to the terms of the stock option plans discussed in 2004 Stock Option Plan, 2002 Stock Option Plan, 2001 Stock Option Plan and 2000 Stock
Option Plan above, with the following exceptions:



| |  |  | the exercise price for the stock options granted to optionees under the 1999 and 1997 Stock Option Plans was determined on the basis of the fair market value of our ordinary shares;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a stock option granted under the 1999 and 1997 Stock Option Plans may only be exercised if the price of our ordinary bearer shares exceeds the exercise price of the stock option on five
successive bank working days within one month prior to exercise by a certain percentage (which percentage is 15 percent for the first year after the expiration of the two-year waiting period and is increased by five percent for each year
thereafter);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a stock option granted under the 1999 and 1997 Stock Option Plans is generally transferable during the life of the optionee;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | the periods during which stock options may be exercised deviate slightly from those under the 2002 Stock Option Plan and the 2001 Stock Option Plan;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event of a termination of the stock options granted under the 1999 and 1997 Stock Option Plans, the optionees have to be compensated in an amount equal to the lower of (1) the fair
value of the terminated stock options and (2) the amount of income tax paid at the time of grant; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | stock options issued under the 1999 Stock Option Plan may be settled in cash.
| | - |  | -----------------------------------------------------------------------------



U.S. Equity-Based Plans



Under the 2005 Incentive Stock Option Plan and the 2004 Incentive Stock Option Plan, selected employees of GPC Biotech and directors of our U.S. subsidiary are
eligible to acquire our ordinary shares pursuant to stock options. Under the 2002 Incentive Stock Option Plan and the 2001 Incentive Stock Option Plan, selected employees of GPC Biotech and employee directors of our U.S. subsidiary and members of
our Management Board are eligible to acquire our ordinary shares pursuant to stock options. Under the 2000 Incentive Stock Option Plan and the 1999 Incentive Stock Option Plan, selected employees and employee directors of our U.S. subsidiary,
members of our Management Board and consultants of GPC Biotech, as well as members of the Supervisory Board residing in the United States, are eligible to acquire our ordinary shares pursuant to stock options.



Stock options granted under these plans may be incentive stock options, or ISOs, which
are intended to qualify for favorable U.S. federal income tax treatment under the provisions of Section 422 of the U.S. Internal Revenue Code of 1986, as amended, or U.S. Internal Revenue Code, or non-qualified stock options, or NSOs, which do not
so qualify. The aggregate fair market value of the ordinary shares represented by any given optionees ISOs that become exercisable for the first time in any calendar year may not exceed US$100,000. Stock options in excess of this limit are
treated as NSOs.



The Management Board, and, to the extent that our
Management Board is concerned, the Supervisory Board, selects the eligible persons to whom stock option, will be granted and determines the grant date, amounts, exercise price, vesting periods and other relevant terms of the stock option grants
(including acceleration provisions) in accordance with the provisions of the respective plans,



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including whether the options are intended to be ISOs or NSOs. Under the plans, employees are eligible to receive grants of ISOs and NSOs, while directors of our U.S.
subsidiary and members of our Management Board and consultants are eligible to receive grants of NSOs only. Stock option grants to members of the Management Board require the approval of the Supervisory Board. The details of any grants of stock
options to members of our Supervisory Board under the terms of the 2000 Incentive Stock Option Plan and the 1999 Incentive Stock Option Plan were approved by our shareholders. The exercise price of options granted under the plans can be determined
by the Management Board, and, to the extent that our Management Board is concerned, the Supervisory Board within specific parameters fixed by our shareholders in the respective resolutions relating to the several plans.



A stock option granted under the 2005 Incentive Stock Option Plan, the 2004 Incentive
Stock Option Plan, the 2002 Incentive Stock Option Plan, the 2001 Incentive Stock Option Plan, the 2000 Incentive Stock Option Plan or the 1999 Incentive Stock Option Plan may not be exercised until the occurrence of each of the following events:
(i) the stock option satisfies a two-year waiting requirement (measured from the date of grant) and (ii) the stock option vests. Furthermore, a stock option granted under the 2002 Stock Option Plan, the 2001 Stock Option Plan, the 2000 Stock Option
Plan, or the 1999 Incentive Stock Option Plan may not be exercised until the price of our ordinary shares exceeds the exercise price of the stock option on five successive stock exchange trading days, or bank working days in the case of the 2000
Incentive Stock Option Plan and the 1999 Incentive Stock Option Plan, during the one month prior to exercise by a certain percentage (which percentage is ten percent, 15 percent in the case of stock options granted under the 1999 Stock Option
Plan, for the first year after the expiration of the two-year waiting period and is in each case increased by five percent for each year thereafter). Likewise, a stock option granted under the 2005 Incentive Stock Option Plan may not be exercised
unless the price of our shares develops better than a reference index, which is the Prime IG Biotechnology Index of the Frankfurt Stock Exchange, during the four weeks prior to the date of exercise and a stock option granted under the 2004 Stock
Option Plan may not be exercised unless the price of our shares develops better than the weighted average of the Prime IG Biotechnology Index of the Frankfurt Stock Exchange and the Nasdaq Biotech Index during the four weeks prior to the date of
exercise. In addition, pursuant to the 2005 Incentive Stock Option Plan, the 2004 Incentive Stock Option Plan, the 2002 Incentive Stock Option Plan and the 2001 Incentive Stock Option Plan, a stock option may only be exercised within a period of six
weeks after publication of our quarterly reports or annual financial statements, and may not be exercised during a subscription rights offering by GPC Biotech and during the period from December 24 to December 31 of each calendar year. Furthermore,
pursuant to the 2000 Incentive Stock Option Plan and the 1999 Incentive Stock Option Plan, a stock option may only be exercised during four designated exercise periods lasting one month each that begin on the third bank working day after publication
of our annual report and our quarterly reports; and stock options may not be exercised during a subscription rights offering by GPC Biotech.



In the event of the termination of service of an optionee, the unvested portion of a stock option is generally forfeited, and the vested and exercisable portion
generally terminates eighteen months (six months in the case of the 2005 Incentive Stock Option Plan and the 2004 Incentive Stock Option Plan) after a termination of service due to the death of the optionee, twelve months (three months in the case
of the 2005 Incentive Stock Option Plan and the 2004 Incentive Stock Option Plan) after a termination of service due to the permanent disability of the optionee or three months after termination of employment for any other reason. Notwithstanding
the foregoing, a stock option may not be exercised following the expiration of its term, which under the plans cannot exceed ten years from the date of grant. A stock option is generally not transferable during the life of the optionee, but is
inheritable upon the death of the optionee.



In the event of our
dissolution, our liquidation, a sale of all or substantially all of our assets, a merger or reverse merger (in which we are not the surviving corporation), each outstanding stock option may be assumed or an equivalent stock option may be substituted
by the successor



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corporation. In the event that no such substitution or assumption occurs, subject to the expiry of the two-year waiting period the outstanding stock options will
automatically vest and become exercisable as of a specified time prior to the event and will terminate immediately prior to the consummation of such event. Notwithstanding the foregoing, if, upon consummation of such dissolution, liquidation, sale,
merger or reverse merger, our shareholders will receive a cash payment for each share surrendered, the Management Board may instead provide that all outstanding stock options will terminate upon consummation of such event and that each optionee will
receive in exchange for the cancelled stock options a cash payment equal to the amount by which the acquisition price for the ordinary shares exceeds the exercise price of the stock options.



Mitotix, Inc. 1996 Equity Incentive Plan



In connection with the acquisition of Mitotix, we assumed the outstanding stock options
under the Mitotix, Inc. 1996 Equity Incentive Plan. The former employees, officers, directors and consultants of Mitotix were eligible to participate in the plan. The plan was terminated as of February 24, 2000, and the optionees are now eligible to
participate in our equity plans. As of December 31, 2005, stock options to purchase 36,610 of our ordinary shares were issued and outstanding under the Mitotix, Inc. 1996 Equity Incentive Plan.



2005, 2004, 2003 and 2002 Convertible Bond Programs



On June 8, 2005, August 31, 2004, on May 21, 2003, and on June 11, 2002, respectively,
our shareholders approved the implementation of the 2005 Convertible Bond Program, 2004 Convertible Bond Program, the 2003 Convertible Bond Program and the 2002 Convertible Bond Program. Under these programs, members of the Management Board, members
of the management bodies and other employees of GPC Biotech and its affiliated subsidiary companies and, with the exception of the 2004 Convertible Bond Program, consultants are eligible to acquire our ordinary shares pursuant to convertible bonds,
with a nominal value 1.00 per convertible bond.



The Management Board, together with the Supervisory Board, and, to the extent that our Management Board is concerned, the Supervisory
Board alone, determines whether the ordinary shares underlying the convertible bonds will be made available from these conditional capitals or from a program to repurchase our ordinary shares.



The Management Board, and to the extent that our Management Board is concerned, the
Supervisory Board, selects the eligible persons to whom convertible bonds will be offered and determines the amounts, vesting periods and other relevant terms (including acceleration provisions) of the convertible bonds.



Convertible bonds issued pursuant to the 2005 Convertible Bond Program, the 2004
Convertible Bond Program, the 2003 Convertible Bond Program and the 2002 Convertible Bond Program may be exercised by the bondholder, after expiry of the two-year waiting period from the date of issuance, to obtain one ordinary share for each
convertible bond upon payment of the conversion price and bear interest at 3.5% per annum starting from the date of issuance. The convertible bonds may be offered to the eligible persons for subscription within the last 15 working days of each
calendar month. The time to maturity of the convertible bonds is ten years from the date of issuance, after which the convertible bonds lapse without compensation to the bondholder (other than repayment of the nominal amount of the convertible bond
plus accrued interest). Convertible bonds are generally not transferable during the life of the bondholder, except to a credit institution specified by GPC Biotech following the expiration of the two-year waiting period or of the cancellation period
described below.



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Under the 2005 Convertible Bond Program, the 2004 Convertible Bond Program, the 2003 Convertible Bond Program and
the 2002 Convertible Bond Program, ordinary shares issued upon exercise of a convertible bondprovided that they are issued before the beginning of our annual general meeting that resolves on the allocation of retained earningsare
entitled to dividends from the beginning of the previous fiscal year. In the event that the ordinary shares are issued after our general meeting, such ordinary shares are entitled to dividends in the fiscal year in which they were issued.



Convertible bonds issued under the 2005 Convertible Bond Program, the
2004 Convertible Bond Program, the 2003 Convertible Bond Program and the 2002 Convertible Bond Program generally vest and become uncancellable in one-quarter installments on each of the first four anniversaries of the date of issuance. A convertible
bond may not be exercised until the occurrence of each of the following events: (i) satisfaction of a two-year waiting requirement (measured from the date of issuance); (ii) vesting; and (iii) the achievement of a share price performance goal on the
date of exercise. Convertible bonds issued pursuant to the 2005 Convertible Bond Program and the 2004 Convertible Bond Program, however, may not be exercised unless the price of our shares develops better than a reference index, which is the Prime
IG Biotechnology Index of the Frankfurt Stock Exchange, during the four weeks prior to the date of exercise. With respect to convertible bonds issued pursuant to the 2003 Convertible Bond Program, the price of our ordinary shares on the Frankfurt
Stock Exchange on the date of exercise exceeds the share price on May 21, 2003 by 100%. With respect to convertible bonds issued pursuant to the 2002 Convertible Bond Program, the price of our ordinary shares on the Frankfurt Stock Exchange must
exceed the exercise price of the convertible bonds on five successive trading days within one month prior to exercise by a certain percentage (which percentage is ten percent for the first year after the expiration of the two-year waiting period and
is increased by five percent for each year thereafter). In addition, pursuant to the 2005 Convertible Bond Program, the 2004 Convertible Bond Program, 2003 Convertible Bond Program and the 2002 Convertible Bond Program, a convertible bond may only
be exercised within a period of six weeks after publication of our quarterly reports or annual financial statement, and may not be exercised during a subscription rights offering by GPC Biotech and during the period from December 24 to December 31
of each calendar year. Notwithstanding the foregoing, convertible bonds may not be exercised following the expiration of their respective terms, which under the plans cannot exceed ten years from the date of grant. The convertible bonds are
generally not transferable during the life of the bondholder, but are inheritable upon the death of the bondholder.



In the event of the termination of service of a bondholder, the unvested portion of a convertible bond may be cancelled without compensation (other than repayment
of the nominal amount of the convertible bond plus accrued interest), and the vested portion is generally cancelled 12 months after the termination of service. In addition, GPC Biotech has the right to cancel a bondholders convertible bonds in
the event insolvency proceedings are instituted against the assets of such bondholder or the convertible bonds are attached by a creditor of such bondholder for more than six months. A bondholder may cancel his or her convertible bonds with three
months notice at the end of a quarter.



In the event of our merger
with and into another company, our reorganization, a change in the nominal value of our ordinary bearer shares or similar changes to our capitalization or corporate structure, the convertible bonds will be replaced by the right to purchase, at the
base price, an equivalent number, respectively, of ordinary shares, equity interests or other interests in GPC Biotech or the successor corporation, the value of which corresponds to the market value of the ordinary shares on the date on which such
event occurred.



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Shares Reserved and Securities Issued and Outstanding Under the Our Equity-Based Plans and
Convertible Bond Programs



Our shareholders at annual
general meetings approved the implementation of our German and U.S equity-based stock option plans and convertible bond programs and the creation of several specific authorized and conditional capitals in amounts sufficient to service these plans
and programs, as follows:



The shareholders at our annual
general meetings may authorize our Management Board to increase our share capital with the consent of our Supervisory Board, within a period of five years by issuing shares for a certain total amount (genehmigtes Kapitalor authorized
capital). Our shareholders may also resolve to create conditional capital; however, they may do so only to issue conversion or subscription rights to holders of convertible bonds, in preparation for a merger with another company or to issue
options to employees and members of the management of our company or of an affiliated company by way of a consent or authorization resolution (bedingtes Kapitalor conditional capital). Any resolution pertaining to the creation of
authorized or conditional capital requires a majority of three quarters of the share capital represented at the relevant shareholders meeting.



The aggregate nominal amount of the authorized capital created by the shareholders may not exceed one half of the share capital existing at the time
of registration of the authorized capital with the commercial register. The aggregate nominal amount of the conditional capital created by the shareholders may not exceed one half of the share capital existing at the time of the annual general
meeting adopting such resolution. The aggregate nominal amount of the conditional capital created for the purpose of granting options to employees and members of the management of our company or of an affiliated company may not exceed ten percent of
the share capital existing at the time of the annual general meeting adopting the resolution.



The following table shows the number of our ordinary shares reserved for issuance under our various German and U.S. equity-based stock option plans
and convertible bond programs out of various authorized and conditional capitals, as well as the number of options and convertible bonds granted and outstanding:



|                         |  |                |  |            |  |           |  |                    |  |                             |  |                 
|------------------------ |  | -------------- |  | ---------- |  | --------- |  | ------------------ |  | --------------------------- |  | ----------------
|                         |  | SharesReserved |  | Granted(1) |  | Exercised |  | OutstandingOptions |  | OutstandingConvertibleBonds |  | TotalOutstanding
|Conditional Capital 1997 |  | 1,888,000      |  | 1,887,810  |  | 1,440,380 |  | 447,430            |  |                            |  | 447,430         
|Conditional Capital 2000 |  | 49,000         |  | 45,900     |  |          |  | 45,900             |  |                            |  | 45,900          
|Authorized Capital 1999  |  | 785,200        |  | 730,330    |  | 175,120   |  | 555,210            |  |                            |  | 555,210         
|Authorized Capital 2000  |  | 1,880,245      |  | 1,642,402  |  | 626,792   |  | 1,015,610          |  |                            |  | 1,015,610       
|Conditional Capital 2001 |  | 740,000        |  | 725,120    |  | 46,109    |  | 646,511            |  | 32,500                      |  | 679,011         
|Conditional Capital 2002 |  | 1,310,000      |  | 1,309,375  |  | 98,135    |  | 711,240            |  | 500,000                     |  | 1,211,240       
|Conditional Capital 2003 |  | 321,500        |  | 292,973    |  | 6,473     |  |                   |  | 286,500                     |  | 286,500         
|Conditional Capital 2004 |  | 1,800,000      |  | 1,784,700  |  |          |  | 849,700            |  | 935,000                     |  | 1,784,700       
|Conditional Capital 2005 |  | 1,125,000      |  | 780,400    |  |          |  | 60,400             |  | 720,000                     |  | 780,400         
|                         |  |                |  |            |  |           |  |                    |  |                             |  |                 
|                         |  | 9,898,945      |  | 9,199,010  |  | 2,393,009 |  | 4,332,001          |  | 2,474,000                   |  | 6,806,001       
|                         |  |                |  |            |  |           |  |                    |  |                             |  |                 

---

|(1) | Net of cancellations.
|--- | ---------------------



We may continue to issue stock options under each of the 2005, 2004, 2002, 2001 and 2000 German and U.S. Equity-Based Plans. No
additional grants will be made under the 1999 Incentive Stock Option Plan and the 1999 and 1997 Stock Option Plans. Furthermore, no additional grants will be made under the 2001 and 2002 convertible bond programs.



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Supervisory Board Practices



Decisions are generally made by the Supervisory Board as a whole. The meeting agendas of the Supervisory Board are determined by the Chairman of the Supervisory
Board. The other members of the Supervisory Board receive in advance of Supervisory Board meetings materials allowing them to prepare for the handling of the items on the agenda. Furthermore, the Supervisory Board conducts an annual self-evaluation
of the effectiveness of its performance as a whole.



To assist the
Supervisory Board in carrying out its duties, the following committees have been created in accordance with our Articles of Association and the internal rules of procedure of the Supervisory Board, the Finance Committee, the Compensation Committee,
the Corporate Governance and Nominations Committee and the Audit Committee (Board Committees). The Board Committees may, to the extent legally possible, additionally be charged with decision-making powers. Pursuant to the Companys Corporate
Governance Principles, the granting of loans to members of our Supervisory Board is not permitted. The entering into by GPC Biotech of advisory contracts or service agreements with members of our Supervisory Board, pursuant to Section 114 of
the German Stock Corporation Act, requires the approval of the Supervisory Board as a whole. The Supervisory Board may, in its own discretion, establish, permanently or temporarily, other committees and charge them with decision-making power.



Finance Committee.    The current members of
the Finance Committee are Dr. Prabhavathi Fernandes (Chairman), Michael Lytton and Dr. Jürgen Drews. The Finance Committee oversees the preparation of the annual general meeting as well as the execution of major transactions approved
by the Supervisory Board as a whole, such as mergers and acquisitions, divestitures, and financing transactions.



Compensation Committee.    The current members of the Compensation Committee are Dr. Jürgen Drews (Chairman), Michael Lytton
and Peter Preuss. The Compensation Committee reviews and approves our compensation policies and programs, including stock option programs and similar incentive-based compensation. It is responsible for reviewing and approving the compensation paid
to the members of our Management Board and oversees ongoing personnel matters of the members of the Management Board, including their membership on boards of other companies.



Corporate Governance & Nominations Committee.    The current members of the Corporate
Governance & Nominations Committee are Peter Preuss (Chairman), Dr. Metin Colpan and James Frates. The Corporate Governance & Nominations Committee assists the Supervisory Board with regard to the identification and
appointment of candidates for the Management Board and the Supervisory Board. In addition, this Committee monitors the Companys compliance with its Corporate Governance Principles and other applicable rules, regulations and law related to
corporate governance.



Audit Committee.    The
current members of our Audit Committee are James Frates (Chairman), Dr. Metin Colpan and Michael Lytton. The Supervisory Board has assured itself that the members of the Audit Committee have sufficient experience and ability in finance and
matters of compliance to satisfy applicable legal and listing requirements, including the requirements of Nasdaq and the U.S. Securities and Exchange Commission, and to enable them to adequately discharge their responsibilities. In addition, the
Supervisory Board has determined that all current members of the Audit Committee satisfy the independence requirements of Nasdaq.



Our Audit Committee is directly responsible for:



| |  | accounting and risk management matters;
| | - | ---------------------------------------



| |  | ensuring the independence of our external auditors;
| | - | ---------------------------------------------------



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| |  | the external audit scope and the engagement of our external auditors as elected by our shareholders in annual general meetings; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| |  | the determination of specific key aspects of the external audit and the compensation of our external auditors.
| | - | --------------------------------------------------------------------------------------------------------------



Employees



As of December 31, 2005, we had 222 employees worldwide, compared to 171 as of December 31, 2004, an increase of 30%. As of December 31, 2005, 52% of
our employees were based in Munich, Germany and 48% were based in our Waltham, Massachusetts and Princeton, New Jersey facilities. Of our 222 employees at December 31, 2005, 170 are engaged in research and development activities and 52 are
involved in general administration. None of our employees are covered by labor unions or covered by a collective bargaining agreement, nor have we experienced any work stoppages at our sites in the past. We believe that we have good relations with
our employees. We draw on a pool of consultants from time to time for advice on certain matters in which we have not developed internal expertise.



The following tables show the breakdown of the total year-end and average numbers of our workforce by main category of activity and geographic area for the past
three years.



|                                                |  |                        |  |                          |  |       
|----------------------------------------------- |  | ---------------------- |  | ------------------------ |  | ------
|As of December 31, 2005                         |  | Research & Development |  | General & Administration |  | Total 
|Germany                                         |  | 92                     |  | 24                       |  | 116   
|United States                                   |  | 78                     |  | 28                       |  | 106   
|                                                |  |                        | 
|As of December 31, 2004                         |  |                        |  |                          |  |       
|Germany                                         |  | 52                     |  | 24                       |  | 76    
|United States                                   |  | 71                     |  | 24                       |  | 95    
|                                                |  |                        | 
|As of December 31, 2003                         |  |                        |  |                          |  |       
|Germany                                         |  | 64.5                   |  | 21.5                     |  | 86    
|United States                                   |  | 71                     |  | 24                       |  | 95    
|                                                |  |                        | 
|Average during the year ended December 31, 2005 |  |                        |  |                          |  |       
|Germany                                         |  | 92                     |  | 25                       |  | 117   
|United States                                   |  | 75                     |  | 26                       |  | 101   
|                                                |  |                        | 
|Average during the year ended December 31, 2004 |  |                        |  |                          |  |       
|Germany                                         |  | 69.5                   |  | 25.25                    |  | 94.75 
|United States                                   |  | 48                     |  | 23                       |  | 71    
|                                                |  |                        | 
|Average during the year ended December 31, 2003 |  |                        |  |                          |  |       
|Germany                                         |  | 67.25                  |  | 22                       |  | 89.75 
|United States                                   |  | 83                     |  | 25.83                    |  | 108.83



In March 2005, we announced the
acquisition of material assets of Axxima. We hired 40 employees of Axxima at the time of this acquisition.



