UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from            to


Commission file number: 001-33277

SYNTA PHARMACEUTICALS CORP.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

04-3508648(I.R.S. Employer Identification No.)45 Hartwell Avenue
Lexington, Massachusetts(Address of principal executive offices)

02421(Zip Code)


Registrant's
telephone number, including area code(781) 274-8200

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

Title of each class

Name of each exchange on which registeredCommon Stock, $0.0001 Par Value Per Share

The NASDAQ Stock Market LLC


Securities
registered pursuant to Section 12(g) of the Exchange Act:None.

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes o    No ý

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 ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company ý


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

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant (without admitting that any person whose shares
are not included in such calculation is an affiliate), computed by reference to the price at which the common stock was last sold on June 30, 2010, the last business day of the registrant's
most recently completed second fiscal quarter, was $61,839,072.

As
of March 4, 2011 the registrant had 42,166,779 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into the following parts of this Annual Report on Form 10-K: Certain
information required in Part III of this Annual Report on Form 10-K is incorporated from the registrant's Proxy Statement for the 2011 Annual Meeting of Stockholders to be
held on May 26, 2011.



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PART I

Item 1.    BUSINESS

The Company

Synta Pharmaceuticals Corp. is a biopharmaceutical company focused on discovering, developing, and commercializing small molecule drugs
to extend and enhance the lives of patients with severe medical conditions, including cancer and chronic inflammatory diseases. We have two drug candidates in clinical trials for treating multiple
types of cancer and several drug candidates in the preclinical stage of development. Each of our drug candidates was discovered and developed internally using our proprietary, unique chemical compound
library and integrated discovery engine. We have granted Hoffman-La Roche, or Roche, an exclusive license to develop and commercialize certain compounds from our calcium release activated
calcium modulator, or CRACM, program resulting from our research partnership with them. We retain full ownership of all of our other drug candidates.

In
2010, we made significant progress in advancing our drug candidates and achieved a number of other important milestones in our other programs, including:



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We
believe that our competitive advantages include:



We
believe that these competitive advantages provide us with multiple, sustainable growth opportunities.

Company Strategy

Our strategy is to discover, develop, and commercialize novel small molecule drug candidates for treating severe medical conditions,
including cancer and chronic inflammatory diseases, using our unique collection of assets, technologies, and capabilities in drug discovery and development. Important elements of our
long-term strategy include:



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Our Drug Candidate Pipeline

The following table summarizes the current status of our most advanced research and development programs:

Product Candidate

Disease

Stage

Development StatusOncology

GanetespibHsp90 inhibitor(Company-Sponsored Phase 2,
Phase 3 Trials)

Non-small cell lung cancer

Phase 2b/3

Expect to initiate in Q2 2011Non-small cell lung cancer

Phase 2

OngoingGastrointestinal stromal tumors

Phase 2

OngoingHematologic cancers (once per week administration)

Phase 1/2

Ongoing(Investigator-Sponsored
Phase 2 Trials)

Colorectal cancer

Phase 2

OngoingGastric cancer

Phase 2

OngoingSmall cell lung cancer

Phase 2

OngoingOcular melanoma

Phase 2

OngoingPancreatic cancer

Phase 2

OngoingProstate cancer

Phase 2

OngoingBreast cancer

Phase 2

OngoingHepatocellular (liver) cancer

Phase 1/2

Ongoing(Phase 1 trials)

Solid tumors in combination with docetaxel

Phase 1

OngoingHematologic cancers (twice per week administration)

Phase 1

OngoingSolid tumors (once per week administration)

Phase 1

OngoingSolid tumors (twice per week administration)

Phase 1

OngoingAdditional Hsp90 inhibitors

Cancer

Preclinical development

OngoingElesclomolMitochondria-targeting agent

Non-small cell lung cancer

Phase 2b

Expect to initiate in Q2 2011Ovarian cancer

Phase 2

OngoingAcute myeloid leukemia

Phase 1

OngoingSTA-9584Vascular disrupting agent

Prostate cancer

Preclinical development

OngoingInflammatory Diseases

CRACM channel inhibitors

Autoimmune diseases
Respiratory conditions
Transplant

Preclinical development

OngoingIL-12/23 inhibitors

Autoimmune diseases

Lead optimization

Ongoing


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We have granted Roche an exclusive license to develop and commercialize certain compounds from our CRACM program resulting from our research
partnership with them, which ended in December 2010. We retain full ownership of all of our other drug candidates.

In
the above table and throughout this report, lead optimization indicates a stage at which compounds have shown activity, selectivity, and efficacy in animal models, as well as an
acceptable preliminary safety profile. These compounds are being optimized for selectivity and potency, drug-like properties, and safety before entering into preclinical development.
Preclinical development activities include manufacturing, formulation, pharmacology and full toxicology studies prior to initiating a Phase 1 clinical trial. Phase 1 indicates initial
clinical safety testing and pharmacological profiling in healthy volunteers, with the exception that Phase 1 clinical trials in oncology are typically performed in patients with cancer.
Phase 2 involves efficacy testing and continued safety testing in patients with a specific disease. There are multiple types of Phase 2 trials: Phase 2 trials may include a
Phase 1 dose-escalation stage (Phase 1/2); they may be single-arm, with relatively few patients (Phase 2a); or they may be randomized and controlled, with
a larger number of patients (Phase 2b). Phase 3 indicates a confirmatory study of
efficacy and safety in a larger patient population, and may involve comparison with placebo, standard treatments, or other active comparators.

Oncology Programs

We have two clinical-stage programs and one preclinical-stage program in oncology:



Oncology Background

Cancers are diseases characterized by abnormal and uncontrolled cell growth and division, typically leading to tumor formation. As a
tumor grows, it can directly disrupt organ function at its site of origin. In addition, cancer cells can also spread to other organs, such as the brain, bones and liver, by a process called
metastasis. The growth of metastatic tumors at these new sites can disrupt the function

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of
other organs. There are many kinds of cancer, but all are characterized by uncontrolled growth of abnormal cells.

The
World Health Organization estimates that more than 12 million people are diagnosed with cancer every year worldwide, and approximately 8 million people die from the
disease annually. The American Cancer Society estimates that approximately 1.5 million people in the United States were diagnosed with cancer in 2009, and approximately 562,000 people will die
from the disease.

According
to a 2009 IMS health report, oncology products are the largest therapeutic class of pharmaceuticals in the world with global sales of $52.4 billion in 2009.

Ganetespib (Hsp90 Inhibitor)

Ganetespib is a potent, synthetic inhibitor of Hsp90. Many of the known oncogenic proteins that play major roles in pathogenesis of
solid tumor and hematologic malignancies are client proteins of Hsp90. By inhibiting Hsp90, ganetespib causes the degradation of these client proteins and the subsequent death of cancer cells
dependent on these proteins. Ganetespib has shown potent anticancer activity in a broad range of solid and hematologic cancers bothin vitroand in vivo,
including cancers resistant to targeted agents and chemotherapies.

In
clinical trials to date, ganetespib has shown encouraging evidence of clinical activity, including prolonged tumor shrinkage in patients who have progressed after, or failed to
respond to, treatment with commonly-used drugs for these tumors. Currently, over 350 patients have been treated with ganetespib across all trials. Ganetespib has been well tolerated to
date, with no evidence of the serious liver or common ocular toxicities seen with other Hsp90 inhibitors. The most common
adverse event seen with ganetespib is diarrhea, which has been manageable and reversible with standard supportive care.

Ganetespib's Mechanism of Action

Ganetespib potently inhibits Hsp90, a chaperone protein required for the proper folding and activation of other cellular proteins,
particularly kinases. Many of these "client proteins" of Hsp90such as AKT, BCR-ABL, BRAF, KIT, MET, EGFR, FLT3, HER2, PDGFRA, VEGFRhave been shown to be critical
to cancer cell growth, proliferation, and survival and are the targets of clinically validated and approved cancer drugs, such as Gleevec, Avastin, Herceptin, Sutent, Nexavar, Tarceva, and Erbitux. In
preclinical studies, inhibiting Hsp90 causes the degradation of multiple client proteins and leads to cancer cell death.

Ganetespib Preclinical Results

Experiments conducted by us and by our collaborators at the Dana-Farber Cancer Institute, Brigham and Women's Hospital in
Boston, University of Massachusetts Medical School in Worcester, The Ohio State University, University of Texas Health Center at San Antonio, and others have shown that
ganetespib:



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Ganetespib Clinical Trials



We initiated a series of Phase 1, open-label trials in patients with solid-tumor and hematologic cancers to identify
the maximum tolerated dose, or MTD, of ganetespib based on once-weekly and twice-weekly intravenous dosing schedules. Preliminary results were presented at the meeting of the American
Society of Clinical Oncology, or ASCO, 2010 for the solid-tumor trials and at the meeting of the American Society of Hematology, or ASH, 2010 for the hematologic cancer trials.

We
observed encouraging signs of clinical activity in these trials including durable tumor shrinkage or confirmed Response Evaluation Criteria in Solid Tumors, or RECIST, responses in
patients with lung cancer, renal cancer, Gleevec-resistant GIST, melanoma, triple-negative breast cancer and colorectal cancer. These patients had progressed on, or failed to respond to, numerous
prior therapies, including chemotherapies such as carboplatin and paclitaxel, and targeted agents such as Avastin, Sutent, Gleevec and Tarceva. Certain patients have remained on treatment with
ganetespib for over one year.

A
maximum tolerated dose of 216 mg/m2 was established in the solid tumor Phase 1 study with once-weekly dosing schedule and 200 mg/m2 was
chosen as the recommended Phase 2 dose. The most commonly reported adverse event across these trials was diarrhea, which was manageable and reversible. There was no evidence of the serious
liver or common ocular toxicities seen with other Hsp90 inhibitors.



In December 2009, we initiated a Phase 2 trial for ganetespib, administered as monotherapy in patients with advanced NSCLC who
have progressed on, or failed to respond to, prior treatments. In September 2010, we announced the expansion of this trial from up to 69 patients to up to 146 patients. We decided to expand the trial
based on encouraging activity observed in the first stage of the two stage clinical trial in patients having tumors with a specific genetic profile, namely the EGFR and KRAS wild type mutational
status. In addition, a new patient cohort was created to allow certain patients from the trial who had received treatment with ganetespib and were showing a mixed responsefor example,
shrinkage of certain tumor lesions, but growth of other tumor lesionsto continue treatment with ganetespib while adding treatment with docetaxel to the regimen.

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In February 2011, we presented preliminary results from patients with EGFR and KRAS wild type tumors. Of 33 evaluable patients, 22 showed target lesion stabilization (growth
<20% at 8 weeks); 10 showed target lesion tumor shrinkage; and three showed confirmed partial responses per RECIST criteria (target lesion shrinkage >30%). The observed tumor
responses were durable, with the three patients all continuing to receive treatment, two having been on treatment for six months and one for fourteen months. We believe that these results demonstrate
that ganetespib is clinically active, as a single agent, in patients with advanced relapsed or refractory NSCLC.

A
favorable safety profile was also observed in this patient population. The highest incidence of treatment-related grade 3 or 4 adverse events, or AEs, were fatigue (8%), diarrhea (6%)
and insomnia (6%). The most common adverse event was diarrhea, which was manageable and reversible. There was no evidence of the serious liver or common ocular toxicities seen with other Hsp90
inhibitors. This differentiated safety profile relative to other Hsp90 inhibitors is consistent with Phase 1 results and results from our other ongoing clinical trials with ganetespib,
constituting over 350 patients treated to date.

This
Phase 2 NSCLC trial of ganetespib is ongoing. Additional results from this trial are expected to be presented by mid-2011.

In
addition to the Phase 2 NSCLC trial, two other company-sponsored clinical trials of ganetespib have been initiated to date: a Phase 1/2 clinical trial in hematologic
cancers with a once-a-week dosing schedule and a Phase 2 clinical trial in GIST. While ganetespib showed some evidence of clinical activity in these trials, our
near-term plans for company-sponsored trials are focused on advancing ganetespib in NSCLC. We are in discussions to continue development of ganetespib in GIST and hematologic cancers in
investigator-sponsored or cooperative-group-sponsored trials.

In
2010, we also began collaborating with a number of clinical investigators to develop plans for testing ganetespib in specific tumor types in several different investigator-sponsored
trials, or ISTs. An IST is a clinical trial conducted with an institution in which the principal investigator makes the regulatory filings and is responsible for the conduct of the trial,
including adverse event reporting, data collection and analysis. ISTs typically enroll a relatively small number of patients and are limited to one or a few clinical sites. While we have less control
over the conduct of ISTs compared to company sponsored trials, ISTs tend to be considerably less expensive than company sponsored clinical trials.

Eight
ganetespib ISTs have been initiated to date, including Phase 2 trials in colorectal cancer, gastric cancer, small cell lung cancer, ocular melanoma, pancreatic cancer,
prostate cancer, and breast cancer. In addition, a Phase 1/2 IST was initiated in hepatocellular (liver) cancer. We expect initial results from certain of these ISTs in the second half
of 2011.

In
January 2011, we announced that the MMRF will provide funding of up to $1 million for a Phase 1 trial evaluating ganetespib as a single agent and in combination with
Velcade for the treatment of relapsed multiple myeloma. We expect this trial to begin in the second half of 2011. We expect to initiate several additional ISTs in 2011 that will evaluate ganetespib in
other tumor types or in combination with additional chemotherapy or targeted agents.

Many
of the clinical and preclinical results described above were presented at recent scientific meetings including the 8th Annual International Symposium on Targeted Anticancer
Therapies (March 2010), April 2010 AACR meeting, ASCO 2010, 11th International Lung Cancer Congress (July 2010), 22nd EORTC-NCI-AACR Symposium on Molecular
Targets and Cancer Therapeutics (November 2010), the December 2010 ASH meeting, 33rd Annual San Antonio Breast Cancer Symposium (December 2010), and the 11th Annual Targeted Therapies of
the Treatment of Lung Cancer meeting (February 2011).

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Future Plans for Ganetespib

Our future plans for ganetespib focus on advancing this drug candidate broadly along five dimensions:











Phase 2b/3 Trial in NSCLC

We are planning to initiate a Phase 2b/3 trial in NSCLC of ganetespib plus docetaxel versus docetaxel alone in the second
quarter of 2011. This trial is being designed as a registration-enabling program with two stages. The first stage is an approximately 240 patient Phase 2b portion designed to establish the
clinical benefit and safety profile of ganetespib in combination with docetaxel relative to docetaxel alone. This part of the trial will be used to build the clinical and operational experience needed
to optimize the design of the second stage, Phase 3 portion of the trial. For example, we may use information obtained in the Phase 2b stage of the trial to refine patient
inclusion/exclusion criteria to enrich the Phase 3 portion with those patients that show the greatest benefit from the addition of

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ganetespib.
The second stage, Phase 3 portion of the trial is expected to enroll between 400 to 600 patients.

We
expect interim results from the first stage, Phase 2b portion of the trial by the end of 2011 or early 2012; with final results expected later in 2012. We expect interim
results from the second stage, Phase 3 portion of the trial by the end of 2012 or early 2013; with final results expected later in 2013. We will discuss additional trial design details as the
trial starts.

Additional Hsp90 Inhibitors

We are currently developing a new series of Hsp90 inhibitor compounds that may be orally administered and may be more suitable for
long-term treatment settings, such as adjuvant or maintenance therapy in oncology. We have also characterized additional small molecule, injectable Hsp90 inhibitors that provide options
for future development. These compounds are in the lead optimization stage.

Elesclomol (Mitochondria-Targeting Agent)

Elesclomol is a first-in-class, investigational drug candidate that triggers programmed cell death, or
apoptosis, in cancer cells through a novel mechanism: disrupting cancer cell energy metabolism by selectively targeting the electron transport chain in cancer cell mitochondria.

Elesclomol's Mechanism of Action

Our preclinical data suggests that upon infusion, elesclomol binds copper in plasma, causing a structural change enabling its uptake
through membranes and into cells. Elesclomol binds copper in a positively charged state called Cu(II). Once inside mitochondria, the elesclomol-Cu(II) complex interacts with the energy
production mechanism of the cell, or the electron transport chain. This interaction reduces the copper from Cu(II) to Cu(I), resulting in a cascade of reduction-oxidation, or redox, reactions, that
causes a rapid increase of oxidative stress, disruption of mitochondrial energy production, and ultimately, triggering of the mitochondrial apoptosis pathway. Although mitochondria generate energy for
cells, they can induce apoptosis under certain conditions, such as high levels of oxidative stress. By increasing oxidative stress inside mitochondria and inducing apoptosis, we believe that
elesclomol attacks cancer cells through a new mechanism that may provide a means to overcome resistance to traditional chemotherapy or targeted therapy. Elesclomol has shown potent
cancer-cell killing activity against a broad range of cancersin vitro, and synergistic anti-cancer activity with paclitaxel and
other agents in animal models of cancer.

LDH: A Potential Predictive Biomarker for Elesclomol Activity

LDH is an enzyme that plays a key role in cancer cell energy metabolism. Under normal oxygen, or normoxic, conditions, energy in tumors
is primarily generated by conversion of nutrients to adenosine triphosphate, or ATP, in the mitochondria, with oxygen as a key component of this process. Levels of LDH generally remain in the normal
range in this state. Under low oxygen, or hypoxic, conditions, energy in tumors is primarily generated by glycolysis in the cytoplasm, and levels of LDH may increase. Accordingly, LDH can be used as a
marker of mitochondrial activity, or tumor cell metabolic state.

Elesclomol
has been shown to have potent anti-cancer activity in a broad range of cancer types under normoxic conditions in which LDH level is low to normal. Under hypoxic
conditions, where LDH levels are elevated, elesclomol's ability to disrupt oxygen-mediated energy production has limited effect, and elesclomol loses anti-cancer activity. Accordingly, we
believe that elevated LDH levels can serve as a predictive indicator of which patients are unlikely to benefit from treatment with elesclomol.

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Clinical
observations have been consistent with the preclinical findings that elesclomol activity depends on metabolic state at the cellular level. In three randomized trials, in a total
of over 800 patients, elesclomol showed clinical activity that correlated with baseline level of LDH. Benefit was seen only in patients with the low to normal levels of LDH associated with normoxic
conditions.

The
following chart summarizes the results of the three randomized, controlled, multi-center trials of elesclomol illustrating the differential response seen in high (LDH>1xULN) LDH
patients versus low (LDH<0.8xULN) LDH patients:

ElesclomolPh 3
melanoma
Paclitaxel +/-
elesclomol;
1:1 randomization*

ElesclomolPh 2b
NSCLC
Carboplatin +
paclitaxel +/-
elesclomol;
86 patients;
1:1 randomization

ElesclomolPh 2b
melanoma
Paclitaxel +/-
elesclomol;
78 patients;
2:1 randomizationMedian
PFS (mo.)



Median
PFS (mo.)



Median
PFS (mo.)N

P+E vs. P

N

CP+E vs. CP

N

P+E vs. PLDH<0.8x ULN

174

4.3 vs. 3.1

35

4.6 vs. 3.1

32

7.1 vs. 3.5LDH>1x ULN

153

1.8 vs. 2.0

27

2.8 vs. 6.3

34

1.7 vs. 1.6


*Phase 3
Melanoma trial: Data as of March 9, 2010 (ASCO 2010 presentation) for all patients enrolled as of November 1, 2008 (N=422 out of
651 total enrolled): those patients who had the opportunity to receive four cycles of treatment prior to February 25, 2009 study termination. LDH <1x or >1x was
pre-specified stratification variable. Trial achieved primary PFS endpoint in the pre-specified LDH<1x population ITT analysis (p=0.036)


In
our ongoing and planned studies with elesclomol, we anticipate enrolling only patients with low to normal LDH levels, as these are the patients we believe are most likely to derive
benefit from treatment with elesclomol.

In
clinical trials to date, the most common adverse events in the elesclomol plus paclitaxel groups included fatigue, alopecia, constipation, nausea, hypoaesthesia, arthralgia, insomnia,
diarrhea, and anemia.

Our
current clinical program for elesclomol includes a clinical trial of elesclomol as a monotherapy in AML. In December 2009, we presented results at the American Society for
Hematology, or ASH, meeting showing that elesclomol was highly active against AML cell lines and primary blast cells from AML patients. In February 2011, we announced that the first patient had been
treated in a Phase 1 dose escalation study of elesclomol as a single agent in patients with AML. This trial will enroll up to
36 patients with relapsed or refractory AML and total baseline serum LDH level less than 0.8 times ULN. Patients will be treated with elesclomol sodium on a once-weekly schedule at a
starting dose of 200 mg/m2, with dose escalation planned based on safety, tolerability and pharmacokinetic considerations. The trial is being conducted at Princess Margaret Hospital in Toronto, Canada
and at Memorial Sloan-Kettering Cancer Center in New York.

We
are also evaluating the use of elesclomol in combination with paclitaxel in ovarian cancer. In March 2011, the Gynecological Oncology Group, or GOG, initiated a Phase 2
clinical trial of elesclomol in combination with paclitaxel for the treatment of persistent or recurrent ovarian, fallopian tube or primary peritoneal cancer for patients with total baseline serum LDH
level less than 0.8 times ULN. The GOG is a non-profit organization with the purpose of promoting excellence in the quality and integrity of clinical and basic scientific research in the
field of gynecologic malignancies. The National Cancer Institute, or NCI, is providing financial support of up to approximately $300,000 for the trial through its Cancer Therapy Evaluation Program, or
CTEP.

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In
the second quarter of 2011, we plan to initiate a Phase 2b trial for elesclomol in NSCLC with a trial design similar to our prior Phase 2b trial for elesclomol in NSCLC.
This new trial, which is expected to enroll approximately 180 patients, would prospectively specify that only patients with low to normal LDH levels will be enrolled. This trial will include a
dose-escalation and safety portion to optimize the dose selection for the Phase 2b portion. We expect the randomized Phase 2b portion to begin in the fourth quarter of 2011.

STA-9584 (Vascular Disrupting Agent)

STA-9584 is a novel, injectable, small molecule compound that appears to disrupt the blood vessels that supply tumors with
oxygen and essential nutrients. In animal models, STA-9584 has been shown to target both new and established tumor blood vessels, in contrast to the mechanism of action of angiogenesis
inhibitors such as Avastin, which only prevent the formation of new tumor vasculature. STA-9584 has shown strong anti-tumor activity in a broad range of preclinical cancer
models, including prostate, lung, breast, melanoma, and lymphoma. These models have shown that STA-9584 may kill tumor cells directly, in addition to disrupting established tumor blood
vessels. This program is currently in preclinical development, with a focus in prostate cancer.

STA-9584's Mechanism of Action

STA-9584 is among a class of compounds known as Vascular Disrupting Agents, or VDAs. In preclinical models,
STA-9584 efficiently kills both cancer cells in tumors as well as the endothelial cells that form blood vessels in tumors, without affecting the vasculature of non-tumor
tissues. The inhibition of angiogenesis and disruption of existing tumor vasculature can prevent transport of oxygen and essential nutrients needed by tumors, and lead to substantial tumor shrinkage,
particularly in bulky tumors that rely heavily on blood vessels for survival.

First
generation angiogenesis inhibitors, such as Avastin, work primarily by preventing the formation of new tumor vessels. In contrast, STA-9584 disrupts both new and
established tumor vessels. STA-9584's more complete anti-vasculature mechanism, together with complementary direct cancer-cell killing, have potential to be
important advantages relative to first generation angiogenesis inhibitors and other endothelial cell-targeted agents.

STA-9584 Development Plans

In November 2010, we announced that the DoD recommended funding of STA-9584 for study in advanced prostate cancer. Under
the DoD Prostate Cancer Research Program (PCRP) of the Office of the Congressionally Directed Medical Research Programs (CDMRP), STA-9584 was approved for a grant of approximately
$1 million. We anticipate initiating work supported by this grant during the first half of 2011.

Our Inflammatory Disease Programs

We have two preclinical-stage programs focusing on treatments for inflammatory diseases. Both of these programs focus on oral,
disease-modifying drug candidates that act through novel mechanisms and could potentially target multiple indications.

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Inflammatory Disease Background

Inflammatory diseases are typically caused by aberrant activity of the immune system. The immune system normally protects the body from
injury and infection, but in autoimmune diseases it attacks and damages the body's own tissues. Major autoimmune diseases include rheumatoid arthritis, or RA, psoriasis, Crohn's disease, and multiple
sclerosis.

Despite
the availability of numerous therapeutic options for these diseases, inflammatory diseases remain major causes of impairment of daily activities, reduced quality of life,
significant disability, and sometimes death. Current therapeutic treatments for chronic inflammatory diseases have the potential to cause musculoskeletal, endocrine, neurologic, and metabolic side
effects, which can limit their long-term use. The limitations of conventional treatments, together with a growing understanding of the pathogenesis of inflammatory diseases, have
stimulated significant interest in the development of targeted immune modulators for the management of chronic inflammatory diseases.

CRACM Ion Channel Inhibitors

Ion channels, the gateways in cell membranes that regulate the flow of ions into and out of cells, play important roles in cell
signaling. Certain ion channels allow electrically excitable cells, such as neurons or muscle cells, to discharge. Drugs that modulate these ion channels have proven to be a successful therapeutic
category, with dozens of such drugs on the market and commonly prescribed for the treatment of various neurological and cardiovascular disorders. Our CRACM research program targets an ion channel that
is believed to play a key role specifically in immune cells rather than in neurons or muscle cells. The CRACM ion channel is the primary route for
calcium entry into T cells and other immune cells, regulating multiple immune cell processes important for initiating and maintaining an inflammatory immune response. CRACM channels regulate the
calcium signaling pathway driving immune cell activation and secretion of TNFalpha, IL-2, and other inflammatory factors. The therapeutic importance of inhibiting this calcium signaling
pathway has been demonstrated through clinical experience with calcineurin inhibitors, such as cyclosporine, which are potent immunomodulators but have significant toxicities due to the broad role
calcineurin plays in nonimmune cells. In contrast to calcineurin, CRACM channels are believed to be critical exclusively to immune cell function. CRACM inhibitors therefore have the potential to
achieve potent anti-inflammatory activity with an improved safety profile, creating the potential for a new category of disease-modifying agents comparable to biologic agents, such as
TNF-alpha inhibitors, but orally available.

We
have developed novel, small molecule inhibitors of CRACM ion channels expressed on immune cells. Our CRACM ion channel inhibitors have shown strong antiinflammatory activity in
preclinical studies bothin vitroandin vivo, inhibiting T cell and mast cell activity, including
cytokine release, degranulation, and immune cell proliferation. Potential applications include a wide range of inflammatory diseases and disorders for which modulating T cell and mast cell function
has been shown to be critical, including RA, asthma, chronic obstructive pulmonary disease, or COPD, allergy, transplant rejection, and other autoimmune diseases and inflammatory conditions. As part
of our strategic alliance with Roche, Roche is advancing several compounds in preclinical development.

We
also have several CRACM inhibitors that are not licensed to Roche in lead optimization. Because there are a number of CRACM ion channel targets on immune cells, we believe that our
next generation CRACM inhibitor compounds could potentially apply to different immune system diseases and address distinct therapeutic areas, such as RA, allergy, asthma, and transplant rejection.

Roche CRACM Inhibitor Alliance

In December 2008, we formed a strategic alliance with Roche to discover, develop, and commercialize small-molecule drugs targeting
CRACM channels. We refer herein to the agreement, as amended in February 2010 and February 2011, as the Roche Agreement. The goal of this alliance is to

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develop
a novel category of oral, disease-modifying agents for the treatment of rheumatoid arthritis and other autoimmune diseases and inflammatory conditions. Under the terms of the Roche Agreement,
we received a $16 million non-refundable upfront license fee. Roche funded research and development conducted by us in 2009 and 2010 and received worldwide rights to develop and
commercialize certain products, referred to as Licensed Compounds, identified and studied prior to the end of the two-year research term, which concluded in December 2010. As of
December 31, 2010, we received approximately $21.1 million in research and development support from
Roche. In the February 2011 amendment of the Roche Agreement, we extended the term of the research license for Roche to continue performing research on certain specified compounds until
June 30, 2011. We are not performing any research on behalf of Roche and we will not receive any additional research and development support from Roche during the extended period of the
research license. That amendment also provided for the return to us of certain Licensed Compounds. We retain all development and commercialization rights for our CRACM inhibitor compounds other than
the specific Licensed Compounds licensed to Roche under the Roche Agreement. Roche is responsible for development and commercialization of the Licensed Compounds, while we retain certain
co-development and co-promotion rights. We are also eligible to receive additional payments, for each of three Licensed Compounds, should specified development and
commercialization milestones be successfully achieved. We will also receive tiered royalties on sales of all approved, marketed products containing Licensed Compounds.

IL-12/23 Inhibitors

The IL-12 cytokine is an important "master switch" that triggers the immune response of the T cell known as
T helper type 1, or Th1. T cells play a critical role in the coordination of the body's immune response, and while Th1 cells are normally involved in the body's defense against
intracellular attack by bacteria and other micro organisms, an overactive Th1 response can lead to various autoimmune or inflammatory diseases including Crohn's disease, psoriasis, RA, multiple
sclerosis, and common variable immunodeficiency. The IL-23 cytokine is critical to the generation of a class of T cells known as Th17, which produce other
pro-inflammatory proteins such as IL-17, which are critical in driving chronic inflammation. We believe that the clinical trial results observed with
anti-IL-12/23 antibody therapies validate the inhibition of IL-12/23 activity as a promising approach for the treatment of inflammatory and autoimmune diseases. We
have identified several small molecule IL-12/23 inhibitors that represent a promising opportunity to develop drug candidates that could be administered orally and potentially address a
wide range of serious inflammatory diseases with high unmet medical needs.

Our Drug Discovery Capabilities

Our drug discovery approach is based on the close integration and rapid cycle times among our chemistry, biology, and pharmaceutical
development groups. Drug candidates are typically identified using novel chemical structures from our chemical compound library in cell-based assays that are designed to preserve the
complexity of biological signaling. Earlyin vivotesting and a rapid optimization process allow us to generate a high number of promising leads from
our screening hits, improve the profiles of our compounds, and, in some cases, discover novel pathways or mechanisms of action with the potential to define entirely new categories of treatment.

Our
approach integrates the following capabilities and resources:



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Manufacturing

Our drug candidates and preclinical compounds are small molecules that can be readily synthesized by processes that we have developed.
Utilizing our medicinal chemistry and process development capabilities, we have developed manufacturing processes to produce the active pharmaceutical ingredient, or API, for our drug candidates. We
also have the internal capability to synthesize small molecule compounds in quantities of up to several hundred grams for use in our preclinical studies, including
proof-of-concept studies in animal models, early pharmacokinetic assays, initial toxicology studies, and formulation development. We currently contract with third parties for
the synthesis of all API and drug product, or DP, materials used in our clinical trials and rely on third-party manufacturers for the supply of our drug candidates in bulk quantities and for the
production of suitable dosage forms.

The
starting materials and reagents required for synthesizing our drug candidates and preclinical compounds are commercially available from multiple sources. We have established a
quality control and quality assurance program, including a set of standard operating procedures, analytical methods, and specifications, designed to ensure that our drug candidates are manufactured in
accordance with the FDA's current Good Manufacturing Practice regulations, or cGMP, and other applicable domestic and

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foreign
regulations. We have selected manufacturers that we believe comply with cGMP and other applicable regulatory standards. We do not currently expect to manufacture cGMP material internally for
our clinical trials nor undertake the commercial scale manufacture of our drug candidates after approval. At an appropriate time, we will discuss with our current suppliers and other third-party
manufacturers the long-term supply and manufacture of these and other drug candidates we may develop.

Ganetespib Manufacturing

We believe that the manufacturing processes for ganetespib API and DP are conventional and fully scalable. We also believe that the
various steps of these processes can be accomplished by many possible third-party contract manufacturing organizations, or CMOs. We currently use a single CMO in the preparation of the ganetespib API
but we have a backup CMO that has previously manufactured ganetespib API on our behalf. We currently use a single CMO for manufacturing ganetespib DP that has specific experience in manufacturing
oncology products and has flexible scale manufacturing capabilities. We believe that the agreements we have entered into to date with these CMOs are sufficient for our current requirements.

Elesclomol Manufacturing

We use several different manufacturers for various process steps in the preparation of elesclomol API and DP. We believe that the
manufacturing process for elesclomol API is conventional and fully scalable. We also believe that the various steps of this process can be accomplished by many possible third-party CMOs. We currently
use a single CMO in the preparation of the elesclomol API, but we have a backup CMO that has previously manufactured elesclomol API on our behalf. We plan to use the sodium salt formulation of
elesclomol in all future clinical trials of elesclomol. The elesclomol sodium DP is lyophilized and manufactured under aseptic conditions. We believe that the process for manufacturing the elesclomol
sodium DP is routine and can be performed by various different CMOs. We have entered into a contract with a CMO with specific experience in manufacturing oncology products and that has flexible scale
manufacturing capabilities. We believe that the agreements that we have entered into to date to produce elesclomol API and the elesclomol sodium DP are sufficient for our anticipated requirements.

Sales and Marketing

We currently have no sales, marketing or distribution capabilities, as such, in order to commercialize any of our drug candidates. We
do, however, have worldwide commercialization rights for all of our development programs, with the exception of the CRACM ion channel program where we retain certain co-promotion rights
with our partner Roche.
We intend to develop these capabilities internally as needed and through collaboration with third parties.

Competition

The development and commercialization of new drugs is highly competitive. We will face competition with respect to all drug candidates
we may develop or commercialize in the future from pharmaceutical and biotechnology companies worldwide. The key competitive factors affecting the success of any approved product will be its efficacy,
safety profile, price, method of administration and level of promotional activity. The efficacy and safety profile of our drug candidates relative to competitors will depend upon the results of our
clinical trials and experience with the approved product in the commercial marketplace. For risks associated with competition, see "Risks Related to Our IndustryOur market is subject to
intense competition..." under "Risk Factors" below in Part I, Item 1A of this Form 10-K.

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Patents and Proprietary Rights

Our success depends in part on our ability to obtain and maintain proprietary protection for our drug candidates, technology, and
know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary
position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions, and improvements that are important to the development of our business.
We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain our proprietary position.

As
of March 4, 2011, our patent portfolio had a total of 724 patents and patent applications worldwide, including specific patent filings with claims to the
composition-of-matter and methods of use of ganetespib and elesclomol. We own or have exclusively licensed a total of 50 issued U.S. patents and 120 U.S. patent applications,
as well as 554 foreign counterparts to these patents and patent applications.

With
respect to our Hsp90 inhibitor program, we have 6 issued U.S. and foreign patents, and 104 pending U.S. and foreign counterpart patent applications. Any U.S. or foreign
patent that issues covering ganetespib will expire no earlier than 2025. Our Hsp90 inhibitor patent portfolio covers ganetespib and structurally related analogs, pharmaceutical compositions, and
methods for treating cancer. Additionally, we have multiple U.S. and corresponding foreign patent applications directed to other Hsp90 inhibitors.

With
respect to elesclomol, we have 2 issued U.S. patents that claim the chemical structure of elesclomol that expire no earlier than 2022. Both of these issued U.S. patents also claim
related chemical structures, pharmaceutical compositions, and methods for treating a subject with cancer. In addition, we have an issued U.S. patent claiming the salt form of elesclomol that expires
no earlier than 2025.

We
have pending U.S. patent applications covering compositions-of-matter, methods of treatment and other aspects of our programs for STA-9584, our
IL-12/23 inhibitors and our CRACM ion channel inhibitors. Counterpart filings to these patents and patent applications have been made in a number of other jurisdictions, including Europe
and Japan. The patent term of our U.S. patents may potentially be extended under applicable laws or regulations, such as the Patent Term Restoration Act.

We
have also in-licensed various technologies to complement our ongoing clinical and research programs. These licenses generally extend for the term of the related patent and
contain customary royalty, termination, and other provisions. We have a license agreement with Beth Israel Deaconess Medical Center that provides us with the exclusive commercial right to certain
patent filings made by Beth Israel in the field of ion channels. We do not believe that this license agreement is currently material to our business. We also have a non-exclusive license
to a U.S. patent assigned to Columbia University that could potentially cover a possible aspect of the elesclomol mechanism. This license is not royalty bearing unless we include specific mechanism
language on the label of any approved product, in which case a nominal royalty would be owed.

Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among
other things, the research, development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are
developing. Our drugs must be approved by the FDA through the new drug application, or NDA, process before they may be legally marketed in the United States.

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United States Government Regulation



In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or the FDCA, and implementing regulations.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial
sanctions. These sanctions could include:



Any
agency or judicial enforcement action could have a material adverse effect on us. The process of obtaining regulatory approvals and the subsequent substantial compliance with appropriate federal,
state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.

The
process required by the FDA before a drug may be marketed in the United States generally involves the following:



Once
a pharmaceutical candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity
and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND.
Some preclinical or nonclinical testing may continue even after the IND is submitted. In addition to including the results of the preclinical studies, the IND will also include a protocol detailing,
among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy
determination. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, specifically places the IND on clinical hold.
In such a case, the IND sponsor and the FDA must resolve any

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outstanding
concerns before clinical trials can begin. A clinical hold may occur at any time during the life of an IND, and may affect one or more specific studies or all studies conducted under the
IND.

All
clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations, which ensures, among other things, that each
research subject provides informed consent. Further, an institutional review board, or IRB, at each institution participating in the clinical trial must review and approve the plan for any clinical
trial before it commences at that institution. Each new clinical protocol must be submitted to the FDA as part of the IND. Progress reports detailing the results of the clinical trials must be
submitted at least annually to the FDA and more frequently in other situations including the occurrence of serious adverse events.

Human
clinical trials are typically conducted in three sequential phases that may overlap or be combined:



Phase 1,
Phase 2, and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend a clinical trial
at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. In addition, an IRB can suspend or terminate approval of a
clinical trial at its institutions for several reasons, including failure of the clinical trial is not being conducted in accordance with the IRB's requirements, in accordance with the clinical
protocol, or if the drug has been associated with unexpected serious harm to patients.

During
the development of a new drug, sponsors are given an opportunity to meet with the FDA at certain points. These points are prior to submission of an IND, at the end of
Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to
date, for the FDA to provide advice, and for the sponsor and FDA to reach agreement on the next phase of development. Sponsors typically use the end of Phase 2 meeting to discuss their
Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug. If a Phase 2 clinical trial is the
subject of discussion at an end of Phase 2 meeting with the FDA, a sponsor may be able to request a Special Protocol Assessment, the purpose of which is to reach agreement with the FDA on the
design of the Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim. If such an agreement is reached, it will be documented and made part of
the administrative record, and it will be binding on the FDA unless public health concerns unrecognized at the time of protocol assessment are evident, and may not be changed except under a few
specific circumstances.

On
occasion, the FDA may suggest or the sponsor of a clinical trial may decide to use an independent data monitoring committee, or DMC, to provide advice regarding the continuing safety
of trial subjects and the continuing validity and scientific merit of a trial. In 2006, the FDA published a

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final
Guidance for Clinical Trial Sponsors on the Establishment and Operations of Clinical Trial Data Monitoring Committees in which it describes the types of situations in which the use of a DMC is
appropriate and suggests how a DMC should be established and operate. DMCs evaluate data that may not be available to the sponsor during the course of the study to perform interim monitoring of
clinical trials for safety and/or effectiveness and consider the impact of external information on the trial. They often make recommendations to the sponsor regarding the future conduct of the trial.

Concurrent
with clinical trials, companies usually complete additional animal safety studies and must also develop additional information about the chemistry and physical characteristics
of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug
candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs. Additionally, appropriate packaging must be selected and tested and stability
studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.

The
results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the
drug, results of chemical studies and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the
payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAs submitted before it accepts them for filing. It may request additional
information rather than accept a NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA
accepts it for filing.

Once
the submission is accepted for filing, the FDA begins an in-depth review. The FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or
may require additional clinical or other data. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA reviews an NDA to
determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product's identity,
strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured and tested.

Satisfaction
of FDA requirements or similar requirements of foreign regulatory authorities typically takes at least several years and the actual time required may vary substantially,
based upon, among other things, the indication and the type, complexity and novelty of the product. Government regulation
may delay or prevent marketing of potential products for a considerable period of time and impose costly requirements upon us. Success in early stage clinical trials does not assure success in later
stage clinical trials. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The
FDA may not grant approval on a timely basis, or at all. Even if a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications
for use may otherwise be limited, which could restrict the commercial application of the product. Further, even after regulatory approval is obtained, later discovery of previously unknown problems
with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Delays in obtaining, or failures to obtain, regulatory approvals for any drug
candidate could substantially harm our business and cause our stock price to drop significantly. In addition, we cannot predict what adverse governmental regulations may arise from future U.S. or
foreign governmental action.

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The FDA has various programs, including Fast Track, priority review, and accelerated approval, which are intended to expedite or
simplify the process for reviewing drugs, and/or provide for approval on the basis of surrogate endpoints. Even if a drug qualifies for one or more of these programs, we cannot be sure that the FDA
will not later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will be shortened. Generally, drugs that may be eligible for
these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs, and those that offer meaningful benefits over existing
treatments. For example, Fast Track is a process designed to facilitate the development, and expedite the review of drugs to treat serious diseases and fill an unmet medical need. Priority review is
designed to give drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists an initial review within six months as compared to a standard review time of
10 months. Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track
designated drug and expedite review of the application for a drug designated for priority review. Accelerated approval provides an earlier approval of drugs to treat serious diseases, and that fill an
unmet medical need based on a surrogate endpoint, which is a laboratory measurement or physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome. As a
condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform post-marketing clinical trials.



Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S. patents may be eligible for
limited patent term extension under
the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as
compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of
14 years from the product's approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of an NDA,
plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the extension must be applied
for prior to expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or
restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on
the expected length of clinical trials and other factors involved in the submission of the relevant NDA.

Market
exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of
non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not
previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not
accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right
of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The
FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were
conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths

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of
an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs
containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA
would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and
effectiveness.



Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is
generally a disease or condition that affects fewer than 200,000 individuals in the United States, or 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 in the United States a drug for this type of disease or condition
will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity
of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and
approval process.

If
a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product
exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Orphan drug
exclusivity, however, also could block the approval of one of our products for seven years if a competitor obtains approval of the same drug as defined by the FDA or if our drug candidate is
determined to be contained within the competitor's product for the same indication or disease.



Section 505(a) of the FDCA, as amended by the FDA Amendments Act of 2007, permits certain drugs to obtain an additional six
months of exclusivity, if the sponsor submits information requested in writing by the FDA, or a Written Request, relating to the use of the drug in children. The FDA may not issue a Written Request
for studies on unapproved or approved indications or where it determines that information relating to the use of a drug in a pediatric population, or part of the pediatric population, may not produce
health benefits in that population.

We
have not requested or received a Written Request for such pediatric studies, although we may ask the FDA to issue a Written Request for such studies in the future. To receive the
six-month pediatric market exclusivity, we would have to receive a Written Request from the FDA, conduct the requested studies in accordance with a written agreement with the FDA or, if
there is no written agreement, in accordance with commonly accepted scientific principles, and submit reports of the studies. The FDA will accept the reports upon its determination that the studies
were conducted in accordance with and are responsive to the original Written Request or commonly accepted scientific principles, as appropriate, and that the reports comply with the FDA's filing
requirements. The FDA may not issue a Written Request for such studies or accept the reports of the studies.



Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory standards is not maintained or if problems
occur after the product reaches the market. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are
subject to further FDA review and approval. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have

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been
commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Any
drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things:



Drug
manufacturers and their subcontractors are required to register their establishments with the FDA and some state agencies, and are subject to periodic unannounced inspections by the FDA and some
state agencies for compliance with cGMP and other laws.

We
rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products. Future FDA and state inspections may identify
compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.

From
time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing
of products regulated by the FDA. 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.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and
commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries before we
can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA
approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under
European Union regulatory systems, we may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is
compulsory for medicines produced by biotechnology or those medicines intended to treat AIDS, cancer, neurodegenerative disorders, or diabetes and optional for those medicines which are highly
innovative, provides for the grant of a single marketing authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national
approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications
and assessments report each member state must decide whether to recognize approval. If a member state does not recognize the marketing authorization, the disputed points are eventually referred to the
European Commission, whose decision is binding on all member states.

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As
in the United States, we may apply for designation of a product as an orphan drug for the treatment of a specific indication in the European Union before the application for marketing
authorization is made. Orphan drugs in Europe enjoy economic and marketing benefits, including up to 10 years of market exclusivity for the approved indication unless another applicant can show
that its product is safer, more effective or otherwise clinically superior to the orphan-designated product.

Reimbursement

Sales of our products will depend, in part, on the extent to which the costs of our products will be covered by third-party payors,
such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly challenging the prices charged for medical products and
services. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state
legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for
substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures,
could further limit our net revenue and results. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our
products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.

The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, imposes requirements for the distribution and pricing of prescription drugs for Medicare
beneficiaries. Under
Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities which will provide coverage of outpatient prescription drugs. Part D plans include both
stand-alone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized.
Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will
cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not
necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government
payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D
prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow
Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from
non-governmental payors.