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Share Ownership by Members of Our Supervisory Board and Management Board



Supervisory Board



The following table provides information with respect to ownership of our ordinary
bearer shares, options and convertible bonds for each of our members of the Supervisory Board as of December 31, 2005, based on an aggregate of 30,151,757 shares outstanding.



|                                |  |         |  |                         |  |                              |  |                   |  |                
|------------------------------- |  | ------- |  | ----------------------- |  | ---------------------------- |  | ----------------- |  | ---------------
|Name                            |  | Shares  |  | % of Outstanding Shares |  | Options or Convertible Bonds |  | Exercise Price() |  | Expiration Date
|Jürgen Drews, M.D., Ph.D.       |  | 28,800  |  | *                       |  | 12,500 convertible bonds     |  | 9.55              |  | 10/09/2006     
|                                |  |         |  |                         |  | 12,500 convertible bonds     |  | 5.77              |  | 05/30/2008     
|                                |  |         |  |                         |  | 10,000 options               |  | 17.89             |  | 05/04/2010     
|Michael Lytton, J.D.            |  |        |  |                        |  | 7,500 convertible bonds      |  | 9.55              |  | 10/09/2006     
|                                |  |         |  |                         |  | 31,500 convertible bonds     |  | 5.77              |  | 05/30/2008     
|                                |  |         |  |                         |  | 10,000 options               |  | 16.38             |  | 03/13/2011     
|Metin Colpan, Ph.D.             |  | 14,400  |  | *                       |  | 5,000 convertible bonds      |  | 9.55              |  | 10/09/2006     
|                                |  |         |  |                         |  | 10,000 convertible bonds     |  | 5.77              |  | 05/30/2008     
|                                |  |         |  |                         |  | 10,000 options               |  | 17.89             |  | 05/04/2010     
|Prabhavathi B. Fernandes, Ph.D. |  |        |  |                        |  | 10,000 convertible bonds     |  | 5.77              |  | 05/30/2008     
|James Frates                    |  | 1,000   |  | *                       |  |                              |  |                   |  |                
|Peter Preuss                    |  | 80,000  |  | *                       |  | 7,500 convertible bonds      |  | 9.55              |  | 10/09/2006     
|                                |  |         |  |                         |  | 22,500 convertible bonds     |  | 5.77              |  | 05/30/2008     
|                                |  |         |  |                         |  |                              |  |                   |  |                
|Total                           |  | 124,200 |  | *                       |  | 119,000 convertible bonds    |  |                   |  |                
|                                |  |         |  |                         |  | 30,000 options               |  |                   |  |                

---

|* | Less than one percent of class.
|- | -------------------------------



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Management Board



The following table provides information with respect to ownership of our ordinary bearer shares, options and convertible bonds for
each of our members of the Management Board as of December 31, 2005, based on an aggregate of 30,151,757 shares outstanding.



|                                   |  |         |  |                         |  |                              |  |                    |  |                    
|---------------------------------- |  | ------- |  | ----------------------- |  | ---------------------------- |  | ------------------ |  | -------------------
|Name                               |  | Shares  |  | % of Outstanding Shares |  | Options or Convertible Bonds |  | Exercise Price () |  | Final Exercise Date
|Bernd R. Seizinger, M.D., Ph.D.(1) |  |        |  |                        |  | 358,303 options              |  | 1.16               |  | 11/11/2008         
|                                   |  |         |  |                         |  | 49,490 options               |  | 1.16               |  | 1/08/2009          
|                                   |  |         |  |                         |  | 111,360 options              |  | 3.98               |  | 9/30/2009          
|                                   |  |         |  |                         |  | 99,000 options               |  | 6.62               |  | 3/31/2010          
|                                   |  |         |  |                         |  | 300,000 options              |  | 17.89              |  | 5/04/2010          
|                                   |  |         |  |                         |  | 90,000 options               |  | 9.69               |  | 8/31/2011          
|                                   |  |         |  |                         |  | 125,000 convertible bonds    |  | 4.36               |  | 8/31/2012          
|                                   |  |         |  |                         |  | 18,925 convertible bonds     |  | 4.87               |  | 5/20/2013          
|                                   |  |         |  |                         |  | 56,075 convertible bonds     |  | 4.96               |  | 5/21/2013          
|                                   |  |         |  |                         |  | 400,000 convertible bonds    |  | 10.90              |  | 9/30/2014          
|                                   |  |         |  |                         |  | 300,000 options              |  | 9.33               |  | 8/31/2014          
|                                   |  |         |  |                         |  | 170,000 convertible bonds    |  | 10.38              |  | 9/30/2015          
|Elmar Maier, Ph.D.(2)              |  | 193,722 |  | *                       |  | 69,000 options               |  | 6.62               |  | 3/31/2010          
|                                   |  |         |  |                         |  | 70,000 options               |  | 17.89              |  | 5/04/2010          
|                                   |  |         |  |                         |  | 50,000 options               |  | 9.69               |  | 8/31/2011          
|                                   |  |         |  |                         |  | 50,000 options               |  | 5.24               |  | 7/31/2012          
|                                   |  |         |  |                         |  | 65,000 convertible bonds     |  | 4.36               |  | 8/31/2012          
|                                   |  |         |  |                         |  | 9,084 convertible bonds      |  | 4.87               |  | 5/20/2013          
|                                   |  |         |  |                         |  | 26,916 convertible bonds     |  | 4.96               |  | 5/21/2013          
|                                   |  |         |  |                         |  | 90,000 convertible bonds     |  | 10.90              |  | 9/30/2014          
|                                   |  |         |  |                         |  | 50,000 options               |  | 9.33               |  | 8/31/2014          
|                                   |  |         |  |                         |  | 100,000 convertible bonds    |  | 10.38              |  | 9/30/2015          
|Sebastian Meier-Ewert, Ph.D.(3)    |  | 254,405 |  | *                       |  | 69,000 options               |  | 6.62               |  | 3/31/2010          
|                                   |  |         |  |                         |  | 70,000 options               |  | 17.89              |  | 5/04/2010          
|                                   |  |         |  |                         |  | 60,000 options               |  | 9.69               |  | 8/31/2011          
|                                   |  |         |  |                         |  | 50,000 options               |  | 5.24               |  | 7/31/2012          
|                                   |  |         |  |                         |  | 85,000 convertible bonds     |  | 2.70               |  | 1/31/2013          
|                                   |  |         |  |                         |  | 34,019 convertible bonds     |  | 4.96               |  | 5/21/2013          
|                                   |  |         |  |                         |  | 11,481 convertible bonds     |  | 4.87               |  | 5/20/2013          
|                                   |  |         |  |                         |  | 100,000 convertible bonds    |  | 10.90              |  | 9/30/2014          
|                                   |  |         |  |                         |  | 50,000 options               |  | 9.33               |  | 8/31/2014          
|                                   |  |         |  |                         |  | 100,000 convertible bonds    |  | 10.38              |  | 9/30/2015          
|Mirko Scherer, Ph.D.(4)            |  | 24,000  |  | *                       |  | 69,000 options               |  | 6.62               |  | 3/31/2010          
|                                   |  |         |  |                         |  | 90,000 options               |  | 17.89              |  | 5/04/2010          
|                                   |  |         |  |                         |  | 50,000 options               |  | 13.34              |  | 3/30/2011          
|                                   |  |         |  |                         |  | 50,000 options               |  | 9.69               |  | 8/31/2011          
|                                   |  |         |  |                         |  | 25,000 convertible bonds     |  | 4.36               |  | 8/31/2012          
|                                   |  |         |  |                         |  | 40,000 convertible bonds     |  | 2.70               |  | 1/31/2013          
|                                   |  |         |  |                         |  | 9,084 convertible bonds      |  | 4.87               |  | 5/20/2013          
|                                   |  |         |  |                         |  | 26,916 convertible bonds     |  | 4.96               |  | 5/21/2013          
|                                   |  |         |  |                         |  | 100,000 convertible bonds    |  | 9.33               |  | 8/31/2014          
|                                   |  |         |  |                         |  | 100,000 options              |  | 9.33               |  | 8/31/2014          
|                                   |  |         |  |                         |  | 100,000 convertible bonds    |  | 10.38              |  | 9/30/2015          
|                                   |  |         |  |                         |  |                              |  |                    |  |                    
|Total                              |  | 472,127 |  | 1.57                    |  | 2,255,153 options            |  |                    |  |                    
|                                   |  |         |  |                         |  | 1,692,500 convertible bonds  |  |                    |  |                    

---

|* | Less than one percent of class.
|- | -------------------------------

|(1) | Dr. Seizinger transferred a total of 705,280 stock options initially granted to him in 1998 and 1999 to a financial institution in connection with cash settled share option agreements
dated July and December 2001, respectively. Upon any exercise by him of the options granted in the agreement of July 2001, Dr. Seizinger will receive cash, not shares, from the financial institution. On any exercise by him of the options in the
agreement of December 2001, Dr. Seizinger will, provided that he has paid to the financial institution the amounts required by the agreement and that certain other conditions are satisfied, be entitled to receive cash, not shares, from the
financial institution. Of the 705,280 options, a total of 395,950 were exercised by the financial institution in July 2001. In 2004, Dr. Seizinger exercised 120,000 of these options, which are not included in this table. In 2005,
Dr. Seizinger sold 66,127 cash settled shares that are not included in this table.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Dr. Maier transferred 12,000 stock options not included in the amount listed in this table to family members. Additionally, the amount of ordinary shares held by Dr. Maier listed in
this table does not include 66,266 ordinary shares held by family members. In 2005, Dr. Maier sold 72,278 shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Dr. Meier-Ewert sold 78,795 ordinary shares in 2005.
|--- | ----------------------------------------------------

|(4) | In July 2001, Dr. Scherer transferred 96,000 ordinary bearer shares to a financial institution in connection with a cash settled share option agreement. On any exercise of his option
under this agreement, Dr. Scherer will receive cash, not shares, from the financial institution. In 2005 and in 2004, Dr. Scherer exercised 47,000 and 30,000, respectively, of these options, which are not included in this table. This table
also does not include 3,770 shares held by family members of Dr. Scherer.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2005, the members of our Management Board held an aggregate of 472,127 shares of GPC Biotech, while the members of our Supervisory Board held an aggregate of 124,200 shares. The aggregate amount of our shares owned
by current Management Board and Supervisory Board members amounts to approximately 2.00% of our outstanding share capital. Of this amount, Dr. Elmar Maier held 193,722 shares, Dr. Sebastian Meier-Ewert held 254,405 shares, Dr. Mirko
Scherer held 24,000 shares, Dr. Metin Colpan held 14,400 shares, Dr. Jürgen Drews held 28,800 shares, Peter Preuss held 80,000 shares and James M. Frates held 1,000 shares. Individually, none of our Management Board or Supervisory
Board members held more than 1.00% of our share capital.



Marketplace Rules Exemptions
Granted by Nasdaq



In 2004, in connection with our listing of
American Depository Shares representing our ordinary shares on Nasdaq, Nasdaq granted us two exemptions with respect its Marketplace Rules.



Quorum



Nasdaq granted us an exemption with respect to Marketplace Rule 4350(f), which requires issuers by-laws to establish a minimum quorum of 33 1/3 % for any
meeting of the holders of common stock. Neither German law nor the rules and regulations promulgated by the Frankfurt Stock Exchange, the primary market for our shares, require a specific quorum for annual general meetings; therefore, our Articles
of Association do not provide for a quorum. The absence of a quorum requirement in the Companys Articles of Association is consistent with German law and such a requirement would be contrary to generally accepted business practice in Germany.



Shareholder Approval of Stock Option Plans



Nasdaq granted us an exemption with respect to Marketplace Rule 4350(i)(1)(A), which
requires issuers to obtain shareholder approval prior to the establishment or material amendment to certain stock option or purchase plans. The exact terms and conditions of our equity compensation plans are not the subject of a shareholder vote at
the annual general meeting. Instead, our shareholders only vote on the creation of underlying capital to service the equity awards and certain other general terms prescribed by German law and authorize the Management Board or, in respect of awards
to be made to the members of our Management Board, the Supervisory Board, to determine the details of our equity compensation plans. It is intended that all such plans be established within any policies and programs approved by the Compensation
Committee.



Item 7. Major Shareholders and Related Party Transactions



Major Shareholders



The following tables set forth
certain information regarding the ownership of our share capital as of December 31, 2005, of our principal shareholders.



As of December 31, 2005, a total 30,151,757 shares were outstanding, with 30,151,757 voting rights. The voting rights of our principal shareholders do not
differ from the voting rights of any other



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shareholders. Ownership of the stock and voting rights was as follows, according to the information available to us on the basis of notifications according to the
German Securities Trading Act (WertpapierhandelsgesetzWpHG) and public filings made in the United States.



|                                                                    |  |                   |  |                    |  |                   
|------------------------------------------------------------------- |  | ----------------- |  | ------------------ |  | ------------------
|                                                                    |  | December 31, 2005
|Shareholder                                                         |  | Number of shares  |  | % of share capital |  | % of voting rights
|Management Board and Supervisory Board as a group                   |  | 596,327           |  | 2.00               |  | 2.00              
|ALTANA Technology Projects GmbH(1)                                  |  | 2,360,000         |  | 7.83               |  | 7.83              
|Deutsche Bank AG(2)                                                 |  | 2,546,279         |  | 8.45               |  | 8.45              
|ROI Verwaltungsgesellschaft mbH(3)                                  |  | 1,900,206         |  | 6.3                |  | 6.3               
|Deutsche Investment-Trust Gesellschaft für Wertpapieranlagen mbH(4) |  | not available     |  | at least 5.0       |  | at least 5.0      

---

|(1) | According to a Schedule 13G, filed April 7, 2005. Voting rights of ALTANA Technology Projects GmbH are attributed to ALTANA Pharma AG and Susanne Klatten.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | According to a Schedule 13G, filed on March 14, 2006.
|--- | -----------------------------------------------------

|(3) | According to a Schedule 13G, filed December 31, 2005. The voting rights of ROI Verwaltungsgesellschaft mbH are attributed to Roland Oetker.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(4) | On July 30, 2004, Deutsche Investment-Trust Gesellschaft für Wertpapieranlagen mbH notified us that it owned 5.56% of our share capital. Since then, we have not
received any notice that Deutsche Investment-Trust Gesellschaft für Wertpapieranlagen mbH owns less than 5% of our share capital.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



To the knowledge of our management, no other shareholder owns directly or indirectly more than five percent of our equity or voting rights. Under German law,
shareholders in a public company are required to notify the company and the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) of the number of shares they own when their percentage ownership
reaches, exceeds or falls below certain threshold levels. German law does not require a shareholder to update this information unless it again reaches, exceeds or falls below a notification threshold. As a result, we cannot be certain whether the
number of shares owned by the shareholders listed above is accurate.



Changes in
Principal Shareholders During the Past Three Fiscal Years



On
May 8, 2003, BB Bioventures LP notified GPC Biotech that its shareholdings amounted to 9.91% of GPC Biotechs voting shares.



On May 27, 2003, BB Bioventures LP notified GPC Biotech that its shareholdings amounted to 4.81% of GPC Biotechs voting shares.



On February 19, 2004, ROI Verwaltungsgesellschaft mbH notified GPC Biotech that
its shareholdings amounted to 5.00% of GPC Biotechs voting shares. The shareholdings are attributed to Roland Oetker.



On July 30, 2004, Deutsche Investment-Trust Gesellschaft für Wertpapieranlagen mbH notified GPC Biotech that its shareholdings amounted to 5.56% of GPC
Biotechs voting shares.



On August 11, 2004, ROI
Verwaltungsgesellschaft mbH notified GPC Biotech that its shareholdings amounted to 4.40% of GPC Biotechs voting shares. The shareholdings are attributed to Roland Oetker.



On November 15, 2004, ROI Verwaltungsgesellschaft mbH notified GPC Biotech that its shareholdings amounted to 5.20% of GPC
Biotechs voting shares. The shareholdings are attributed to Roland Oetker.



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On February 23, 2006, DH Capital GmbH & Co. KG and OH Beteiligungen GmbH & Co. KG, entities
affiliated with the family of Dietmar Hopp, each subscribed for 1,436,000 of our voting shares. Giving effect to the transactions, each of these new shareholders owned 4.35% of our total voting shares then outstanding.



On March 15, 2006, DWS Investment GmbH notified GPC Biotech that its shareholdings
amounted to 4.87% of GPC Biotechs voting shares as of March 7, 2006. DWS Investment GmbH is one of the subsidiaries of Deutsche Bank AG whose aggregate shareholdings as of December 31, 2005 (based on a Schedule 13G filed on
March 14, 2006) amounted to 8.45% of GPC Biotechs voting shares. Taking into consideration the reduction in DWS Investment GmbHs shareholdings, the total shareholdings attributed to Deutsche Bank AG as of March 7, 2006 amounted
to 5.53% of GPC Biotechs voting shares.



Related Party Transactions



We have, from time to time, entered into agreements with our
shareholders and affiliates. We describe the principal transactions entered into since 2001 below.



In November 2001, we formed a strategic alliance with ALTANA Pharma AG in connection with the establishment by ALTANA Pharma of the ALTANA Research Institute,
ALTANA Pharmas U.S. research operation based in Waltham, Massachusetts. This alliance encompasses a technology transfer component as well as research collaboration. Pursuant to the agreement with ALTANA Pharma, we are assisting ALTANA Pharma
with the ALTANA Research Institute through the transfer of certain of our genomic and proteomic technologies to the ALTANA Research Institute. Effective January 2003, we entered into another collaboration agreement with ALTANA Pharma pursuant to
which we licensed LeadCodeto ALTANA Pharma. We were entitled to receive a total of $60 million in payments from ALTANA Pharma,
including upfront payments, license and technology transfer fees, and research funding under these agreements. Under each of these agreements, ALTANA Pharma is also obligated to make certain milestone payments totaling approximately $15 million
(subject to reduction in certain circumstances) to us in connection with the development and commercialization of each product resulting from the research collaborations. However, committed revenues from the collaboration and license agreement and
the LeadCode agreement with ALTANA Pharma will decrease substantially as the collaboration terms of those agreements approach their expiration in mid-2007. In the past, ALTANA Pharma was our largest customer, accounting for approximately 97% of our
total revenues in 2005, 99% of our total revenues in 2004, and 94% of our total revenues in 2003. In addition, Dr. Seizinger, our President and Chief Executive Officer, is a member of the Supervisory Board of ALTANA Pharma AG, which is a
subsidiary of ALTANA AG.



Dr. Drews, the Chairman of our Supervisory
Board, is also the Vice Chairman of the supervisory board of MorphoSys AG. Additionally, Dr. Metin Colpan, a member of our Supervisory Board, is also a member of the supervisory board of MorphoSys AG. In April 1999, we entered into a
collaboration and license agreement with MorphoSys. Since the initiation of the collaboration, MorphoSys has identified more than a dozen antibodies, from which we selected our product candidate known as 1D09C3. MorphoSys is entitled to milestone
payments upon the occurrence of specified events in the development and commercialization of antibody product candidates resulting from the collaboration. If all milestones were achieved, these milestone payments would total approximately 10 million. MorphoSys is also entitled to receive royalties on net sales of any of these antibody products by us. If we enter into an
agreement with a partner for the commercialization of any of these antibody products, we would be obligated to pay MorphoSys a percentage of sublicense fees, milestone payments and royalties.



Mr. Preuss, a member of our Supervisory Board, is also a Regent of the University
of California. In February 2004, we entered into a research agreement with The Regents of the University



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of California as sponsor of a research project entitled Characterization of JM-118 Resistance. We supported this research project in 2005 by a grant
of $81,140.



Metin Colpan, a member of our Supervisory Board also serves
on the board of Ingenium Pharmaceuticals AG. In connection with our acquisition of substantially all of the assets of Axxima, we became a successor to a Collaboration Agreement between Axxima and Ingenium Pharmaceuticals AG, dated as of
October 30, 2004, with respect to the conduct of several programs for the research and development of specific targeted pharmaceutical products in the field of inflammation and pain and cardiovascular disease. Under the Collaboration Agreement,
Ingenium agreed to share profits in the event they commercialize products from the collaboration in the fields of inflammation and pain. Similarly, we have agreed to share profits with Ingenium in the event we commercialize products from the
collaboration in the field of cardiovascular disease. As of December 31, 2005, no monies had been paid to or received from Ingenium under the Collaboration Agreement. However, we also received a joint grant with Ingenium totaling 2.2 million (1.1
million each) in committed funding from the German Ministry for Education and Research through its BioChancePLUS program. This funding is available until 2007 and will support collaborative drug discovery efforts. The grant was transferred from
Axxima to GPC Biotech and involves collaborative work initiated between Axxima and Ingenium. The goal of the collaboration is to establish proof of concept for the activity of specific kinase inhibitors in animal models covering several disease
areas.



Loans Extended and Guarantees Provided



Under the provisions of the U.S. Sarbanes-Oxley Act enacted in July 2002 and our
Corporate Governance Principles, no new loans or guarantees may be extended or provided to the members of our Management Board or the members of the Supervisory Board. In December 1998 and January and September 1999, we made loans in an aggregate
amount of approximately 86,000 to Dr. Seizinger, our Chief Executive Officer. Each of these loans had a five-year term and
bears interest at the rate of 6 percent per annum. For so long as Dr. Seizinger serves as the Chairman of our Management Board, principal and accumulated interest of the loans are forgiven in equal installments over the term of the respective
loan. As of December 31, 2003 and January 31, 2004, respectively, the loans granted to Dr. Seizinger in December 1998 and January 1999 had been forgiven in full. On March 15, 2004, Dr. Seizinger made a payment to the Company
in the amount of 6,783.21 in full repayment of all principal and accrued interest outstanding under the loan granted to
Dr. Seizinger in September 1999.



Furthermore, in July 2001, our
U.S. subsidiary made a loan in the aggregate amount of $200,000 to Dr. Kley, our Vice President Research Waltham. The loan terms were amended in July 2003. The amended loan has a four-year term and bears interest at the rate of 5.5 percent per
annum. For so long as Dr. Kley remains employed by our U.S. subsidiary, principal and accumulated interest of the loan is forgiven in equal installments over the term of the loan. The loan agreement additionally provides that the loan will be
forgiven in full in specific circumstances following a change in control of GPC Biotech. The aggregate outstanding balance of the loan, including accrued interest, to Dr. Kley as of December 31, 2005 was approximately $100,000.



In July 2002, we made a loan in the aggregate amount of 100,000 to Dr. Scherer, our Chief Financial Officer. This loan had a five-year term and bore interest at the rate of 6 percent per annum. Following partial
repayment of this loan in fiscal year 2003, Dr. Scherer repaid the remaining principal and accrued interest of this loan in full on March 4, 2004.



All of these loans were made for personal financial purposes.



C. Interests of Experts and Counsel.



Not applicable.



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Item 8. Financial Information



CONSOLIDATED FINANCIAL STATEMENTS



Please refer to
Item 18. Financial Statements



Legal Proceedings



We are not currently, and since January 1, 2003, have not been a party to any
material legal proceedings.



Dividend Policy and Liquidation Process



We have never paid any dividends on our ordinary bearer shares. Under German
corporate law, we currently have no ability to pay dividends because of our past losses. We do not expect to have any annual net income in the foreseeable future. If we were to earn annual net income, we currently plan to retain such annual net
income for the foreseeable future to finance business development and internal growth. We therefore do not anticipate to pay dividends in the foreseeable future.



Under German law, GPC Biotech may pay dividends only from retained earnings(Bilanzgewinn)reflected in its unconsolidated
financial statements (as opposed to the consolidated financial statements for GPC Biotech and its subsidiary) prepared in accordance with the principles set forth in the German Commercial Code (Handelsgesetzbuch) and as adopted and approved
by the Management Board and the Supervisory Board. In determining the retained earnings that may be distributed as dividends, under German law, the Management Board may allocate to earnings reserves (Gewinnrücklagen) up to 50% of GPC
Biotechs remaining net income for the fiscal year after deducting amounts to be allocated to legal and statutory reserves and losses carried forward. The Management Board may also increase retained earnings when preparing the financial
statements with funds withdrawn from earnings reserves.



Our
shareholders, in their resolution on the appropriation of retained earnings, may carry forward distributable retained earnings in part or in full and may allocate additional amounts to earnings reserves. Profits carried forward will be automatically
incorporated in the retained earnings of the next fiscal year. Amounts allocated to the earnings reserves are available for dividends only if and to the extent the earnings reserves have been dissolved by the Management Board when preparing the
financial statements, thereby increasing the retained earnings.



Our
shareholders may declare dividends at an ordinary general shareholders meeting, which must be held within the first eight months of each fiscal year. Dividends approved at an ordinary general shareholders meeting are payable promptly
after the meeting, unless otherwise decided at the meeting. Because all of our shares are in book-entry form represented by one or more global certificates deposited with Clearstream Banking AG in Frankfurt am Main, Germany, shareholders would
receive dividends through Clearstream Frankfurt for credit to their deposit accounts.



Apart from liquidation as a result of insolvency proceedings, GPC Biotech may be liquidated only with a majority of three-quarters of the share capital present or represented at a shareholders meeting at which the vote is
taken. In accordance with the German Stock Corporation Act (Aktiengesetz), upon a liquidation of GPC Biotech, any liquidation proceeds remaining after paying off all of GPC Biotechs liabilities would be distributed among the
shareholders in proportion to the number of shares held by each shareholder. Dividends are subject to German withholding tax. See German TaxationWithholding Tax.



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Form, Certification and Transferability of the Shares



The form and contents of our share certificates, dividend and renewal coupons are determined by our Management Board with the consent
of our Supervisory Board. We may combine individual shares into share certificates that represent multiple shares (global shares, global certificates). Shareholders have no right to receive individual share certificates and all shares are
represented by one or more global bearer share certificates.



All of our
outstanding shares are bearer shares. If a resolution regarding a capital increase does not specify whether such increase will be in bearer or registered form, the new shares resulting from such capital increase will be bearer shares by default. Any
resolution regarding a capital increase may determine the profit participation of the new shares resulting from such capital increase in deviation from § 60(2)(3) of the German Stock Corporation Act.



Our shares are freely transferable, with the transfer of ownership governed by the
rules of the relevant clearing system.



Significant Changes



None.



Item 9. The Offer and Listing.



Plan of distribution



Not applicable.



Trading Markets



Our shares are currently traded on the Frankfurt Stock Exchange under the symbol GPC. Our shares also are traded on Nasdaq
under the symbol GPCB. Furthermore, shares are included in the German TecDAX index, which includes certain large companies in the technology segment of the Frankfurt Stock Exchange.



The table below sets forth, for the periods indicated, the high and low closing prices
of our shares and ADSs as reported by the Frankfurt Stock Exchange Xetra trading system and Nasdaq, in euro and U.S. dollars, respectively:



|                         |  |        |  |       |  |       |  |       |  |   |  |     
|------------------------ |  | ------ |  | ----- |  | ----- |  | ----- |  | - |  | ----
|                         |  | NASDAQ |  | XETRA
|Year                     |  | High   |  | $     |  | Low   |  | High  |  |  |  | Low 
|2001                     |  |       |  |       |  |      |  | 30.50 |  |   |  | 7.50
|2002                     |  |       |  |       |  |      |  | 13.47 |  |   |  | 2.17
|2003                     |  |       |  |       |  |      |  | 9.25  |  |   |  | 2.57
|2004                     |  | 16.00  |  |       |  | 10.32 |  | 16.36 |  |   |  | 8.07
|2005                     |  | 15.11  |  |       |  | 10.56 |  | 11.90 |  |   |  | 7.99
|                         |  |        |  |       |  |      
|Year                     |  |        |  |       |  |       |  |       |  |   |  |     
|2005                     |  |        |  |       |  |       |  |       |  |   |  |     
|January through March    |  | 15.84  |  |       |  | 11.32 |  | 11.90 |  |   |  | 8.80
|April through June       |  | 12.39  |  |       |  | 10.15 |  | 9.86  |  |   |  | 7.99
|July through September   |  | 13.79  |  |       |  | 10.51 |  | 11.19 |  |   |  | 8.80
|October through December |  | 13.49  |  |       |  | 10.49 |  | 10.94 |  |   |  | 9.15



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|                         |  |        |  |       |  |       |  |       |  |   |  |       
|------------------------ |  | ------ |  | ----- |  | ----- |  | ----- |  | - |  | ------
|                         |  | NASDAQ |  | XETRA
|Year                     |  | High   |  | $     |  | Low   |  | High  |  |  |  | Low   
|2004                     |  |        |  |       |  |       |  |       |  |   |  |       
|January through March    |  |       |  |       |  |      |  | 16.36 |  |   |  | 8.07  
|April through June       |  |       |  |       |  |      |  | 14.13 |  |   |  | 10.68 
|July through September   |  | 14.52  |  |       |  | 10.32 |  | 12.05 |  |   |  | 8.52  
|October through December |  | 16.00  |  |       |  | 12.36 |  | 11.92 |  |   |  | 9.80  
|                         |  |        |  |       |  |      
|Year                     |  |        |  |       |  |       |  |       |  |   |  |       
|2006                     |  |        |  |       |  |       |  |       |  |   |  |       
|January through February |  | 15.50  |  |       |  | 12.78 |  | 12.93 |  |   |  | 10.70 
|                         |  |        |  |       |  |      
|Month                    |  |        |  |       |  |       |  |       |  |   |  |       
|September 2005           |  | 13.79  |  |       |  | 11.75 |  | 11.19 |  |   |  | 10.16 
|October 2005             |  | 12.75  |  |       |  | 10.49 |  | 10.58 |  |   |  | 9.25  
|November 2005            |  | 13.19  |  |       |  | 10.59 |  | 10.30 |  |   |  | 9.15  
|December 2005            |  | 13.49  |  |       |  | 11.33 |  | 10.98 |  |   |  | 9.53  
|January 2006             |  | 15.11  |  |       |  | 12.78 |  | 12.39 |  |   |  | 10.770
|February 2006            |  | 14.33  |  |       |  | 12.55 |  | 11.00 |  |   |  | 9.78  
|March 2006               |  | 17.29  |  |       |  | 15.17 |  | 14.50 |  |   |  | 12.69 



On March 31, 2006, the closing
price of our shares on the Frankfurt Stock Exchange Xetra trading system was 13.20 and the closing price of our ADSs on Nasdaq was
$16.40.



Item 10. Additional Information.



For
further information regarding the Companys Articles of Association, please refer to Exhibit 1 to this annual report and to our Form F-1 (No. 333-116303), filed on June 9, 2004.



Material Contracts



Spectrum Pharmaceuticals



In September 2002, we entered into a Co-Development and License Agreement with Spectrum Pharmaceuticals, Inc. (formerly known as Neotherapeutics, Inc.), under which
we received an exclusive license, with the right to grant sublicenses, for the commercialization of satraplatin in the field of treating cancer in humans. This license includes a sublicense of all patent rights and other rights previously licensed
to Spectrum Pharmaceuticals by Johnson Matthey plc, the company that invented satraplatin. In the event that the license agreement between Spectrum Pharmaceuticals and Johnson Matthey is terminated, Johnson Matthey has agreed with Spectrum
Pharmaceuticals that our sublicense will be automatically assigned to Johnson Matthey, which will receive all rights and have all obligations currently held by Spectrum Pharmaceuticals. However, we have limited ability to enforce directly any
Spectrum Pharmaceuticals rights or Johnson Mattheys obligations in their agreement.



Under the agreement with Spectrum Pharmaceuticals, we made an upfront payment to Spectrum Pharmaceuticals of $2.0 million in 2002 and a further payment of $2.0 million in September 2003 upon the first dosing of the first
patient in the first registrational clinical trial of satraplatin. Of the 2003 payment, $1.0 million was made in the form of an equity investment by us in Spectrum Pharmaceuticals common stock. In addition, we are obligated to make milestone
payments to Spectrum Pharmaceuticals upon the occurrence of specific events in the development of satraplatin beginning with the acceptance by the FDA of an NDA for satraplatin. These milestone payments would total up to $18 million if all
milestones were to be achieved. We also have established a joint development committee, comprised of three representatives from each company, responsible for the



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planning and oversight of the development of satraplatin. The chairperson of the committee, a representative of GPC Biotech, has a tie-breaking vote in the event the
committee cannot reach a unanimous decision.



If we market and sell
satraplatin ourselves, Spectrum Pharmaceuticals will receive royalties on our net sales of products, commencing on the date of first commercial sale and running until the expiration of the last-to-expire valid claim of a licensed patent or patent
application. In the event we decide to market satraplatin without a partner in the United States, Spectrum Pharmaceuticals will also have the right to elect to co-promote the product with us on terms to be negotiated. Spectrum Pharmaceuticals is
also entitled to receive a share of sublicense fees and royalties received by us from our co-development and license agreement with Pharmion and if we enter into a marketing arrangement with another company outside of the Pharmion territories. The
term of the agreement ends with the expiration of our obligation to pay Spectrum Pharmaceuticals royalties on sales of products although some obligations, such as provisions relating to confidentiality and indemnification, survive termination. In
addition, the agreement may be terminated earlier by either party, based upon material breach or the commencement of bankruptcy or insolvency proceedings involving the other, or by us upon six months notice to Spectrum Pharmaceuticals.



Pharmion Corporation



On December 19, 2005, we entered into a Co-Development and License Agreement with
Pharmion GmbH, a wholly-owned indirect subsidiary of Pharmion Corporation, related to satraplatin. Under the terms of the agreement, Pharmion gained exclusive commercialization rights for satraplatin for Europe, the Middle East, including Turkey,
Australia and New Zealand, while we retained our current rights to the North American market and all other territories. Pharmion made an upfront payment of $37.1 million, including an $18 million reimbursement for satraplatin clinical development
costs incurred prior to October 1, 2005 and $19.1 million for funding of clinical development costs incurred after October 1, 2005 but prior to the effective date of the agreement and certain future clinical development to be conducted
jointly. We also agreed to pursue a joint development plan to evaluate development activities for satraplatin in a variety of tumor types and will share global development costs, for which Pharmion has made an additional commitment of $22.2 million,
in addition to the $37.1 million in initial payments. Pharmion is also obligated to pay us an additional $30.5 million based on the achievement of certain regulatory filing and approval milestones, and $15 million for each subsequent EMEA approval
for certain additional indications up to a maximum of $75 million for such approvals. We also have the right to receive royalties on net sales of satraplatin in Pharmions territories at rates of 26% to 30% on annual net sales up to $500
million, and 34% on annual net sales over $500 million. Finally, Pharmion is obligated to pay sales milestones totaling up to $105 million, based on the achievement of significant annual sales levels in the Pharmion territories. The Agreement also
provides for a joint executive committee to oversee and coordinate the parties activities, as well as a joint development committee and a joint commercialization committee. We will each lead regulatory and commercial activities in our
respective territories. The Co-Development and License Agreement terminates on a country by country basis with the expiration of Pharmions obligation to pay us royalties on sales of satraplatin. Upon termination, Pharmion will retain a
non-exclusive, fully-paid, royalty-free license to continue the commercialization of satraplatin in the Pharmion territories.



Contemporaneously with the Co-Development and License Agreement, we also entered into a Supply Agreement. Pursuant to the terms of the Supply Agreement, Pharmion
has agreed to purchase 100% of its requirements for satraplatin from us, and we have agreed to manufacture and supply the requirements of Pharmion for satraplatin. Pricing is based upon 110% of the fully allocated costs of manufacture, subject to
annual adjustment. The parties will form a joint manufacturing committee to, among other things, oversee activities with respect to the manufacture of satraplatin, to coordinate regulatory activities relating to its manufacture and to establish work
plans for analytical methods transfer.



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ALTANA Pharma



In 2001, we entered into an agreement with ALTANA Pharma, which was our most significant collaboration prior to our agreement with
Pharmion. Under this contract, we are assisting ALTANA Pharma through mid-2007 with its research institute in the United States. This agreement includes a research collaboration as well as a transfer of technologies. Pursuant to the technology
transfer component of the agreement, we agreed to transfer certain of our genomic and proteomic technologies to ALTANA Pharma for use by the ALTANA Research Institute. Under the terms of the agreement, we have granted ALTANA Pharma a non-exclusive
license, with limited sublicense rights, to utilize these technologies and any improvements to these technologies in its research and development activities. Improvements made to our technologies by either party are owned by us.



The alliance also includes a research collaboration to identify and validate targets in
various disease areas. Subject to the payment of exclusivity fees by ALTANA Pharma, we have granted ALTANA Pharma an exclusive license, with the right to grant sublicenses, to perform research on drug targets discovered in the collaboration, as
selected by ALTANA Pharma, and to commercialize any products resulting from the use of these drug targets. We retain our intellectual property rights to any drug targets not selected by ALTANA Pharma. Under certain circumstances, rights to drug
targets selected by ALTANA Pharma revert to us. The duration of the portion of the agreement pursuant to which we assist ALTANA Pharma with the ALTANA Research Institute runs through June 2007, while the term of the research collaboration ended in
April 2005.



Effective January 2003, we entered into another
collaboration agreement with ALTANA Pharma pursuant to which we licensed LeadCode.



We were entitled to receive a total of $60 million in payments from ALTANA Pharma,
including upfront payments, license and technology transfer fees, and research funding over the term of the collaboration and license agreement and the Lead Code collaboration agreement. However, committed revenues from the collaboration and license
agreement and the LeadCodeagreement with ALTANA Pharma will decrease substantially as the collaboration terms of those agreements
approach their expiration in mid-2007.



ALTANA Pharma is also obligated
to make certain milestone payments totaling approximately $15 million (subject to reduction in certain circumstances) to us in connection with the development and commercialization of each product resulting from the research collaborations. For any
of these products that receive regulatory approval and are marketed by ALTANA Pharma, we will also be entitled to royalties on net sales of such products. ALTANAs obligation to pay royalties to us expires on a country-by-country basis on the
later of the date of expiration of the last-to-expire patent having certain valid claims covering a particular product and the date that is ten years from the date of the first commercial sale of such product. These agreements terminate with the
expiration of ALTANA Pharmas obligation to pay us royalties. The agreement scan be terminated earlier by either us or ALTANA Pharma in the case of material breach by the other party, a change of control of GPC Biotech or the bankruptcy,
insolvency, dissolution or winding up of either party.



Under the
collaboration and license agreement, ALTANA Pharma may negotiate with us for additional non-exclusive licenses to our technology from time to time. We granted a non-exclusive license to ALTANA Pharma with respect to our MaRX technology effective in
June 2002.



In addition, as of December 31, 2005, we have subleased
to ALTANA Pharma 23,500 square feet of space in our facilities in Waltham, Massachusetts for the ALTANA Research Institute. The term of this sublease runs until June 30, 2007, with an option for ALTANA Pharma to extend the term for one year.



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Prior to the current ALTANA Pharma alliance, we entered into two collaborations with ALTANA Pharma in the fields of
oncology and infectious disease. These collaborations have been successfully concluded, and we are entitled to milestone payments and royalties on products that may be derived from these collaborations.



MorphoSys



In April 1999, we entered into a collaboration and license agreement with MorphoSys AG, under which we collaborated with MorphoSys in
the discovery and generation of monoclonal antibodies directed at specified targets. MorphoSys identified these antibodies using its proprietary HuCAL® technology. MorphoSys has granted us exclusive rights, with the right to grant sublicenses, to develop and commercialize antibody product candidates resulting
from the collaboration in a field that includes human therapeutic use. Our license agreement with MorphoSys includes a number of sublicenses related to enabling technologies. Since the initiation of the collaboration, MorphoSys has identified more
than a dozen antibodies, from which we selected our product candidate known as 1D09C3.



The research term of the collaboration expired in February 2001. However, there are milestone payments due to MorphoSys and the licensors of enabling technologies upon the occurrence of specified events in the development and
commercialization of licensed products. If all milestones were achieved, these milestone payments would total approximately 10
million. MorphoSys and the licensors of the enabling technologies are also entitled to receive royalties on net sales of products by us. In addition, if we enter into an agreement with a partner for the commercialization of the product, instead of
paying the milestones and royalties specified in the agreement, we would be obligated to pay MorphoSys various percentages of sublicense fees, milestone payments and royalties received from such partner. Unless sooner terminated, our obligation to
pay MorphoSys and certain third party licensors royalties on sales of a product expires on a country-by-country basis on the later of the last-to-expire licensed patents having a valid claim covering a particular product and a date that is no later
than twelve years from the date of the first commercial sale. Either party may terminate the agreement based on material breach or the commencement of bankruptcy or insolvency proceedings involving the other, and we may also terminate the agreement
for any reason upon fifteen days notice to MorphoSys. The obligations under certain provisions of the agreement, including provisions relating to confidentiality and ownership of intellectual property, survive termination.



Bristol-Myers Squibb



Through our acquisition of Mitotix, Inc. in March 2000, we are party to a research,
development and marketing agreement with Bristol-Myers Squibb, as successor to DuPont Pharmaceuticals, in the field of cyclin-dependent kinase inhibitors. Pursuant to an amendment to the agreement in April 2000, the research collaboration was
terminated, although various provisions of the agreement including some sublicenses and milestone and royalty obligations remained in effect. We are entitled to milestone payments, totaling $16 million for the first product and totaling $8 million
for any subsequent product if all milestones are achieved, and royalties on net sales for any products developed and commercialized by Bristol-Myers Squibb based upon lead compounds identified during the collaboration. Both we and Bristol-Myers
Squibb also retain exclusive rights to develop and commercialize certain other selected compounds tested during the collaboration. Each party is obligated to make milestone and royalty payments to the other for any product incorporating any of these
selected compounds. Aggregate milestones payable by Bristol-Myers Squibb for any product that incorporates one of these selected compounds are the same as discussed above. For the first product developed and commercialized by us that incorporates
one of these selected compounds we would owe Bristol-Myers Squibb milestone payments totaling $19.5 million and totaling approximately $5 million for any subsequent product, in both cases if all milestones are achieved.



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In addition, both we and Bristol-Myers Squibb have co-exclusive rights to utilize the intellectual property
resulting from the collaboration for the identification, research, development and commercialization of new cyclin-dependent kinase inhibitors. We are each obligated to make royalty payments to the other for any product incorporating a compound
independently identified during a specified time period through the use of this co-exclusive intellectual property. In addition, Bristol-Myers Squibb would owe us milestone payments as described above for any product incorporating a compound
identified through the use of this intellectual property during the same specified time period. The royalty term expires on a country-by-country basis on the later of the date of expiration of the last- to-expire licensed patent having a valid claim
covering a given product and the date that is ten years from the date of the first commercial sale. Either party may terminate the agreement based on material breach or the commencement of bankruptcy or insolvency proceedings involving the other,
and we may also terminate the license to Bristol-Myers Squibb upon six months notice for failure to diligently pursue the discovery and development of products. The obligations under certain provisions of the agreement, including provisions
relating to confidentiality and non-solicitation of employees, survive termination.



Axxima Pharmaceuticals



On
March 2, 2005, we entered into an Asset Purchase Agreement for the acquisition of substantially all of the assets of Axxima Pharmaceuticals AG. Axxima, a kinase drug discovery firm based in Munich, Germany which filed for insolvency in December
2004. Axximas assets were transferred to a newly formed holding company. We purchased the holding company, which, in addition to substantially all of the assets of Axxima, held a net 8.7 million cash infusion from investors and substantially all of Axximas patents, patent applications and know-how as well as several early-stage drug discovery
programs in the areas of cancer. In addition to the initial purchase price of 2 million, the Asset Purchase Agreement obligates us
and any exclusive licensee or purchaser of relevant Axxima patents, to make milestone payments to the insolvency receiver of Axxima for the entry of three compounds protected by Axximas patent estate at the time of entry, into Phase 1, 2 and 3
clinical trials, up to a maximum total amount of 9 million.



Exchange Controls



In accordance with UN and EU laws and regulations, Germany currently does not restrict capital movements between Germany and other countries except for capital
transactions with Iraq, Burma/Myanmar, Zimbabwe and institutions of the Taliban party in Afghanistan, Osama bin Laden and Al Qaida.



For statistical purposes, subject to certain exceptions, each corporation or person domiciled in Germany is required to report to the Deutsche Bundesbank each
payment received from or made to a corporation or person not domiciled in Germany in excess of 12,500 (or an equivalent amount in a
foreign currency). Moreover, all claims and liabilities of a corporation or person domiciled in Germany against or towards a corporation or person not domiciled in Germany in excess of 5 million (or an equivalent amount in a foreign currency), individually or in the aggregate, are required to be reported to the Deutsche Bundesbank.



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Taxation



German Taxation



The following discussion describes certain material German tax consequences for beneficial owners of shares or ADSs who are (i) not German residents for German income tax purposes (i.e., persons whose residence, habitual
abode, statutory seat or place of effective management and control is not located in Germany) and (ii) whose shares do not form part of the business property of a permanent establishment or fixed base in Germany. Throughout this section we
refer to these owners as non-German Holders. This summary is based on German tax laws and typical tax treaties to which Germany is a party, as they are in effect on the date hereof, and is subject to changes in German tax laws or such
treaties. The following discussion does not purport to be a comprehensive discussion of all German tax consequences that may be relevant for non-German Holders.



Prospective purchasers of shares or ADSs are urged to consult their tax advisers about the tax consequences of the acquiring, holding, disposal, or other
transfer of shares or ADSs and the procedures for obtaining a possible refund of German withholding tax paid.



Taxation of Corporations in Germany



Profits earned by a German resident corporation are generally subject to a corporate income tax at a rate of 25% plus 5.5% solidarity surcharge thereon, amounting
to a total of 26.375%. German resident corporations are also subject to profit-related trade tax (Gewerbesteuer) on income, the exact amount of which depends on the municipality in which the corporation maintains its business
establishment(s). The trade income tax rates range between 15% and 20%. Trade tax on income is a deductible item in computing the corporations tax base for corporate income and trade tax purposes.



Dividend distributions received by corporations are generally 95% exempt from corporate
income tax. Dividend distributions by a German resident corporation are generally 95% exempt from trade income tax, if the corporation holds, as of the beginning of the relevant assessment period, at least 10% of the share capital of the
distributing corporation.



Taxation of Shareholders



Withholding Tax



Dividends are subject to withholding tax at a tax rate of 20% of the gross amount of the dividend. In addition, the solidarity
surcharge of 5.5% on the withholding tax will be retained, resultingin a total withholding tax rate of 21.1%. The withholding tax rate may be reduced for non-German Holders by an applicable double tax treaty. Under most double tax treaties
the withholding tax rate is reduced to 15%. The reduction is granted by way of a refund of the excess of the amount of tax withheld (including the solidarity surcharge) over the applicable treaty rate (in general, 75%). The application for refund
must be filed with the German Federal Office for Taxes (Bundeszentralamt für Steuern),An der Küppe 1, D-53225 Bonn, Germany). The relevant forms can be obtained from the German Federal Office for Taxes or from German embassies and
consulates.



Special Tax Rules for U.S. Holders



Under the income tax treaty between the United States and Germany (the
Treaty), the withholding tax rate is reduced to 15% of the gross amount of the dividends for U.S. holders (as defined below in United States Federal Income Taxation) that are eligible for the benefits of the Treaty and that
hold less than 10% of the voting shares in GPC Biotech. For eligible U.S. holders that



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hold 10% of the voting shares or more the withholding tax rate is reduced to 5%. The reduction of withholding tax is granted by way of refund as discussed in the
preceding paragraph.



Withholding Tax Refund Procedure for U.S.
Holders



For shares and ADSs kept in custody with The Depositary
Trust Company (DTC) in New York or one of its participating banks, the German tax authorities have introduced a collective procedure for the refund of German withholding tax and the solidarity surcharge thereon. Under this procedure, DTC
may submit claims for refunds payable to eligible U.S. holders under the Treaty collectively to the German tax authorities on behalf of the holders. The German Federal Tax Office will pay the refund amounts on a preliminary basis to DTC, which will
pay these amounts to the eligible U.S. holders. The Federal Tax Office may review whether the refund was made in accordance with the law within four years after making the payment to DTC. Details of this collective procedure are available from DTC.



Alternatively, a newly introduced simplified collective refund procedure
based on electronic data exchange (Datenträgerverfahren) may be available. Financial institutions that deal with dividend distributions of GPC Biotech (for example, custodian banks or clearing offices) or GPC Biotech itself may, subject
to certain conditions, apply to participate in this procedure at the German Federal Tax Office. Upon acceptance, the participant may electronically file collective refund claims with the German Federal Tax Office.



Individual claims for refund may be made on a special German form, which must be filed
with the German Federal Office for Taxes (Bundeszentralamt für Steuern) An der Küppe 1, D-53225 Bonn, Germany. Copies of the required form may be obtained from the German Federal Tax Office at the same address or from the Embassy of
the Federal Republic of Germany, 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998. The form can also be downloaded from the following website: www.bzst.bund.de. Claims must be filed within a four-year period from the end of the calendar year
in which the dividend was received.



As part of the individual refund
claim, an eligible U.S. holder must submit to the German tax authorities the original bank voucher (or certified copy thereof) issued by the paying entity documenting the tax withheld, and an official certification on IRS Form 6166 of its last
United States federal income tax return. IRS Form 6166 may be obtained by filing a request with the Internal Revenue Service Center in Philadelphia, Pennsylvania, Foreign Certification Request, P.O. Box 16347, Philadelphia, PA 19114-0447. Requests
for certifications must include the eligible U.S. holders name, Social Security Number or Employer Identification Number, tax return form number, and tax period for which the certification is requested. Requests for certification can include a
request to the Internal Revenue Service to send the certification directly to the German tax authorities. If no such request is made, the Internal Revenue Service will send a certification on IRS Form 6166 to the eligible U.S. holder, who then must
submit this document with its claim for refund.