On
February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This law provides funding for the federal government to compare the
effectiveness of different treatments for the same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and
the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress. Although the results of the comparative effectiveness studies
are not intended to mandate coverage policies for public or private payors, it is not clear how such a result could be avoided and what if any effect the research will have on the sales of our product
candidates, if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a
competitor's product could adversely affect the sales of our product candidates. Decreases in third-party reimbursement for our product

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candidates
or a decision by a third-party payor to not cover our product candidates could reduce physician usage of the product candidate and have a material adverse effect on our sales, results of
operations and financial condition.

The
Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the Affordable Care Act or the ACA) enacted in
March 2010, are expected to have a significant impact on the health care industry. ACA is expected to expand coverage for the uninsured while at the same time contain overall healthcare costs. With
regard to pharmaceutical products, among other things, ACA is expected to expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements
under the Medicare D program. We cannot predict the impact of ACA on pharmaceutical companies as many of the ACA reforms require the promulgation of detailed regulations implementing the statutory
provisions which has not yet occurred. In addition, the current legal challenges to ACA, as well as congressional efforts to repeal ACA, add to the uncertainty of the legislative changes enacted as
part of ACA.

We
expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs, including the cost
of prescription drugs. At the present time, Medicare is prohibited from negotiating directly with pharmaceutical companies for drugs. However, Congress is currently considering passing legislation
that would lift the ban on federal negotiations. In addition, Congress has been considering much broader regulation of healthcare and the House and Senate have passed different versions of bills for
healthcare reform. While we cannot predict whether those bills will be reconciled or whether another version of healthcare reform legislation will be enacted into law, passage of such a law or the
adoption of other legislative of regulatory proposals could have a material adverse effect on our business, financial condition and profitability.

In
addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from
country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or
indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for
pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the European Union do not follow price structures of the
United States and generally tend to be significantly lower.

Employees

As of December 31, 2010, we had 112 full time employees, including a total of 46 employees who hold M.D. or Ph.D. degrees. 82 of
our employees are primarily engaged in research and development activities, and 30 are primarily engaged in general and administrative activities. Our employees are not represented by any collective
bargaining unit, and we believe our relations with our employees are good.

Company History and Available Information

We commenced operations in July 2001. In September 2002, we acquired Principia Associates, Inc., which had previously acquired
Shionogi BioResearch Corp., a U.S.-based drug discovery subsidiary of the Japanese pharmaceutical company, Shionogi & Co., Ltd. In this acquisition, we acquired a unique chemical
compound library, an integrated set of drug discovery capabilities, and a pipeline of preclinical

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and
research programs. Since 2002, we have been advancing these programs into later stages of development; discovering and developing additional drug candidates; and expanding our management and
scientific teams and capabilities to support more advanced stages of drug development and commercialization.

Our
principal executive offices are located at 45 Hartwell Avenue, Lexington, Massachusetts 02421, and our telephone number is (781) 274-8200. Our website address is www.syntapharma.com. The
information contained on our website is not incorporated by reference into, and does not form any part of, this Annual Report
on Form 10-K. We have included our website address as a factual reference and do not intend it to be an active link to our website. Our trademarks include Synta Pharmaceuticals, our
corporate logo, SYMMETRY and the SYMMETRY logo. Other service marks, trademarks and trade names appearing in this Annual Report on Form 10-K are the property of their respective
owners. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, are
available free of charge through the Investors section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and
Exchange Commission.

Item 1A.    RISK FACTORS

If any of the following risks occurs, our business, business prospects, financial condition, results of operations, or cash flows could be materially harmed.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception, and we expect to incur losses for the foreseeable future and may never reach profitability.

Since inception we have incurred significant operating losses and, as of December 31, 2010, we had an accumulated deficit of
$351.1 million. We expect to continue to incur significant operating expenses and capital expenditures and anticipate that our expenses and losses may increase substantially in the foreseeable
future as we:



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We
must generate significant revenue to achieve and maintain profitability. Even if we succeed in developing and commercializing one or more of our drug candidates, we may not be able to
generate sufficient revenue and we may never be able to achieve or maintain profitability.

Our operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

We commenced operations in July 2001. Our operations to date have been limited to organizing and staffing our company, acquiring,
developing, and securing our technology, and undertaking preclinical studies and clinical trials of our drug candidates. We have not yet demonstrated an ability to obtain regulatory approval,
formulate and manufacture a commercial-scale product, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future
success or viability may not be as accurate as they could be if we had a longer operating history or had previously discovered, developed, and/or commercialized an approved product.

If we fail to obtain the funding necessary to support our operations, we will be unable to successfully develop and commercialize our lead drug candidates.

Although we have raised substantial funding to date, we will require additional funding in order to complete clinical development and
commercialize our current drug candidates and to conduct the research and development and clinical and regulatory activities necessary to bring any future drug candidates to market. Our future funding
requirements will depend on many factors that are currently unknown to us, including:



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There
can be no assurance that additional funds will be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available on a timely basis,
we may be required to:



We
do not anticipate that we will generate product revenue in the foreseeable future, if at all. We expect our continuing operations to use cash over the next several years and such cash
use may increase significantly from year to year. While we are engaged in multiple preliminary partnership discussions for each of our currently unpartnered programsganetespib,
elesclomol, STA-9584, CRACM compounds not licensed by Roche under the Roche Agreement, and our IL-12/23 inhibitorswhich could result in one or more new partnership
agreements, that may include upfront payments and cost-sharing provisions, there is no guarantee we will be successful in entering into any such partnership agreements on commercially
reasonable terms, if at all, or that we will receive any other revenue through these partnership efforts in the future. Based on our current operating levels, we expect our cash resources will be
sufficient to fund operations into 2012. This estimate assumes that certain activities contemplated for 2011 will be conducted subject to the availability of sufficient financial resources. We are
evaluating additional potential sources of funding, including partnership agreements, cost or risk-sharing arrangements, equity financings, use of our $35 million equity line of credit facility
or other sources.

However,
our operating plans may change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional
capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Raising additional capital may cause dilution to existing stockholders, restrict our operations or require us to relinquish rights.

We may seek the additional capital necessary to fund our operations through public or private equity offerings, collaboration
agreements, debt financings, or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders' ownership
interests will be diluted and the terms may include liquidation or other preferences that adversely affect their rights as a stockholder. Debt financing, if available, may involve agreements that
include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures, or declaring dividends. For example, the terms of our
Loan and Security Agreement with General Electric Capital Corporation subject us to certain negative covenants including a prohibition on declaring or paying dividends. If we raise additional funds
through collaboration and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or drug candidates, or grant licenses on terms that are not favorable
to us.

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Our existing loan and security agreement contains affirmative and negative covenants that may restrict our business and financing activities. If we fail to comply with
covenants in our loan and security agreement, we may be required to repay our indebtedness thereunder, which may have an adverse effect on our liquidity.

On September 30, 2010, we entered into a $15 million loan and security agreement with General Electric Capital
Corporation, or GECC, and one other lender, which we refer to herein as the GECC Term Loan. The GECC Term Loan is secured by substantially all of our assets, except our intellectual property. We have,
however, granted GECC a springing security interest in our intellectual property in the event that we are not in compliance with certain cash burn covenants set forth in the agreement. In addition,
the GECC Term Loan contains restrictive covenants, including the requirement for us to receive prior written consent of GECC to enter into loans, other than up to $4.0 million of equipment
financing, restrictions on the declaration or payment of dividends, restrictions on acquisitions, and customary default provisions that include material adverse events, as defined therein. Our failure
to comply with these covenants may result in the declaration of an event of default that, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the
GECC Term Loan, which would require us to pay all amounts outstanding. If an event of default occurs, we may not be able to cure it within any applicable cure period, if at all. If the maturity of our
indebtedness is accelerated, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on
terms acceptable to us or at all.

Risks Related to the Development and Regulatory Approval of Our Drug Candidates

Our success is largely dependent on the success of ganetespib, elesclomol and our other drug candidates, and we cannot be certain that we will be able to obtain regulatory
approval for or successfully commercialize any of these drug candidates.

We anticipate that our success will depend largely on the receipt of regulatory approval and successful commercialization of our drug
candidates: ganetespib, elesclomol, STA-9584 and our preclinical-stage CRACM inhibitor. The future success of our drug candidates will depend on several factors, including the
following:



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Many
of these factors are beyond our control. Accordingly, there can be no assurance that we will ever be able to generate revenues through the sale of an approved product or through strategic
collaborations based on our products.

If we do not obtain the required regulatory approvals, we will be unable to market and sell our drug candidates.

Our drug candidates are subject to extensive governmental regulations relating to development, clinical trials, manufacturing, and
commercialization. Rigorous preclinical testing and clinical trials and an extensive regulatory review and approval process are required to be successfully completed in the United States and in many
foreign jurisdictions before a new drug can be sold. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. The time
required to obtain approval by the FDA is unpredictable but typically exceeds five years following the commencement of clinical trials, depending upon the complexity of the drug candidate.

We
have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA. In connection with the clinical trials
of our drug candidates, we face risks that:



Of
the large number of drugs in development, only a small percentage result in the submission of a new drug application, or NDA, to the FDA and even fewer are approved for
commercialization. Furthermore, even if we do receive regulatory approval to market a commercial product, any such approval may be subject to limitations on the indicated uses for which we may market
the product.

In clinical studies with elesclomol, we have begun to use a new formulation. However, we have limited prior clinical experience with this formulation and cannot ensure that
no new toxicities will be observed in current or future clinical trials with elesclomol.

Although the FDA has given us permission to resume clinical development of elesclomol following specific protocols that exclude
patients with elevated LDH levels, we are using a different formulation of elesclomol than we used in our prior completed elesclomol clinical trials. The prior formulation utilized the free acid form
of elesclomol, which needed to be dissolved in an organic solvent prior to administration. The types of combination therapies that were possible with the free acid formulation of elesclomol, and the
amount of elesclomol that could be delivered safely in this formulation, were limited because of the additional toxicities caused by presence of the organic solvent. Accordingly, we have developed a
water-soluble, lyophilized sodium salt form of elesclomol, or elesclomol sodium, that does not need to be dissolved in an organic solvent and therefore has the potential to be used more easily with
other oncology products or as a stand alone agent without need for an organic solvent. We are using this formulation in current clinical trials of elesclomol and intend to continue using this
formulation for future studies and for commercialization, if elesclomol is approved. Although we have shown comparable pharmacokinetics of the new formulation of lyophilized elesclomol sodium in
animals, we can provide no guarantees that the sodium salt formulation will be commercially suitable, that efficacy will be established or that new toxicities or other adverse effects will not be
identified in the clinical trials that we conduct with this formulation.

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If we are unable to successfully reformulate and scale up ganetespib, it may limit the commercial potential of this drug candidate, even if approved.

The current formulation and administration procedures for ganetespib may be inconvenient or unacceptable to certain patients due to the
method of administration and frequency of dosing. These factors may lead to slower enrollment rates in our clinical trials and, if approved, may limit the commercial potential of ganetespib. In
addition, to date, we have only produced ganetespib active pharmaceutical ingredient, or API, and drug product, or DP, on a relatively small scale. Although we believe that the current processes for
producing ganetespib API and DP formulation are fully scalable, these products may prove to be unexpectedly challenging to manufacture on a larger, commercial scale, which may add to the cost of
manufacture or delay the approval of ganetespib. While we have identified a possible improved formulation of ganetespib that we believe may broaden its commercial potential and decrease manufacturing
risk, this new formulation has not yet been used in our clinical trials. If this formulation does not perform similarly compared with our current formulation of ganetespib, additional clinical trials
may be required. Further, if this next generation formulation is not commercially acceptable and we are unable to develop a commercially acceptable formulation using our own know-how or
technology, we may need to rely on third party proprietary formulation technology. Such third party formulation development may require significant time and expense. We cannot assure you that our
efforts to reformulate ganetespib will be successful. If we are unable to reformulate ganetespib, ganetespib may have more limited potential target indications and market size if it is approved.

While we believe that elesclomol's mechanism of action may have applicability to a broad range of solid tumor cancers, most of our clinical trials of elesclomol to date have
shown negative or inconclusive results and there can be no assurances that future clinical trials of elesclomol will yield positive results.

Based on our understanding of the mechanism of action and the preclinical activity we have seen with elesclomol, we believe that
elesclomol may have applicability to a broad range of cancers. However, other than our Phase 2b clinical trial in metastatic melanoma, the results of our clinical trials of elesclomol have been
negative or inconclusive. We have completed Phase 2 clinical trials of elesclomol in sarcoma and non-small cell lung cancer. The results of the soft tissue sarcoma clinical trial
did not definitively establish evidence of clinical activity. In the non-small cell lung cancer clinical trial, no improvement was observed in time-to-progression
between combination treatment with elesclomol and a standard first-line combination therapy. In February 2009, we announced that we were suspending the SYMMETRY trial, our global, pivotal
Phase 3 clinical trial of elesclomol for the treatment of metastatic melanoma. In subsequent analyses, although we identified a population of patients (those who did not have elevated levels of
LDH) for which the primary endpoint of progression-free survival, or PFS, was achieved and the safety profile was acceptable, the SYMMETRY trial did not achieve the primary endpoint of the
study and therefore will not support approval of elesclomol in metastatic melanoma. Although we have been analyzing data from these trials to assess the future development of elesclomol in melanoma
and other cancer types and the FDA has given us approval to resume clinical development of elesclomol following specific protocols that exclude patients with elevated LDH levels, there can be no
assurances that we will continue the development of elesclomol in these indications, or that elesclomol will prove effective in and be approved for treating these or other forms of cancer.

Because our drug candidates are in an early stage of development, there is a high risk of failure, and we may never succeed in developing marketable products or generating
product revenue.

We have no drug candidates that have received regulatory approval for commercial sale. We do not expect to have any commercial products
on the market in the foreseeable future, if at all. We are exploring human diseases at the cellular level and attempting to develop drug candidates that intervene

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with
cellular processes. Drug development is an uncertain process that involves trial and error, and we may fail at numerous stages along the way. Success in preclinical studies of a drug candidate
may not be predictive of similar results in humans during clinical trials, and successful results from early or small clinical trials of a drug candidate may not be replicated in later and larger
clinical trials. For example, although our Phase 2b clinical trial of elesclomol for the treatment of metastatic melanoma achieved the primary endpoint of increasing PFS, the SYMMETRY trial did
not achieve the primary endpoint of PFS and therefore will not support approval of elesclomol in metastatic melanoma.
Accordingly, the results from preclinical studies and the completed and ongoing clinical trials for our drug candidates may not be predictive of the results we may obtain in later stage clinical
trials.

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

We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause us
or any regulatory authority to delay or suspend those clinical trials or delay the analysis of data derived from them. For example, in February 2009, we announced that we were suspending our
Phase 3 SYMMETRY trial of elesclomol for the treatment of metastatic melanoma as well as all other ongoing studies of elesclomol. This decision to suspend the clinical development of elesclomol
was based on the results of an interim analysis by the independent data monitoring committee, or DMC, of the SYMMETRY trial data. The DMC noted that while the primary endpoint of PFS showed a trend
that favored the elesclomol plus paclitaxel, or ELPAC, arm of the study, early analysis of the secondary endpoint of overall survival, or OS, favored the control arm. Subsequently, elesclomol was put
on clinical hold by the FDA at our request. A number of events, including any of the following, could delay the completion of our other ongoing and planned clinical trials and negatively impact our
ability to obtain regulatory approval for, and to market and sell, a particular drug candidate, including our other clinical drug candidate, ganetespib, and our drug candidates that are still in
preclinical studies, including STA-9584, our CRACM inhibitor candidate and our IL-12/23 inhibitor candidate:



Commercialization
of our drug candidates may be delayed by the imposition of additional conditions on our clinical trials by the FDA or any foreign regulatory authority or the
requirement of additional supportive studies by the FDA or any foreign regulatory authority. In addition, clinical trials require sufficient patient enrollment, which is a function of many factors,
including the size of the

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target
patient population, the nature of the trial protocol, the proximity of patients to clinical sites, the availability of effective treatments for the relevant disease, the conduct of other
clinical trials that compete for the same patients as our clinical trials, and the eligibility criteria for our clinical trials. Our failure to enroll patients in our clinical trials could delay the
completion of the clinical trial beyond our expectations. In addition, the FDA could require us to conduct clinical trials with a larger number of subjects than we have projected for any of our drug
candidates. We may not be able to enroll a sufficient number of patients in a timely or cost-effective manner. Furthermore, enrolled patients may drop out of our clinical trials, which
could impair the validity or statistical significance of the clinical trials.

We
do not know whether our clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, if at all. Delays in our clinical trials will result in
increased development costs for our drug candidates. In addition, if our clinical trials are delayed, our competitors may be able to bring products to market before we do and the commercial viability
of our drug candidates could be limited. If approved, we may not receive a package insert for any of our products that are competitive
and differentiated, which may change our strategies with respect to how and when we commercialize any of our products.

Failure to comply with foreign regulatory requirements governing human clinical trials and marketing approval for drugs could prevent us from selling our drug candidates in
foreign markets, which may adversely affect our operating results and financial condition.

The requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement for marketing our drug
candidates outside the United States vary greatly from country to country and may require additional testing. We expect that our future clinical development of our drug candidates will involve a
number of clinical trials in foreign jurisdictions, particularly in Europe. We have no experience in obtaining foreign regulatory approvals. The time required to obtain approvals outside the United
States may differ from that required to obtain FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not guarantee approval by regulatory
authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA. Failure to comply with these
regulatory requirements or obtain required approvals could impair our ability to develop foreign markets for our drug candidates and may have a material adverse effect on our results of operations and
financial condition.

Our drug candidates will remain subject to ongoing regulatory review even if they receive marketing approval, and if we fail to comply with continuing regulations, we could
lose these approvals and the sale of any approved commercial products could be suspended.

Even if we receive regulatory approval to market a particular drug candidate, the manufacturing, labeling, packaging, adverse event
reporting, storage, advertising, promotion, and record keeping related to the product will remain subject to extensive regulatory requirements. If we fail to comply with the regulatory requirements of
the FDA and other applicable domestic and foreign regulatory authorities or previously unknown problems with any approved commercial products, manufacturers, or manufacturing processes are discovered,
we could be subject to administrative or judicially imposed sanctions, including:



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If side effects or toxicities increase or are identified during the time our drug candidates are in development or after they are approved and on the market, we may be
required to perform lengthy additional clinical trials, change the labeling of any such products, or withdraw any such products from the market, any of which would hinder or preclude our ability to
generate revenues.

We have observed significant toxicities in preclinical animal studies of our clinical drug candidate, ganetespib. Although in clinical
trials to date, we have not observed the serious liver and common occular toxicities observed with first generation Hsp90 inhibitors, if these or other serious toxicities occur at or below a clinical
dose of ganetespib required to show efficacy, we may not be able to demonstrate that the drug is safe and effective. In our completed Phase 2b clinical trial of elesclomol for metastatic
melanoma, there were four patients with possible or probable drug-related serious adverse events related to treatment with elesclomol. In addition, in February 2009, we announced that we
were suspending our Phase 3 SYMMETRY trial of elesclomol for the treatment of metastatic melanoma as well as all other ongoing studies of elesclomol. This decision to suspend the clinical
development of elesclomol was based on the results of an analysis by the DMC of the SYMMETRY trial data. The DMC noted that while the primary endpoint of PFS showed a trend that favored the ELPAC arm
of the study; early analysis of the secondary endpoint of OS favored the control arm. In an updated analysis presented at the American Society of Clinical Oncology in June 2010, we showed that
baseline LDH levels were a predictive marker of treatment outcome in melanoma patients treated in the SYMMETRY trial. In patients with normal LDH levels, treatment with ELPAC showed improved PFS and
neutral effect on OS, while in patients with elevated LDH levels, treatment with ELPAC showed no effect on PFS and a negative impact on OS.

Even
if we are successful in obtaining regulatory approval for one or more of our drug candidates, as the drug is used in a larger patient population, if the incidence of side effects or
toxicities increases or if other unacceptable effects are identified:



Any
of these events could harm or prevent sales of the affected products or could substantially increase the costs and expenses of commercializing and marketing any such products.

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While we choose to test our drug candidates in specific clinical indications based in part on our understanding of their mechanisms of action, our understanding may be
incorrect or incomplete and, therefore, our drugs may not be effective against the diseases tested in our clinical trials.

Our rationale for selecting the particular therapeutic indications for each of our drug candidates is based in part on our
understanding of the mechanism of action of these drug candidates. However, our understanding of the drug candidate's mechanism of action may be incomplete or incorrect, or the mechanism may not be
clinically relevant to the diseases treated. In such cases, our drug candidates may prove to be ineffective in the clinical trials for treating those diseases.

We deal with hazardous materials and must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our activities involve the controlled storage, use, and disposal of hazardous materials, including cytotoxic agents, genotoxic agents,
infectious agents, corrosive, explosive and flammable chemicals, and various radioactive compounds. We are subject to federal, state, and local laws and regulations governing the use, manufacture,
storage, handling, and disposal of these hazardous materials. Although we believe that our safety procedures for the handling and disposing of these materials comply with the standards prescribed by
these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials.

In
the event of an accident, state or federal authorities may curtail our use of these materials, and we could be liable for any civil damages that result, which may exceed our financial
resources and may seriously harm our business. We currently maintain insurance covering hazardous waste clean up costs in an amount of up to $250,000 per site. Because we believe that our laboratory
and materials handling policies and practices sufficiently mitigate the likelihood of materials liability or third-party claims, we currently carry no insurance covering such claims. While we believe
that the amount of insurance we carry is sufficient for typical risks regarding our handling of these materials, it may not be sufficient to cover pollution conditions or other extraordinary or
unanticipated events. Additionally, an accident could damage, or force us to shut down, our operations.

Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct our clinical trials and nonclinical safety assessment studies, and those third parties may not perform satisfactorily, including failing
to meet established timelines for the completion of such clinical trials and studies.

We do not have the ability to independently conduct clinical trials and certain nonclinical safety assessment studies, particularly
those studies conducted under Good Laboratory Practices, or GLP, for our drug candidates, and we rely on third parties such as contract research organizations, medical institutions, and clinical
investigators in the case of clinical trials, and contract research organizations in the case of nonclinical safety assessment studies, to perform these functions. Our reliance on these third parties
for clinical development activities reduces our control over these activities. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors.
To date, our contract research organizations and other similar entities with which we are working have performed well; however, if these third parties do not successfully carry out their contractual
duties, meet expected timelines, or comply with applicable regulatory requirements, we may be delayed in obtaining regulatory approvals for our drug candidates and may be delayed in our efforts to
successfully commercialize our drug candidates for targeted diseases.

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We have no manufacturing capacity and depend on third-party manufacturers to produce our clinical trial drug supplies.