Capital Gains



Half of the gains from a disposal of shares or ADSs held by an
individual non-German Holder may be subject to German individual income tax, if the individual non-German Holder or, in case of a gratuitous transfer, the legal predecessor has held, directly or indirectly, at any time during the five years
preceding the disposal at least 1% of the share capital of GPC Biotech.



Gains from the disposal of shares or ADSs held by a corporate non-German Holder are generally exempt from trade income tax and corporate income tax. If the shareholder or, in case of a gratuitous transfer, the legal predecessor has held,
directly or indirectly, at any time during the five



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years preceding the disposal, at least 1% of the share capital of the corporation, only 95% of the gain from the disposal of the shares or ADSs may be exempt from
corporate income tax and the solidarity surcharge. Losses deriving from the disposal of shares or ADSs are not tax-deductible.



Many double tax treaties, however, provide complete exemption from German taxation of gains derived from the disposal of shares or ADSs if and to the extent the
shares or ADSs are not held as assets attributable to a permanent establishment in Germany.



Inheritance and Gift Tax



The transfer of
shares or ADSs to other persons by way of gift or inheritance is only subject to German inheritance and gift tax, if:



| | (1) | the testator, donor, heir, donee or any other beneficiary had his domicile or residence in Germany or has not been living abroad as a German citizen for more than five years without having a
domicile in Germany; or
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | the shares or ADSs belonged to assets attributable to a permanent establishment or a permanent representative of the testator or of the donor in Germany; or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | the testator or donor, either alone or with other closely related persons, held at the time of the inheritance or donation, directly or indirectly at least 10% of the share capital of GPC
Biotech.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The few presently applicable inheritance and gift
taxation treaties Germany is a party to generally provide that German inheritance or gift tax is levied in case (1) and, with certain restrictions, in case (2) above.



Other German Taxes



Upon the acquisition, sale or other disposal of shares or ADSs, no German stock exchange transfer tax, value added tax, stamp duty or other tax is levied. Under
special circumstances it is possible that entrepreneurs elect for a value added tax duty of otherwise value added tax exempt turnovers. Net wealth tax is, at present, not levied in Germany.



United States Federal Income Taxation



The following discussion is a summary of material U.S. federal income tax
considerations applicable to the ownership and disposition of shares or ADSs by you, if you are a U.S. holder. In general you will be a U.S. holder if:



| |  | you are the beneficial owner of shares or ADSs;
| | - | -----------------------------------------------



| |  | you are either (i) an individual resident or citizen of the United States, (ii) a corporation or any other entity treated as a corporation for U.S. federal income tax purposes
created in or organized under the laws of the United States or any state thereof, (iii) an estate whose income is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if a U.S. court can exercise primary
supervision over the administration of the trust and one or more U.S. persons are authorized to control all substantial decisions of the trust;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | you own our shares or ADSs as capital assets;
| | - | ---------------------------------------------



| |  | you own directly or indirectly less than 10% of our outstanding voting stock;
| | - | -----------------------------------------------------------------------------



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| |  | you are fully eligible for benefits under the Limitations on Benefits article of the Income Tax Treaty between the United States of America and Germany, signed August 29, 1989 (the
Treaty); and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | you are not also a resident of Germany for German tax purposes.
| | - | ---------------------------------------------------------------



The Treaty benefits discussed below generally are not available to holders who hold shares or ADSs in connection with the conduct of business through a permanent
establishment, or the performance of personal services through a fixed base, in Germany.



If a partnership holds shares or ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds shares or ADSs,
you are urged to consult your own tax advisor regarding the specific tax consequences of owning and disposing of your shares or ADSs.



The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular holder, including tax
considerations that arise from rules of general application or that are generally assumed to be known by U.S. holders. This summary is based on provisions of the Internal Revenue Code of 1986, as amended (the Code), existing and proposed
U.S. Treasury Regulations, rulings, administrative pronouncements and judicial decisions in effect as of the date of this annual report. All of the authorities are subject to change, possibly with retroactive effect, and to differing
interpretations. In addition, this summary does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to U.S. holders who are subject to special treatment under U.S.
federal income tax law, including insurance companies, dealers in stocks or securities, financial institutions, tax-exempt organizations, persons subject to the alternative minimum tax, and persons having a functional currency other than the U.S.
dollar.



U.S. holders are urged to consult with their own tax advisors
regarding the tax consequences of the ownership and disposition of shares or ADSs, including the effects of federal, state, local, foreign and other tax laws with respect to their particular circumstances.



For U.S. federal income tax purposes, if you own ADSs represented by ADRs, you
generally will be treated as the owner of the shares represented by such ADRs.



Dividends



Subject to the passive foreign
investment company rules discussed below, if we make any distributions of cash or other property to you, you generally will be required to include in gross income the amount of any distributions (including the amount of any German taxes withheld in
respect of such distribution as described above in the German Taxation section), to the extent that such distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Distributions
in excess of our earnings and profits will be applied against and will reduce your tax basis in your shares or ADSs and, to the extent in excess of such tax basis, will be treated as gain from a sale or exchange of such shares or ADSs. Dividends
paid by us will not be eligible for the dividends received deduction applicable in some cases to U.S. corporations.



Any dividend paid in euro, including the amount of any German taxes withheld therefrom, can be included in your gross income in an amount equal to the U.S. dollar
value of the euro calculated by reference to the spot rate of exchange in effect on the date the dividend is received by you, in the case of shares, or by the Depositary, in the case of ADSs, regardless of whether the euro are converted into U.S.
dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the



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date the dividend can be included in your gross income to the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss.



Any dividends paid by us to you with respect to shares or ADSs will be
treated as foreign source income and will be characterized as passive income or, in the case of some U.S. holders, financial services income for U.S. foreign tax credit purposes. Under recently enacted legislation, for
taxable years beginning January 1, 2007, dividend income generally will constitute passive category income or, in the case of certain U.S. Holders, general category income. Subject to limitations, you may elect to claim
a foreign tax credit against your U.S. federal income tax liability for German income tax withheld from dividends received in respect of shares or ADSs. The rules relating to the determination of the foreign tax credit are complex. Accordingly, you
should consult your own tax advisor to determine whether and to what extent you would be entitled to the credit. The United States Treasury has expressed concerns that parties to whom ADSs are pre-released may be taking actions that are inconsistent
with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of German withholding tax on dividends could be affected by future actions that may be taken by the United States
Treasury. If you do not elect to claim a foreign tax credit, you may instead claim a deduction for German income tax withheld, but only for a year in which you elect to do so with respect to all foreign income taxes.



Qualified dividend income received by non-corporate U.S. holders in taxable
years beginning before January 1, 2009 generally will be taxed at a maximum rate of 15% rather than at rates applicable to other items of ordinary income. For this purpose, qualified dividend income generally includes dividends paid
on shares of U.S. corporations as well as dividends paid on shares of certain non-U.S. corporations if, among other things, (i) the shares of the non-U.S. corporation (including ADSs backed by such shares) are readily tradable on an established
securities market in the United States, or (ii) the non-U.S. corporation is eligible with respect to substantially all of its income for the benefits of a comprehensive income tax treaty with the United States which contains an exchange of
information program (the Treaty has been identified by the U.S. Treasury Department as a qualifying treaty). Dividends paid by us with respect to the shares or ADSs should constitute qualified dividend income for U.S. federal income tax
purposes unless we qualify as a PFIC (as discussed below) in which case they would be taxed at the higher rates applicable to other items of ordinary income.



Sale or Exchange of Shares or ADSs



Subject to the passive foreign investment company rules discussed below, upon the sale or other disposition of shares or ADSs, you generally will recognize capital
gain or loss equal to the difference between the amount realized on the disposition and your adjusted tax basis in your shares or ADSs. Gain or loss upon the disposition of shares or ADSs generally will be U.S. source gain or loss, and will be
treated as long-term capital gain or loss if, at the time of the disposition, your holding period for the shares or ADSs exceeds one year. If you are a non-corporate U.S. holder, any capital gains recognized before January 1, 2009 generally
will be subject to U.S. federal income tax at a maximum rate of 15% if you have a holding period greater than one year. The deductibility of capital losses is subject to significant limitations.



The surrender of ADSs in exchange for shares pursuant to the Deposit Agreement
governing the ADSs will not be a taxable event for U.S. federal income tax purposes. Accordingly, you will not recognize any gain or loss upon such surrender.



Passive Foreign Investment Company Status



We currently believe that we will not be treated as a passive foreign investment company, or PFIC, for the taxable year ended December 31, 2005. However,
because the determination of whether



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a company is a PFIC must be made annually, and because there are uncertainties in the application of the relevant rules, there can be no assurance that we will not be
classified as a PFIC for any particular year.



A non-U.S. corporation
will be classified as a PFIC in any taxable year in which, after taking into account the income and assets of certain subsidiaries, either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the average value of
its assets is attributable to assets that produce or are held to produce passive income. Whether or not we will be classified as a PFIC in any taxable year is a factual determination and will depend upon our assets, the market value of the share and
our activities in each year, and is therefore subject to change.



If we
are classified as a PFIC for any taxable year, the so-called interest charge regime of Code section 1291 will apply to any U.S. holder of shares or ADSs that does not make a mark-to-market election (as described below). Under
the interest charge regime, (i) any gain you realize on the sale or other disposition of the shares or ADSs (possibly including a gift, exchange in a corporate reorganization, or grant as security for a loan) and any excess
distribution that we make to you (generally, any distributions to you in respect of the shares or ADSs during a single taxable year that are greater than 125% of the average annual distributions received by you in the three preceding years, or
if shorter, your holding period for the shares or ADSs), will be treated as ordinary income that was earned ratably over each day in your holding period for the shares or ADSs, (ii) the portion of such gain or distribution that is allocable to
prior taxable years will, with certain exceptions, be subject to tax at the highest rate applicable to ordinary income for the relevant taxable years, regardless of the tax rate otherwise applicable to you, and (iii) the interest charge
generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.



The interest charge regime would not apply to you if you were eligible for and timely made a valid qualifying electing fund election, in which case you
would be required to include in income on a current basis your pro rata share of our ordinary income and net capital gains. We do not currently intend to complete the actions necessary for U.S. holders to make a qualifying electing fund election in
the event that we are considered a passive foreign investment company for any taxable year.



If we are a PFIC and our shares or ADSs are treated as marketable securities under applicable Treasury regulations, you may avoid the interest charge regime by making a valid mark-to-market election with
respect to the shares or ADSs. If a mark-to-market election is made, the electing U.S. holder generally (i) will be required to recognize as ordinary income an amount equal to the difference, if any, between the fair market value of
the shares or ADSs and the holders adjusted tax basis in such shares or ADSs at the close of each taxable year, and (ii) if the U.S. holders adjusted tax basis in the shares or ADSs exceeds their fair market value, will be allowed
to deduct the excess as an ordinary loss, but only to the extent of the net amount of income previously included as a result of the mark-to-market election. A U.S. holders adjusted basis in the shares or ADSs will be adjusted to reflect the
amounts included or deducted with respect to the mark-to-market election, and any gain or loss on the disposition of shares or ADSs will generally be ordinary income, or, to the extent of previously included mark-to-market inclusions, ordinary loss.
The mark-to-market election is made on a shareholder-by-shareholder basis and, once made, cannot be revoked without the consent of the United States Internal Revenue Service unless the shares or ADSs cease to be marketable. Under applicable Treasury
regulations, marketable stock includes stock of a PFIC that is regularly traded on a qualified exchange or other market. Because our shares are traded on the Frankfurt Stock Exchange and our ADSs are on Nasdaq, we expect the shares and
ADSs to be treated as regularly traded, and a U.S. Holder should be able to make a mark-to-market election, but no assurance can be given. If we are a PFIC and, in a later year, cease to be a PFIC, a U.S. holder who has made a valid
mark-to-market election would not be required to continue to include in income amounts determined



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under the mark-to-market regime, though the mark-to-market election would remain in effect and would continue to apply if we were treated as a PFIC in a subsequent
taxable year.



Special rules apply with respect to the calculation of the
amount of the foreign tax credit with respect to excess distributions by a PFIC. In general, these rules allocate creditable foreign taxes over the U.S. holders holding period for shares or ADSs and otherwise coordinate the foreign tax credit
limitation rules with the PFIC rules.



In addition to the special PFIC
tax regime, dividends paid on shares of a PFIC are not eligible for the reduced (maximum 15%) rate of taxation of dividends received by non-corporate U.S. holders on shares of qualifying corporations and would be taxed at the higher rates applicable
to other items of ordinary income. If we are a PFIC for any taxable year, U.S. holders who acquire shares or ADSs from decedents could be denied the step-up in the tax basis for such shares or ADSs, which would otherwise have been available.



If you own shares or ADSs during any year in which we are a PFIC, you
must file IRS Form 8621 with your annual United States federal income tax return for each year in which you own shares or ADSs, even if we subsequently would not be considered a PFIC.



U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the shares or ADSs and the
availability and advisability of making an election to avoid the adverse U.S. federal income tax consequences of the interest charge regime should we be classified as a PFIC for any taxable year.



U.S. Information Reporting and Backup Withholding



Dividend payments with respect to shares or ADSs and proceeds from the sale, exchange,
redemption, or other disposition of shares or ADSs may be subject to information reporting to the IRS and possible U.S. backup withholding. Certain exempt recipients (such as corporations) are not subject to these information reporting requirements.
Backup withholding will also not apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other required certification. U.S. persons who are required to establish their exempt status
generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification).



Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holders U.S. federal income tax liability, and a holder may obtain a refund of any excess amounts withheld by
filing the appropriate claim for refund with the IRS and furnishing any required information.



Documents on Display



We are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the Securities and Exchange Commission. However, as we are a foreign private issuer, we and our
shareholders are exempt from some of the Exchange Act reporting requirements. The reporting requirements that do not apply to us or our shareholders include the proxy solicitation rules and Section 16 short-swing profit reporting for our
officers and directors and for holders of more than 10% of our shares. In addition, we are not required to file annual, quarterly or current reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose
securities are registered under the Exchange Act. However, we will file with the SEC, as long as we are required to do so, within 180 days after the end of each fiscal year, an annual report on Form 20-F containing financial statements audited by an
independent registered public accounting firm. We also intend to file



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periodic reports on Form 6-K. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commissions Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the materials may be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The public may obtain
information on the operation of the Commissions Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. Our Securities and Exchange Commission filings are also available over the Internet at the Securities and
Exchange Commissions website at http://www.sec.gov.



Item 11. Quantitative and Qualitative Disclosures About Market Risk.



Our main exposure to market risk is limited to interest rate and currency exchange rate risks.



Our investment portfolio is subject to interest rate risk and its value will decrease if market interest rates increase. The primary
objective of our investment activities is to preserve capital. To minimize risk, we maintain a portfolio of cash, cash equivalents, and short-term, long-term and restricted investments in a variety of interest-bearing instruments, including a bond
fund, high-grade European and United States fixed and variable rate corporate bonds and money market funds. As a general policy, we do not invest in equity securities for cash management purposes. Any equity securities in other companies that we own
were acquired as part of licensing agreements. Since our investments are short term in duration (i.e. maturities of 3 years or less), we believe that an immediate 10% change in market interest rates would not be material to our financial condition
or results of operations.



Our results of operations and financial
condition are also subject to exchange rate risks. Fluctuations between the euro and the U.S. dollar can affect our financial results. The U.S. dollar denominated proportion of our revenues and operating costs can vary from year to year. In 2005, a
significant amount of our revenues and expenses was denominated in U.S. dollars. Additionally, we hold cash in the form of U.S. dollars and our investment portfolio includes some marketable securities denominated in U.S. dollars to fund our U.S.
operations. Accordingly, any appreciation of the euro against the dollar would have the effect of reducing our reported revenues and reducing our reported expenses and vice versa. We do not, however, hold any derivative financial instruments to
protect us from the exchange rate risk associated with the U.S. dollar and the euro. A significant portion of other income and expense relates to foreign currency gains and losses on accounts receivables, accounts payable and cash. Other income
(expense), net was 2.9 million for the year ended December 31, 2005 compared with (1.6) million for the year ended December 31, 2004.



Item 12. Description of Securities Other than Equity Securities.



Not applicable.



PART II



Item 13. Defaults, Dividend Arrearages and Delinquencies.



None.



Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.



None.



115



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##### Table of Contents

Item 15. Controls and Procedures.



As
required by Rule 13a-15 under the Securities Exchange Act of 1934, our chief executive officer and our chief financial officer, assisted by other members of our management, have evaluated our disclosure controls and procedures as of
December 31, 2005. Based on this evaluation, they have concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in this annual report is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to
the date of the evaluation.



Item 16A. Audit Committee Financial Expert.



Our Supervisory Board has determined that Mr. James Frates, a member of our Supervisory Board and Chairman of our Audit Committee, meets the requirements of an audit committee financial expert and the independence requirements as
defined in the Nasdaq listing standards.



Item 16B. Code of Ethics.



The company
has adopted a code of ethics applicable to the companys principal executive officer and principal financial officer. This code of ethics is contained within the companys code of conduct which can be found at the companys website at
www.gpc-biotech.com. Information found at this website is not incorporated by reference into this document.



Item 16C. Principal Accountant Fees and Services.



Auditor Fees



Fees billed to the company for professional
services by its principal accountant, Ernst & Young, during the fiscal years 2004 and 2005 were as follows:



|                   |  |                     |  |      
|------------------ |  | ------------------- |  | -----
|Type of fees       |  | 2005                |  | 2004 
|                   |  | (in thousands of )
|Audit fees         |  | 377                 |  | 1,286
|Audit related fees |  | 59                  |  |     
|Tax fees           |  | 9                   |  | 8    
|All other fees     |  | 12                  |  | 27   
|                   |  |                     |  |      
|Total              |  | 457                 |  | 1,321
|                   |  |                     |  |      



No services falling under the
de minimis exception of paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X were provided to the company by Ernst & Young in 2004 and 2005.



Audit Committee Pre-Approval Policies



All services provided by our auditor and companies affiliated with our auditor must be pre-approved by the audit committee of our Supervisory Board
(Aufsichtsrat). The annual contract conditions and fees relating to the audit of the financial statements of the company must be approved by the audit committee on a case-by-case basis. Other services may be pre-approved by the audit
committee within the authorizations the audit committee has adopted; if they fall outside these authorizations, they require case-by-case approval.



Item 16D. Exemptions from the Listing Standards for Audit Committees.



None.



116



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##### Table of Contents

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.



Not applicable.



PART III



Item 17. Financial Statements.



We
have responded to Item 18 in lieu of responding to this item.



Item 18. Financial Statements.



See
our consolidated financial statements beginning at page F-1.



Under a
regulation adopted by the European and German Parliaments, our consolidated financial statements are also be prepared in accordance with International Financial Reporting Standards (IFRS) beginning with the 2005 fiscal year in addition to U.S. GAAP.
For the 2005 fiscal year and thereafter, we will continue to prepare financial statements in accordance with U.S. GAAP for purposes of our annual reports filed on Form 20-F.



Item 19. Exhibits.



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|1             |  | Articles of Association of GPC Biotech AG (English translation).                                                                                                                                                                                                                                                                                                                                                                                                                              
|              | 
|2.1           |  | Form of Deposit Agreement between GPC Biotech, The Bank of New York, as depositary, and all registered holders and beneficial owners from time to time of American Depositary Receipts issued thereunder,
including the form of American Depositary Receipt.*                                                                                                                                                                                                                                 
|              | 
|2.2           |  | The total amount of long-term debt securities GPC Biotech authorized under any instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. GPC
Biotech agrees to furnish to the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of GPC Biotech or its subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed.
|              | 
|4.1           |  | Co-Development and License Agreement, dated September 30, 2002, by and between NeoTherapeutics, Inc. and GPC Biotech AG.*                                                                                                                                                                                                                                                                                                                                                                     
|              | 
|4.2           |  | Collaboration and License Agreement, dated April 15, 1999, by and between GPC AG-Genome Pharmaceuticals Corporation and MorphoSys AG.*                                                                                                                                                                                                                                                                                                                                                        
|              | 
|4.3           |  | Amendment to Collaboration and License Agreement, dated December 4, 2000, by and between GPC Biotech AG (formerly GPC AG-Genome Pharmaceuticals Corporation) and MorphoSys AG.*                                                                                                                                                                                                                                                                                                               
|              | 
|4.4           |  | Amendment to Collaboration and License Agreement, dated February 23, 2004, by and between GPC Biotech AG (formerly GPC AG-Genome Pharmaceuticals Corporation) and MorphoSys AG.*                                                                                                                                                                                                                                                                                                              
|              | 
|4.5           |  | Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated June 2, 1997, by and between Mitotix, Inc. and the DuPont Merck Pharmaceuticals Company.*                                                                                                                                                                                                                                                                                                            
|              | 
|4.6           |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated April 3, 2000, by and between Mitotix, Inc. and The DuPont Pharmaceuticals
Company.*                                                                                                                                                                                                                                                                                                    



117



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|     |  |                                                                                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.7  |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated July 30, 2000, by and between Mitotix, Inc. and The DuPont Pharmaceuticals
Company.*      
|     | 
|4.8  |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated October 1, 2000, by and between Mitotix, Inc. and The DuPont Pharmaceuticals
Company.*    
|     | 
|4.9  |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated December 28, 2000, by and between Mitotix, Inc. and Bristol-Myers Squibb Pharma
Company.* 
|     | 
|4.10 |  | Collaboration and License Agreement, dated as of November 1, 2001, by and between BYK Gulden Lomberg Chemische Fabrik GMBH and GPC Biotech AG.*                                                 
|     | 
|4.11 |  | Amendment to Collaboration and License Agreement, dated as of June 30, 2002, by and between BYK Gulden Lomberg Chemische Fabrik GMBH and GPC Biotech AG.*                                       
|     | 
|4.12 |  | Amendment to Collaboration and License Agreement, dated January 31, 2003, by and between ALTANA Pharma AG (formerly BYK Gulden Lomberg Chemische Fabrik GMBH) and GPC Biotech AG.*              
|     | 
|4.13 |  | Hybrid Collaboration and License Agreement dated as of January 31, 2003, by and between ALTANA Pharma AG and GPC Biotech AG.*                                                                   
|     | 
|4.14 |  | Co-Development and License Agreement by and between GPC Biotech AG and Pharmion GmbH, dated December 19, 2005.(1)                                                                               
|     | 
|4.15 |  | Supply Agreement by and between GPC Biotech AG and Pharmion GmbH, dated December 19, 2005.(1)                                                                                                   
|     | 
|4.16 |  | Asset Purchase Agreement between GPC Biotech AG (as successor to Blitz 05-001 GmbH) and Rechtsanwalt Dr. Joseph Füchsl as Insolvency Receiver of Axxima Pharmaceuticals AG, dated March 2,
2005.
|     | 
|4.17 |  | Service Agreement (Vorstandsvertrag) with Dr. Bernd Seizinger dated June 1, 2003 (English translation).*                                                                                        
|     | 
|4.18 |  | Addendum to Service Agreement with Dr. Bernd Seizinger dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*              
|     | 
|4.19 |  | Service Agreement (Vorstandsvertrag) with Dr. Mirko Scherer dated September 1, 2003 (English translation).*                                                                                     
|     | 
|4.20 |  | Addendum to Service Agreement with Dr. Mirko Scherer dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*                
|     | 
|4.21 |  | Service Agreement (Vorstandsvertrag) with Dr. Sebastian Meier-Ewert dated March 5, 2004 (English translation).*                                                                                 
|     | 
|4.22 |  | Addendum to Service Agreement with Dr. Sebastian Meier-Ewert dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*        
|     | 
|4.23 |  | Service Agreement (Vorstandsvertrag) with Dr. Elmar Maier dated March 5, 2004 (English translation).*                                                                                           
|     | 
|4.21 |  | Addendum to Service Agreement with Dr. Elmar Maier dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*                  