We do not currently operate manufacturing facilities or testing facilities for clinical or commercial production of ganetespib or
elesclomol, or any of our preclinical drug candidates. We have limited experience in drug manufacturing, and we lack the resources and the capabilities to manufacture any of our drug candidates on a
clinical or commercial scale. As a result, we currently rely on third-party manufacturers to manufacture, test, release, supply, store, and distribute drug supplies for our clinical trials. Any
performance failure on the part of our existing or future manufacturers could delay clinical development or regulatory approval of our drug candidates or commercialization of any approved products,
producing additional losses and depriving us of potential product revenue.

Our
drug candidates require precise, high quality manufacturing. Failure by our contract manufacturers to achieve and maintain high manufacturing standards could result in patient injury
or death, product recalls or withdrawals, delays or failures in testing or delivery, cost overruns, or other problems that could seriously hurt our business. Contract manufacturers may encounter
difficulties involving production yields, quality control, and quality assurance. These manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state and
foreign agencies to ensure strict compliance with current Good Manufacturing Practice regulations, or cGMPs, and other applicable U.S. and foreign government regulations and standards. We periodically
audit our contract manufacturers responsible for supplying our clinical drug materials and have put quality agreements in place that we believe are appropriate for our materials. However, we do not
have direct control over third party manufacturers' compliance with cGMPs and other standards and therefore, cannot provide assurance regarding such compliance.

If
for some reason our contract manufacturers cannot perform as agreed, we may be unable to replace such third-party manufacturers in a timely manner and the production of our drug
candidates would be interrupted, resulting in delays in clinical trials and additional costs. Switching manufacturers may be difficult because the number of potential manufacturers is limited and the
FDA must approve any replacement manufacturer after our drug candidates are approved. Such approval would require new testing and compliance inspections. In addition, a new manufacturer would have to
be educated in, or develop substantially equivalent processes for, production of our drug candidates after receipt of FDA approval. It may be difficult or impossible for us to find a replacement
manufacturer on acceptable terms quickly, or at all.

We contract with single manufacturers for the production of elesclomol and ganetespib API and DP for clinical trials and the failure of these manufacturers to supply
sufficient quantities of material on a timely basis could have a material adverse effect on our business.

We use single manufacturers for the supply of elesclomol and ganetespib: in each case, one for the synthesis of API and another for
production of DP. The manufacturing
processes for ganetespib API and DP are conventional and fully-scalable. We believe that the various steps of these processes can be accomplished by many possible third-party contract manufacturing
organizations, or CMOs. We currently use a single CMO in the preparation of the ganetespib API but we have a backup CMO that has previously manufactured ganetespib API on our behalf. We currently use
a single CMO for manufacturing ganetespib DP that has specific experience in manufacturing oncology products and that has flexible scale manufacturing capabilities. We believe that the agreements we
have entered into to date with these CMOs are sufficient for our current requirements.

The
manufacturing process for elesclomol API is conventional and fully-scalable. We believe that the various steps of this process can be accomplished by many possible third-party CMOs.
We currently use a single CMO in the preparation of the elesclomol API but we have a backup CMO that has previously manufactured elesclomol API on our behalf. The elesclomol sodium DP is lyophilized
and

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manufactured
under aseptic conditions. We believe that the process for manufacturing the elesclomol sodium DP is routine and can be performed by various different CMOs. We have entered into a contract
with a CMO with specific experience in manufacturing oncology products and that has flexible scale manufacturing capabilities. We believe that the agreements to produce the elesclomol sodium DP that
we have entered into to date would be sufficient for our anticipated requirements.

If
any of these CMOs failed to perform under their contracts, we believe that we could readily transfer the manufacturing methods to other CMOs. However, there may be a significant time
delay before we could secure the necessary materials and such a delay could have an adverse effect on our ability to conduct our clinical trials. In addition, we have not entered into any agreement
with our CMOs for the supply of ganetespib or elesclomol on a commercial scale. There can be no assurance that we will be able to enter into such an agreement on favorable terms, if at all.

We anticipate continued reliance on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and other regulatory agencies for any of our
drug candidates.

To date, our drug candidates have been manufactured in relatively small quantities for preclinical testing and clinical trials by
third-party manufacturers. If the FDA or other regulatory agencies approve any of our drug candidates for commercial sale, we expect that we would continue to rely, at least initially, on third-party
manufacturers to produce commercial quantities of our approved drug candidates. These manufacturers may not be able to successfully increase the manufacturing capacity for any of our approved drug
candidates in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA or other regulatory authorities must
review and approve. If they are unable to successfully increase the manufacturing capacity for a drug candidate, particularly elesclomol, or we are unable to establish our own manufacturing
capabilities, the commercial launch of any approved products may be delayed or there may be a shortage in supply.

If Roche does not develop and commercialize a licensed CRACM inhibitor compound on a timely basis, or at all, or if we are unable to partner our other CRACM inhibitors with
another company on reasonable terms, or at all, we may be unable to develop and/or commercialize a CRACM inhibitor without additional capital.

In December 2008, we formed a strategic alliance with Roche to discover, develop, and commercialize small-molecule drugs targeting
CRACM channels. We refer herein to the agreement, as amended in February 2010 and February 2011, as the Roche Agreement. Although the research collaboration phase of the Roche Agreement ended in
December 2010, Roche remains responsible for development and commercialization of certain CRACM inhibitor compounds that were exclusively licensed to Roche under the Roche Agreement, or Licensed
Compounds, while we retain certain co-development and co-promotion rights to the Licensed Compounds. We remain eligible to receive additional payments, for each of three
Licensed Compounds, should specified development and commercialization milestones be successfully achieved by Roche. We will also receive tiered royalties on sales of all approved, marketed products
containing Licensed Compounds. Other than the Licensed Compounds, we retain all worldwide rights to our CRACM inhibitor compounds and are free to develop such compounds alone or with another partner.

The
Roche Agreement provides for certain termination provisions. Roche may terminate the agreement on a Licensed Compound-by-Licensed Compound basis upon
providing advance written notice. Loss of Roche as a partner in the development or commercialization of the Licensed Compounds, any dispute over the terms of, or decisions regarding the agreement, or
any other adverse developments in our relationship with Roche could result in an inability to develop and/or commercialize the Licensed Compounds.

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We
may not be successful in partnering our other CRACM inhibitors with another company on reasonable terms, or at all. The loss of Roche as a partner for the Licensed Compounds or our
inability to successfully partner our other CRACM inhibitors with another company could accelerate our need for additional capital.

If we do not establish additional collaborations, we may have to alter our development plans.

Our drug development programs and potential commercialization of our drug candidates will require substantial additional cash to fund
expenses. We own all rights to our two lead drug candidates, elesclomol and ganetespib, and are fully responsible for the associated development costs. In addition, because the research term under the
Roche Agreement ended in December 2010, we are also solely responsible for future expenses related to the CRACM inhibitor compounds which are not covered under the development and commercialization
license to Roche under the Roche Agreement. Our strategy also continues to include the potential of selectively collaborating with leading pharmaceutical and biotechnology companies to assist us in
furthering development and potential commercialization of some of our drug candidates and research programs. We may enter into one or more of such collaborations in the future, especially for target
indications in which the potential collaborator has particular therapeutic expertise or that involve a large, primary care market that must be served by large sales and marketing organizations or for
markets outside of North America. We face significant competition in seeking appropriate collaborators and these collaborations are complex and time-consuming to negotiate and document. We
may not be able to negotiate collaborations on acceptable terms, or at all. Even if we successfully enter into a collaboration, we cannot provide assurance that our partner will perform its
contractual obligations or will not terminate the agreement. If that were to occur, we may have to curtail the development of a particular drug candidate, reduce or delay its development program or
one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or
commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital,
which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring our drug candidates to market and generate product revenue.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our drug candidates, we may be unable to
generate product revenue.

We do not currently have an organization for the sales, marketing, and distribution of pharmaceutical products. In order to
commercialize and market any of our products that may be approved by the FDA, we must build our sales, marketing, managerial, and other non-technical capabilities or make arrangements with
third parties to perform these services. If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, we may not be able to
generate product revenue and we may not become profitable.

Risks Related to Our Intellectual Property

If our patent position does not adequately protect our drug candidates or any future products, others could compete against us more directly, which would harm our business.

Our success depends in part on our ability to obtain and maintain proprietary protection for our drug candidates, technology, and
know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary
position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions, and improvements that are important to the development of our

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business.
We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities, as appropriate, to develop and maintain our proprietary
position.

As
of March 4, 2011, our patent portfolio had a total of 724 patents and patent applications worldwide, including specific patent filings with claims to the
composition-of-matter and methods of use of ganetespib and elesclomol. We own or have exclusively licensed a total of 50 issued U.S. patents and 120 U.S. patent applications,
as well as 554 foreign counterparts to these patents and patent applications.

With
respect to our Hsp90 inhibitor program, we have 6 issued U.S. and foreign patents, and 104 pending U.S. and foreign counterpart patent applications. Any U.S. or foreign patent that
issues covering ganetespib will expire no earlier than 2025. Our Hsp90 inhibitor patent portfolio covers ganetespib and structurally related analogs, pharmaceutical compositions, and methods for
treating cancer. Additionally, we have multiple U.S. and corresponding foreign patent applications directed to other Hsp90 inhibitors.

With
respect to elesclomol, we have 2 issued U.S. patents that claim the chemical structure of elesclomol that expire no earlier than 2022. Both of these issued U.S. patents also claim
related chemical structures, pharmaceutical compositions, and methods for treating a subject with cancer. In
addition, we have an issued U.S. patent claiming the salt form of elesclomol that expires no earlier than 2025.

We
have pending U.S. patent applications covering compositions-of-matter, methods of treatment and other aspects of STA-9584, our CRACM ion channel
inhibitors and our IL-12/23 inhibitors. Counterpart filings to these patents and patent applications have been made in a number of other jurisdictions, including Europe and Japan. The
patent term of our U.S. patents may potentially be extended under applicable laws or regulations, such as the Patent Term Restoration Act.

We
have also in-licensed various technologies to complement our ongoing clinical and research programs. These licenses generally extend for the term of the related patent and
contain customary royalty, termination, and other provisions. We have a license agreement with Beth Israel Deaconess Medical Center that provides us with the exclusive commercial right to certain
patent filings made by Beth Israel in the field of ion channels. We do not believe that this license agreement is currently material to our business. We also have a non-exclusive license
to a U.S. patent assigned to Columbia University that could potentially cover a possible aspect of the elesclomol mechanism. This license is not royalty bearing unless we include specific mechanism
language on the label of any approved product, in which case a nominal royalty would be owed.

Our
commercial success will depend in part on our ability to obtain additional patents and protect our existing patent position as well as our ability to maintain adequate protection of
other intellectual property for our technologies, drug candidates, and any future products in the United States and other countries. If we do not adequately protect our intellectual property,
competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. The laws of some foreign
countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

The
patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, validity and
enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated, or circumvented. We will be able to protect our proprietary rights from unauthorized
use by third parties only to the extent that our proprietary technologies, drug candidates, and any future products are covered by valid and enforceable patents or are effectively maintained as trade
secrets.

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In
addition, although we do not believe that any of the patents or patent applications that we currently license are material to our business, we may in the future license intellectual
property that is material to us. In such cases, we may be dependent upon the licensors to obtain, maintain and enforce patent protection for the licensed intellectual property. These licensors may not
successfully prosecute patent applications or may fail to maintain issued patents. The licensors may also determine not to pursue litigation against other companies that infringe the patents, or may
pursue such litigation less aggressively than we would. If any of the foregoing occurs, and the terms of any such future license do not allow us to assume control of patent prosecution, maintenance
and enforcement, any competitive advantage we may have due to the license may be diminished or eliminated.

The
degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:



Although
third parties may challenge our rights to, or the scope or validity of our patents, to date we have not received any communications from third parties challenging our patents or
patent applications covering our drug candidates.

We
typically file for patent protection first on the composition-of-matter of our drug candidates and also claim their activities and methods for their production
and use to the extent known at that time. As we learn more about the mechanisms of action and new methods of manufacture and use of these drug candidates, we generally file additional patent
applications for these new inventions. Although our patents may prevent others from making, using, or selling similar products, they do not ensure that we will not infringe the patent rights of third
parties. For example, because we sometimes identify the mechanism of action or molecular target of a given drug candidate after identifying its composition-of-matter and
therapeutic use, we may not be aware until the mechanism or target is further elucidated that a third party has an issued or pending patent claiming biological activities or targets that may cover our
drug candidate. If such a patent exists or is granted in the future, we cannot provide assurances that a license will be available on commercially reasonable terms, or at all.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers,
and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate
remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and

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proprietary
information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade
secret protection could adversely affect our competitive business position.

Litigation or other proceedings or third-party claims of intellectual property infringement would require us to spend time and money and could prevent us from developing or
commercializing our drug candidates.

Our commercial success will depend in part on not infringing upon the patents and proprietary rights of other parties and enforcing our
own patents and proprietary rights against others. Certain of our research and development programs are in highly competitive fields in which numerous third parties have issued patents and patent
applications with claims closely related to the subject matter of our programs. We are not currently aware of any litigation or other proceedings or claims by third parties that our drug candidates,
technologies or methods infringe their intellectual property.

However,
while it is our practice to conduct freedom to operate searches and analyses, we cannot guarantee that we have identified every patent or patent application that may be relevant
to the research, development or commercialization of our drug candidates. In the case of patent applications, we assess the likelihood of claims in pending, third party patent applications being
allowed which may interfere with our freedom to operate relative to our drug candidates. We cannot provide assurances that our assessments in this regard will be correct and that patent claims
covering our drug candidates that were assessed a low likelihood of issuance by us will not issue to a third party in the future. Moreover, there can be no assurance that third parties will not assert
against us patents that we believe are not infringed by us or are invalid. For example, we are aware of a U.S. patent and a related European patent that claim generic chemical structures,
pharmaceutical formulations and methods of treatment relating to compounds similar to ganetespib and a U.S. patent that claims methods of treating certain cancers using Hsp90 inhibitors. The claims of
these patents may be relevant to the
commercialization of our drug candidate, ganetespib. However, based on our analysis of these patents, we do not believe that the manufacture, use, importation or sale of ganetespib would infringe any
valid claim of these patents. However, we cannot guarantee that these patents would not be asserted against us and, if asserted, that a court would find these patents to be invalid or not infringed.

In
the event of a successful infringement action against us with respect to any third party patent rights, we may be required to:



We
may not be able to obtain licenses from other parties at a reasonable cost, or at all. If we are not able to obtain necessary licenses at a reasonable cost, or at all, we could
encounter substantial delays in product introductions while we attempt to develop alternative technologies, methods, and products, which we may not be able to accomplish.

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We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential
information or trade secrets of their former employers.

As
is commonplace in our industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential
competitors. Although no claims against us are currently pending, we have previously been subject to a claim by an alleged competitor that a prospective employee we sought to hire was bound by an
ongoing non-competition obligation which prevented us from hiring this employee. We may be subject in the future to claims that our employees or prospective employees are subject to a
continuing obligation to their former employers (such as non-competition or non-solicitation obligations) or claims that our employees or we have inadvertently or otherwise
used or disclosed trade secrets or other proprietary information of their former employers. 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.

Risks Related to the Commercialization of Our Drug Candidates

If physicians and patients do not accept our future products or if the markets for indications for which any drug candidate is approved is smaller than expected, we may be
unable to generate significant revenue, if any.

Even if any of our current drug candidates or any other drug candidates we may develop or acquire in the future obtain regulatory
approval, they may not gain market acceptance among physicians, healthcare payors, patients, and the medical community. Physicians may elect not to recommend these drugs for a variety of reasons
including:



If
any approved drugs fail to achieve market acceptance, we may not be able to generate significant revenue and our business would suffer.

If the government and third-party payors fail to provide coverage and adequate reimbursement rates for our future products, if any, our revenue and prospects for
profitability will be harmed.

In
both domestic and foreign markets, our sales of any future products will depend in part upon the availability of reimbursement from third-party payors. Such third-party payors include
government health programs such as Medicare, commercial health insurers, and managed care organizations. These third-party payors are increasingly attempting to contain healthcare costs by demanding
price discounts or rebates and limiting both coverage and the amounts that they will pay for new drugs, and, as a result, they may not cover or provide adequate payment for our drugs. We might need to
conduct post-marketing studies in order to demonstrate the cost-effectiveness of any future products to such

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payors'
satisfaction. Such studies might require us to commit a significant amount of financial and other resources. Our future products might not ultimately be considered cost-effective.
Adequate third-party reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.

U.S.
and foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare. For example, in some foreign markets, the government controls the pricing
of prescription drugs. In the United States, we expect that there will continue to be federal and state proposals to implement similar governmental controls. In addition, Medicare and increasing
emphasis on managed
care in the United States will continue to put pressure on pharmaceutical product pricing. Cost control initiatives could decrease the price that we would receive for any products in the future, which
would limit our revenue and profitability. Accordingly, legislation and regulations affecting the pricing of pharmaceuticals might change before our drug candidates are approved for marketing.
Adoption of such legislation could further limit reimbursement for pharmaceuticals.

For
example, the Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation
expanded Medicare coverage for drugs prescribed for the elderly and disabled and introduced new reimbursement methodologies. Although we do not know what the full impact of the new reimbursement
methodologies will have on the prices of new drugs, we expect that there will be added pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation
could decrease the coverage and price that we receive for any approved products, not only from Medicare, but also from private payors which often follow Medicare's policies, and could seriously harm
our business.

Changes in healthcare policy could increase our costs, decrease our revenues and impact sales of and reimbursement for any approved products.

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This law provides
funding for the federal government to compare the effectiveness of different treatments for the same illness. Although the results of the comparative effectiveness studies are not intended to mandate
coverage policies for public or private payors, it is not clear how such a result could be avoided and what if any effect the research will have on the sales of our product candidates, if any such
product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a competitor's product could
adversely affect the sales of our product candidates. Decreases in third-party reimbursement for our product candidates or a decision by a third-party payor to not cover our product candidates could
reduce physician usage of the product candidate and have a material adverse effect on our sales, results of operations and financial condition.

In
March 2010, the President signed the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the
Affordable Care Act or the ACA). The ACA is expected to have a significant impact on the health care industry. The ACA is expected to expand coverage for the uninsured while at the same time contain
overall healthcare costs. With regard to pharmaceutical products, among other things, the ACA is expected to expand and increase industry rebates for drugs covered under Medicaid programs and make
changes to the coverage requirements under the Medicare D program. We cannot predict the impact of the ACA on pharmaceutical companies as many of the ACA reforms require the promulgation of detailed
regulations implementing the statutory provisions which has not yet occurred. In addition, the current legal challenges to the ACA, as well as congressional efforts to repeal the ACA, add to the
uncertainty of the legislative changes enacted as part of the ACA.

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In
addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from
country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or
indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for
pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products.

If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, we could be forced to pay
substantial damage awards.

The use of any of our drug candidates in clinical trials, and the sale of any approved products, might expose us to product liability
claims. For example, we may face product liability claims by patients treated with elesclomol, whether or not elesclomol harmed the patients in any way. We currently maintain product liability
insurance, and we monitor the amount of coverage we maintain as the size and design of our clinical trials evolve and adjust the amount of coverage we maintain accordingly. However, there can be no
assurance that such insurance coverage will fully protect us against some or all of the claims to which we might become subject. We might not be able to maintain adequate insurance coverage at a
reasonable cost or in sufficient amounts or scope to protect us against potential losses. In the event a claim is brought against us, we might be required to pay legal and other expenses to defend the
claim, as well as uncovered damages awards resulting from a claim brought successfully against us. Furthermore, whether or not we are ultimately successful in defending any such claims, we might be
required to direct financial and managerial resources to such defense and adverse publicity could result, all of which could harm our business.

If we inadvertently violate the guidelines pertaining to promotion and advertising of our clinical candidates or approved products, we may be subject to disciplinary action
by the FDA's Division of Drug Marketing, Advertising, and Communications or other regulatory bodies.

The FDA's Division of Drug Marketing, Advertising, and Communications, or DDMAC, is responsible for reviewing prescription drug
advertising and promotional labeling to ensure that the information contained in these materials is not false or misleading. There are specific disclosure requirements and the applicable regulations
mandate that
advertisements cannot be false or misleading or omit material facts about the product. Prescription drug promotional materials must present a fair balance between the drug's effectiveness and the
risks associated with its use. Most warning letters from DDMAC cite inadequate disclosure of risk information.

DDMAC
prioritizes its actions based on the degree of risk to the public health, and often focuses on newly introduced drugs and those associated with significant health risks. There are
two types of letters that DDMAC typically sends to companies which violate its drug advertising and promotional guidelines: notice of violation letters, or untitled letters, and warning letters. In
the case of an untitled letter, DDMAC typically alerts the drug company of the violation and issues a directive to refrain from future violations, but does not typically demand other corrective
action. A warning letter is typically issued in cases that are more serious or where the company is a repeat offender. Although we have not received any such letters from DDMAC, we may inadvertently
violate DDMAC's guidelines in the future and be subject to a DDMAC untitled letter or warning letter, which may have a negative impact on our business.

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We are subject to federal and state laws prohibiting "kickbacks" and false or fraudulent claims, and state gift ban laws which, if violated, could subject us to substantial
penalties. Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business.

A federal law commonly known as the federal antikickback law, and several similar state laws, prohibit the payment of any remuneration
that is intended to induce physicians or others either to refer patients or to acquire or arrange for or recommend the acquisition of health care products or services. Other federal and state laws
generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid or other third-party payors that are false or fraudulent, or
for items or services that were not provided as claimed.

A
number of states have enacted laws that require pharmaceutical and medical device companies to monitor and report payments, gifts and other remuneration made to physicians and other
health care professional and health care organizations. Some state statutes, such as the one in Massachusetts, impose an outright ban on gifts to physicians. These laws are often referred to as "gift
ban" or "aggregate spend" laws, and they carry substantial fines if they are violated. Similar legislation, known as the Physician Payments Sunshine Act, has been introduced in Congress each year for
the past several years, but has not yet been enacted.

In
the event that we are found to have violated these laws or decide to settle a claim that we have done so, our business may be materially adversely affected as a result of any payments
required to be made, restrictions on our future operations or actions required to be taken, damage to our business reputation or adverse publicity in connection with such a finding or settlement or
other adverse effects relating thereto. Additionally, even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to, and thus could harm
our business and results of operations.

Risks Related to Our Industry

We may not be able to keep up with the rapid technological change in the biotechnology and pharmaceutical industries, which could make any future approved products obsolete
and reduce our revenue.

Biotechnology and related pharmaceutical technologies have undergone and continue to be subject to rapid and significant change. Our
future will depend in large part on our ability to maintain a competitive position with respect to these technologies. Our competitors may render our technologies obsolete by advances in existing
technological approaches or the development of new or different approaches, potentially eliminating the advantages in our drug discovery process that we believe we derive from our research approach
and proprietary technologies. In addition, any future products that we develop, including our clinical drug candidates, may become obsolete before we recover expenses incurred in developing those
products, which may require that we raise additional funds to continue our operations.

Our market is subject to intense competition. If we are unable to compete effectively, our drug candidates may be rendered noncompetitive or obsolete.

We are engaged in segments of the pharmaceutical industry that are highly competitive and rapidly changing. Many large pharmaceutical
and biotechnology companies, academic institutions, governmental agencies, and other public and private research organizations are pursuing the development of novel drugs that target cancer and
chronic inflammatory diseases. We face, and expect to continue to face, intense and increasing competition as new products enter the market and advanced technologies become available. In addition to
currently approved drugs, there are a significant number of drugs that are currently under development and may become available in the future for the treatment of cancer and chronic inflammatory
diseases. We would expect our drug candidates to

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compete
with marketed drugs and potentially with drug candidates currently under development. Many of our competitors have:



Competitive
products may render our products obsolete or noncompetitive before we can recover the expenses of developing and commercializing our drug candidates. Furthermore, the
development of new
treatment methods and/or the widespread adoption or increased utilization of any vaccine for the diseases we are targeting could render our drug candidates noncompetitive, obsolete or uneconomical. If
we successfully develop and obtain approval for our drug candidates, we will face competition based on the safety and effectiveness of our drug candidates, the timing of their entry into the market in
relation to competitive products in development, the availability and cost of supply, marketing and sales capabilities, reimbursement coverage, price, patent position and other factors. If we
successfully develop drug candidates but those drug candidates do not achieve and maintain market acceptance, our business will not be successful.

In
particular, we believe that our products face the following sources of significant competition:

Ganetespib.If approved, ganetespib may compete against the currently approved therapies for the treatment of various cancer types and
other cancer
treatments currently under development. In particular, ganetespib may compete with other agents under development that inhibit Hsp90, including IPI-504 and IPI-493, being
developed by Infinity Pharmaceuticals, AUY922 and HSP990, being developed by Novartis/Vernalis, KW-2478, being developed by Kyowa Hakko Kirin, MPC-3100, being developed by
Myrexis, XL888, being developed by Exelixis, AT13387, being developed by Astex, and Debio0932, being developed by Curis/Debiopharma, among others.

Elesclomol.If approved, elesclomol may compete with other anticancer agents whose mechanisms may involve the induction of oxidative
stress,
including arsenic trioxide, hydroxyurea and NOV-002, being developed by Novelos/Mundipharma in the U.S. and marketed as Glutoxim by Pharma Vam in Russia.

STA-9584.If approved, STA-9584 may compete with the currently approved therapies for the treatment of cancers, and other
cancer treatments currently under development, including other vascular disrupting agents such as CA4P, being developed by Oxigene; AVE8062 being developed by Sanofi-Aventis, BNC105, being developed
by Bionomics, MPC-6827 (Azixa), being developed by Myrexis, EPC-2407 (crolibulin), being developed by EpiCept, NPI-2358 (plinabulin) being developed by Nereus
Pharmaceuticals, and CYT997, being developed by YM BioSciences.

CRACM Ion Channel Inhibitors.If approved, CRACM inhibitors may compete with the currently approved therapies for the treatment of
inflammatory
diseases, and other antiinflammatory treatments
currently under development, including other CRACM inhibitors, oral inhibitors of other targets, and biologics approaches.

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IL-12/23 Inhibitors.If approved, IL-12/23 inhibitors may compete against the currently approved therapies for the treatment
of chronic inflammatory diseases, including:



Our
ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery, development and commercialization to:



Risks Related to Employee Matters and Managing Growth

We may be unsuccessful in retaining certain key personnel.

The competition for qualified personnel in the biotechnology field is intense and we must retain and motivate highly qualified
scientific personnel. We are highly dependent on certain officers and employees, including Safi R. Bahcall, Ph.D., our President and Chief Executive Officer, and certain principal members of our
executive and scientific teams. All of the agreements with these principal members of our executive and scientific teams provide that employment is at-will and may be terminated by the
employee at any time and without notice. The loss of the services of any of these persons might impede the achievement of our research, development, and commercialization objectives. Recruiting and
retaining qualified scientific personnel and possibly sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms
given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and
research institutions. We do not maintain "key person" insurance on any of our employees. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in
formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory
contracts with other entities that may limit their availability to us.

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If we make strategic acquisitions, we will incur a variety of costs and might never realize the anticipated benefits.

All of our acquisitions to date have been of related parties. Accordingly, we have very limited experience in independently identifying
acquisition candidates and integrating the operations of truly independent acquisition candidates with our company. Currently we are not a party to any acquisition agreements, nor do we have any
understanding or commitment with respect to any such acquisition. If appropriate opportunities become available, however, we might attempt to acquire approved products, additional drug candidates, or
businesses that we believe are a strategic fit with our business. If we pursue any transaction of that sort, the process of negotiating the acquisition and integrating an acquired product, drug
candidate, or business might result in operating difficulties and expenditures and might require significant management attention that would otherwise be available for ongoing development of our
business, whether or not any such transaction is ever consummated. Moreover, we might never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, or impairment expenses related to goodwill, and impairment or amortization expenses related to other intangible
assets, which could harm our financial condition.

Risks Related to Our Common Stock

Our stock price has been and is likely to continue to be volatile and the market price of our common stock may drop.

Prior to our February 2007 initial public offering, there was not a public market for our common stock. There is a limited history on
which to gauge the volatility of our stock price; however, since our common stock began trading on The NASDAQ Global Market on February 6, 2007 through December 31, 2010, our stock price
has fluctuated from a low of $1.20 to a high of $11.25. Furthermore, the stock market has recently experienced significant volatility, particularly with respect to pharmaceutical, biotechnology, and
other life sciences company stocks. The volatility of pharmaceutical, biotechnology, and other life sciences company stocks often does not relate to the operating performance of the companies
represented by the stock. Some of the factors that may cause the market price of our common stock to fluctuate include:



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These
and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their
shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have
instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the
lawsuit. Such a lawsuit could also divert the time and attention of our management.

Insiders have substantial control over us which could delay or prevent a change in corporate control or result in the entrenchment of management and/or the board of
directors.

Our directors, executive officers and principal stockholders, together with their affiliates and related persons, beneficially own, in
the aggregate, approximately 45% of our outstanding common stock. These stockholders, if acting together, may have the ability to determine the outcome of matters submitted to our stockholders for
approval, including the election and removal of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, these persons, acting together, may have the
ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our common stock by:



Provisions of our charter, bylaws, and Delaware law may make an acquisition of us or a change in our management more difficult.

Certain provisions of our restated certificate of incorporation and restated bylaws could discourage, delay, or prevent a merger,
acquisition, or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions also
could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.

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Stockholders
who wish to participate in these transactions may not have the opportunity to do so. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or
remove our management. These provisions:



In
addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria
are met, prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a prescribed period of time.

We do not anticipate paying cash dividends, and accordingly, our stockholders must rely on stock appreciation for any return on their investment.

We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, we are
currently prohibited from making a dividend payment under the terms of our Loan and Security Agreement with General Electric Capital Corporation. As a result, capital appreciation, if any, of our
common stock will be the sole source of gain on an investment in our common stock for the foreseeable future.

Item 1B.    UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2.    PROPERTIES

Our operations are based primarily in Lexington, Massachusetts, which is located approximately 10 miles west of Boston, Massachusetts.
We currently lease a total of 76,580 square feet of office and

50

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laboratory
space, including 61,580 square feet in Lexington and 15,000 square feet in the neighboring town of Bedford, Massachusetts. We lease the following properties:

Location

Approximate
Square Feet

Use

Lease
Expiration Date45 Hartwell Avenue
Lexington, Massachusetts


34,520

Office and Laboratory

November 2011125 Hartwell Avenue
Lexington, Massachusetts


27,060

Office and Laboratory

November 201145-47 Wiggins Avenue
Bedford, Massachusetts


15,000

Office and Laboratory

October 2011


We
are currently in negotiations to renew our expiring leases under our existing renewal options.

Item 3.    LEGAL PROCEEDINGS

We are currently not a party to any material legal proceedings.

Item 4.    (REMOVED AND RESERVED)

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PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on The NASDAQ Global Market under the symbol "SNTA." The following table sets forth the high and low sales
prices of our common stock as quoted on The NASDAQ Global Market for the periods indicated.

2009:

High

LowFirst Quarter

$
9.55

$
1.20Second Quarter


5.09


2.10Third Quarter


3.33


2.11Fourth Quarter


6.95


2.59




2010:

High

LowFirst Quarter

$
6.50

$
3.81Second Quarter


4.79


2.66Third Quarter


4.13


2.55Fourth Quarter


6.50


3.23


Stockholders

As of March 4, 2011, there were approximately 93 stockholders of record of the 42,166,779 outstanding shares of our
common stock.

Dividends

We have never paid or declared any cash dividends on our common stock and we are currently prohibited from making any dividend payment
under the terms of our Loan and Security Agreement with General Electric Capital Corporation. We currently intend to retain all available funds and any future earnings to fund the development and
expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors
and will depend on our financial condition, results of operations, contractual restrictions, capital requirements, and other factors that our board of directors deems relevant.

Unregistered Sales of Securities

None.

Issuer Purchases of Equity Securities

None.

52

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Stock Performance Graph

The following graph compares the cumulative total stockholder return on our common stock from February 6, 2007 (the first
trading date following our initial public offering) to December 31, 2010 with the cumulative total return of (i) the NASDAQ Composite Index and (ii) the NASDAQ Biotechnology
Index. This graph assumes the investment of $100.00 on February 6, 2007 in our common stock, the NASDAQ Composite Index and the NASDAQ Biotechnology Index, and assumes any dividends are
reinvested. We have not paid any dividends on our common stock, and we do not include dividends in the representation of our performance. The stock price performance on the graph below does not
necessarily indicate future price performance.

COMPARISON OF CUMULATIVE TOTAL RETURN AMONG  SYNTA PHARMACEUTICALS CORP., NASDAQ COMPOSITE INDEX  AND NASDAQ BIOTECHNOLOGY INDEX

GRAPHIC

ASSUMES $100 INVESTED ON FEB. 06, 2007
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2010

The information in this section shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission, and is not
to be incorporated by reference in any filing of Synta Pharmaceuticals Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or
after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in those filings.

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Item 6.    SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated financial data and has been derived from our audited consolidated financial
statements. Consolidated balance sheets as of December 31, 2010 and 2009, as well as consolidated statements of operations for the years ended December 31, 2010, 2009, and 2008, and the
reports thereon are included elsewhere in this Annual Report on Form 10-K. The consolidated balance sheets as of December 31, 2008, 2007 and 2006, as well as the consolidated
statements of operations for the years ended December 31, 2007 and 2006 are derived from our audited financial statements not included herein. The information below should be read in
conjunction with our audited consolidated financial statements (and notes thereon) and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included below in
Item 7.

Years ended December 31,2010

2009

2008

2007

2006(all amounts in thousands except per share data)Consolidated Statement of Operations Data:Revenues:License and milestone revenue(1)(2)

$
4,572

$
125,701

$
8,513

$
743

$
Cost sharing reimbursements, net(1)(2)


9,253


18,544


(5,898
)




Grant revenue


978











Total revenues


14,803


144,245


2,615


743


Operating expenses:Research and development


40,252


51,054


81,581


52,025


50,503General and administrative


11,449


12,651


14,742


14,934


8,648Restructuring





1,236








Total operating expenses


51,701


64,941


96,323


66,959


59,151Income (loss) from operations


(36,898
)

79,304


(93,708
)

(66,216
)

(59,151
)Other (expense) income, net


(569
)

(216
)

1,090


2,721


1,881Net income (loss)


(37,467
)

79,088


(92,618
)

(63,495
)

(57,270
)Convertible preferred stock dividends














1,859Convertible preferred stock beneficial conversion feature











58,585


Net income (loss) attributable to common stockholders

$
(37,467
)
$
79,088

$
(92,618
)
$
(122,080
)
$
(59,129
)Net income (loss) attributable to common stockholders per share:Basic

$
(0.93
)
$
2.33

$
(2.75
)
$
(3.76
)
$
(2.66
)Diluted

$
(0.93
)
$
2.32

$
(2.75
)
$
(3.76
)
$
(2.66
)Weighted-average common shares outstanding:Basic


40,365


33,888


33,736


32,466


22,265Diluted


40,365


34,119


33,736


32,466


22,265


54

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As of December 31,2010

2009

2008

2007

2006Consolidated Balance Sheet Data:Cash, cash equivalents and marketable securities

$
50,973

$
44,155

$
73,563

$
115,577

$
46,824Collaboration receivable(2)


116





16,000





Working capital


34,784


28,105


57,898


96,225


36,081Total assets


54,067


48,910


97,253


122,649


54,789Capital lease obligations, net of current portion


26


799


2,012


2,815


3,170Deferred collaboration revenue, net of current portion(1)(2)


2,159


6,731


114,415


74,166


Term loan, net of current portion


11,667











Convertible preferred stock














41,820Common stock


4


3


3


3


2Additional paid-in capital


374,528


338,491


333,862


324,946


234,807Accumulated deficit


(351,050
)

(313,583
)

(392,671
)

(300,053
)

(236,558
)Total stockholders' equity (deficit)


23,479


24,911


(58,791
)

24,896


(1,747
)


(1)In
October 2007, we entered into the GSK Agreement with GSK for elesclomol which was terminated in September 2009, resulting in immediate recognition of
amounts previously deferred. See Notes 2 and 10 in the accompanying consolidated financial statements.(2)In
December 2008, we entered into the Roche Agreement with Roche for our CRACM inhibitor program. See Notes 2 and 9 in the accompanying consolidated
financial statements.


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Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read
together with the consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report on Form 10-K.

Overview

Synta Pharmaceuticals Corp. is a biopharmaceutical company focused on discovering, developing, and commercializing small molecule drugs
to extend and enhance the lives of patients with severe medical conditions, including cancer and chronic inflammatory diseases. We have two drug candidates in clinical trials for treating multiple
types of cancer and several drug candidates in the preclinical stage of development. Each of our drug candidates was discovered and developed internally using our proprietary, unique chemical compound
library and integrated discovery engine. We have granted Hoffman-La Roche, or Roche, an exclusive license to develop and commercialize certain compounds from our calcium release activated
calcium modulator, or CRACM, program resulting from our research partnership with them. We retain full ownership of all of our other drug candidates.

We
believe that our competitive advantages include: the broad clinical and commercial potential of our drug candidates; the strength of our intellectual property portfolio, consisting of
over 700 issued and pending patents; our proprietary chemical compound library and the strength of our drug discovery platform, with which we have generated all of our drug candidates; our ability to
integrate discovery, translational, and clinical research to optimize our scientific and clinical choices and further strengthen our intellectual property position; our operational experience in
effectively managing large-scale, global clinical programs; the full ownership of our programs, which creates strategic flexibility in partnership discussions that can be used to enhance the value we
may ultimately capture from our drug candidates; our strong network of relationships with leading investigators and institutions, which facilitates our ability to conduct clinical trials efficiently;
and the skills, talent, and level of industry experience of our employees. We believe that these competitive advantages provide us with multiple, sustainable growth opportunities.

We
were incorporated in March 2000 and commenced operations in July 2001. Since that time, we have been principally engaged in the discovery and development of novel drug candidates. We
have funded our operations principally with $311.7 million in net proceeds from private and public offerings of our common stock and Series A convertible preferred stock, including
$26.7 million in net proceeds from the sale of 6,388,889 shares of our common stock at $4.50 per share in an underwritten public offering that was completed in January 2010 and
$5.0 million in net proceeds from the direct sale of 1,440,923 shares of our common stock at $3.47 per share to a director and largest existing stockholder, that was completed in November 2010,
as well as $15.0 million in gross proceeds from a term loan that was executed in September 2010 with General Electric Capital Corporation, or GECC, and one other lender (referred to herein as
the GECC Term Loan). In October 2010, we entered into a common share purchase agreement, or Purchase Agreement, with Azimuth Opportunity Ltd., or Azimuth, pursuant to which we obtained a
committed equity line of credit facility, or Facility, under which we may sell up to a maximum of $35 million or 8,106,329 shares of our common stock, whichever is fewer, over the
18-month term of the agreement, subject to certain conditions and limitations.

In
addition to raising capital from financing activities, we have also received substantial capital from partnering activities. In October 2007, we entered into a global collaborative
development, commercialization and license agreement with GlaxoSmithKline, or GSK, for the joint development and commercialization of elesclomol, one of our oncology drug candidates, which we refer to
as the GSK Agreement. On June 10, 2009, following the suspension of our global Phase 3 clinical trial of elesclomol plus paclitaxel in metastatic melanoma, called the SYMMETRY trial, we
received written

56

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notice
from GSK of their intent to terminate the GSK Agreement. The collaboration terminated on September 10, 2009. In December 2008, as amended in February 2010 and February 2011, we entered
into a collaborative license agreement with Roche, or the Roche Agreement, for our CRACM inhibitor program, which is currently in the preclinical stage. As of December 31, 2010, we have
received $167.1 million in nonrefundable partnership payments under these agreements with GSK and with Roche, including $96 million in upfront payments, $50 million in operational
milestones and $21.1 million in research and development funding, which, together with the net cash proceeds from equity financings, the GECC Term Loan and the exercise of common stock warrants
and options, provided aggregate net cash proceeds of approximately $495.3 million. We have also generated funds from government grants, equipment lease financings and investment income. We are
engaged in preliminary
partnership discussions for a number of our programs, which may provide us with additional financial resources if consummated.

We
have devoted substantially all of our capital resources to the research and development of our drug candidates. Since our inception, we have had no revenues from product sales. As of
December 31, 2010, we had an accumulated deficit of $351.1 million. We expect to incur significant operating losses for the foreseeable future as we advance our drug candidates from
discovery through preclinical development and clinical trials, and seek regulatory approval and eventual commercialization. We will need to generate significant revenues from product sales to achieve
future profitability and may never do so.

Oncology Programs

We have two clinical-stage programs and one preclinical-stage program in oncology:

Ganetespib (Hsp90 Inhibitor)

Ganetespib (formerly STA-9090) is a potent, synthetic, small molecule inhibitor of Hsp90, a chaperone protein that is
essential to the function of certain other proteins, for example tyrosine kinases that drive the growth, proliferation, and survival of many different types of cancer. Many of the known oncogenic
proteins that play major roles in pathogenesis of solid tumor and hematologic malignancies are client proteins of Hsp90. By inhibiting Hsp90, ganetespib causes the degradation of these client proteins
and the subsequent death of cancer cells dependent on these proteins. Ganetespib is structurally unrelated to the ansamycin family of first-generation Hsp90 inhibitors (such as 17-AAG and
IPI-504) and has shown superior activity to these agents in preclinical studies. In clinical trials to date, ganetespib has shown encouraging evidence of clinical activity, including
prolonged tumor shrinkage in patients who have progressed after, or failed to respond to, treatment with commonly-used drugs for these tumors. Currently, over 350 patients have been
treated with ganetespib across all trials. Ganetespib has been well tolerated to date, with no evidence of the serious liver or common ocular toxicities seen with other Hsp90 inhibitors. The most
common adverse event seen with ganetespib is diarrhea, which has been manageable and reversible with standard supportive care. Ganetespib is currently being evaluated in eleven Phase 2 clinical
trials, with several additional trials expected to initiate in 2011, both as a single agent, or monotherapy, and in combination with other therapies.

In
2010, we initiated nine clinical trials, including a Phase 1 company-sponsored clinical trial of ganetespib in combination with docetaxel in solid tumors and eight
investigator-sponsored trials, or
ISTs, which include a Phase 1/2 trial in hepatic cancer and seven Phase 2 trials in colon, gastric, ocular melanoma, pancreatic, prostate, breast and small-cell lung cancers.

In
January 2011, we announced that the Multiple Myeloma Research Foundation will provide funding of up to $1 million for a Phase 1 trial evaluating ganetespib as a single
agent and in combination with Velcade for the treatment of relapsed multiple myeloma. We expect this trial to begin

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in
the second half of 2011. In addition, we expect to initiate several additional ISTs that will evaluate ganetespib in other tumor types or in combination with additional chemotherapy or targeted
agents.

We
are planning to initiate a Phase 2b/3 trial in NSCLC of ganetespib plus docetaxel versus docetaxel alone in the second quarter of 2011. This trial is being designed as a
registration-enabling program with two stages. The first stage is an approximately 240 patient Phase 2b portion designed to establish the clinical benefit and safety profile of ganetespib in
combination with docetaxel relative to docetaxel alone. This part of the trial is expected to require $10 million or less in external costs in 2011. The first stage of this trial will be used
to build the clinical and operational experience needed to optimize the design of the second stage, Phase 3 portion of the trial. For example, we may use information obtained in the
Phase 2b stage of the trial to refine patient inclusion/exclusion criteria to enrich the Phase 3 portion with those patients that show the greatest benefit from the addition of
ganetespib. The second stage, Phase 3 portion of the trial is expected to enroll between 400 to 600 patients.

We
are currently developing a new series of Hsp90 inhibitor compounds that may be orally administered and may be more suitable for long-term treatment settings such as
adjuvant or maintenance therapy in oncology. We have also characterized additional small molecule, injectable Hsp90 inhibitors that provide options for future development. These compounds are in the
lead optimization stage.

Elesclomol (Mitochondria-Targeting Agent)

Elesclomol is a first-in-class, investigational drug candidate that triggers programmed cell death, or
apoptosis, in cancer cells through a novel mechanism: disrupting cancer cell mitochondrial metabolism. Results from three randomized clinical trials and subsequent research have established that the
patient baseline serum level of lactate dehydrogenase, or LDH, is an important predictor of elesclomol treatment outcome. Elesclomol is currently in a Phase 2 clinical trial in ovarian cancer
in combination with paclitaxel and a Phase 1 clinical trial in acute myeloid leukemia, or AML, as a single agent.

In
the second quarter of 2011, we plan to initiate a Phase 2b trial for elesclomol in NSCLC with a trial design similar to our prior Phase 2b trial for elesclomol in NSCLC.
This new trial, which is expected to enroll approximately 180 patients, would prospectively specify that only patients with low to normal LDH levels will be enrolled. This trial will include a
dose-escalation and safety portion to optimize the dose selection for the Phase 2b portion. We expect the randomized Phase 2b portion to begin in the fourth quarter of 2011.