118



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|     |  |                                                                                                                                                                                                                                                     
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.22 |  | Stock Option Plan 2005 (English translation).                                                                                                                                                                                                       
|     | 
|4.23 |  | Stock Option Plan 2004 (English translation). **                                                                                                                                                                                                    
|     | 
|4.24 |  | Stock Option Plan 2002 (English translation).*                                                                                                                                                                                                      
|     | 
|4.25 |  | Stock Option Plan 2001 (English translation).*                                                                                                                                                                                                      
|     | 
|4.26 |  | Stock Option Plan 2000 (English translation).*                                                                                                                                                                                                      
|     | 
|4.27 |  | Option Terms dated September 1999 (English translation).*                                                                                                                                                                                           
|     | 
|4.28 |  | Option Terms for 1997 (English translation).*                                                                                                                                                                                                       
|     | 
|4.29 |  | 2005 Incentive Stock Option Plan.                                                                                                                                                                                                                   
|     | 
|4.30 |  | 2004 Incentive Stock Option Plan.                                                                                                                                                                                                                   
|     | 
|4.31 |  | 2002 Incentive Stock Option Plan.*                                                                                                                                                                                                                  
|     | 
|4.32 |  | 2001 Incentive Stock Option Plan.*                                                                                                                                                                                                                  
|     | 
|4.33 |  | 2000 Incentive Stock Option Plan.*                                                                                                                                                                                                                  
|     | 
|4.34 |  | 1999 U.S. Incentive Stock Option Plan.*                                                                                                                                                                                                             
|     | 
|4.35 |  | Convertible Bonds Terms and Conditions for executives (Führungskräfte) as well as employees and consultants of the Company and its affiliated subsidiary companies (nachgeordnete
verbundene Unternehmen) in Germany and abroad, dated June 8, 2005.
|     | 
|4.36 |  | Convertible Bonds Terms and Conditions for Managers of the Company and Management Bodies and Managers of Second-Tier Domestic and Foreign Affiliated Enterprises dated September 30,
2004.**                                                        
|     | 
|4.37 |  | Convertible Bonds Terms and Conditions for Managers of the Company and Management Bodies and Managers of Second-Tier Domestic and Foreign Affiliated Enterprises as well as for Consultants dated May 21,
2003.*                                    
|     | 
|4.38 |  | Convertible Bonds Terms and Conditions for Managers of the Company and Management Bodies and Managers of Second-Tier Domestic and Foreign Affiliated Enterprises as well as for Consultants dated May 20,
2003.*                                    
|     | 
|4.39 |  | Convertible Bonds Terms and Conditions for Members of the Supervisory Board dated October 9, 2001 (English translation).*                                                                                                                           
|     | 
|4.40 |  | Convertible Bonds Terms and Conditions for Members of the Supervisory Board dated May 26, 2003 (English translation).*                                                                                                                              
|     | 
|4.41 |  | Terms and Conditions for Stock Appreciation Rights granted to members of the Supervisory Board in 2005.                                                                                                                                             
|     | 
|4.42 |  | Terms and Conditions for Stock Appreciation Rights granted to members of the Supervisory Board in 2004. **                                                                                                                                          
|     | 
|4.42 |  | Transfer Agreement between Credit Suisse First Boston International, Dr. Bernd Seizinger and GPC Biotech AG dated November 15, 2001.*                                                                                                               
|     | 
|8    |  | Subsidiaries of the Registrant.*                                                                                                                                                                                                                    
|     | 
|12.1 |  | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                         
|     | 
|12.2 |  | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                         



119



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|     |  |                                                                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|13.1 |  | Certification of the Principal Executive Officer in accordance with 18 U.S.C. Section 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|13.2 |  | Certification of the Principal Financial Officer in accordance with 18 U.S.C. Section 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|14.1 |  | Consent of Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, independent registered public accounting firm.                                           



|* | Incorporated by reference from the Registrants Form F-1 (No. 333-116303) filed June 9, 2004.
|- | ---------------------------------------------------------------------------------------------

|** | Incorporated by reference from the Registrants Form 20-F (No. 001-117629) filed March 31, 2005.
|-- | ------------------------------------------------------------------------------------------------

|(1) | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the SEC pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



120



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act, as amended, the registrant certifies that it meets all of the requirements for filing this annual report on Form 20-F
and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.



GPC BIOTECH AGBy:

/s/ BERND R. SEIZINGERName:

Bernd R. SeizingerTitle:

Chief Executive OfficerBy:

/s/ MIRKO SCHERERName:

Mirko SchererTitle:

Chief Financial Officer




Dated April 3, 2006



121



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##### Table of Contents

GPC Biotech AG



Consolidated Financial
Statements



Contents



|                                                           |  |    
|---------------------------------------------------------- |  | ---
|Report of Independent Registered Public Accounting Firm    |  | F-2
|Consolidated Balance Sheets                                |  | F-3
|Consolidated Statements of Operations                      |  | F-4
|Consolidated Statements of Cash Flows                      |  | F-5
|Consolidated Statements of Changes in Shareholders Equity |  | F-6
|Notes to Consolidated Financial Statements                 |  | F-7



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Supervisory Board and Shareholders of GPC Biotech AG:



We have audited the accompanying consolidated balance sheets of GPC Biotech AG as of December 31, 2005 and 2004, and the related consolidated statements of
operations, changes in shareholders equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements based on our audits.



We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GPC Biotech AG at December 31, 2005 and 2004, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.



Munich, March 10, 2006

Ernst & Young AG

Wirtschaftsprüfungsgesellschaft



|                       |  |                      
|---------------------- |  | ---------------------
|/s/Julie Linn Teigland |  | /s/ Dr. E. Napolitano
|Julie Linn Teigland    |  | Dr. E. Napolitano    



F-2



---

##### Table of Contents

GPC Biotech AG

Consolidated Balance Sheets



|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | - |  | -------- | -
|                                                                                                                                                                                                                                    |  | December 31,                                    |  
|                                                                                                                                                                                                                                    |  | 2005                                            |   |  | 2004     |  
|Assets                                                                                                                                                                                                                              |  | (in thousand , except share andper share data) |  
|Current assets:                                                                                                                                                                                                                     |  |                                                 |   |  |          |  
|Cash and cash equivalents                                                                                                                                                                                                           |  | 30,559                                          |   |  | 59,421   |  
|Marketable securities and short-term investments                                                                                                                                                                                    |  | 63,061                                          |   |  | 69,248   |  
|Accounts receivable                                                                                                                                                                                                                 |  | 31,326                                          |   |  | -        |  
|Accounts receivable, related party                                                                                                                                                                                                  |  | 1,436                                           |   |  | 1,006    |  
|Prepaid expenses                                                                                                                                                                                                                    |  | 1,333                                           |   |  | 1,170    |  
|Other current assets                                                                                                                                                                                                                |  | 3,920                                           |   |  | 4,211    |  
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|Total current assets                                                                                                                                                                                                                |  | 131,635                                         |   |  | 135,056  |  
|                                                                                                                                                                                                                                    |  |                                                
|Property and equipment, net                                                                                                                                                                                                         |  | 4,103                                           |   |  | 2,615    |  
|Intangible assets, net                                                                                                                                                                                                              |  | 1,072                                           |   |  | 1,133    |  
|Other assets, non-current                                                                                                                                                                                                           |  | 838                                             |   |  | 768      |  
|Restricted cash                                                                                                                                                                                                                     |  | 1,615                                           |   |  | 2,321    |  
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|Total assets                                                                                                                                                                                                                        |  | 139,263                                         |   |  | 141,893  |  
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|                                                                                                                                                                                                                                    |  |                                                
|Liabilities and shareholders equity                                                                                                                                                                                                |  |                                                 |   |  |          |  
|Current liabilities:                                                                                                                                                                                                                |  |                                                 |   |  |          |  
|Accounts payable                                                                                                                                                                                                                    |  | 2,141                                           |   |  | 519      |  
|Accrued expenses and other current liabilities                                                                                                                                                                                      |  | 11,274                                          |   |  | 6,910    |  
|Current portion of deferred revenue, related party                                                                                                                                                                                  |  | 5,228                                           |   |  | 4,938    |  
|Current portion of deferred revenue                                                                                                                                                                                                 |  | 19,548                                          |   |  | -        |  
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|Total current liabilities                                                                                                                                                                                                           |  | 38,191                                          |   |  | 12,367   |  
|                                                                                                                                                                                                                                    |  |                                                
|Deferred revenue, related party, net of current portion                                                                                                                                                                             |  | 975                                             |   |  | 2,925    |  
|Deferred revenue, net of current portion                                                                                                                                                                                            |  | 12,053                                          |   |  | -        |  
|Convertible bonds                                                                                                                                                                                                                   |  | 2,334                                           |   |  | 1,768    |  
|Other liabilities, non-current                                                                                                                                                                                                      |  | 2,177                                           |   |  | -        |  
|Shareholders equity:                                                                                                                                                                                                               |  |                                                 |   |  |          |  
|Ordinary shares,  1 non-par, notional value shares authorized: 53,780,630 at December 31, 2005 and
51,655,630 December 31, 2004 shares issued and outstanding: 30,151,757 at December 31, 2005 and 28,741,194 at
December 31, 2004 |  | 30,152                                          |   |  | 28,741   |  
|Additional paid-in capital                                                                                                                                                                                                          |  | 284,931                                         |   |  | 266,074  |  
|Accumulated other comprehensive loss                                                                                                                                                                                                |  | (2,093                                          | ) |  | (2,732   | )
|Accumulated deficit                                                                                                                                                                                                                 |  | (229,457                                        | ) |  | (167,250 | )
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|Total shareholders equity                                                                                                                                                                                                          |  | 83,533                                          |   |  | 124,833  |  
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  
|Total liabilities and shareholders equity                                                                                                                                                                                          |  | 139,263                                         |   |  | 141,893  |  
|                                                                                                                                                                                                                                    |  |                                                 |   |  |          |  



See accompanying notes to
consolidated financial statements.



F-3



---

##### Table of Contents

GPC Biotech AG

Consolidated Statements of Operations



|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|--------------------------------------------------------- |  | ----------------------------------------------- | - |  |  |  | ---------- | - |  |  |  | ---------- | -
|                                                          |  | Year ended December 31,                         |  
|                                                          |  | 2005                                            |   |  |  |  | 2004       |   |  |  |  | 2003       |  
|                                                          |  | (in thousand , except share and per sharedata) |  
|Collaborative revenues (a)                                |  | 9,341                                           |   |  |  |  | 12,649     |   |  |  |  | 20,821     |  
|Grant revenues                                            |  | -                                               |   |  |  |  | -          |   |  |  |  | 773        |  
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|Total revenues                                            |  | 9,341                                           |   |  |  |  | 12,649     |   |  |  |  | 21,594     |  
|                                                          |  |                                                 |   |  | 
|Research and development expenses                         |  | 55,684                                          |   |  |  |  | 39,955     |   |  |  |  | 37,535     |  
|General and administrative expenses                       |  | 20,590                                          |   |  |  |  | 13,173     |   |  |  |  | 11,526     |  
|In process research and development                       |  | 683                                             |   |  |  |  | -          |   |  |  |  | -          |  
|Amortization of intangible assets                         |  | 417                                             |   |  |  |  | 413        |   |  |  |  | 2,007      |  
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|Total operating expenses                                  |  | 77,374                                          |   |  |  |  | 53,541     |   |  |  |  | 51,068     |  
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|Operating loss                                            |  | (68,033                                         | ) |  |  |  | (40,892    | ) |  |  |  | (29,474    | )
|                                                          |  |                                                 |   |  | 
|Other income (expense), net                               |  | 2,938                                           |   |  |  |  | (1,554     | ) |  |  |  | (113       | )
|Interest income                                           |  | 2,963                                           |   |  |  |  | 2,618      |   |  |  |  | 2,892      |  
|Interest expense                                          |  | (75                                             | ) |  |  |  | (99        | ) |  |  |  | (136       | )
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|                                                          |  | 5,826                                           |   |  |  |  | 965        |   |  |  |  | 2,643      |  
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|Net loss                                                  |  | (62,207                                         | ) |  |  |  | (39,927    | ) |  |  |  | (26,831    | )
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|                                                          |  |                                                 |   |  | 
|Basic and diluted loss per share, in euro                 |  | (2.08                                           | ) |  |  |  | (1.60      | ) |  |  |  | (1.29      | )
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|                                                          |  |                                                 |   |  | 
|Shares used in computing basic and diluted loss per share |  | 29,877,348                                      |   |  |  |  | 24,950,638 |   |  |  |  | 20,731,535 |  
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  
|(a) Revenues from
related partyCollaborative revenues     |  | 9,095                                           |   |  |  |  | 12,588     |   |  |  |  | 20,192     |  
|                                                          |  |                                                 |   |  |  |  |            |   |  |  |  |            |  



See accompanying notes to
consolidated financial statements.



F-4



---

##### Table of Contents

GPC Biotech AG

Consolidated Statements of Cash Flows



|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|----------------------------------------------------------------------------------------------- |  | ----------------------- | - |  |  |  | ------- | - |  |  |  | ------- | -
|                                                                                                |  | Year ended December 31, |  
|                                                                                                |  | 2005                    |   |  |  |  | 2004    |   |  |  |  | 2003    |  
|Cash flows from operating activities:                                                           |  | (in thousand )         |  
|Net loss                                                                                        |  | (62,207                 | ) |  |  |  | (39,927 | ) |  |  |  | (26,831 | )
|Adjustment to reconcile net loss to net cash used in operating activities:                      |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Depreciation                                                                                    |  | 3,478                   |   |  |  |  | 1,568   |   |  |  |  | 1,820   |  
|Amortization                                                                                    |  | 417                     |   |  |  |  | 413     |   |  |  |  | 2,007   |  
|Compensation cost for stock option plans and convertible bonds                                  |  | 6,665                   |   |  |  |  | 3,451   |   |  |  |  | 2,511   |  
|Loss accrual on sublease contract                                                               |  | 2,988                   |   |  |  |  | -       |   |  |  |  | -       |  
|Acquired in-process research and development                                                    |  | 683                     |   |  |  |  | -       |   |  |  |  | -       |  
|Change in accrued interest income on marketable securities and short term investments           |  | 478                     |   |  |  |  | (556    | ) |  |  |  | (60     | )
|Bond premium amortization                                                                       |  | 629                     |   |  |  |  | 513     |   |  |  |  | 444     |  
|(Gain)/loss on disposal of property and equipment                                               |  | (83                     | ) |  |  |  | 56      |   |  |  |  | 151     |  
|(Gain)/loss on marketable securities and short-term investments                                 |  | -                       |   |  |  |  | 841     |   |  |  |  | (32     | )
|Changes in operating assets and liabilities:                                                    |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Accounts receivable, related party                                                              |  | (430                    | ) |  |  |  | (1,006  | ) |  |  |  | -       |  
|Accounts receivable                                                                             |  | (31,325                 | ) |  |  |  | 754     |   |  |  |  | (32     | )
|Other assets, current and non-current                                                           |  | 1,550                   |   |  |  |  | (1,987  | ) |  |  |  | (1,201  | )
|Accounts payable                                                                                |  | 1,552                   |   |  |  |  | (96     | ) |  |  |  | 249     |  
|Deferred revenue, related party                                                                 |  | (1,671                  | ) |  |  |  | (2,241  | ) |  |  |  | (3,924  | )
|Deferred revenue                                                                                |  | 31,602                  |   |  |  |  | (165    | ) |  |  |  | (276    | )
|Other liabilities and accrued expenses                                                          |  | 2,887                   |   |  |  |  | 566     |   |  |  |  | 2,200   |  
|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Net cash used in operating activities                                                           |  | (42,787                 | ) |  |  |  | (37,816 | ) |  |  |  | (22,974 | )
|                                                                                                |  |                         |   |  | 
|Cash flows from investing activities:                                                           |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Purchases of property, equipment and licenses                                                   |  | (4,549                  | ) |  |  |  | (1,071  | ) |  |  |  | (1,669  | )
|Proceeds from the sale of property and equipment                                                |  | 187                     |   |  |  |  | -       |   |  |  |  | -       |  
|Proceeds from the sale of marketable securities and short-term investments                      |  | 35,803                  |   |  |  |  | 4,289   |   |  |  |  | 47,760  |  
|Purchases of marketable securities and short-term investments                                   |  | (31,408                 | ) |  |  |  | (20,267 | ) |  |  |  | (27,368 | )
|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Net cash (used in) provided by investing activities                                             |  | 33                      |   |  |  |  | (17,049 | ) |  |  |  | 18,723  |  
|                                                                                                |  |                         |   |  | 
|Cash flows from financing activities:                                                           |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Proceeds from issuance of shares in asset acquisition, net of payments for costs of transaction |  | 10,412                  |   |  |  |  | -       |   |  |  |  | -       |  
|Proceeds from equity offering, net of payments for costs of transaction                         |  | -                       |   |  |  |  | 77,976  |   |  |  |  | -       |  
|Proceeds from issuance of convertible bonds                                                     |  | 580                     |   |  |  |  | 935     |   |  |  |  | 517     |  
|Repayment of convertible bonds                                                                  |  | (8                      | ) |  |  |  | (4      | ) |  |  |  | -       |  
|Proceeds from exercise of stock options and convertible bonds                                   |  | 517                     |   |  |  |  | 2,038   |   |  |  |  | 77      |  
|Cash received for subscribed shares                                                             |  | -                       |   |  |  |  | -       |   |  |  |  | 215     |  
|Principal payments under capital lease obligations                                              |  | -                       |   |  |  |  | (634    | ) |  |  |  | (639    | )
|Principal payment of loans                                                                      |  | -                       |   |  |  |  | (639    | ) |  |  |  | (128    | )
|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Net cash provided by financing activities                                                       |  | 11,501                  |   |  |  |  | 79,672  |   |  |  |  | 42      |  
|                                                                                                |  |                         |   |  | 
|Effect of exchange rate changes on cash                                                         |  | 1,393                   |   |  |  |  | (314    | ) |  |  |  | (769    | )
|Changes in restricted cash                                                                      |  | 998                     |   |  |  |  | (19     | ) |  |  |  | (22     | )
|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|                                                                                                |  |                         |   |  | 
|Net increase (decrease) in cash and cash equivalents                                            |  | (28,862                 | ) |  |  |  | 24,474  |   |  |  |  | (5,000  | )
|Cash and cash equivalents at beginning of year                                                  |  | 59,421                  |   |  |  |  | 34,947  |   |  |  |  | 39,947  |  
|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Cash and cash equivalents at end of year                                                        |  | 30,559                  |   |  |  |  | 59,421  |   |  |  |  | 34,947  |  
|                                                                                                |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Supplemental Information:                                                                       |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Cash paid for interest                                                                          |  | 107                     |   |  |  |  | 63      |   |  |  |  | 136     |  
|Non-cash investing and financing activities:                                                    |  |                         |   |  |  |  |         |   |  |  |  |         |  
|Net assets acquired in exchange for shares in connection with asset acquisition                 |  | 2,667                   |   |  |  |  |         |   |  |  |  |         |  



See accompanying notes to
consolidated financial statements.



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##### Table of Contents

GPC Biotech AG

Consolidated Statements of Changes in Shareholders Equity



|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|---------------------------------------------------------- |  | --------------- |  | ------ |  | ------------------------ |  | ---------------- |  | --------------------------------- |  | ------------------ |  | ------------------------
|                                                           |  | Ordinary shares |  |        |  |                          |  |                  |  |                                   |  |                   
|                                                           |  | Shares          |  | Amount |  | AdditionalPaid-inCapital |  | SubscribedShares |  | AccumulatedOtherComprehensiveLoss |  | AccumulatedDeficit |  | TotalShareholdersEquity
|Balance at December 31, 2002                               |  | 20,719,780      |  | 20,720 |  | 187,781                  |  | -                |  | (739)                             |  | (100,492)          |  | 107,270                 
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Components of comprehensive loss:                          |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Net loss                                                   |  |                 |  |        |  |                          |  |                  |  |                                   |  | (26,831)           |  | (26,831)                
|Change in unrealized gain on available-for-sale securities |  |                 |  |        |  |                          |  |                  |  | 30                                |  |                    |  | 30                      
|Accumulated translation adjustments                        |  |                 |  |        |  |                          |  |                  |  | (1,393)                           |  |                    |  | (1,393)                 
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Total comprehensive loss                                   |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  | (28,194)                
|Exercise of stock options and convertible bonds            |  | 34,295          |  | 34     |  | 43                       |  | 215              |  |                                   |  |                    |  | 292                     
|Compensation cost for stock options and convertible bonds  |  |                 |  |        |  | 2,511                    |  |                  |  |                                   |  |                    |  | 2,511                   
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Balance at December 31, 2003                               |  | 20,754,075      |  | 20,754 |  | 190,335                  |  | 215              |  | (2,102)                           |  | (127,323)          |  | 81,879                  
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Components of comprehensive loss:                          |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Net loss                                                   |  |                 |  |        |  |                          |  |                  |  |                                   |  | (39,927)           |  | (39,927)                
|Change in unrealized gain on available-for-sale securities |  |                 |  |        |  |                          |  |                  |  | (154)                             |  |                    |  | (154)                   
|Accumulated translation adjustments                        |  |                 |  |        |  |                          |  |                  |  | (476)                             |  |                    |  | (476)                   
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Total comprehensive loss                                   |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  | (40,557)                
|Issuance of shares in equity offering                      |  | 7,160,000       |  | 7,160  |  | 70,816                   |  |                  |  |                                   |  |                    |  | 77,976                  
|Exercise of stock options and convertible bonds            |  | 827,119         |  | 827    |  | 1,472                    |  | (215)            |  |                                   |  |                    |  | 2,084                   
|Compensation cost for stock options and convertible bonds  |  |                 |  |        |  | 3,451                    |  |                  |  |                                   |  |                    |  | 3,451                   
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Balance at December 31, 2004                               |  | 28,741,194      |  | 28,741 |  | 266,074                  |  | -                |  | (2,732)                           |  | (167,250)          |  | 124,833                 
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Components of comprehensive loss:                          |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Net loss                                                   |  |                 |  |        |  |                          |  |                  |  |                                   |  | (62,207)           |  | (62,207)                
|Change in unrealized gain on available-for-sale securities |  |                 |  |        |  |                          |  |                  |  | (684)                             |  |                    |  | (684)                   
|Accumulated translation adjustments                        |  |                 |  |        |  |                          |  |                  |  | 1,323                             |  |                    |  | 1,323                   
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Total comprehensive loss                                   |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  | (61,568)                
|Issuance of shares in asset acquisition                    |  | 1,311,098       |  | 1,311  |  | 11,768                   |  |                  |  |                                   |  |                    |  | 13,079                  
|Exercise of stock options and convertible bonds            |  | 99,465          |  | 100    |  | 424                      |  |                  |  |                                   |  |                    |  | 524                     
|Compensation cost for stock options and convertible bonds  |  |                 |  |        |  | 6,665                    |  |                  |  |                                   |  |                    |  | 6,665                   
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         
|Balance at December 31, 2005                               |  | 30,151,757      |  | 30,152 |  | 284,931                  |  | -                |  | (2,093)                           |  | (229,457)          |  | 83,533                  
|                                                           |  |                 |  |        |  |                          |  |                  |  |                                   |  |                    |  |                         



See accompanying notes to
consolidated financial statements.



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##### Table of Contents

1. Nature of Business and Organization



GPC
Biotech AG is a biopharmaceutical company discovering and developing new drugs to treat cancer. GPC Biotech AG is incorporated in the Federal Republic of Germany and has its registered offices in Martinsried/Planegg (hereafter referred to as GPC
Biotech or the Company). The Companys lead product candidate  satraplatin  is currently being tested in a Phase 3 registrational trial for second-line chemotherapy in hormone-refractory prostate cancer. This trial
achieved its target enrollment of 912 patients in December 2005. The U.S. Food and Drug Administration (FDA) has granted fast track designation to satraplatin for this indication, and in December 2005, GPC Biotech initiated the rolling New Drug
Application (NDA) submission process for this compound by submitting the Chemical Manufacturing Controls section of the NDA to the FDA. In December 2005, the Company signed a co-development and licensing agreement with Pharmion GmbH, a wholly owned
subsidiary of Pharmion Corporation, for satraplatin for Europe and certain other territories. GPC Biotech is also developing a monoclonal antibody with a novel mechanism-of-action against a variety of lymphoid tumors, currently in Phase 1 clinical
development, and has ongoing preclinical drug development and discovery programs that leverage its expertise in kinase inhibitors. The Company has one wholly owned subsidiary, GPC Biotech Inc., with two locations, Waltham (MA, USA) and Princeton
(NJ, USA). The Princeton location is the headquarters for the Companys drug development activities. The Waltham site is primarily engaged in oncology drug discovery activities, in addition to activities related to a collaboration with the
ALTANA Research Institute (a research center of ALTANA Pharma AG), also located in Waltham.