In October 2007, as amended in June 2008, we entered into the GSK Agreement for the joint development and commercialization of
elesclomol under which we received nonrefundable payments, including an $80 million upfront license fee and $50 million in operational milestone payments. On June 10, 2009,
following the suspension of the SYMMETRY trial, we received written notice from GSK of their intent to terminate the GSK Agreement. The termination of the GSK Agreement was effective on
September 10, 2009. In accordance with the termination provisions of the GSK Agreement, all rights to the elesclomol program have been returned to us as of the effective date of termination. We
may continue to develop elesclomol alone or with another partner. Under the termination provisions in the GSK Agreement, we may be required to pay GSK a low single-digit royalty on future sales of
elesclomol.

STA-9584 (Vascular Disrupting Agent)

STA-9584 is a novel, injectable, small molecule compound that appears to disrupt the blood vessels that supply tumors with
oxygen and essential nutrients, and is in preclinical development.

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In
November 2010, we announced that the United States Department of Defense recommended funding of STA-9584, in the amount of approximately $1 million, for study in
advanced prostate cancer. We anticipate initiating work supported by this grant during the first half of 2011.

Our Inflammatory Disease Programs

We have two preclinical-stage programs focusing on treatments for inflammatory diseases. Both of our inflammatory disease programs
focus on oral, disease-modifying drug candidates that act through novel mechanisms and could potentially target multiple indications.

CRACM Ion Channel Inhibitors

We have developed novel, small molecule inhibitors of CRACM ion channels expressed on immune cells. Our CRACM ion channel inhibitors
have shown strong antiinflammatory activity in preclinical studies bothin vitroandin vivo, inhibiting
T cell and mast cell activity, including cytokine release, degranulation, and immune cell proliferation. Potential applications include a wide range of inflammatory diseases and disorders for which
modulating T cell and mast cell function has been shown to be critical, including rheumatoid arthritis, or RA, asthma, chronic obstructive pulmonary disease, or COPD, allergy, transplant rejection,
and other autoimmune diseases and inflammatory conditions. As part of our strategic alliance with Roche, Roche is advancing several compounds in preclinical development.

We
have several CRACM inhibitors, which are not licensed to Roche, in lead optimization. Because there are a number of CRACM ion channel targets on immune cells, we believe that our next
generation CRACM inhibitor compounds could potentially apply to different immune system diseases and address distinct therapeutic areas, such as RA, allergy, asthma, and transplant rejection.



In December 2008, we formed a strategic alliance with Roche to discover, develop, and commercialize small-molecule drugs targeting
CRACM channels. We refer herein to the agreement, as amended in February 2010 and February 2011, as the Roche Agreement. The goal of this alliance is to develop a novel category of oral,
disease-modifying agents for the treatment of RA and other autoimmune diseases and inflammatory conditions.

Under
the terms of the Roche Agreement, we received a $16 million non-refundable upfront license fee. Roche funded research and development conducted by us, which
included discovery and certain early development activities. As of December 31, 2010, we have received approximately
$21.1 million in research and development support under the Roche Agreement. Roche received worldwide rights to develop and commercialize certain products, referred to as Licensed Compounds,
which were identified and studied prior to the end of the two-year research term that concluded on December 31, 2010. We do not expect to earn any cost sharing revenue or receive
any additional research and development support under the Roche Agreement in 2011. Roche is responsible for development and commercialization of the Licensed Compounds, while we retain certain
co-development and co-promotion rights. We are also eligible to receive additional payments, for each of three Licensed Compounds, should specified development and
commercialization milestones be successfully achieved. Development milestones across multiple indications of up to $245 million could be earned for the first product, and up to half of this
amount could be earned for each of the second and third products. Commercialization milestones of up to $170 million could be earned for each of three products. We will also receive tiered
royalties on sales of all approved, marketed products containing Licensed Compounds.

In
the February 2011 amendment of the Roche Agreement, we extended the term of the research license for Roche to continue performing research on certain specified compounds until
June 30, 2011.

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That
amendment also provided for the return to us of certain Licensed Compounds. We retain all development and commercialization rights for our CRACM inhibitor compounds other than the specific
Licensed Compounds licensed to Roche under the Roche Agreement.

IL-12/23 Inhibitors

We have identified several small molecule IL-12/23 inhibitors that represent a promising opportunity to develop drug
candidates that could be administered orally and potentially address a wide range of serious inflammatory diseases with high unmet medical needs.

Financial Operations Overview

Revenue

We have not yet generated any product revenue and do not expect to generate any product revenue in the foreseeable future, if at all.
Our revenues have been generated primarily through partnership agreements with GSK and Roche. The terms of these agreements include payment to us of upfront license fees, milestone payments, research
and development cost sharing and royalties. We will seek to generate revenue from product sales and from future collaborative or strategic relationships. Upfront license payments and milestones are
recognized ratably as collaboration revenue using the time-based model over the estimated performance period and any changes in the estimated performance period could result in substantial
changes to the period over which these revenues are recognized (see "Critical Accounting Policies and EstimatesRevenue Recognition"). In the future, we expect any revenue we generate will
fluctuate from quarter-to-quarter as a result of the timing and amount of payments received and expenses incurred under future collaborations or strategic relationships, and
the amount and timing of payments we receive upon the sale of our drug candidates, to the extent any are successfully commercialized.

Research and Development

Research and development expense consists of costs incurred in connection with developing and advancing our drug discovery technology
and identifying and developing our drug candidates. We charge all research and development expenses to operations as incurred.

Our
research and development expense consists of:



We
do not know if we will be successful in developing our drug candidates. We believe that accurately projecting total program-specific expenses through commercialization is not possible
at this time. The timing and amount of these expenses will depend upon the costs associated with potential future clinical trials of our drug candidates, and the related expansion of our research and
development organization, regulatory requirements, advancement of our preclinical programs and product manufacturing costs, many of which cannot be determined with accuracy at this time based on our
stage of development. This is due to the numerous risks and uncertainties associated with the duration

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and
cost of clinical trials, which vary significantly over the life of a project as a result of unanticipated events arising during clinical development, including with respect
to:



Our
expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals and the expense of filing, prosecuting, defending or enforcing any patent
claims or other intellectual property rights. In addition, we may obtain unexpected or unfavorable results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of
some drug candidates or focus on others. A change in the outcome of any of the foregoing variables in the development of a drug candidate could mean a significant change in the costs and timing
associated with the development of that drug candidate. For example, if the FDA or other regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate,
or if we experience significant delays in any of our clinical trials, we would be required to expend significant additional financial resources and time on the completion of clinical development.
Additionally, future commercial and regulatory factors beyond our control will evolve and therefore impact our clinical development programs and plans over time. In 2011, we anticipate that our
overall research and development expenses for personnel and external costs will increase as we further advance the clinical development of ganetespib and elesclomol. However, these increases will be
offset in part due to the anticipated lower investment in CRACM research following the conclusion on December 31, 2010 of the initial two-year research term under the Roche
Agreement.

Beyond
our current lead drug candidates, we anticipate that we will select drug candidates and research projects for further development on an ongoing basis in response to their
preclinical and clinical success, as well as commercial potential.

General and Administrative

General and administrative expense consists primarily of salaries and related expenses for personnel in executive, finance, business
and commercial development, investor and medical community relations, human resources and administrative functions. Other costs include stock-based compensation costs, directors' and officers'
liability insurance premiums, legal costs of pursuing patent protection of our intellectual property, fees for general legal, accounting, public-company requirements and compliance, and other
professional services, as well as overhead-related costs not otherwise included in research and development. In 2011, we anticipate our general and administrative expenses will remain at levels
similar to 2010.

Restructuring

On March 12, 2009, we committed to a restructuring plan that consisted primarily of an immediate workforce reduction of
approximately 90 positions, to a total of approximately 130 positions, to align our workforce to our revised operating plans following the suspension of our SYMMETRY clinical trial. In the first
quarter of 2009, we recorded a restructuring charge of approximately $1.2 million for severance and estimated benefits continuation costs and outplacement services. In addition, we paid
approximately $0.2 million in unused paid-time off that had been recognized as expense prior to the restructuring, including $0.1 million in the year ended
December 31, 2008 and $0.1 million in the first quarter of 2009. The approximate $1.4 million in restructuring related payments for severance, unused paid-time off,
benefits and outplacement services was fully paid in 2009. To conserve additional capital

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resources,
we did not renew one of our office building leases that expired in August 2009 and consolidated our operations within our three other facilities. We did not incur an impairment charge in
connection with the facility consolidation.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements
which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reported periods. We are required to make estimates and judgments with respect to contract research accruals, the recoverability of long-lived assets, measurement of stock-based
compensation and the periods of performance under collaborative research and development agreements. We base our estimates on historical experience, known trends and events, and various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources and the reported amounts of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions.

We
believe the following accounting policies and estimates are most critical to aid in understanding and evaluating our reported financial results.

Marketable Securities

Marketable securities consist of investments in high-grade corporate obligations that are guaranteed by the United States
government, and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations they are
classified as current assets on the consolidated balance sheets.

We
adjust the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. We include such amortization and
accretion in interest and investment income. Realized gains and losses and declines in value, if any, that we judge to be other-than-temporary on
available-for-sale securities are reported in interest and investment income. To determine whether an other-than-temporary impairment exists, we
consider whether we intend to sell the debt security and, if we do not intend to sell the debt security, we consider available evidence to assess whether it is more likely than not that we will be
required to sell the security before the recovery of its amortized cost basis. During the years ended December 31, 2010 and 2009, we determined that no securities were
other-than-temporarily impaired.

Marketable
securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive income
(loss), which is a separate component of stockholders' equity. The fair value of these securities is based on quoted market prices. Realized gains and losses are determined on the specific
identification method. During the years ended December 31, 2010 and 2009, we recorded no realized gains or losses on marketable securities.

Revenue Recognition



Our principal source of revenue is from collaborative research and development agreements, which may include upfront license payments,
development milestones,
reimbursement of research and development costs, profit sharing payments, sales milestones and royalties. The application of accounting rules requires subjective analysis and requires management to
make estimates and assumptions about whether deliverables within multiple-element arrangements are separable from the other aspects of the contractual arrangement into separate units of accounting and
to determine the fair value to be allocated to each unit of accounting.

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We evaluate the multiple deliverables within our collaborations to determine whether the delivered elements that are our obligation have value to our collaborators on a stand-alone basis
and whether objective reliable evidence of fair value of the undelivered items exists. Deliverables that meet these criteria are considered a separate unit of accounting. Deliverables that do not meet
these criteria are combined and accounted for as a single unit of accounting. The appropriate recognition of revenue is then applied to each separate unit of accounting.

Our
deliverables under our collaboration agreements, including the related rights and obligations, contractual cash flows and performance periods, are more fully described in
Notes 8 and 9 of the accompanying consolidated financial statements. Certain of the deliverables have been combined as a single unit of accounting.

The
cash flows associated with the single unit of accounting from the research and development portions of our collaborations are recognized as revenue using a time-based
model. Under this model, cash flow streams are recognized as revenue over the estimated performance period. Upon achievement of milestones, as defined in the collaboration agreements, revenue is
recognized to the extent the accumulated service time, if any, has occurred. The remainder is deferred and recognized as revenue ratably over the remaining estimated performance period. A change in
the period of time expected to complete the deliverable is accounted for as a change in estimate on a prospective basis. Revenue is limited to amounts that are non-refundable and that our
collaborators are contractually obligated to pay us.

Royalty
revenues are based upon a percentage of net sales. Royalties from the sales of products will be recorded on the accrual basis when results are reliably measurable, collectibility
is reasonably assured and all other revenue recognition criteria are met. Sales milestones, which are based upon the achievement of certain agreed-upon sales thresholds, will be recognized
in the period in which the respective sales threshold is achieved and collectibility is reasonably assured.

Accrued Expenses and Accrued Contract Research Liabilities

As part of the process of preparing financial statements, we are required to estimate accrued expenses. This process involves
identifying services which have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our
financial statements. Given our current business, the primary area of uncertainty concerning accruals which could have a material effect on our business is with respect to service fees paid to
contract manufacturers in conjunction with the production of clinical drug supplies and to contract research organizations in connection with our preclinical studies and clinical trials. In connection
with all of the foregoing service fees, our estimates are most affected by our understanding of the status and timing of services provided. The majority of our service providers, including contract
research organizations, invoice us in arrears for services performed. In the event that we do not identify some costs which have begun to be incurred, or we under or over estimate the level of
services performed or the costs of such services in a given period, our reported expenses for such period would be understated or overstated. We currently reflect the over or under accrual of expenses
directly in our operations in the period the amount was determined.

Our
arrangements with contract research organizations in connection with clinical trials often provide for payment prior to commencing the project or based upon predetermined milestones
throughout the period during which services are expected to be performed. We recognize expense relating to these arrangements based on the various services provided over the estimated time to
completion. The date on which services commence, the level of services performed on or before a given date, and the cost of such services are often determined based on subjective judgments. We make
these judgments based upon the facts and circumstances known to us based on the terms of the contract and our ongoing monitoring of service performance. In the years ended December 31, 2010,
2009 and 2008,

63

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respectively,
we had arrangements with multiple contract research organizations whereby these organizations commit to performing services for us over multiple reporting periods. We currently recognize
and plan to continue to recognize the expenses associated with these arrangements based on our expectation of the timing of the performance of components under these arrangements by these
organizations. Generally, these components consist of the costs of setting up the trial, monitoring the trial, closing the trial and preparing the resulting data. Costs related to patient enrollment
in clinical trials are accrued as patients are enrolled in the trial.

With
respect to financial reporting periods presented in this Annual Report on Form 10-K, and based on our receipt of invoices from our third party providers, the
timing of our actual costs incurred have not differed materially from our estimated timing of such costs. In light of the foregoing, we do not believe our estimates of future expenses and our practice
of making judgments concerning the accrual of expenses are reasonably likely to change in the future. There were no changes in our estimates and accruals for contract service fees that had a material
effect on our net income (loss) for the years ended December 31, 2010, 2009 and 2008, respectively.

Stock-Based Compensation

We use the Black-Scholes option pricing model as it is the most appropriate valuation method for our option grants. The Black-Scholes
model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. Since we have a limited history of stock activity, expected volatility for
the period from April 1, 2009 through December 31, 2010 was based upon the weighted-average historical volatility data of our common stock and the historical volatility data of our
common stock and the historical volatility data from several guideline public biotechnology companies similar in size and value to us that also have stock compensation plans with similar terms. Prior
to April 1, 2009, expected volatility was based solely on historical data from several similar guideline public biotechnology companies with similar stock compensation plans and terms. We will
continue using our historical volatility and other similar public entity volatility information until our historical volatility alone is relevant to measure expected volatility for future option
grants. We estimate the forfeiture rate based on historical data. Our options generally vest 25% after one year of service and quarterly over three years thereafter. Based on an analysis of historical
forfeitures, we applied a forfeiture rate of 10% to all options that vest upon completion of the first year of service following the date of grant. The analysis is re-evaluated at least
annually and the forfeiture rate is adjusted as necessary. The risk-free interest rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in
effect at the time of the grant. The expected lives for options granted represent the period of time that options granted are expected to be outstanding. We use the simplified method for determining
the expected lives of options.

For
awards with graded vesting, we allocate compensation costs on a straight-line basis over the requisite service period. Accordingly, we amortize the fair value of each
option over each option's service period, which is generally the vesting period.

We
account for stock options issued to non-employees by valuing and remeasuring such stock options to the current fair value until the performance date has been reached.

Our
net income (loss) included compensation costs in the amount of $4.0 million, $4.6 million and $7.6 million for the years ended December 31, 2010, 2009 and
2008, respectively, and no income tax benefit related to our stock-based compensation arrangements for employee and non-employee awards. As of December 31, 2010, the total amount of
unrecognized stock-based compensation expense was $4.3 million, which will be recognized over a weighted average period of 1.8 years.

64

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Consolidated Results of Operations

Years Ended December 31, 2010, 2009 and 2008



Years Ended
December 31,

2010 / 2009 Comparison

2009 / 2008 Comparison2010

2009

2008

$

%

$

%(dollars in millions)Collaboration revenues:License and milestone revenueRoche

$
4.6

$
4.6

$
0.1

$




%
$
4.5


4,500
%License and milestone revenueGSK





121.1


8.4


(121.1
)

(100
)%

112.7


1,342
%4.6


125.7


8.5


(121.1
)

(96
)%

117.2


1,379
%Cost sharing reimbursements, netRoche


9.2


11.9





(2.7
)

(23
)%

11.9



%Cost sharing reimbursements, netGSK





6.6


(5.9
)

(6.6
)

(100
)%

12.5


212
%9.2


18.5


(5.9
)

(9.3
)

(50
)%

24.4


414
%Total collaboration revenue


13.8


144.2


2.6


(130.4
)

(90
)%

141.6


5,446
%Grant revenue


1.0








1.0



%





%Total revenues

$
14.8

$
144.2

$
2.6

$
(129.4
)

(90
)%
$
141.6


5,446
%




Overview.In December 2008, as amended in February 2010 and February 2011, we entered into a collaborative license agreement with Roche
to discover,
develop, and commercialize small-molecule drugs targeting CRACM channels and received a $16 million nonrefundable upfront payment from Roche in January 2009. Reimbursements of research and
development costs to us by Roche were recorded as cost sharing revenue in the period in which the related research and development costs were incurred. The initial two-year research term
concluded on December 31, 2010 and, accordingly, we do not expect to earn any cost sharing revenue or receive any additional research and development support under the Roche Agreement in 2011.
(See Notes 2 and 8 in the accompanying condensed consolidated financial statements.)

In
2010 as compared to 2009, cost sharing reimbursements from Roche decreased by $2.7 million due to the realignment of our resources to focus on advancing the research program,
thereby shifting preclinical and clinical development to Roche, as well as a corresponding lower level of research and development funding by Roche.

In
2009 as compared to 2008, we recognized a full year of license revenue in connection with the $16 million nonrefundable upfront payment we received from Roche in January 2009
and we began performing research and development services under the Roche Agreement.



Overview:In October 2007, as amended in June 2008, we entered into a collaborative development, commercialization and license
agreement with GSK for
elesclomol, received an $80 million nonrefundable upfront payment from GSK and achieved a total of $50 million in nonrefundable operational milestones. In 2008, we began recognizing, as
a reduction to revenue, net cost sharing reimbursements due to GSK for costs they incurred under the development program. In 2009, following the suspension of the Company's global Phase 3
clinical trial of elesclomol plus paclitaxel in metastatic melanoma, called the SYMMETRY trial, GSK terminated the GSK Agreement effective September 10, 2009. (See Notes 2 and 9 in the
accompanying condensed consolidated financial statements.)

65

---



In
2010 as compared to 2009, no revenue related to GSK was recognized due to the termination of the GSK Agreement in September 2009. In 2009 as compared to 2008, license and milestone
revenue recognized under the GSK Agreement increased by $112.7 million. In the third quarter of 2009, upon the effectiveness of the termination of the GSK Agreement, we recognized approximately
$114.6 million of remaining deferred revenue from upfront payments and milestones, all of which were recorded as license and milestone revenue as we had no further obligation for deliverables
under the GSK Agreement. Also, in 2009, cost sharing reimbursements related to GSK increased by $12.5 million. The requirement to pay the cumulative GSK cost sharing reimbursements did not
survive termination of the GSK Agreement and in the third quarter of 2009, upon the effectiveness of the termination of the GSK Agreement, we reversed approximately $10 million of cost sharing
reimbursement liabilities as collaboration revenue.



In 2010, we recognized grant revenue of $1.0 million as compared to no grant revenue recognition in 2009. In November 2010, we
were informed that all four Therapeutic Discovery Tax Credit applications we submitted under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability
Reconciliation Act, or the Healthcare Reform Act of 2010, had been approved and that we had been awarded approximately $1.0 million in grants. These funds were received in December 2010.



Years Ended
December 31,

2010 / 2009
Comparison

2009 / 2008
Comparison2010

2009

2008

$

%

$

%(dollars in millions)Clinical-stage drug candidatesGanetespib

$
26.0

$
14.7

$
6.3

$
11.3


77
%
$
8.4


133
%Elesclomol


2.9


19.7


60.1


(16.8
)

(85
)%

(40.4
)

(67
)%Apilimod





0.5


0.4


(0.5
)

(100
)%

0.1


25
%Total clinical-stage drug candidates


28.9


34.9


66.8


(6.0
)

(17
)%

(31.9
)

(48
)%CRACM


7.6


10.6


5.7


(3.0
)

(28
)%

4.9


86
%Other early stage programs


3.8


5.6


9.1


(1.8
)

(32
)%

(3.5
)

(38
)%Total research and development

$
40.3

$
51.1

$
81.6

$
(10.8
)

(21
)%
$
(30.5
)

(37
)%




In 2010 as compared to 2009, costs incurred under our ganetespib program increased by $11.3 million, principally including
increases of $6.6 million for personnel-related costs, related research supplies, operational overhead and stock compensation, and $4.7 million for external costs.

In
2009 as compared to 2008, costs incurred under our ganetespib program increased by $8.4 million, principally including increases of $6.9 million for personnel-related
costs, related research supplies, operational overhead and stock compensation, and $1.5 million for external costs.

These
increases in 2010 and 2009 were principally due to the advancement of clinical development, including fifteen ongoing clinical trials as of December 31, 2010, the
manufacture of supporting drug supply, and the evaluation of additional cancer types and planning activities in connection with future clinical trials. In 2010, we initiated nine clinical trials,
including a Phase 1 company-sponsored clinical trial of ganetespib in combination with docetaxel in solid tumors and eight investigator-sponsored clinical trials, which include a
Phase 1/2 trial in hepatic cancer and seven Phase 2 trials in colon,

66

---



gastric,
ocular melanoma, pancreatic, prostate, breast and small-cell lung cancers. In 2009, we initiated four company-sponsored clinical trials, including two Phase 1/2 clinical
trials in hematologic cancers and two Phase 2 clinical trials in NSCLC and GIST. In 2011, we anticipate that the overall costs under our ganetespib program will continue to increase as we
further advance clinical development, including the planned initiation of a randomized, registration-enabling Phase 2b/3 clinical trial of ganetespib in combination with docetaxel in NSCLC in
the second quarter of 2011 and possible additional clinical trials in other cancer types, as well as the conduct of non-clinical supporting activities.