2. Significant Accounting Policies



Basis of Financial Statement
Presentation



The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).



Principles of Consolidation



The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, GPC Biotech Inc. All significant intercompany
investments, accounts and transactions have been eliminated.



Reclassifications



Where necessary, certain prior year amounts have been
reclassified to conform with the current year presentation.



Cash Equivalents,
Marketable Securities and Short-term Investments



Highly-liquid
investments with maturities of three months or less at the date of purchase are considered to be cash equivalents; those with maturities greater than three months are included in marketable securities and short-term investments. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 115 Accounting for Certain Investments in Debt and Equity Securities, the Company has classified all marketable securities and short-term investments as
available-for-sale and, as a result, classifies them as current assets and carries such amounts at fair value. Unrealized gains and losses are included in accumulated other comprehensive income (loss) in shareholders equity until realized.
Realized gains and losses on sales of all such securities are reported in earnings and computed using the specific identification cost method. Realized gains or losses and charges for other-than-temporary declines in value, if any, on
available-for-sale securities are reported in other income or expense as incurred.



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##### Table of Contents

As a general policy, the Company does not invest in equity securities for cash management purposes. Any equity
securities owned by the Company were acquired as part of licensing agreements.



Restricted Cash



Restricted cash represents
amounts held in interest bearing escrow accounts as security deposits related to facility leases.



Concentration of Credit Risk



Financial
instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and marketable securities and short-term investments. The risk is minimized by the Companys investment policies, which limit
investments to those that have relatively short maturities and that are placed with highly rated issuers. Marketable securities and short-term investments include bonds from corporate issuers. The maximum loss that could occur if bond issuers
default on their bond obligations would be  40.8 million as of December 31, 2005.



One collaboration partner, ALTANA Pharma AG, accounted for  9,095,000 of total revenues in 2005 representing 97%,  12,588,000 of total revenues in 2004 representing 99% and  20,192,000 of the total revenues in
2003 representing 94%. No other partner or customer accounted for more than 10% of total revenues in 2005, 2004 and 2003.



Segment Information



SFAS No. 131, Disclosures about the Segments of an Enterprise and Related Information,establishes standards for the way that public
business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishes
standards for related disclosures about the products and services, geographic areas and major customers.



The Company operates in one business segment, which primarily focuses on discovery and development of anticancer drugs. The Companys revenue is derived
primarily from co-development and research collaborations with life science companies. Additional revenue is derived from governmental grants for specific research and development programs. The results of operations are reported to the
Companys chief operating decision-makers on an aggregate basis.



The total book value of long-lived assets located outside of the Companys home location of Germany was  1,841,000 and  1,560,000 at December 31, 2005 and 2004, respectively. All of these assets
were located in the United States of America.



Revenues from external
customers attributed to the Companys home location of Germany were  9,095,000,  12,360,000 and  21,197,000 in the years
ended December 31, 2005, 2004 and 2003, respectively. Revenues from external customers attributed to locations outside of Germany were  246,000,  289,000 and  397,000 in the years ended December 31, 2005, 2004 and 2003, respectively. Revenues are attributed to countries based on the location of the Companys legal entity that is party to the
underlying contract.



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##### Table of Contents

Property and Equipment



Property and equipment are stated at cost less accumulated depreciation and any impairment in value. Property and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets as follows:



|                                      |  |                                       
|------------------------------------- |  | --------------------------------------
|                                      |  | Estimated Useful Life                 
|Computer equipment and software costs |  | 3 years                               
|Office equipment                      |  | 5-10 years                            
|Laboratory equipment                  |  | 5 years                               
|Furniture and fixtures                |  | 5 years                               
|Leasehold improvements                |  | Lesser of useful life or life of lease
|Equipment under capital lease         |  | Lesser of useful life or life of lease



Intangible Assets



Intangible assets primarily include specifically identified intangible assets acquired
in a business combination and in an asset acquisition. Amortization of intangible assets is computed using the straight-line method over the useful lives of the respective assets.



The Company accounts for indefinite-lived intangible assets in accordance with SFAS No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142, indefinite-lived intangible assets are not amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise.



The estimated useful life of major intangible assets is as follows:



|                              |  |                      
|----------------------------- |  | ---------------------
|                              |  | Estimated Useful Life
|Patents                       |  | 10 years             
|Acquired partnered technology |  | 4 years              



Impairment of Long-lived Assets



In accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, the Company reviews long-lived assets, including definite-lived intangible assets, for impairment when impairment indicators exist and, if necessary, recognizes an impairment expense equal
to the difference between the carrying amount of the asset and the fair value as determined by discounted cash flows.



Fair Value of Financial Instruments



The carrying value of financial instruments such as cash and cash equivalents, accounts receivable and accounts payable approximate their fair value based on the
short-term maturities of these instruments.



Revenue Recognition



The Company accounts for revenues in accordance with the
Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 104.



The Company accounts for multi-element arrangements in accordance with FASB Emerging Issues Task Force (EITF) Issue No. 00-21 Revenue Arrangements with Multiple Deliverables. Accordingly, arrangements
that may involve the delivery or performance of multiple products, services and/or rights to use assets are divided into separate units of accounting based on certain criteria.



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##### Table of Contents

Consideration is allocated to the different units of accounting based on their fair values. Revenue recognition is considered separately for each accounting unit when
all criteria of SAB 104 have been met.



The Companys revenues
consist of fees earned from co-development and license agreements, from research and development collaborations and grant revenues. Revenues from co-development and license agreements and from collaboration and license agreements generally consist
of licensing fees and/or technology access fees, reimbursement fees, payments from a partner for shared development costs, fees for research and development support, as well as milestone and royalty payments. Revenues from grants generally consist
of reimbursements of a portion of expenses incurred in performing research in specified projects.



The Company receives non-refundable licensing and technology access and initiation fees and reimbursement fees for costs incurred in the past. These fees are
typically received upfront upon signing of a co-development and license agreement or a research and collaboration agreement. In addition to these initial fees, certain agreements contain terms for fixed, non-refundable, annual licensing fees upfront
each year for the duration of the agreement. In accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, all fees received or to be received under these arrangements are recognized on a straight-line basis over the term of the
agreements, as this is the period over which the license is granted or the Company is substantially and continually involved.



Payments for co-development activities are received under a co-development arrangement whereby certain drug candidate development costs are shared with a partner.
Co-development revenues are derived from a negotiated, fixed-percentage of certain costs incurred in the joint development and commercialization activities of the licensed drug program. Co-development revenues are recognized as qualified development
costs are incurred and are included in collaboration revenues in the consolidated statement of operations. Any amounts received prior to incurrence of qualified development costs are deferred until such costs are incurred.



Fees for development activities performed by drug development employees are received
from co-development partners for work directly related to the development of a licensed product or other activities contemplated under the co-development and license agreement. Fees for research support performed by research scientists are received
from collaboration partners for research services performed under the agreements. Fees are generally stated at a yearly flat fee rate per development employee or per research scientist. The Company recognizes fees for development activities and
research support revenue as the work and the services are performed. Amounts received in advance of services performed are recorded as deferred revenue until earned.



Milestone revenues are derived from the achievement of predetermined goals, which are defined in the co-development and license
agreements as well as the collaboration agreements. These milestones are subject to significant contingencies and, therefore, the related contingent revenue is not realized until the milestone has been reached and, if applicable, customer acceptance
has been obtained. Payments received that relate to the achievement of substantive milestones that were contingent at the outset of the arrangement are recorded as revenue when the milestones are achieved.



Royalty revenues generally result from sales of products based on net sales of the
licensed product in the licensee territory as set forth in the co-development and license agreements. Royalty revenues may also result from the sale of products based on research performed under collaboration agreements. Royalties are based on the
volume of products sold and are recognized as revenue upon notification of sales from the collaboration partner. The Company has not yet received or recognized any royalty payments from collaboration agreements.



Grant revenues from governmental agencies for the support of specific research and
development projects are recorded as revenue to the extent the related expenses have been incurred.



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##### Table of Contents

Research and Development



GPC Biotech incurs development expenses related to its preclinical and clinical drug development programs. It also incurs research expenses associated with both
partnered and unpartnered research activities, as well as the development and maintenance of its drug discovery technologies.



The Company enters into research and development agreements with third parties consisting of technology licensing fees and technology access fees, ongoing funding
of research and development activities as well as milestone and royalty payments. GPC Biotech also enters into contracts with contract research organizations to conduct clinical trials. Furthermore, the Company licenses rights to develop drug
candidates on a preferably exclusive basis.



Technology license fees and
technology access fees relate to technology licenses that the Company pays in connection with its research and development arrangements. If these licenses are used in various research and development programs and/ or are sublicensed to third
parties, they are considered to have alternative future uses. The Company treats payments for licenses that have alternative future uses as intangible assets in accordance with SFAS No. 2, Accounting for Research and Development
Costs, (SFAS No. 2) and includes them in other intangible assets. The Company amortizes these intangible assets to amortization expense over the period of the license.



If the licenses do not have an alternative future use the payments are expensed
immediately.



Technology license fees are typically paid upfront annually
and relate to licenses where the Company typically has the option to renew for a subsequent year at the end of the license term. Those fees are recorded as prepaid expenses.



Milestone payments to other parties are expensed when the liability is incurred, which is when the milestones are achieved.



Fees paid to contract research organizations to conduct clinical trials
are expensed as incurred.



Fees paid upfront to license drug candidates
and for the right to further develop those candidates are expensed as incurred in accordance with SFAS No. 2.



Income Tax



The Company provides for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes.Under SFAS No. 109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.



Foreign Currency



The functional currency of GPC Biotech AG is the euro whereas the functional currency of GPC Biotech Inc. is the U.S. dollar. All balance sheet items have been
translated into euro using the exchange rate at the balance sheet date and all items in the statement of operations have been converted into euro at an average exchange rate of the year. The effect of the translation is shown as a separate component
of shareholders equity.



Gains and losses resulting from foreign
currency transactions denominated in a currency other than the functional currency are recorded at the approximate rate of exchange at the transaction date.



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##### Table of Contents

For the year ended December 31, 2005, the Company recorded a net foreign currency gain of  2,416,000 and net foreign currency losses for the years ended December 31, 2004 and 2003 of  1,698,000 and  215,000,
respectively, as included in other income (expense), net.



Stock-Based Compensation



The Company accounts for its stock option plans and convertible
bonds in accordance with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Convertible bonds, in addition to stock options, are issued as compensation to members of the Management Board and senior
management. The fair value of options and convertible bonds granted is established as of the date of grant and recognized as compensation expense over the vesting period of the option or convertible bond. Compensation expense recognized on options
and convertible bonds that do not vest due to termination of employment is reversed in the period of forfeiture. Compensation cost for stock options and convertible bonds is included in research and development expenses and general and
administrative expenses in the statements of operations.



Stock
appreciation rights are accounted for as liability awards under SFAS No. 123. Compensation expense for stock appreciation rights, if any, will be accrued and recognized based on the intrinsic value at each balance sheet as the difference
between the stock price on the balance sheet date and the stock price on the date of grant. Compensation expense for stock appreciation rights that contain vesting terms that are dependent on the achievement of certain events will be accrued and
recognized at each balance sheet date following the achievement of that event. Compensation expense recorded will be equal to the amount of cash ultimately paid to settle the stock appreciation rights.



Use of Estimates



The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date of financial statements. Actual results could differ from those
estimates.



New Accounting Standards



On December 16, 2004, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 123 (revised 2004) (SFAS No. 123(R)), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. SFAS
No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Under SFAS No. 123R, companies must calculate
and record in the statement of operations the cost of equity instruments, such as stock options or restricted stock, awarded to employees for services received. The cost of instruments is to be measured based on the fair value of the instruments on
the date they are granted (with certain exceptions) and is required to be recognized over the period during which the employees are required to provide services in exchange for the equity instruments. SFAS No. 123R is effective in the first
annual reporting period beginning after June 15, 2005, and will thus be adopted by the Company in its first calendar quarter of 2006.



SFAS No. 123R provides two alternatives for adoption: (1) a modified prospective method in which compensation cost is recognized for all
awards granted subsequent to the effective date of this statement as well as the for the unvested portion of awards outstanding as of the effective date and (2) a modified retrospective method which follows the approach in the
modified prospective method, but also permits entities to restate prior periods to reflect compensation costs calculated under SFAS No. 123 for pro forma amounts disclosure. The Company plans to adopt SFAS No. 123R using the
modified prospective method.



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##### Table of Contents

On March 30, 2005, the SEC released Staff Accounting Bulletin No. 107, Share Based
Payments, (SAB 107), which expresses the views of the SEC staff regarding the application of SFAS No. 123R.



The Company has not quantified the total impact that the adoption of SFAS No. 123R will have on its first quarter 2006 consolidated financial statements.



In May 2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections, which is a replacement of APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Changes in Interim Financial Statements. SFAS No. 154 applies to
all voluntary changes in accounting principle and changes the accounting for reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in
accounting principle unless it is impracticable. In addition, SFAS No. 154 requires that a change in method of depreciation, amortization or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that
is effected by a change in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The impact of adoption SFAS No. 154 cannot be
accurately estimated at this time as no such accounting changes are currently contemplated.



In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47). FIN 47 provides guidance relating to the identification of and
financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liabilitys fair
value can be reasonably estimated. FIN 47 also defines when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The provision is effective no later than the end of fiscal years ending
after December 15, 2005. The Company will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does not believe the adoption will have a material impact on its consolidated financial position or results of operations or cash flows.



3. Product Candidate Licensing Activities



Effective December 19, 2005, the Company entered into a co-development and license
agreement with Pharmion GmbH, a wholly owned subsidiary of Pharmion Corporation (Pharmion), whereby Pharmion was granted exclusive commercialization rights in certain territories for satraplatin for the treatment of cancer in humans. Pharmions
exclusive commercialization rights include Europe, Turkey, the Middle East, Australia and New Zealand, while GPC Biotech retains rights to all other territories including North America, South America and parts of Asia, including Japan. The terms of
the agreement call for Pharmion to make an upfront payment of $37.1 million to GPC Biotech, including an $18 million reimbursement fee for costs previously incurred related to the development of satraplatin (a cost reimbursement) and $19.1 million
for funding of ongoing and certain future clinical development activities to be conducted jointly by Pharmion and GPC Biotech. The companies will pursue a joint plan to develop satraplatin in a variety of tumor types and will share global
development costs for at least one additional registrational trial, for which Pharmion has made an additional commitment of $22.2 million, in addition to the $37.1 million in initial payments received in January 2006. Pharmion will also pay
GPC Biotech $30.5 million based on the achievement of certain regulatory filing and approval milestones for the first indication, and up to an additional $75 million for up to five subsequent EMEA approvals for additional indications. GPC
Biotech will also receive royalties on sales of satraplatin in Pharmions territories at rates of 26.25 to 30 percent on annual sales up to $500 million, and 34 percent on annual sales over $500 million. Pharmion will pay GPC Biotech sales
milestones totaling up to $105 million, based on the achievement of significant annual sales levels in the Pharmion territories. Pharmion and GPC Biotech will lead regulatory and commercial activities in their respective territories. The two
companies also signed a supply agreement



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##### Table of Contents

Based on the guidance included in EITF 00-21, the Company has used the residual method to assess the fair value of
the multiple contractual elements in this agreement. Revenues resulting from the supply agreement, royalties and milestone payments will be recognized when earned.



The $18 million upfront cost reimbursement will be recognized as revenue on a straight-line basis over the period of substantial
involvement of the Company in the development activities. The $19.1 million for shared development costs will be treated as prepaid development costs and will be recognized as shared development costs are incurred.



On December 17, 2004, the Company licensed to Debiopharm S.A. the exclusive,
worldwide rights to develop and commercialize the Companys pre-clinical small molecule MHC class II antagonists program. In addition to an upfront licensing payment, GPC Biotech will be eligible to receive milestone payments and royalties.



On September 30, 2002, the Company signed an agreement with
Spectrum Pharmaceuticals, Inc. (Spectrum) (formerly NeoTherapeutics, Inc.) granting GPC Biotech the exclusive worldwide license to satraplatin for the treatment of cancer in humans. An initial licensing fee of $2 million was paid to
Spectrum upon signing. In October 2003, another licensing fee was paid upon the dosing of the first patient in a registrational Phase 3 study in the amount of $2 million (approximately  1,725,000), consisting of a $1 million cash payment and a $1 million equity investment. The equity investment in Spectrum represents 128,370 shares of Spectrum.
Under the terms of the agreement, GPC Biotech also will pay milestones totaling up to $18 million, the first of which is anticipated to be the acceptance of the NDA (New Drug Application) for filing by the U.S. Food and Drug Administration. Upon
commercialization of satraplatin, Spectrum will also receive royalties based on net sales. Furthermore, subject to certain limitations, Spectrum is entitled to receive a share of sublicense fees received by GPC Biotech if the Company enters into a
licensing agreement with another company. Under the terms of the agreement, GPC Biotech will fully fund development and commercialization expenses for satraplatin.



4. Collaboration Agreements



The Company has entered into several collaboration and license agreements with life science companies which were typically based on licensing technology platforms
and funded research. These agreements include alliances based on the transfer and/or non-exclusive licenses of technology platforms, alliances which combine a technology license with a focus on a specific disease or therapeutic approach, and
disease-focused programs under which the Company conducts research funded by its partners. The Companys technology-based alliances are generally structured as research collaborations. Under these arrangements, the Company performs research in
a specific disease area aimed at discoveries leading to novel pharmaceutical products. These alliances generally provide research funding over an initial period, with renewal provisions, varying by agreement. Under these agreements, the
Companys partners may make up-front payments, license payments, ongoing research funding payments, and additional payments upon the achievement of specific research and product development milestones and/or pay royalties or, in some cases,
make profit-sharing payments to the Company based upon any product sales resulting from the collaboration.



Total revenue recognized under collaboration and license agreements amounted to  9,341,000,  12,649,000 and  20,821,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Total costs incurred under research collaborations and license agreements
amounted to  910,000,  1,371,000 and  3,565,000 for the years ended December 31, 2005, 2004 and 2003, respectively.



Significant Agreements Beginning in 2005



There were no significant agreements entered into in 2005.



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##### Table of Contents

Significant Agreements Beginning in 2004 and Earlier



Effective January 31, 2003, the Company entered into an agreement with ALTANA Pharma to license the Companys proprietary
drug-protein interaction technology, LeadCode, to evaluate compounds in the
public domain, as well as certain proprietary compounds of ALTANA Pharma. Under the terms of this agreement, the Company will receive additional funding for the license, transfer and implementation of LeadCode for use at the ALTANA Research Institute. In addition, the Company is eligible to receive over $15 million
in milestone payments, in addition to royalties, for each product that is a direct result of the collaboration.



Effective November 1, 2001, the Company entered into an alliance with ALTANA Pharma to establish a U.S. Research Institute in Waltham, MA (USA) to use the
Companys genomic and proteomic technologies. ALTANA Pharma and the Company entered into three agreements under which the Company receives funding under a collaboration and license agreement in the form of an upfront payment, technology license
and implementation fees, as well as research and technology transfer funding. The Company is non-exclusively licensing selected genomics, proteomics, automation and bioinformatics technologies to ALTANA Pharma and is collaborating with ALTANA Pharma
on two drug discovery programs. The Company receives further funding under a sublease agreement. Furthermore, the Company received additional funding until March 31, 2003 under a separate service agreement. In addition, the Company is eligible
to receive implementation, research, preclinical and clinical milestone payments and royalty payments for each product resulting from the two collaborative drug discovery programs. The establishment term expires in June 2007.



Effective December 29, 2000, ALTANA Pharma and the Company entered into a target
identification and drug discovery collaboration in oncology. Under this agreement, GPC Biotech utilized its proprietary functional genomics and proteomics platform for ALTANA Pharma to identify tumor specific targets whose inhibition selectively
drives cancer cells, but not normal cells, into programmed cell death (apoptosis). GPC Biotech received an upfront payment and received research funding and was eligible to receive research and clinical milestones, which were subject to achieving
specific research and development goals. In addition, under the terms of the agreement the Company will receive royalties on products from drug targets resulting from the alliance sold by ALTANA Pharma and will have exclusive rights to develop
products for drug targets resulting from the alliance that are not selected by ALTANA Pharma. This agreement terminated on December 29, 2003.



5. Acquisition of Significant Assets



On March 2, 2005, the Company entered into an agreement to acquire significant assets of Axxima Pharmaceuticals AG (Axxima), a Munich-based company
in bankruptcy proceedings. Axxima was a drug discovery company focusing on the field of kinase inhibition. The acquisition of these assets is expected to assist in the growth of the Companys drug pipeline with novel mechanism-based therapies
to treat cancer.



The aggregate purchase price of the assets was  13.1 million, which was paid by issuing 1,311,098 ordinary shares. The value of the shares issued was determined based on an
average closing price of the Companys shares around the transaction date of March 2, 2005. Costs of the transaction and costs of registering the shares were also considered in the value of the transaction. The transaction has been
accounted for as an acquisition of assets in a transaction other than a business combination.



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##### Table of Contents

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed
(in thousand ):



|                                             |  |        |  
|-------------------------------------------- |  | ------ | -
|Cash                                         |  | 10,705 |  
|Property and equipment                       |  | 2,683  |  
|Intangible and other assets                  |  | 1,725  |  
|In-process research and development acquired |  | 683    |  
|Total assets acquired                        |  | 15,796 |  
|Liabilities due                              |  | (2,293 | )
|Deferred tax liability                       |  | (424   | )
|                                             |  |        |  
|Total liabilities assumed                    |  | (2,717 | )
|                                             |  |        |  
|Net assets acquired                          |  | 13,079 |  
|                                             |  |        |  



The  0.7 million assigned to acquired in process research and development were expensed at the date of acquisition in accordance with FASB Interpretation
No. 4, Applicability of SFAS No. 2 to Business Combinations Accounted for by the Purchase Method. The amount is included in operating expenses.



6. Marketable Securities and Short-term Investments



The following is a summary of the balances of marketable securities and short-term investments at December 31, 2005 and 2004 (in thousand ):



|                       |  |        |  |       
|---------------------- |  | ------ |  | ------
|                       |  | 2005   |  | 2004  
|Marketable securities  |  | 41,294 |  | 46,827
|Short-term investments |  | 21,767 |  | 22,421
|                       |  |        |  |       
|Total                  |  | 63,061 |  | 69,248
|                       |  |        |  |       



The following is a summary of
marketable securities at December 31, 2005 and 2004 (in thousand ), all of which are available-for-sale:



|                              |  |        |  |                        |  |                         |   |  |                     
|----------------------------- |  | ------ |  | ---------------------- |  | ----------------------- | - |  | --------------------
|                              |  | 2005  
|                              |  | Cost   |  | Gross Unrealized
Gains |  | Gross Unrealized
Losses |   |  | Estimated Fair Value
|Variable rate corporate bonds |  | 15,010 |  | -                      |  | (60                     | ) |  | 14,950              
|Fixed rate corporate bonds    |  | 26,123 |  | -                      |  | (238                    | ) |  | 25,885              
|Equity securities             |  | 781    |  | -                      |  | (322                    | ) |  | 459                 
|                              |  |       
|Total                         |  | 41,914 |  | -                      |  | (620                    | ) |  | 41,294              
|                              |  |       



|                              |  |        |  |                        |  |                         |   |  |                     
|----------------------------- |  | ------ |  | ---------------------- |  | ----------------------- | - |  | --------------------
|                              |  | 2004  
|                              |  | Cost   |  | Gross Unrealized
Gains |  | Gross Unrealized
Losses |   |  | Estimated Fair Value
|Variable rate corporate bonds |  | 4,998  |  | 8                      |  | -                       |   |  | 5,006               
|Fixed rate corporate bonds    |  | 41,159 |  | 73                     |  | (38                     | ) |  | 41,194              
|Equity securities             |  | 781    |  | -                      |  | (154                    | ) |  | 627                 
|                              |  |       
|Total                         |  | 46,938 |  | 81                     |  | (192                    | ) |  | 46,827              
|                              |  |       



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##### Table of Contents

The fair market values of marketable securities are based on quoted market prices. All bonds included in marketable
securities have maturities of 3 years or less.