In 2010 as compared to 2009, costs incurred under our elesclomol program decreased by $16.8 million, principally including
decreases of $7.5 million for personnel-related costs, related research supplies, operational overhead and stock compensation, and $9.3 million for external costs. These decreases were
principally due to non-recurring costs incurred in 2009 resulting from the suspension of our previous elesclomol program and subsequent restructuring in the first quarter of 2009, offset
in part by efforts in support of the restart of clinical development. In the fourth quarter of 2010, we initiated a Phase 2 clinical trial of elesclomol in combination with paclitaxel in
ovarian cancer that is being conducted by the GOG and a Phase 1 clinical trial of elesclomol as a single agent in AML, with patient enrollment in these studies expected in the first quarter of
2011. In 2011, we anticipate that the overall costs under our elesclomol program will increase significantly as we further advance clinical development, including the planned initiation of a
randomized Phase 2b clinical trial in NSCLC in the second quarter of 2011. This trial will include a dose-escalation and safety portion to optimize the dose selection for the
Phase 2b portion. We expect the randomized Phase 2b portion to begin by the fourth quarter of 2011.

In
2009 as compared to 2008, costs incurred under our elesclomol program decreased by $40.4 million, principally including decreases of $12.3 million for personnel-related
costs, related research supplies and operational overhead, $2.9 million for stock compensation, and $25.2 million for external costs. On February 26, 2009, we suspended the
SYMMETRY trial, our global, pivotal Phase 3 clinical trial which was initiated in the third quarter of 2007, as well as the additional ongoing clinical studies using the sodium salt, water
soluble formulation of elesclomol, including the Phase 1/2 trial of elesclomol in combination with docetaxel and prednisone in prostate cancer that was initiated in the fourth quarter of 2008
and the monotherapy Phase 1 trial in solid tumors that was initiated in January 2009. Subsequently, on March 12, 2009, we committed to a restructuring that consisted primarily of an
immediate workforce reduction. In 2009, stock compensation decreased by $2.9 million due in part to the workforce reduction in the first quarter of 2009 and in part to the
non-recurring correction recognized in the first quarter of 2008. (See Note 2 in the accompanying condensed consolidated financial statements.)



In 2010 as compared to 2009, costs incurred under our apilimod program decreased by $0.5 million principally due to decreases of
$0.2 million for personnel-related costs, related research supplies, operational overhead and stock compensation, and $0.3 million for external costs. Based on our review of the results
of a Phase 2a clinical trial of apilimod in patients with RA, we do not expect to continue development of apilimod in this indication, with this formulation and route of administration. In 2009
as compared to 2008, costs incurred under our apilimod program principally increased by $0.1 million due to a $0.1 million increase for external costs.



In 2010 as compared to 2009, costs incurred under our CRACM program decreased by $3.0 million, principally including decreases
of $2.0 million for personnel-related costs, related research

67

---



supplies,
operational overhead and stock compensation, and $1.0 million for external costs. These decreases reflect the realignment of our resources to focus on advancing the research program,
thereby shifting preclinical and clinical development to Roche, as well as a corresponding lower level of research and development funding by Roche. In 2011, we anticipate that costs under the CRACM
program will decrease as the result of a lower investment in CRACM research following the conclusion on December 31, 2010 of the initial two-year research term under the Roche
Agreement.

In
2009 as compared to 2008, costs incurred under our CRACM program increased by $4.9 million, principally including increases of $4.1 million for personnel-related costs,
related research supplies, operational overhead and stock compensation, and $0.8 million for external costs. The increase in external costs was principally due to the advancement of the program
towards preclinical development.



In 2010 as compared to 2009, costs incurred under our other early-stage programs decreased by $1.8 million principally due to
decreases of $1.2 million for personnel-related costs, related research supplies, operational overhead and stock compensation, and $0.6 million for external costs. In 2009 as compared to
2008, costs incurred under our other early-stage programs decreased by $3.5 million principally due to decreases of $3.1 million for personnel-related costs, related research supplies,
operational overhead and stock compensation, and $0.4 million for external costs.



Years Ended
December 31,

2010 / 2009
Comparison

2009 / 2008
Comparison2010

2009

2008

$

%

$

%(dollars in millions)General and administrative

$
11.4

$
12.6

$
14.7

$
(1.2
)

(10
)%
$
(2.1
)

(14
)%


In
2010 as compared to 2009, the decrease in general and administrative expense principally resulted from decreases of $0.6 million for personnel-related costs and related
overhead in connection with decreased headcount and stock compensation and $0.6 million in external professional fees, including intellectual property and general legal fees, public-company
reporting and compliance costs, director and officer insurance premiums, investor and medical-community relations, commercial development and corporate taxes. In 2011, we anticipate our general and
administrative expenses will remain at levels similar to 2010.

In
2009 as compared to 2008, the decrease in general and administrative expense principally resulted from decreases of $1.3 million for personnel-related costs and related
overhead in connection with decreased headcount and stock compensation due in part to the workforce reduction in the first quarter of 2009 and $0.8 million in external professional fees,
including intellectual property and general legal fees, public-company reporting and compliance costs, director and officer insurance premiums, investor and medical-community relations, commercial
development and corporate taxes.

68

---







Years Ended
December 31,

2010 / 2009
Comparison

2009 / 2008
Comparison2010

2009

2008

$

%

$

%(dollars in millions)Interest and investment income

$


$
0.1

$
1.6

$
(0.1
)

(100
)%
$
(1.5
)

(94
)%Interest expense


(0.6
)

(0.3
)

(0.5
)

(0.3
)

(100
)%

0.2


40
%Other (expense) income, net

$
(0.6
)
$
(0.2
)
$
1.1

$
(0.4
)

(200
)%
$
(1.3
)

(118
)%


In
2010 as compared to 2009, interest and investment income decreased by $0.1 million principally due to declining interest rates. Interest expense increased by
$0.3 million principally due to interest expense in connection with the GECC Term Loan that was executed in September 2010, offset by lower average principal balances of capital equipment
leases. In 2011, we anticipate that interest expense will increase based upon a full year of interest expense related to the GECC Term Loan. In 2009 as compared to 2008, interest and investment income
decreased by $1.5 million principally due to declining interest rates and lower average cash balances, and interest expense decreased by $0.2 million due to lower average principal
balances of capital equipment leases.

Liquidity and Capital Resources

Cash Flows

The following table provides information regarding our cash position, cash flows and capital expenditures for the years ended
December 31, 2010, 2009 and 2008.

Year Ended December 31,2010

2009

2008(dollars in millions)Cash, cash equivalents and marketable securities

$
51.0

$
44.2

$
73.6Working capital


34.8


28.1


57.9Cash flows (used in) provided by:Operating activities


(38.2
)

(26.8
)

(37.9
)Investing activities


(19.8
)

21.0


(23.7
)Financing activities


45.2


(2.1
)

(1.9
)Capital expenditures (included in investing activities)


(0.1
)

(0.5
)

(2.2
)


Our
operating activities used cash of $38.2 million, $26.8 million and $37.9 million in 2010, 2009 and 2008, respectively. The use of cash in these periods
principally resulted from our losses from operations, as adjusted for non-cash charges for depreciation and stock-based compensation, and changes in our working capital accounts.

In
2010, our investing activities used cash of $19.8 million, including purchases of marketable securities in the amount of $36.9 million and purchases of property and
equipment in the amount of $0.1 million, offset by $17.2 million in maturities of marketable securities in our investment portfolio. In 2009, our investing activities provided cash of
$21.0 million, including maturities of marketable securities in our investment portfolio in the amount of $60.8 million, offset by the purchases of marketable securities in the amount of
$39.3 million and purchases of property and equipment in the amount of $0.5 million. In 2008, our investing activities used cash of $23.7 million, including purchases of
marketable securities in the amount of $21.5 million and purchases of property and equipment in the amount of $2.2 million.

Our
financing activities provided cash of $45.2 million in 2010, and used cash of $2.1 million and $1.9 million in 2009 and 2008, respectively. In 2010, we raised
approximately $47.0 million in net cash

69

---



proceeds,
including $26.7 million in net proceeds from the sale of 6,388,889 shares of our common stock in an underwritten public offering in January 2010, $15.0 million in gross
proceeds from the GECC Term Loan that was executed in September 2010, and $5.0 million in net proceeds from the direct sale of 1,440,923 shares of our common stock in November 2010 to a
director and largest existing stockholder, as well as $0.3 million from the exercise of common stock options. In 2008, we raised $0.9 million in proceeds from the sale and
lease-back of property and equipment. We repaid $1.8 million, $2.2 million and $2.8 million in capital equipment leases in 2010, 2009 and 2008, respectively.

Contractual Obligations and Commitments

The following tables summarize our contractual obligations at December 31, 2010 and the effects such obligations are expected to
have on our liquidity and cash flows in future periods (in millions).

Contractual Obligations (as of December 31, 2010)

Total

2011

2012
through
2013

2014
through
2015

More than
5 yearsCapital lease obligations(1)

$
0.2

$
0.2

$


$


$
Operating lease obligations


1.8


1.7


0.1





Research and development contracts(2)


8.8


6.7


2.1





GECC Term Loan(1)


17.8


4.7


13.1





Total

$
28.6

$
13.3

$
15.3

$


$



(1)Including
scheduled interest payments.(2)Research
and development contracts principally include contracts for human clinical studies, animal studies and clinical manufacturing. In the event a study
or manufacturing contract is terminated prior to the planned completion by mutual agreement between the contractor and us, the amount paid under such contracts may be less than the amounts presented.




We lease our research and office facilities under non-cancelable operating leases with terms expiring in 2011. We are
currently in negotiations to renew our expiring leases under our existing renewal options. Each of these leases contains renewal options ranging from one to five years.

In
accordance with the termination provisions of the GSK Agreement, all rights to the elesclomol program were returned to us. We may continue to develop elesclomol alone or with another
partner and may pay GSK a low single-digit royalty on any potential future sales of elesclomol.

Under
various license agreements, substantially all of which are related to our early-stage discovery programs, we may be obligated to pay up to an aggregate of $1.5 million if
specified development and commercialization milestones are met, as follows (in millions).

Milestone

AmountPhase 1 clinical trials

$
0.1Phase 2 clinical trials


0.1Phase 3 clinical trials


0.2Completion of Phase 3 clinical trials


0.1FDA new drug approval


0.8European market approval


0.2Total

$
1.5


70

---



Term Loan with General Electric Capital Corporation (GECC)

On September 30, 2010, we entered into the $15 million GECC Term Loan. Interest on the borrowings under the GECC Term
Loan accrues at an annual rate of 9.75%. We will make interest-only payments through June 2011, followed by 27 equal monthly payments of principal plus accrued interest on the outstanding
balance. In addition to the interest payable under the GECC Term Loan, we paid origination fees in the amount of $150,000 and are obligated to pay an exit fee of $450,000 at the time of the final
payment of the outstanding principal. These amounts are being amortized and accreted, respectively, to interest expense over the term of the GECC Term Loan. We also paid approximately $177,000 of
legal fees and expenses in connection with the GECC Term Loan. These expenses have been deferred and, together with the $150,000 origination fees, are included in other assets, and will be expensed
over the term of the GECC Term Loan. In the year ended December 31, 2010, we recognized approximately $453,000 in interest expense related to the GECC Term Loan. No warrants were issued in
connection with the GECC Term Loan. We may prepay the full amount of the GECC Term Loan, subject to prepayment premiums under certain circumstances.

The
GECC Term Loan is secured by substantially all of our assets, except our intellectual property. We have granted GECC a springing security interest in our intellectual property in the
event we are not in compliance with certain cash burn covenants, as defined. The GECC Term Loan contains restrictive covenants, including the requirement for us to receive prior written consent of
GECC to enter into loans, other than up to $4.0 million of equipment financing, restrictions on the declaration or payment of dividends, restrictions on acquisitions, and customary default
provisions that include material adverse events. We have determined that the risk of subjective acceleration under the material adverse events clause is remote. In addition, at the time of closing the
GECC Term Loan, we were required to repay approximately $787,000 of remaining principal outstanding under our existing equipment leases with GECC.

Equity Line of Credit with Azimuth

On October 4, 2010, we entered into a common stock purchase agreement, or the Purchase Agreement, with Azimuth
Opportunity Ltd., or Azimuth, pursuant to which we obtained an equity line of credit facility, which we refer to as the Facility, under which we may sell, in our sole discretion, and Azimuth is
committed to purchase, subject to the terms and conditions set forth in the Purchase Agreement, up to $35 million or 8,106,329 shares of our common stock, whichever is fewer, over the
18-month term of the agreement. Each draw down is limited in size, unless otherwise mutually agreed by the parties, to the lesser of (i) certain agreed-upon draw down
amounts (the largest of which is $4.25 million), based on the threshold price selected by us
for the draw down, and (ii) 2.5% of our market capitalization at the time of such draw down. Azimuth is not required to purchase shares of our common stock if the threshold price is less than
$2.00 per share. The per share price of the shares sold in each draw down will be determined based on the daily volume weighted average price of our common stock on each trading day during the draw
down period, less a discount ranging from 4.875% to 6%. The Purchase Agreement also provides that, from time to time and in our sole discretion, we may grant Azimuth the right to exercise one or more
options to purchase additional shares of common stock during each draw down pricing period for the amount of shares based upon the maximum option dollar amount and the option threshold price specified
by us. There were no transaction fees paid or warrants issued by us to Azimuth in connection with execution of the Purchase Agreement. Shares under the Facility, if issued, will be registered under
our registration statement on Form S-3 declared effective by the Securities and Exchange Commission on August 28, 2008. Upon each sale of common stock to Azimuth, we will pay
to Reedland Capital Partners a placement fee equal to 1.0% of the aggregate dollar amount received by us from such sale. To date, no shares have been sold to Azimuth under the Facility. The Purchase
Agreement may be terminated by either party at any time.

71

---



Liquidity

Funding Requirements

We expect to continue to incur significant operating expenses and capital expenditures and anticipate that our expenses and losses may
increase substantially in the foreseeable future as we:



Our
funding requirements will depend on a number of factors, including:



72

---





As
of December 31, 2010, we had $51 million in cash, cash equivalents and marketable securities, an increase of $6.8 million from $44.2 million as of
December 31, 2009. This increase principally reflects $47 million in net cash proceeds from financing activities and $9.1 million in research and development funding from Roche,
offset by cash used in operations as discussed under "Cash Flows" above. The $47 million in net cash proceeds from financing activities includes $26.7 million in net proceeds from the
sale of 6,388,889 shares of our common stock in an underwritten public offering in January 2010, $15 million in gross proceeds from the GECC Term Loan that was executed in September 2010 and
$5 million in net proceeds from the direct sale of 1,440,923 shares of our common stock in November 2010, as well as $0.3 million from the exercise of common stock options.

We
do not anticipate that we will generate product revenue in the foreseeable future, if at all. We expect our continuing operations to use cash over the next several years and such cash
use may increase significantly from year to year. While we are engaged in multiple preliminary partnership discussions for each of our currently unpartnered programsganetespib,
elesclomol, STA-9584, CRACM compounds not licensed by Roche under the Roche Agreement, and our IL-12/23 inhibitorswhich could result in one or more new partnership
agreements, that may include upfront payments and cost-sharing provisions,
there is no guarantee we will be successful in entering into any such partnership agreements on commercially reasonable terms, if at all, or that we will receive any other revenue through these
partnership efforts in the future. Based on our current operating levels, we expect our cash resources will be sufficient to fund operations into 2012. This estimate assumes that certain activities
contemplated for 2011 will be conducted subject to the availability of sufficient financial resources. We are evaluating additional potential sources of funding, including partnership agreements, cost
or risk-sharing arrangements, equity financings, use of our $35 million equity line of credit facility or other sources.

We
may require significant additional funds earlier than we currently expect in order to conduct additional clinical trials and conduct additional preclinical and discovery activities.
Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to estimate the amounts of increased capital outlays and
operating expenditures associated with our current and anticipated clinical trials.

To
the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our future cash needs through public or private equity offerings,
collaboration agreements, debt financings or licensing arrangements. However, the credit markets and the financial services industry have recently been experiencing a period of turmoil and uncertainty
that have made equity and debt financing more difficult to obtain. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely
affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities or by selling convertible debt securities, further dilution to our
existing stockholders may result. If we raise funds through collaboration agreements or licensing arrangements, we may be required to relinquish rights to our technologies or drug candidates, or grant
licenses on terms that are not favorable to us.

73

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If
adequate funds are not available, we may be required to terminate, significantly modify or delay our research and development programs, reduce our planned commercialization efforts,
or obtain funds through collaborators that may require us to relinquish rights to our technologies or drug candidates that we might otherwise seek to develop or commercialize independently.
Conversely, we may elect to raise additional funds even before we need them if the conditions for raising capital are favorable, including through offerings of securities pursuant to our shelf
registration statement on Form S-3, under which we currently have up to $116.2 million in securities available for issuance, including up to $35.0 million in shares of
common stock that we may offer and sell under the ELOC with Azimuth.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose entities.

Tax Loss Carryforwards

In 2005, 2007 and 2010, we performed analyses to determine if there were changes in ownership, as defined by Section 382 of the
Internal Revenue Code that would limit our ability to utilize certain net operating loss and tax credit carryforwards. We determined that we experienced a change in ownership, as defined by
Section 382, in connection with the acquisition of Principia Associates, Inc. on September 20, 2002, but did not experience a change in ownership upon the effectiveness of our IPO
or any other equity offerings to date. As a result, the utilization of our federal tax net operating loss carryforwards generated prior to the ownership change is limited. As of December 31,
2010 we have net operating loss carryforwards for U.S. federal tax purposes of approximately $288.6 million, after taking into consideration net operating losses expected to expire unused as a
result of this limitation, and the remainder will expire in varying amounts through 2030 unless utilized. In addition, as of December 31, 2010, we have state net operating loss carryforwards of
approximately $160.4 million, which will expire through 2014 unless utilized. The utilization of these net operating loss carryforwards may be further limited as we experience future ownership
changes as defined in Section 382 of the Internal Revenue Code.

Recent Accounting Pronouncements

Refer to Note 2, "Summary of Significant Accounting Polices," in the accompanying notes to the consolidated financial statements
for a discussion of recent accounting pronouncements.

Certain Factors That May Affect Future Results of Operations

The Securities and Exchange Commission encourages companies to disclose forward- looking information so that investors can better
understand a company's future prospects and make informed investment decisions. This Annual Report on Form 10-K contains such "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.

Words
such as "may," "anticipate," "estimate," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance used in connection with any discussion of
future operating or financial performance, identify forward-looking statements. All forward-looking statements are management's present expectations of future events and are subject to a number of
risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to those set
forth under the heading "Risk Factors" contained in Item 1A of this Annual Report on Form 10-K.

In
light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Annual Report on Form 10-K
or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual
Report on Form 10-K. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new
information, future events or otherwise. All subsequent forward- looking statements attributable to Synta or to any person acting on its behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section.

74

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Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity.As of December 31, 2010, we had cash, cash equivalents and marketable securities of $51 million
consisting
of cash deposited in a highly rated financial institution in the United States and in a short-term U.S. Treasury money market fund, as well as high-grade commercial paper and
government-agency securities that are guaranteed by the U.S. government. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations and we do
not enter into investments for trading or speculative purposes. We believe that we did not have material exposure to high-risk investments such as mortgage-backed securities, auction rate
securities or other special investment vehicles within our money-market fund investments. We believe that we do not have any material exposure to changes in fair value as a result of changes in
interest rates. Declines in interest rates, however, would reduce future investment income.

Capital Market Risk.We currently have no product revenues and depend on funds raised through other sources. One possible source of
funding is
through further equity offerings. Our ability to raise funds in this manner depends upon capital market forces affecting our stock price.

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is included at the end of this Annual Report on Form 10-K beginning
on page F-1.

Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Item 9A.    CONTROLS AND PROCEDURES

1.     Disclosure Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on
Form 10-K. Based on the evaluation of our disclosure controls and procedures as of December 31, 2010, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our principal executive and
principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

2.     Internal Control Over Financial Reporting



Management's Annual Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control system was designed to provide reasonable assurance to our
management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are

75

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subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, it used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2010, our
internal control over financial reporting is effective at a reasonable assurance level based on those criteria.

Our
independent registered public accounting firm has issued its report on the effectiveness of our internal control over financial reporting. This report appears below.



Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
Synta Pharmaceuticals Corp.

We
have audited Synta Pharmaceuticals Corp.'s. internal control over financial reporting as of December 31, 2010, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Synta Pharmaceuticals Corp.'s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

76

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In
our opinion Synta Pharmaceuticals Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO
criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2010
and 2009, and the related consolidated statements of operations, stockholders' equity (deficit) and comprehensive income (loss) and cash flows for each of the three years in the period ended
December 31, 2010 of Synta Pharmaceuticals Corp. and our report dated March 11, 2011 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Boston,
Massachusetts
March 11, 2011



There
were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during the fourth quarter of
our last fiscal year, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    OTHER INFORMATION

Not applicable.

77

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PART III

Item 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The response to this item is incorporated by reference from the discussion responsive thereto under the captions "Management and
Corporate Governance," "Section 16(a) Beneficial Ownership Reporting Compliance" and "Code of Conduct and Ethics" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be held
on May 26, 2011.

We
have adopted a code of conduct and ethics that applies to all of our directors, officers and employees. This code is publicly available on our website at www.syntapharma.com.Amendments to the code of
conduct and ethics or any grant of a waiver from a provision of the code requiring disclosure under
applicable Securities and Exchange Commission and The NASDAQ Stock Market rules will be disclosed in a Current Report on Form 8-K.

Item 11.    EXECUTIVE COMPENSATION

The response to this item is incorporated by reference from the discussion responsive thereto under the captions "Compensation
Discussion and Analysis," "Executive Officer and Director Compensation," "Management and Corporate GovernanceCommittees of the Board of Directors and Meetings" and "Compensation Committee
Report" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be held on May 26, 2011.

Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The response to this item is incorporated by reference from the discussion responsive thereto under the captions "Security Ownership of
Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be held on May 26, 2011.

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The response to this item is incorporated by reference from the discussion responsive thereto under the captions "Certain Relationships
and Related Person Transactions," "Management and Corporate GovernanceThe Board of Directors" and "Management and Corporate GovernanceDirector Independence" in our Proxy
Statement for the 2011 Annual Meeting of Stockholders to be held on May 26, 2011.

Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The response to this item is incorporated by reference from the discussion responsive thereto under the caption "Proposal
No. 2Independent Public Accountants" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be held on May 26, 2011.

78

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PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULESItem 15(a)

The following documents are filed as part of this Annual Report on Form 10-K:Item 15(a)(1) and (2)

The Consolidated Financial Statements beginning on page F-1 are filed as part of this Annual Report on Form 10-K. Other financial statement schedules have not been included because they are not applicable or
the information is included in the financial statements or notes thereto.Item 15(a)(3)

Exhibits


The
following is a list of exhibits filed as part of this Annual Report on Form 10-K.

Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
Number3.1

Restated Certificate of Incorporation of the Registrant.



S-1/A
(Exhibit 3.2)

1/23/07

333-1388943.2

Restated Bylaws of the Registrant.