The equity securities
above represent 128,370 registered shares of Spectrum Pharmaceuticals, Inc. purchased in accordance with a licensing agreement (see Note 4).



The following is a summary of the short-term investments at December 31, 2005 and 2004 (in thousand ), all of which are available-for-sale:



|          |  |        |  |                      |  |                         |  |                             |  |                     
|--------- |  | ------ |  | -------------------- |  | ----------------------- |  | --------------------------- |  | --------------------
|          |  | 2005  
|          |  | Cost   |  | GrossUnrealizedGains |  | Gross Unrealized
Losses |  | Accrued Interest
Receivable |  | Estimated Fair Value
|Bond fund |  | 21,334 |  | 433                  |  | -                       |  | -                           |  | 21,767              
|          |  |        |  |                      |  |                         |  |                             |  |                     
|Total     |  | 21,334 |  | 433                  |  | -                       |  | -                           |  | 21,767              
|          |  |        |  |                      |  |                         |  |                             |  |                     



|          |  |        |  |                      |  |                         |  |                             |  |                     
|--------- |  | ------ |  | -------------------- |  | ----------------------- |  | --------------------------- |  | --------------------
|          |  | 2004  
|          |  | Cost   |  | GrossUnrealizedGains |  | Gross Unrealized
Losses |  | Accrued Interest
Receivable |  | Estimated Fair Value
|Bond fund |  | 21,334 |  | 609                  |  | -                       |  | 478                         |  | 22,421              
|          |  |       
|Total     |  | 21,334 |  | 609                  |  | -                       |  | 478                         |  | 22,421              
|          |  |       



The realized gain on
available-for-sale marketable securities and short-term investments in 2005, 2004 and 2003 was  331,000,  0 and  8,000, respectively. The realized loss on available-for-sale marketable securities and short-term investments in 2005, 2004 and 2003 amounted to  0,  0 and  1,000, respectively. Realized gains and losses are calculated using specific identification to determine cost basis and are included in other income (expense),
net.



The aggregate unrealized losses on available-for-sale marketable
securities and short-term investments at December 31, 2005 was  620,000. The aggregate fair value of securities with
unrealized losses at December 31, 2005 was  36,288,000 and consisted of the following (in thousand ):



|                              |  |                    |  |                |                    |  |           |       |                |   |  |           |  |                |  
|----------------------------- |  | ------------------ |  | -------------- | ------------------ |  | --------- | ----- | -------------- | - |  | --------- |  | -------------- | -
|                              |  | Less than 12months |  |                | 12 Months orlonger |  |           | Total |               
|                              |  | FairValue          |  | UnrealizedLoss |                    |  | FairValue |       | UnrealizedLoss |   |  | FairValue |  | UnrealizedLoss |  
|Variable rate corporate bonds |  | 9,944              |  | (60            | )                  |  | -         |       | -              |   |  | 9,944     |  | (60            | )
|Fixed rate corporate bonds    |  | 25,885             |  | (238           | )                  |  | -         |       | -              |   |  | 25,885    |  | (238           | )
|Equity securities             |  | -                  |  | -              |                    |  | 459       |       | (322           | ) |  | 459       |  | (322           | )
|                              |  |                    |  |                |                    |  |           |       |                |   |  |           |  |                |  
|Total                         |  | 35,829             |  | (298           | )                  |  | 459       |       | (322           | ) |  | 36,288    |  | (620           | )
|                              |  |                    |  |                |                    |  |           |       |                |   |  |           |  |                |  



Securities that are in loss
positions consist of both debt securities and equity securities. All unrealized losses on both debt and equity securities are considered to be temporary in nature. The debt securities with unrealized losses are corporate bonds from highly rated
issuers. Management believes that the impairments extend from increases in the current market interest rates compared with the market rate at which time the bonds were purchased. Management believes that the impairments do not extend from decreases
in the quality ratings of the issuing companies. The bonds all have maturities of less than 3 years and the full value of the bonds is expected to be ultimately recovered.



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##### Table of Contents

The equity securities were purchased in connection with a licensing agreement with Spectrum Pharmaceuticals
(Spectrum) for satraplatin, the Companys anti-cancer drug in phase 3 registration trials. Spectrum retains certain rights in satraplatin and thus will benefit from the commercialization of satraplatin.



The aggregate unrealized losses on available-for-sale marketable securities and
short-term investments at December 31, 2004 was  192,000. The aggregate fair value of securities with unrealized losses
at December 31, 2004 was  17,618,000 and consisted of equity securities and fixed-rate corporate bonds with remaining
maturities of less than 2 years. These securities were in a loss position for less than 12 months as of December 31, 2004.



7. Property and Equipment



Property and equipment consisted of the following at December 31, 2005 and 2004 (in thousand ):



|                                        |  |        |   |  |        |  
|--------------------------------------- |  | ------ | - |  | ------ | -
|                                        |  | 2005   |   |  | 2004   |  
|Leasehold improvements                  |  | 1,748  |   |  | 938    |  
|Office and laboratory equipment         |  | 5,455  |   |  | 5,094  |  
|Computer equipment and related software |  | 3,440  |   |  | 3,161  |  
|Furniture and fixtures                  |  | 519    |   |  | 358    |  
|                                        |  |        |   |  |        |  
|                                        |  | 11,162 |   |  | 9,551  |  
|Less accumulated depreciation           |  | (7,059 | ) |  | (6,936 | )
|                                        |  |        |   |  |        |  
|Property and equipment, net             |  | 4,103  |   |  | 2,615  |  
|                                        |  |        |  



Depreciation expense amounted to
 3,478,000,  1,568,000 and  1,820,000 in 2005, 2004 and 2003, respectively.



8. Intangible Assets



The Company has recorded intangible assets acquired in a business combination and an asset acquisition based on their fair values, as
determined by independent valuations at the date of acquisition. Additionally, intangible assets have been recorded as a result of license purchases. The table below summarizes intangible assets, all of which are amortized, as of December 31
(in thousand ):



|                               |  |        |   |  |        |  
|------------------------------ |  | ------ | - |  | ------ | -
|                               |  | 2005   |   |  | 2004   |  
|Gross carrying amount          |  |        |   |  |        |  
|Patents                        |  | 566    |   |  | 491    |  
|Partnered technology           |  | 1,359  |   |  | 1,180  |  
|Other intangible assets        |  | 1,263  |   |  | 1,174  |  
|                               |  |        |  
|Total gross carrying amount    |  | 3,188  |   |  | 2,845  |  
|                               |  |        |  
|                               |  |       
|Accumulated depreciation       |  |        |   |  |        |  
|Patents                        |  | (181   | ) |  | (78    | )
|Partnered technology           |  | (1,359 | ) |  | (1,180 | )
|Other intangible assets        |  | (576   | ) |  | (454   | )
|                               |  |        |  
|Total accumulated depreciation |  | (2,116 | ) |  | (1,712 | )
|                               |  |        |  
|Total intangible assets, net   |  | 1,072  |   |  | 1,133  |  
|                               |  |        |  



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##### Table of Contents

During the fourth quarter of 2003, the Company reviewed its intangible assets acquired in a business combination
for impairment and recorded an impairment charge at December 31, 2003 relating to the patent portfolio in the amount of  1,163,000, thereby creating a new cost basis of  534,000. Indicators of impairment arose when
management decided in 2003 to discontinue several of the research programs that used these patents. The fair value of the patent portfolio was determined using estimated discounted cash flows of each program that uses the patents. From these cash
flows an implied royalty rate, success probabilities and discounting factor were used to determined the fair value of the underlying patents. The impairment charge is included in 2003 operating expenses as amortization of intangible assets. In 2005
and 2004 no impairment expense was incurred.



The amortization expense
for intangibles acquired in a business combination, including impairment expenses, for the years ended December 31, 2005, 2004 and 2003 was  417,000,  413,000 and  2,007,000, respectively. The estimated amortization expense for intangibles for the next five years is as follows (in thousand ):



|                                |  |    
|------------------------------- |  | ---
|For the year ended December 31, |  |    
|2006                            |  | 595
|2007                            |  | 261
|2008                            |  | 102
|2009                            |  | 91 
|2010                            |  | 23 



9. Accrued Expenses and Other Current
Liabilities



Accrued expenses and other current liabilities at
December 31, 2005 and 2004 consisted of the following (in thousand ):



|                                                   |  |        |  |      
|-------------------------------------------------- |  | ------ |  | -----
|                                                   |  | 2005   |  | 2004 
|Accrued external R&D obligations                   |  | 5,051  |  | 2,150
|Accrued personnel expenses and payroll liabilities |  | 3,437  |  | 2,391
|Accrued legal, patent and advisory services        |  | 629    |  | 427  
|Other accruals                                     |  | 2,157  |  | 1,942
|                                                   |  |       
|Total                                              |  | 11,274 |  | 6,910
|                                                   |  |       



10. Other Liabilities, Non-current



On May 1, 2005, the Company sublet to a third party some excess
office and laboratory space in the U.S. In accordance with Financial Accounting Standards Board Technical Bulletin 79-15, Accounting for Loss on Sublease Not Involving the Disposal of a Segment and Statement of Financial Accounting
Statements 146, Accounting for Costs Associated with Exit of Disposal Activities, the Company recorded an expense and a liability related to the projected shortfall between the Companys rent obligation under the lease and the
rental income to be received over the term of the sub-lease. The expense recorded at sublease inception amounted to  2,849,000.



The balance of the liability as
of December 31, 2005 was  2,572,000, of which  2,177,000 was included in other liabilities, non-current and  395,000 was
included in accrued expenses and other current liabilities.



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##### Table of Contents

11. Commitments and Contingencies



Operating Lease Commitments



The Company has entered into several lease arrangements for office, laboratory and storage space as well as for laboratory and office equipment. In total, the
Company incurred rental expenses of  7,306,000,  4,565,000 and  5,067,000 in the years 2005, 2004 and 2003, respectively. Income
from subleases amounted to  1,311,000,  1,167,000 and  1,393,000 in the years 2005, 2004 and 2003, respectively. Rental expenses
and sublease income are included in research and development and general and administrative expenses.



The Company has entered into lease agreements for office and laboratory space that expire at different times through 2015, however certain leases can be terminated
earlier at the option of the Company. One agreement calls for future incremental increases in rental payments in 2008. This lease also requires $1,667,000 to be held in escrow as security for credit. The Company records its rental expenses and
sublease rental income using the straight-line method in accordance with SFAS No. 13, Accounting for Leases. The balance of accrued rental payments at December 31, 2005, was  481,000.



In certain leases the Company provided a customary indemnification to the lessor for certain claims that may arise under the lease. A maximum obligation is not explicitly stated, thus the potential amount of future maximum
payments that might arise under this indemnification obligation cannot be reasonably estimated. The Company has not experienced any prior claims against similar lease indemnifications in the past and management has determined that the associated
estimated fair value of the liability is not material. As such, the Company has not recorded any liability for this indemnity in the consolidated financial statements. The Company does, however, accrue for losses for any known contingent liability,
including those that may arise from indemnification provisions, when future payment is both reasonably estimable and probable. The Company carries specific and general liability insurance policies, which the Company believes would provide, in most
cases, some, if not total, recourse to any claims arising from this lease indemnification provision.



Future minimum lease commitments for all non-cancelable operating leases for the years ending December 31 are as follows (in thousand ):



|                                |  |      
|------------------------------- |  | -----
|Non-cancelable operating leases |  |      
|2006                            |  | 5,120
|2007                            |  | 5,089
|2008                            |  | 5,283
|2009                            |  | 5,302
|2010                            |  | 4,295
|Thereafter                      |  | 1,370



Aggregate future minimum rentals
to be received under non-cancelable subleases as of December 31, 2005 were  2,556,000.



Contingencies



The Company may be party to certain legal proceedings and claims which arise during the ordinary course of business. In the opinion of
management, the ultimate outcome of these matters will not have material adverse effects on the Companys financial position, results of operations or cash flows.



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##### Table of Contents

Guarantees and Indemnification Obligations



The Company enters into agreements in the ordinary course of business with, among others, vendors, service providers, contract
manufacturers and collaboration, licensing and co-development partners. Pursuant to certain of these agreements it has agreed to indemnify the other party for certain matters, such as property damage, personal injury, acts or omissions of the
Company, or its employees, agents or representatives, or third party claims alleging that the the actvities of our contractual partner pursuant to the contract infringe a patent, trademark or copyright of such third party.



The Company assesses the fair value of its liability on the above indemnities to be
immaterial based on historical experience and information known at December 31, 2005.



12. Loans Receivable from Employees



At December 31,
2005 and 2004, loans receivable from employees of the Company amounted to  90,000 and  124,000, respectively, and are included in other current and non-current assets. At December 31, 2005, the amount related to two different loans with original
terms of four years. The loans are being forgiven or repaid in equal installments.



Forgiveness of loans, if applicable, is included in compensation expense in the period they are forgiven and is contingent upon continued employment of the employee. Loans made to employees bear interest at the rate of 5.5% to
6% per annum and were made for personal financial purposes.



13. Related Party
Disclosures



In 2003, 2001, 2000 and 1998, the Company entered into
collaboration agreements with ALTANA Pharma AG (ALTANA Pharma, formerly known as Byk Gulden Lomberg Chemische Fabrik GmbH) as described in Note 4. ALTANA Pharma is a related party, since the Companys Chairman
(Vorstandsvorsitzender), Dr. Bernd Seizinger, is a member of the Supervisory Board of ALTANA Pharma.



At December 31, 2005 and 2004, the Company had accounts receivable from ALTANA Pharma arising out of the normal course of business in the amount  1,436,000 and  1,006,000. All payments for accounts receivable from ALTANA Pharma have been settled for cash at amounts stipulated in the various contracts with ALTANA Pharma. Collaborative revenues and deferred revenues related to
ALTANA Pharma have been classified as related party on the statements of operations and balance sheets, respectively.



In addition, the Company subleases part of its facilities to ALTANA Pharma. Of the total sublease income disclosed in Note 11,  1,000,000,  982,000 and  1,051,000 for the years ended December 31, 2005, 2004 and 2003, respectively, relates to the subleases with ALTANA Pharma.



During 2004, the Company made two milestone payments to Morphosys AG, a
related party to the Company. The payment was made under a collaboration and licensing agreement signed in April 1999. Morphosys AG is a related party to the Company due to the fact that two members of the Supervisory Board of the Company are also
members of the Supervisory Board of Morphosys AG. The transactions during 2004 amounted to  869,000. At December 31,
2005, the Company has accrued expenses in the amount of  439,000 related to a clinical development milestone reached. There
were no payments in 2005 or 2003.



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##### Table of Contents

14. Long-Term Debt



During September 1999, the Company entered into a loan agreement with IKB Deutsche Industriekreditbank AG in the amount of  1,023,000, all of which was received in July 2000. In 2004, the Company paid off its entire remaining obligation under this loan agreement. The term of the loan
was 10 years with semi-annual repayments beginning in March 2002. The loan was unsecured and bore interest at 4.25% per annum. Interest expenses for the years ended December 31, 2005, 2004 and 2003 were  0,  29,000 and  35,000, respectively, all of which was paid.



15. Convertible Bonds



Convertible bonds are issued as compensation to members of the Management Board and senior management and previously had also been issued to members of the
Supervisory Board. The fair value of convertible bonds is estimated using an option pricing model using the same assumptions as those used for stock options (see Note 16) and recognized in the statement of operations over their future vesting
periods. Total compensation cost related to convertible bonds included in research and development and general and administration expenses for the years ended December 31, 2005, 2004 and 2003 was  3,691,000,  1,549,000 and  890,000, respectively. The aggregate fair value of convertible bonds issued in 2005, 2004 and 2003 was  4,410,000,  6,472,000 and  1,541,000, respectively. The weighted-average grant date fair value of convertible bonds granted in 2005, 2004 and 2003 was  6.13,  6.92 and  2.98, respectively.



The following table summarizes the details of the various convertible bond issuances at December 31, 2005:



|                     |  |              |  |                                  |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |               |                                  |        
|-------------------- |  | ------------ |  | -------------------------------- |  | ------------------------ | ---- | ------------ | --- | - | -------------------- | --- | --------------------------- | --------- | ---------------------------------------------- | --------- | ---------------------------- | ------------- | -------------------------------- | -------
|Year ofissuance      |  | NumberIssued |  | NumberOutstandingat Dec. 31,2005 |  | Nominalvalue eachpaid in |      | InterestRate |     |   | Vestingperiod(years) |     | First year ofexercisability |           | No. ofsharesentitled topurchaseat Dec. 31,2005 |           | Additionalpayment toexercise |               | Numberexercisableat Dec. 31,2005
|2005                 |  | 720,000      |  | 720,000                          |  |                         | 1.00 |              | 3.5 | % |                      | 4   |                             | 2007      |                                                | 720,000   |                              |  9.38 - 9.67 |                                  | -      
|2004                 |  | 935,000      |  | 935,000                          |  |                         | 1.00 |              | 3.5 | % |                      | 4   |                             | 2006      |                                                | 935,000   |                              |  8.33 - 9.90 |                                  | -      
|2003                 |  | 512,973      |  | 506,500                          |  |                         | 1.00 |              | 3.5 | % |                      | 2-4 |                             | 2004-2005 |                                                | 506,500   |                              |  1.70 - 4.77 |                                  | 278,506
|2002                 |  | 280,000      |  | 280,000                          |  |                         | 1.00 |              | 3.5 | % |                      | 4   |                             | 2004      |                                                | 280,000   |                              |  3.36        |                                  | 210,000
|2001                 |  | 47,500       |  | 32,500                           |  |                         | 1.00 |              | 3.5 | % |                      | 2   |                             | 2003      |                                                | 32,500    |                              |  8.55        |                                  | 32,500 
|                     |  |              |  |                                  |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |               |                                  |        
|                     |  | 2,495,473    |  | 2,474,000                        |  |                          |      |              |     |   |                      |     |                             |           |                                                | 2,474,000 |                              |               |                                  | 521,006
|                     |  |              |  |                                  |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |               |                                  |        
|Thereof not paid in: |  | (140,000)    |  |                                  |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |              
|                     |  |              |  |                                  |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |               |                                  |        
|                     |  |              |  | 2,334,000                        |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |               |                                  |        
|                     |  |              |  |                                  |  |                          |      |              |     |   |                      |     |                             |           |                                                |           |                              |               |                                  |        



60,000 convertible bonds issued
in 2004 were subject to the achievement of certain business development goals. During 2005, the Compensation Committee of the Supervisory Board elected to remove these conditions. As a result of this modification, compensation expense in the amount
of  105,000 was recognized in general and administrative expense in 2005. The remaining fair value of these convertible bonds
will be recognized over the remaining vesting period.



On
December 30, 2005, the Company granted 140,000 convertible bonds to certain members of senior management. The convertible bonds were not paid in as of December 31, 2005 and thus not recorded in the financial statements of the Company at
that date as no liability existed. Additionally, no compensation expense related to this grant was recognized in 2005. The convertible bonds vest over 4 years and will entitle bondholders to purchase 140,000 ordinary shares of the Company at  9.67 per share above the nominal value of  1.00 to be paid in per convertible bond. The bonds will pay interest of 3.5% per annum and will be first exercisable in December 30, 2007.



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##### Table of Contents

16. Stock Options Issued to Employees and Consultants



The Company grants stock options to the employees, the members of the Management Board and previously had granted stock options to
certain consultants.



According to the stock option plans, the options
have a duration of ten years. The respective strike prices equal the five-day average of the closing price of the Companys ordinary shares prior to the respective date of grants. The vesting period is four years, with graded vesting of the
options over the vesting period. According to German law (§ 193 II, No. 3 AktG), the rights can be exercised two years after the grant, at the earliest.



The fair value of the options was estimated using an option pricing model as proposed by SFAS No. 123. The following table
summarizes the assumptions used in calculating the fair value:



|                       |  |              |  |        |  |       
|---------------------- |  | ------------ |  | ------ |  | ------
|                       |  | Date Granted
|                       |  | 2005         |  | 2004   |  | 2003  
|Risk-free rate         |  | 2.90%        |  | 3.24%  |  | 3.24% 
|Dividend yield         |  | 0.0%         |  | 0.0%   |  | 0.0%  
|Volatility             |  | 77.81%       |  | 88.01% |  | 91.02%
|Estimated life (years) |  | 4.00         |  | 4.00   |  | 4.00  



For options issued during 2005,
2004 and 2003, total compensation cost was  1,778,000,  5,532,000 and  636,000, respectively,
which is being recognized over the vesting period of those options. Compensation cost related to stock options included in the statements of operations was  2,974,000,  1,903,000 and  1,621,000 in 2005, 2004 and 2003, respectively.



The following table presents the stock option activity for the years ended December 31, 2005, 2004 and 2003:



|                                                                |  |           |  |                                  |       |         |           |                                  |   |         |  |                                 |  |   |     
|--------------------------------------------------------------- |  | --------- |  | -------------------------------- | ----- | ------- | --------- | -------------------------------- | - | ------- |  | ------------------------------- |  | - | ----
|                                                                |  | 2005      |  | 2004                             |       | 2003   
|                                                                |  | Options   |  | Weighted- Average Exercise Price |       | Options |           | Weighted- Average Exercise Price |   | Options |  | Weighted- Average ExercisePrice
|Outstanding at January 1                                        |  | 4,167,556 |  |                                 | 9.50  |         | 3,835,458 |                                  |  | 8.77    |  | 4,112,859                       |  |  | 8.80
|Granted                                                         |  | 308,301   |  |                                 | 9.90  |         | 869,600   |                                  |  | 9.86    |  | 177,000                         |  |  | 5.44
|Exercised                                                       |  | (92,992)  |  |                                 | 5.23  |         | (458,989) |                                  |  | 3.61    |  | (88,925)                        |  |  | 3.29
|Forfeited                                                       |  | (50,864)  |  |                                 | 12.57 |         | (78,513)  |                                  |  | 12.23   |  | (365,476)                       |  |  | 8.86
|Expired                                                         |  |          |  |                                  |      |         |          |                                  |   |        |  |                                |  |   |    
|                                                                |  |          
|Outstanding at December 31                                      |  | 4,332,001 |  |                                 | 9.59  |         | 4,167,556 |                                  |  | 9.50    |  | 3,835,458                       |  |  | 8.77
|                                                                |  |          
|Vested at December 31                                           |  | 3,157,086 |  |                                 | 9.86  |         | 2,654,947 |                                  |  | 10.03   |  | 2,575,250                       |  |  | 8.70
|                                                                |  |          
|Exercisable at December 31                                      |  | 2,924,351 |  |                                 | 9.88  |         | 2,619,072 |                                  |  | 10.12   |  | 2,383,250                       |  |  | 9.02
|                                                                |  |          
|Weighted-average fair value per options granted during the Year |  |           |  |                                 | 5.77  |         |           |                                  |  | 6.36    |  |                                 |  |  | 3.59
|                                                                |  |           |  |                                  |       |         |           |                                  |   |         |  |                                 |  |   |     



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##### Table of Contents

The following table represents weighted-average price and contractual life information regarding significant option
groups outstanding at December 31, 2005:



|                                 |  |                     |  |                                 |       |                                                 |      |        |           |                                |   |      
|-------------------------------- |  | ------------------- |  | ------------------------------- | ----- | ----------------------------------------------- | ---- | ------ | --------- | ------------------------------ | - | -----
|                                 |  | Options Outstanding |  |                                 |       | Options Exercisable                            
|Range of Exercise Prices in
Euro |  | Number              |  | Weighted-Average Exercise Price |       | Weighted-AverageRemainingContractualLife(Years) |      | Number |           | Weighted-AverageExercise Price
|1.16 -   2.98                    |  | 395,670             |  |                                | 1.67  |                                                 | 4.22 |        | 347,095   |                                |  | 1.53 
|3.21 -   5.77                    |  | 832,020             |  |                                | 4.34  |                                                 | 5.59 |        | 678,920   |                                |  | 4.28 
|6.53 -   8.64                    |  | 513,000             |  |                                | 6.91  |                                                 | 5.01 |        | 431,875   |                                |  | 6.70 
|9.07 - 11.91                     |  | 1,551,761           |  |                                | 9.77  |                                                 | 7.93 |        | 467,761   |                                |  | 9.73 
|12.13 - 17.89                    |  | 960,350             |  |                                | 16.68 |                                                 | 4.74 |        | 919,500   |                                |  | 16.81
|24.60 - 59.74                    |  | 79,200              |  |                                | 32.09 |                                                 | 4.95 |        | 79,200    |                                |  | 32.09
|                                 |  |                    
|                                 |  | 4,332,001           |  |                                | 9.59  |                                                 | 6.03 |        | 2,924,351 |                                |  | 9.88 
|                                 |  |                    



17. Stock Appreciation Rights



During 2004 and 2005, the Company issued stock appreciation rights to members of the
Supervisory Board and to certain members of the senior management team. The stock appreciation rights vest upon the marketing approval of satraplatin in the United States or the European Union or both and will be settled in cash. The settlement
price will be determined as of the date of marketing approval and will be calculated on a sixty-day average stock price following the day of approval of satraplatin by either the U.S. Food and Drug Administration (FDA) or the European Agency for the
Evaluation of Medicinal Products (EMEA), depending on the terms specified in the right. Compensation expense for stock appreciation rights, if any, will be accrued and recognized based on the intrinsic value at each balance sheet date beginning
after the marketing approval of satraplatin as the difference between the stock price on the balance sheet date and the stock price on the date of grant. Compensation expense recorded will be equal to the amount of cash ultimately paid to settle the
stock appreciation rights. As of and for the years ended December 31, 2005 and 2004, no liability for stock appreciation rights has been recorded and no compensation expense has been recorded.



The following table summarizes the stock appreciation rights granted to members of the
Supervisory Board and a member of senior management during 2005:



|                  |  |                    |  |             |       |        |        
|----------------- |  | ------------------ |  | ----------- | ----- | ------ | -------
|                  |  | Grant Date         |  | Grant Price |       | Number
|Supervisory Board |  | July 1, 2005       |  |            | 9.03  |        | 86,250 
|Senior Management |  | September 30, 2005 |  |            | 10.38 |        | 100,000
|                  |  |                   
|Total             |  |                    |  |             |       |        | 186,250
|                  |  |                    |  |             |       |        |        



The following table summarizes
the status of stock appreciation rights outstanding as of December 31, 2005:



|             |  |                                     |  |        |  |        
|------------ |  | ----------------------------------- |  | ------ |  | -------
|             |  | Number of stock appreciation rights
|Strike Price |  | Unvested                            |  | Vested |  | Total  
|  9.03      |  | 86,250                              |  | -      |  | 86,250 
|10.22       |  | 86,250                              |  | -      |  | 86,250 
|10.38       |  | 100,000                             |  | -      |  | 100,000
|10.97       |  | 375,000                             |  | -      |  | 375,000
|             |  |                                     |  |        |  |        
|Total        |  | 647,500                             |  | -      |  | 647,500
|             |  |                                     |  |        |  |        



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##### Table of Contents

18. Income Taxes



The Companys loss before income taxes for the years ended December 31, arose in the following jurisdictions (in thousand ):



|                         |  |        |  |        |  |       
|------------------------ |  | ------ |  | ------ |  | ------
|                         |  | 2005   |  | 2004   |  | 2003  
|Germany                  |  | 46,716 |  | 27,127 |  | 16,122
|Other                    |  | 15,491 |  | 12,800 |  | 10,709
|                         |  |        |  |        |  |       
|Loss before income taxes |  | 62,207 |  | 39,927 |  | 26,831
|                         |  |        |  |        |  |       



Deferred tax liabilities and
assets are comprised of the following at December 31 (in thousand ):



|                                                 |  |           |  |         
|------------------------------------------------ |  | --------- |  | --------
|                                                 |  | 2005      |  | 2004    
|Deferred Tax Assets:                             |  |           |  |         
|Net operating loss carryforwards                 |  | 85,108    |  | 63,010  
|Research and development tax credits             |  | 7,338     |  | 6,355   
|Deferred revenue                                 |  | 7,118     |  | -       
|Accrued expenses and losses                      |  | 3,824     |  | 2,160   
|Intangible Assets                                |  | -         |  | 579     
|Plant and Equipment                              |  | 243       |  | 47      
|Other                                            |  | 96        |  | 140     
|Valuation Allowance                              |  | (102,992) |  | (71,909)
|                                                 |  |          
|                                                 |  | 735       |  | 382     
|                                                 |  |          
|Deferred Tax Liabilities:                        |  |           |  |         
|Intangible assets                                |  | (49)      |  | -       
|Marketable securities and short-term investments |  | (686)     |  | (382)   
|                                                 |  |          
|Net deferred taxes                               |  | -         |  | -       
|                                                 |  |           |  |         



The reconciliation of income tax
computed at the statutory rate applicable to the Companys income tax expense for the years ended December 31 is as follows (in thousands of , except percent):



|                                      |  |          |  |         |  |          |  |         |  |          |  |        
|------------------------------------- |  | -------- |  | ------- |  | -------- |  | ------- |  | -------- |  | -------
|                                      |  | 2005     |  | 2004    |  | 2003    
|                                      |  | Amount   |  | Percent |  | Amount   |  | Percent |  | Amount   |  | Percent
|German tax benefit                    |  | (24,497) |  | 39.4%   |  | (15,723) |  | 39.4%   |  | (10,062) |  | 37.5%  
|Costs associated with equity offering |  |         |  | %      |  | (3,647)  |  | 9.1%    |  |         |  | %     
|Non-deductible expenses and others    |  | (4,170)  |  | 6.7%    |  | (3,957)  |  | 9.9%    |  | 3,626    |  | (13.5)%
|Change in tax rate                    |  |         |  | %      |  | (60)     |  | 0.2%    |  | 240      |  | (0.9)% 
|Research and development tax credit   |  | (1,284)  |  | 2.0%    |  | (3,680)  |  | 9.2%    |  | (922)    |  | 3.4%   
|Different tax rate in other countries |  | (1,132)  |  | 1.8%    |  | (193)    |  | 0.5%    |  | (278)    |  | 1.0%   
|Change in valuation allowance         |  | 31,083   |  | (49.9)% |  | 27,260   |  | (68.3)% |  | 7,396    |  | (27.6)%
|                                      |  |         
|Income tax expense                    |  |         |  | %      |  |         |  | %      |  |         |  | %     
|                                      |  |         



As a result of the net losses
incurred by the Company in each year since inception, the Company is in a net deferred tax asset position. Realization of deferred tax assets is dependent upon future taxable income, if any, the timing and amount of which is uncertain. Accordingly,
a valuation allowance has been established against the net deferred tax assets as it is more likely than not that they will not be utilized in the near future.



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##### Table of Contents

For fiscal years ending in 2004 and beyond, a new law is in effect restricting the use of net operating loss (NOL)
carryforwards for German corporation tax and trade tax purposes. The Companys maximum NOL carryforward that may be utilized in any one year is restricted to 60% of the annual taxable income above  1 million. For fiscal years ending before 2004, a NOL carryforward could be utilized without any restrictions to reduce the annual corporate income and trade tax
taxable income to  0. The amount of NOL carryforwards for German corporation and trade tax purposes is  119,897,000 and  119,863,000, respectively. In general, these NOLs do not expire.



As a result of an ownership change in the U.S. subsidiary in 2000, the Company has a limitation of  1,479,000 per year for the losses incurred prior to the change in ownership, on the amount of income that is available to be offset by federal NOL carryforwards
generated in the U.S. The Company has  36,753,000 of net operating losses carried forward that are subject to this limitation.
Generally, federal net operating losses generated in the U.S. can be carried back 2 years and forward 20 years. For net operating losses in tax years beginning before August 6, 1997, taxpayers can carry back a net operating loss 3 years and
forward 15 years. The Company has  76,233,000 of federal NOL carryforwards subject to a 20 year carryforward and  22,191,000 subject to a 15 year carryforward. Federal NOL carryforwards generated in the U.S. expire at various times between the
years 2007 and 2025.



The Company has  55,793,000 of state net operating losses that expire at various times between the years of 2006 and 2012. The Company has  41,268,000 of state NOL carryforwards subject to a 5-year carryforward and  14,525,000 subject to a 7-year carryforward.



The Companys U.S. subsidiary had federal research and development credits of  4,891,000 and state research and development credits of  3,764,000 at
December 31, 2005.



Because the Company has historically incurred
net operating losses, current and deferred tax expense for the years ending December 31, 2005, 2004 and 2003 was  0.



No income taxes are provided for on undistributed earnings of the
foreign subsidiary where those earning are considered to be permanently invested. Total undistributed earnings in such foreign subsidiaries amounted to approximately  0.



As of
December 31, 2005, the statute of limitations for income tax audits in Germany remains open for the tax years ended on or after December 31, 1999 and the statute of limitations for income tax audits in the US and the states of
Massachusetts and New Jersey remains open for the tax years ended on or after December 31, 2001. The German tax authorities currently perform an audit of income tax for the years 1999 through 2003.



19. Loss per Share



Basic loss per ordinary share is based on the weighted-average number of ordinary shares outstanding. For the years ended
December 31, 2005, 2004 and 2003, diluted net loss per ordinary share was the same as basic net loss per ordinary share as the inclusion of weighted-average ordinary shares issuable upon exercise of stock options and convertible bonds would be
antidilutive. The number of potentially dilutive shares excluded from the loss per share calculation due to their antidilutive effect was 2,305,008, 1,902,398 and 1,196,101 for the years ended December 31, 2005, 2004 and 2003, respectively.



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##### Table of Contents

The following table sets forth the computation of basic and diluted loss per share (in thousand , except share and per share data):



|                                                                                         |  |            |  |            |  |           
|---------------------------------------------------------------------------------------- |  | ---------- |  | ---------- |  | ----------
|                                                                                         |  | 2005       |  | 2004       |  | 2003      
|Numerator:                                                                               |  |            |  |            |  |           
|Net loss                                                                                 |  | (62,207)   |  | (39,927)   |  | (26,831)  
|                                                                                         |  |            | 
|Denominator:                                                                             |  |            |  |            |  |           
|Denominator for basic and diluted earnings per share  weighted-average number of shares |  | 29,877,348 |  | 24,950,638 |  | 20,731,535
|                                                                                         |  |           
|Basic and diluted loss per share                                                         |  | (2.08)     |  | (1.60)     |  | (1.29)    
|                                                                                         |  |            |  |            |  |           



20. Shareholders Equity



Ordinary Shares



The holders of the Companys ordinary shares are entitled to one vote for each share held at all meetings of shareholders.
Dividends and distribution of assets of the Company in the event of liquidation are subject to the rights of any then-outstanding ordinary shares. The Company has never declared or paid dividends on any of its ordinary shares and does not expect to
do so in the foreseeable future.



Authorized Shares



To assist management in undertaking strategic activities, capital increases and to
service the stock option plans and convertible bonds, the shareholders of the Company have authorized the future issuance of ordinary shares in specific circumstances with the permission of the Supervisory Board. At December 31, 2005, the total
number of ordinary shares potentially issuable was 23,628,873. The number of ordinary shares authorized for exercise of stock options and convertible bonds was 4,798,409 and 2,707,527, respectively. The number of ordinary shares authorized for the
purpose of potential merger and acquisition activities is 10,122,937, of which up to 7,000,000 new shares can also be issued for future capital increases. The number of ordinary shares authorized for the purposes of potential convertible debt
issuances is 6,000,000.



Subsequent to December 31, 2005 the Company
issued 2,860,000 shares from authorized capital (see Note 22).



Exercise of Stock
Options and Convertible Bonds



During 2005, 2004 and 2003,
several stock option and convertible bondholders exercised some of their fully vested options and convertible bonds, receiving 99,465, 827,119 and 34,295 ordinary shares, respectively.



At December 31, 2003, consultants and employees of the Company had subscribed to 54,630 ordinary shares with a total value of
 214,660, which has been included in shareholders equity. The subscribed shares represent amounts paid for exercises of
stock options for which ordinary shares have not been issued at December 31, 2003. The ordinary shares were subsequently registered on January 19, 2004 and issued shortly after.



Issuance of Shares in Asset Acquisition



On March 2, 2005, the Company purchased the significant assets of Axxima Pharmaceuticals by issuing 1,311,098 ordinary shares (see Note 5). The value of the
transaction was  13,079,000, which consisted of shares 1,311,098 shares valued at  9.80 each plus net transaction costs of  230,000.



F-27



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##### Table of Contents

Sale of Ordinary Shares in Global Equity Offering



On July 2, 2004, the Company successfully concluded a combined equity offering of 7,160,000 new shares to current and new
shareholders at that time. On June 30, 2004, the new shares began trading on the Frankfurt Stock Exchange and the American Depository Shares (ADS) began trading on the NASDAQ stock exchange. The shares were sold at 12.50 in a rights offering and at 12.00
per share and $14.55 per ADS in a global offering and yielded  78.0 million after deducting underwriters fees and
costs. The offering closed and payment for the shares was received on July 2, 2004. Total costs of the transaction were  9,261,000.



Accumulated Other Comprehensive Loss



The balance of the components of accumulated other comprehensive
loss as of December 31, 2005, 2004 and 2003 were as follows (in thousand ):



|                                                 |  |              |  |         |  |        
|------------------------------------------------ |  | ------------ |  | ------- |  | -------
|                                                 |  | December 31,
|                                                 |  | 2005         |  | 2004    |  | 2003   
|Unrealized gain on available-for-sale securities |  | (187)        |  | 497     |  | 651    
|Accumulated translation adjustments              |  | (1,906)      |  | (3,229) |  | (2,753)
|                                                 |  |             
|Total accumulated other comprehensive loss       |  | (2,093)      |  | (2,732) |  | (2,102)
|                                                 |  |             



21. Employee Benefit Plan



GPC Biotech Inc. has a defined contribution plan qualified under the provisions of the
Internal Revenue Code section 401(k). All individuals who are employed by GPC Biotech Inc. are immediately eligible for enrollment in the plan. GPC Biotech Inc. contributes 50% of the first 4% of annual compensation contributed by each participant.
Contributions are fully vested immediately. Costs of the plan, including the matching contribution, charged to operating expenses amounted to  144,000,  133,000 and  88,000 in 2005, 2004 and 2003, respectively.



22. Subsequent event



On February 23, 2006, the
Company issued 2,860,000 new ordinary shares at  12.67 per share for a total amount of  36.2 million through a private placement.



F-28



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##### Table of Contents

Exhibit Index



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|1              |  | Articles of Association of GPC Biotech AG (English translation).                                                                                                                                                                                                                                                                                                                                                                                                                              
|               | 
|2.1            |  | Form of Deposit Agreement between GPC Biotech, The Bank of New York, as depositary, and all registered holders and beneficial owners from time to time of American Depositary Receipts issued thereunder,
including the form of American Depositary Receipt.*                                                                                                                                                                                                                                 
|               | 
|2.2            |  | The total amount of long-term debt securities GPC Biotech authorized under any instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. GPC
Biotech agrees to furnish to the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of GPC Biotech or its subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed.
|               | 
|4.1            |  | Co-Development and License Agreement, dated September 30, 2002, by and between NeoTherapeutics, Inc. and GPC Biotech AG.*                                                                                                                                                                                                                                                                                                                                                                     
|               | 
|4.2            |  | Collaboration and License Agreement, dated April 15, 1999, by and between GPC AG-Genome Pharmaceuticals Corporation and MorphoSys AG.*                                                                                                                                                                                                                                                                                                                                                        
|               | 
|4.3            |  | Amendment to Collaboration and License Agreement, dated December 4, 2000, by and between GPC Biotech AG (formerly GPC AG-Genome Pharmaceuticals Corporation) and MorphoSys AG.*                                                                                                                                                                                                                                                                                                               
|               | 
|4.4            |  | Amendment to Collaboration and License Agreement, dated February 23, 2004, by and between GPC Biotech AG (formerly GPC AG-Genome Pharmaceuticals Corporation) and MorphoSys AG.*                                                                                                                                                                                                                                                                                                              
|               | 
|4.5            |  | Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated June 2, 1997, by and between Mitotix, Inc. and the DuPont Merck Pharmaceuticals Company.*                                                                                                                                                                                                                                                                                                            
|               | 
|4.6            |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated April 3, 2000, by and between Mitotix, Inc. and The DuPont Pharmaceuticals
Company.*                                                                                                                                                                                                                                                                                                    
|               | 
|4.7            |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated July 30, 2000, by and between Mitotix, Inc. and The DuPont Pharmaceuticals
Company.*                                                                                                                                                                                                                                                                                                    
|               | 
|4.8            |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated October 1, 2000, by and between Mitotix, Inc. and The DuPont Pharmaceuticals
Company.*                                                                                                                                                                                                                                                                                                  
|               | 
|4.9            |  | Amendment to Amended and Restated Collaborative, Research, Development and Marketing Agreement, dated December 28, 2000, by and between Mitotix, Inc. and Bristol-Myers Squibb Pharma
Company.*                                                                                                                                                                                                                                                                                               
|               | 
|4.10           |  | Collaboration and License Agreement, dated as of November 1, 2001, by and between BYK Gulden Lomberg Chemische Fabrik GMBH and GPC Biotech AG.*                                                                                                                                                                                                                                                                                                                                               
|               | 
|4.11           |  | Amendment to Collaboration and License Agreement, dated as of June 30, 2002, by and between BYK Gulden Lomberg Chemische Fabrik GMBH and GPC Biotech AG.*                                                                                                                                                                                                                                                                                                                                     
|               | 
|4.12           |  | Amendment to Collaboration and License Agreement, dated January 31, 2003, by and between ALTANA Pharma AG (formerly BYK Gulden Lomberg Chemische Fabrik GMBH) and GPC Biotech AG.*                                                                                                                                                                                                                                                                                                            



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|     |  |                                                                                                                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.13 |  | Hybrid Collaboration and License Agreement dated as of January 31, 2003, by and between ALTANA Pharma AG and GPC Biotech AG.*                                                                   
|     | 
|4.14 |  | Co-Development and License Agreement by and between GPC Biotech AG and Pharmion GmbH, dated December 19, 2005.(1)                                                                               
|     | 
|4.15 |  | Supply Agreement by and between GPC Biotech AG and Pharmion GmbH, dated December 19, 2005.(1)                                                                                                   
|     | 
|4.16 |  | Asset Purchase Agreement between GPC Biotech AG (as successor to Blitz 05-001 GmbH) and Rechtsanwalt Dr. Joseph Füchsl as Insolvency Receiver of Axxima Pharmaceuticals AG, dated March 2,
2005.
|     | 
|4.17 |  | Service Agreement (Vorstandsvertrag) with Dr. Bernd Seizinger dated June 1, 2003 (English translation).*                                                                                        
|     | 
|4.18 |  | Addendum to Service Agreement with Dr. Bernd Seizinger dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*              
|     | 
|4.19 |  | Service Agreement (Vorstandsvertrag) with Dr. Mirko Scherer dated September 1, 2003 (English translation).*                                                                                     
|     | 
|4.20 |  | Addendum to Service Agreement with Dr. Mirko Scherer dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*                
|     | 
|4.21 |  | Service Agreement (Vorstandsvertrag) with Dr. Sebastian Meier-Ewert dated March 5, 2004 (English translation).*                                                                                 
|     | 
|4.22 |  | Addendum to Service Agreement with Dr. Sebastian Meier-Ewert dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*        
|     | 
|4.23 |  | Service Agreement (Vorstandsvertrag) with Dr. Elmar Maier dated March 5, 2004 (English translation).*                                                                                           
|     | 
|4.21 |  | Addendum to Service Agreement with Dr. Elmar Maier dated May 1, 2003 relating to revised severance benefits upon a change in control of GPC Biotech AG (English translation).*                  
|     | 
|4.22 |  | Stock Option Plan 2005 (English translation).                                                                                                                                                   
|     | 
|4.23 |  | Stock Option Plan 2004 (English translation). **                                                                                                                                                
|     | 
|4.24 |  | Stock Option Plan 2002 (English translation).*                                                                                                                                                  
|     | 
|4.25 |  | Stock Option Plan 2001 (English translation).*                                                                                                                                                  
|     | 
|4.26 |  | Stock Option Plan 2000 (English translation).*                                                                                                                                                  
|     | 
|4.27 |  | Option Terms dated September 1999 (English translation).*                                                                                                                                       
|     | 
|4.28 |  | Option Terms for 1997 (English translation).*                                                                                                                                                   
|     | 
|4.29 |  | 2005 Incentive Stock Option Plan.                                                                                                                                                               
|     | 
|4.30 |  | 2004 Incentive Stock Option Plan.                                                                                                                                                               
|     | 
|4.31 |  | 2002 Incentive Stock Option Plan.*                                                                                                                                                              
|     | 
|4.32 |  | 2001 Incentive Stock Option Plan.*                                                                                                                                                              
|     | 
|4.33 |  | 2000 Incentive Stock Option Plan.*                                                                                                                                                              
|     | 
|4.34 |  | 1999 U.S. Incentive Stock Option Plan.*                                                                                                                                                         



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|     |  |                                                                                                                                                                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.35 |  | Convertible Bonds Terms and Conditions for executives (Führungskräfte) as well as employees and consultants of the Company and its affiliated subsidiary companies (nachgeordnete
verbundene Unternehmen) in Germany and abroad,dated June 8, 2005.
|     | 
|4.36 |  | Convertible Bonds Terms and Conditions for Managers of the Company and Management Bodies and Managers of Second-Tier Domestic and Foreign Affiliated Enterprises dated September 30, 2004.
**                                                      
|     | 
|4.37 |  | Convertible Bonds Terms and Conditions for Managers of the Company and Management Bodies and Managers of Second-Tier Domestic and Foreign Affiliated Enterprises as well as for Consultants dated May 21,
2003.*                                   
|     | 
|4.38 |  | Convertible Bonds Terms and Conditions for Managers of the Company and Management Bodies and Managers of Second-Tier Domestic and Foreign Affiliated Enterprises as well as for Consultants dated May 20,
2003.*                                   
|     | 
|4.39 |  | Convertible Bonds Terms and Conditions for Members of the Supervisory Board dated October 9, 2001 (English translation).*                                                                                                                          
|     | 
|4.40 |  | Convertible Bonds Terms and Conditions for Members of the Supervisory Board dated May 26, 2003 (English translation).*                                                                                                                             
|     | 
|4.41 |  | Terms and Conditions for Stock Appreciation Rights granted to members of the Supervisory Board in 2005                                                                                                                                             
|     | 
|4.42 |  | Terms and Conditions for Stock Appreciation Rights granted to members of the Supervisory Board in 2004. **                                                                                                                                         
|     | 
|4.42 |  | Transfer Agreement between Credit Suisse First Boston International, Dr. Bernd Seizinger and GPC Biotech AG dated November 15, 2001.*                                                                                                              
|     | 
|8    |  | Subsidiaries of the Registrant.*                                                                                                                                                                                                                   
|     | 
|12.1 |  | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                        
|     | 
|12.2 |  | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                        
|     | 
|13.1 |  | Certification of the Principal Executive Officer in accordance with 18 U.S.C. Section 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                            
|     | 
|13.2 |  | Certification of the Principal Financial Officer in accordance with 18 U.S.C. Section 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                            
|     | 
|14.1 |  | Consent of Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, independent registered public accounting firm.                                                                                                                                       



|* | Incorporated by reference from the Registrants Form F-1 (No. 333-116303) filed June 9, 2004.
|- | ---------------------------------------------------------------------------------------------

|** | Incorporated by reference from the Registrants Form 20-F (No. 001-117629) filed March 31, 2005
|-- | -----------------------------------------------------------------------------------------------

|(1) | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the SEC pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



3