S-1/A
(Exhibit 3.4)

1/23/07

333-1388944.1

Form of Common Stock Certificate.



S-1/A
(Exhibit 4.1)

2/5/07

333-1388944.2.1

Amended and Restated Investor Rights Agreement, dated December 13, 2002, by and among the Registrant and certain stockholders of the Registrant.



S-1/A
(Exhibit 4.2.1)

12/1/06

333-1388944.2.2

First Amendment, dated January 11, 2005, to the Amended and Restated Investor Rights Agreement, dated December 13, 2002, by and among the Registrant and certain stockholders of the Registrant.



S-1/A
(Exhibit 4.2.2)

12/1/06

333-1388944.2.3

Second Amendment, dated January 31, 2007, to the Amended and Restated Investor Rights Agreement, dated December 13, 2002, by and among the Registrant and certain stockholders of the Registrant.



S-1/A
(Exhibit 4.2.3)

2/5/07

333-138894


79

---



Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
NumberLease Agreements10.1

Duffy Hartwell Limited Partnership Commercial Lease, dated November 4, 1996, by and between Duffy Hartwell Limited Partnership and Shionogi BioResearch Corp., as amended by First Amendment to Commercial Lease,
dated August 30, 2006.



S-1/A
(Exhibit 10.5)

12/1/06

333-13889410.2

Second Amendment, dated May 27, 2008, to Commercial Lease by and between Duffy Hartwell LLC, as successor in interest to Duffy Hartwell Limited Partnership, and the Registrant, as successor in interest to
Shionogi BioResearch Corp., dated November 4, 1996, as amended.



10-Q
(Exhibit 10.1)

8/7/08

001-3327710.3

Lease of 125 Hartwell Avenue, Lexington, MA, dated October 26, 1992, by and between Fuji ImmunoPharmaceuticals Corp. and 125 Hartwell Trust, as amended by First Amendment dated January 31, 1993, Second
Amendment dated October 1, 1997, Third Amendment dated November 1, 2002, Assignment and Assumption of Lease and Consent of Release by Landlord and Fourth Amendment of Lease, dated July 9, 2004, Fifth Amendment, dated October 22,
2004 and Sixth Amendment, dated August 1, 2005.



S-1/A
(Exhibit 10.6)

12/1/06

333-13889410.4

Seventh Amendment, dated November 26, 2007, to Lease of 125 Hartwell Avenue, Lexington, MA, dated October 26, 1992, by and between the Registrant, as successor-by-assignment, and 125 Hartwell
Trust.



10-K
(Exhibit 10.6.1)

3/20/08

001-3327710.5

Eighth Amendment, dated June 19, 2008, to Lease of 125 Hartwell Avenue, Lexington, MA, dated October 26, 1992, by and between the Registrant, as successor-by-assignment, and 125 Hartwell Trust.



10-Q
(Exhibit 10.2)

8/7/08

001-33277


80

---



Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
Number10.6

Ninth Amendment, dated May 19, 2009, to Lease of 125 Hartwell Avenue, Lexington, MA, dated October 26, 1992, by and between the Registrant, as successor-by-assignment, and 125 Hartwell Trust.



10-Q
(Exhibit 10.1)

8/4/09

001-3327710.7

Pinnacle Properties Management, Inc. Standard Form Commercial Lease, dated May 31, 1999, by and between 6-8 Preston Court, L.L.C. and Asiana Pharmaceuticals Corporation, as amended by Amendment to Lease #1,
dated July 31, 2000, Amendment to Lease #2, dated November 26, 2001, and Amendment to Lease #3, dated December 2003, and as assigned to the Registrant by Assignment and Assumption of Lease and Landlord's Consent, dated May 25, 2005,
and Subordination, Non-Disturbance and Attornment Agreement, dated May 25, 2005.



S-1/A
(Exhibit 10.8)

12/1/06

333-13889410.8

Lease Agreement, dated December 14, 2006, by and between ARE-MA Region No. 24, LLC and the Registrant.



S-1/A
(Exhibit 10.27)

1/4/07

333-138894Credit Facilities and Loan Agreements10.9

Common Stock Purchase Agreement, dated October 4, 2010, by and between the Registrant and Azimuth Opportunity Ltd.



8-K
(Exhibit 10.1)

10/5/10

001-3327710.10

Loan and Security Agreement, dated as of September 30, 2010, by and among the Registrant, Synta Securities Corp., General Electric Capital Corporation, and MidCap Funding III, LLC.



8-K
(Exhibit 10.1.1)

10/5/10

001-3327710.11

First Amendment, dated as of November 9, 2010, to Loan and Security Agreement, dated as of September 30, 2010, by and among the Registrant, Synta Securities Corp., General Electric Capital Corporation, and
MidCap Funding III, LLC.

X


81

---



Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
Number10.12

Promissory Note issued by the Registrant to General Electric Capital Corporation.



8-K
(Exhibit 10.1.2)

10/5/10

001-3327710.13

Promissory Note issued by the Registrant to MidCap Funding III, LLC.



8-K
(Exhibit 10.1.3)

10/5/10

001-3327710.14

Guaranty, dated as of September 30, 2010, by and among Synta Securities Corp. and General Electric Capital Corporation.



8-K
(Exhibit 10.1.14)

10/5/10

001-3327710.15

Pledge Agreement, dated as of September 30, 2010, by and among the Registrant, Synta Securities Corp., and General Electric Capital Corporation.



8-K
(Exhibit 10.1.5)

10/5/10

001-33277Agreements with Respect to Collaborations, Licenses, Research and Development10.16

Collaborative Development, Commercialization and License Agreement, dated October 8, 2007, by and between the Registrant and GlaxoSmithKline.



10-K
(Exhibit 10.24)

3/20/08

001-3327710.17

Amendment No. 1, dated June 27, 2008, to Collaborative Development, Commercialization and License Agreement, dated October 8, 2007, by and between the Registrant and GlaxoSmithKline.



10-Q
(Exhibit 10.4)

8/7/08

001-3327710.18

Collaboration and License Agreement, dated December 23, 2008, by and between the Registrant and F. Hoffmann-La Roche Ltd, and its affiliate, Hoffman-La Roche Inc.



10-K/A
(Exhibit 10.27)

11/10/09

001-3327710.19

Amendment, dated February 5, 2010, to Collaboration and License Agreement, dated December 23, 2008, by and between the Registrant and F. Hoffmann-La Roche Ltd, and its affiliate, Hoffman-La
Roche Inc.



10-Q
(Exhibit 10.1)

5/4/10

001-33277


82

---



Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
NumberEquity Compensation Plans*10.20

2001 Stock Plan.



S-1/A
(Exhibit 10.1)

12/1/06

333-138894*10.21

Amended and Restated 2006 Stock Plan.



8-K
(Exhibit 10.1)

6/21/10

001-33277*10.22

Form of incentive stock option agreement under 2006 Stock Plan.



S-1/A
(Exhibit 10.2(a))

1/23/07

333-138894*10.23

Form of nonqualified stock option agreement under 2006 Stock Plan.



S-1/A
(Exhibit 10.2(b))

1/23/07

333-138894*10.24

Form of restricted stock agreement under 2006 Stock Plan.



S-1/A
(Exhibit 10.2(c))

1/23/07

333-138894*10.25

Form of nonqualified stock option agreement for directors under 2006 Stock Plan.



S-1/A
(Exhibit 10.2(d))

1/23/07

333-138894*10.26

Form of restricted stock agreement for directors under 2006 Stock Plan.



S-1/A
(Exhibit 10.2(e))

1/23/07

333-138894Agreements with Executive Officers and Directors*10.27

Amended and Restated Director Compensation Policy, effective June 10, 2009.



10-Q
(Exhibit 10.2)

8/4/09

001-33277*10.28

Non-Qualified Stock Option Agreement, dated February 27, 2008, by and between the Registrant and Keith R. Gollust.



10-K
(Exhibit 10.4)

3/20/08

001-33277*10.29

Letter Agreement, dated April 18, 2005, by and between the Registrant and Safi R. Bahcall, Ph.D.



S-1/A
(Exhibit 10.13)

12/1/06

333-138894*10.30

Letter Agreement, dated October 12, 2002, by and between the Registrant and Dr. Keizo Koya.



S-1/A
(Exhibit 10.14)

12/1/06

333-138894*10.31

Letter Agreement, dated April 15, 2004, by and between the Registrant and Dr. Jeremy Chadwick.



S-1/A
(Exhibit 10.16)

12/1/06

333-138894*10.32

Letter Agreement, dated February 19, 2004, by and between the Registrant and Keith Ehrlich.



S-1/A
(Exhibit 10.17)

12/1/06

333-138894*10.33

Letter Agreement, dated January 14, 2003, by and between the Registrant and Wendy E. Rieder.



S-1/A
(Exhibit 10.18)

12/1/06

333-138894


83

---



Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
Number*10.34

Letter Agreement, dated July 9, 2008, by and between the Registrant and Michael P. Bailey.



10-Q
(Exhibit 10.12)

11/13/08

001-33277*10.35

Letter Agreement, dated December 9, 2008, by and between the Registrant and Vojo Vukovic.



10-K
(Exhibit 10.29)

3/11/10

001-33277*10.36

Letter Agreement, dated November 19, 2010, by and between the Registrant and Amar Singh.

X*10.37

Form of Severance and Change in Control Agreement between the Registrant and each of Keizo Koya, Amar Singh and Vojo Vukovic.



10-K
(Exhibit 10.30)

3/11/10

001-33277*10.38

Form of Severance and Change in Control Agreement between the Registrant and each of Keith S. Ehrlich and Wendy E. Rieder.



10-K
(Exhibit 10.31)

3/11/10

001-33277*10.39

Retention Award from the Registrant to Keith S. Ehrlich, dated April 14, 2009.



10-Q
(Exhibit 10.3)

8/4/09

001-33277*10.40

Agreement and Release, dated January 14, 2005, by and between the Registrant and Lan Bo Chen, Ph.D.



S-1/A
(Exhibit 10.22)

12/1/06

333-138894*10.41

Consulting Agreement, dated April 18, 2005, by and between the Registrant and Lan Bo Chen, Ph.D.



S-1/A
(Exhibit 10.23)

12/1/06

333-138894*10.42

Amendment to Consulting Agreement, dated March 23, 2007, by and between the Registrant and Lan Bo Chen, Ph.D.



10-K
(Exhibit 10.19.1)

3/20/08

001-33277*10.43

Form of Indemnification Agreement between the Registrant and its directors and executive officers.



S-1/A
(Exhibit 10.26)

12/1/06

333-138894*10.44

Summary of bonus arrangements applicable to the Registrant's Named Executive Officers.



10-K
(Exhibit 10.23)

3/20/08

001-3327710.45

Subscription Agreement, dated November 10, 2010, by and between the Registrant and Bruce Kovner.



8-K
(Exhibit 10.1)

11/12/10

001-3327721.1

List of Subsidiaries.



10-K
(Exhibit 21.1)

3/28/07

001-33277


84

---



Exhibit
Number

Exhibit Description

Filed
with this
Report

Incorporated by
Reference herein
from Form or
Schedule

Filing
Date

SEC File /
Registration
Number23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

X31.1

Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

X31.2

Certification of Principal Accounting and Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

X32.1

Certification of the Principal Executive Officer and the Principal Accounting and Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

X


*Management
contract, compensatory plan or arrangement.Confidential
portions of these documents have been filed separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.


85

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

SYNTA PHARMACEUTICALS CORP.Date: March 11, 2011

By:

/s/ SAFI R. BAHCALL, PH.D. Safi R. Bahcall, Ph.D. President and Chief Executive Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
indicated below and on the dates indicated.

Signatures

Title

Date/s/ SAFI R. BAHCALL, PH.D. Safi R. Bahcall, Ph.D.

President, Chief Executive Officer and Director (principal executive officer)

March 11, 2011/s/ KEITH S. EHRLICH Keith S. Ehrlich

Vice President, Finance and Administration, Chief Financial Officer (principal accounting and financial officer)

March 11, 2011/s/ KEITH R. GOLLUST Keith R. Gollust

Chairman of the Board

March 11, 2011/s/ LAN BO CHEN Lan Bo Chen, Ph.D

Director

March 11, 2011/s/ BRUCE KOVNER Bruce Kovner

Director

March 11, 2011/s/ DONALD W. KUFE Donald W. Kufe, M.D.

Director

March 11, 2011/s/ WILLIAM REARDON William Reardon, C.P.A.

Director

March 11, 2011/s/ ROBERT WILSON Robert N. Wilson

Director

March 11, 2011


86

---





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS        SYNTA PHARMACEUTICALS CORP.        Years ended December 31, 2010, 2009, and 2008

PageReport of Independent Registered Public Accounting Firm

F-2Consolidated Financial Statements:Balance Sheets

F-3Statements of Operations

F-4Statements of Stockholders' Equity (Deficit) and Comprehensive Income (Loss)

F-5Statements of Cash Flows

F-6Notes to Financial Statements

F-7


F-1

---





Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
Synta Pharmaceuticals Corp.

We
have audited the accompanying consolidated balance sheets of Synta Pharmaceuticals Corp. (the "Company") as of December 31, 2010 and 2009, and the related consolidated
statements of operations, stockholders' equity (deficit) and comprehensive income (loss) and cash flows for each of the three years in the period ended December 31, 2010. 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. An audit 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 Synta Pharmaceuticals Corp. at
December 31, 2010 and 2009, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We
have also audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 11, 2011, expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Boston,
Massachusetts
March 11, 2011

F-2

---





SYNTA PHARMACEUTICALS CORP.        Consolidated Balance Sheets        (in thousands, except share and per share amounts)

December 31,2010

2009AssetsCurrent assets:Cash and cash equivalents

$
31,310

$
44,155Marketable securities


19,663


Collaboration receivable


116


Prepaid expenses and other current assets


431


419Total current assets


51,520


44,574Property and equipment, net


2,181


3,978Other assets


366


358Total assets

$
54,067

$
48,910Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable

$
1,925

$
3,957Accrued contract research costs


2,511


2,099Other accrued liabilities


4,194


4,504Capital lease obligations


201


1,262Deferred collaboration revenue


4,572


4,647Term loan


3,333


Total current liabilities


16,736


16,469Long-term liabilities:Capital lease obligations


26


799Deferred collaboration revenue


2,159


6,731Term loan


11,667


Total long-term liabilities


13,852


7,530Total liabilities


30,588


23,999Commitments and contingencies (Note 12)Stockholders' equity:Preferred stock, par value $0.0001 per share Authorized: 5,000,000 shares at December 31, 2010 and 2009; no shares issued and outstanding at
December 31, 2010 and 2009





Common stock, par value $0.0001 per share Authorized: 100,000,000 shares at December 31, 2010 and 2009; 42,090,205 and 33,978,300 shares issued and
outstanding at December 31, 2010 and 2009, respectively


4


3Additional paid-in-capital


374,528


338,491Accumulated other comprehensive income


(3
)

Accumulated deficit


(351,050
)

(313,583
)Total stockholders' equity


23,479


24,911Total liabilities and stockholders' equity

$
54,067

$
48,910


See
accompanying notes to consolidated financial statements.

F-3

---





SYNTA PHARMACEUTICALS CORP.        Consolidated Statements of Operations        (in thousands, except share and per share amounts)

Years Ended December 31,2010

2009

2008Revenues:Collaboration revenues:License and milestone revenue

$
4,572

$
125,701

$
8,513Cost sharing reimbursements, net


9,253


18,544


(5,898
)Total collaboration revenues


13,825


144,245


2,615Grant revenue


978





Total revenues


14,803


144,245


2,615Operating expenses:Research and development


40,252


51,054


81,581General and administrative


11,449


12,651


14,742Restructuring





1,236


Total operating expenses


51,701


64,941


96,323Income (loss) from operations


(36,898
)

79,304


(93,708
)Other (expense) income, net


(569
)

(216
)

1,090Net income (loss)

$
(37,467
)
$
79,088

$
(92,618
)Net income (loss) per common share:Basic

$
(0.93
)
$
2.33

$
(2.75
)Diluted

$
(0.93
)
$
2.32

$
(2.75
)Weighted-average common shares outstanding:Basic


40,365,215


33,887,766


33,735,579Diluted


40,365,215


34,118,846


33,735,579


See
accompanying notes to consolidated financial statements.

F-4

---





SYNTA PHARMACEUTICALS CORP.        Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income (Loss)        (in thousands, except share
amounts)

Common stock



Accumulated
other
comprehensive
income (loss)Additional
paid-in
capital

Accumulated
deficit

Total
stockholders'
equity (deficit)

Comprehensive
income (loss)Shares

AmountBalance at December 31, 2007


33,875,942

$
3

$
324,946




$
(300,053
)
$
24,896

$
(63,497
)Issuance of restricted common shares


45,242














Exercise of stock options


625





1








1Forfeitures of restricted common shares


(2,225
)













Compensation expense related to stock options for services








7,572








7,065Reclassification of vested stock options granted to non-employee consultants








1,343








1,850Unrealized gain on marketable securities











15





15


15Net loss














(92,618
)

(92,618
)

(92,618
)Balance at December 31, 2008


33,919,584


3


333,862


15


(392,671
)

(58,791
)

(92,603
)Issuance of restricted common shares


46,216














Exercise of stock options


25,000





50








50Forfeitures of restricted common shares


(12,500
)













Compensation expense related to stock options for services








4,579








4,579Unrealized loss on marketable securities











(15
)




(15
)

(15
)Net income














79,088


79,088


79,088Balance at December 31, 2009


33,978,300

$
3

$
338,491

$


$
(313,583
)
$
24,911

$
79,073Issuance of common shares in equity offering, net


6,388,889


1


26,688








26,689Issuance of common shares to a related party, net


1,440,923





4,985








4,985Issuance of restricted common shares


180,719














Exercise of stock options


132,745





316








316Forfeitures of restricted common shares


(31,371
)













Compensation expense related to stock options for services








4,048








4,048Unrealized loss on marketable securities











(3
)




(3
)

(3
)Net loss














(37,467
)

(37,467
)

(37,467
)Balance at December 31, 2010


42,090,205

$
4

$
374,528

$
(3
)
$
(351,050
)
$
23,479

$
(37,470
)


See accompanying notes to consolidated financial statements.

F-5

---





SYNTA PHARMACEUTICALS CORP.        Consolidated Statements of Cash Flows        (in thousands)

Years Ended December 31,2010

2009

2008Cash flows from operating activities:Net income (loss)

$
(37,467
)
$
79,088

$
(92,618
)Adjustments to reconcile net income (loss) to net cash used in operating activities:Stock-based compensation expense


4,048


4,579


7,572Depreciation and amortization


1,933


2,463


2,717Changes in operating assets and liabilities:Collaboration receivable


(116
)

16,000


Restricted cash





151


(68
)Prepaid expenses and other current assets


(12
)

1,088


(170
)Other assets


(8
)

(255
)

(27
)Accounts payable


(2,032
)

626


840Accrued contract research costs


412


(10,294
)

8,876Other accrued liabilities


(310
)

1,663


(2,841
)Deferred collaboration revenue


(4,647
)

(115,625
)

31,486Collaboration payable





(6,294
)

6,294Net cash used in operating activities


(38,199
)

(26,810
)

(37,939
)Cash flows from investing activities:Purchases of marketable securities


(36,916
)

(39,303
)

(21,503
)Maturities of marketable securities


17,250


60,806


Purchases of property and equipment


(136
)

(454
)

(2,184
)Net cash (used in) provided by investing activities


(19,802
)

21,049


(23,687
)Cash flows from financing activities:Proceeds from issuances of common stock and exercise of common stock options, net of transaction costs


27,005


50


1Proceeds from the sale of common stock to a related party


4,985





Proceeds from term loan


15,000





Proceeds from saleleaseback of property and equipment








880Payment of capital lease obligations


(1,834
)

(2,179
)

(2,787
)Net cash provided by (used in) financing activities


45,156


(2,129
)

(1,906
)Net decrease in cash and cash equivalents


(12,845
)

(7,890
)

(63,532
)Cash and cash equivalents at beginning of period


44,155


52,045


115,577Cash and cash equivalents at end of period

$
31,310

$
44,155

$
52,045Supplemental disclosure of noncash operating, investing and financing activities:Collaboration receivable for upfront license payment







$
16,000Acquisition of equipment under capital leases




$
58

$
1,748Supplemental disclosure of cash flow information:Cash paid for interest

$
578

$
312

$
489


See
accompanying notes to consolidated financial statements.

F-6

---





SYNTA PHARMACEUTICALS CORP.        Notes to Consolidated Financial Statements

(1) Nature of Business

Synta Pharmaceuticals Corp. (the Company) was incorporated in March 2000 and commenced operations in July 2001. The Company is a biopharmaceutical company focusing on discovering,
developing and commercializing small molecule drugs to extend and enhance the lives of patients with severe medical conditions, including cancer and chronic inflammatory diseases.

The
Company is subject to risks common to emerging companies in the drug development and pharmaceutical industry including, but not limited to, uncertainty of product development and
commercialization, lack of marketing and sales history, dependence on key personnel, uncertainty of market acceptance of products, product liability, uncertain protection of proprietary technology,
potential inability to raise additional financing and compliance with the U.S. Food and Drug Administration (FDA) and other government regulations.

The
Company has incurred significant operating losses since its inception and, as a result, at December 31, 2010 had an accumulated deficit of $351.1 million. Operations
have been funded principally through the sale of common stock and convertible preferred stock, capital leases, non-refundable partnership payments under the agreements with GlaxoSmithKline
(GSK) and Hoffman-La Roche (Roche), and proceeds from a term loan by General Electric Capital Corporation (GECC) (see Note 12). At December 31, 2010, the Company had
approximately $51.0 million in cash, cash equivalents and marketable securities.

Based
on the Company's current operating levels, it expects its cash resources will be sufficient to fund operations into 2012. This estimate assumes that certain activities contemplated
for 2011 will be conducted subject to the availability of sufficient financial resources. The Company is evaluating additional potential sources of funding, including partnership agreements, cost or
risk-sharing agreements, equity financings, use of its $35 million equity line of credit facility (see Note 5) or other sources.

However,
the Company may require significant additional funds earlier than it currently expects in order to conduct additional clinical trials and continue to fund its operations. There
can be no assurances, however, that additional funding will be available on favorable terms, or at all.

(2) Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP)
requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include contract research accruals,
recoverability of long-lived assets, measurement of stock-based compensation, and the periods of performance under its collaborative research and development agreements. The Company bases
its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates
are recorded in the period in which they become known. Actual results could differ from those estimates.

F-7

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase and an
investment in a U.S. Treasury money market fund to be cash equivalents. Changes in cash and cash equivalents may be affected by shifts in investment portfolio maturities, as well as actual cash
disbursements to fund operations.

The
primary objective of the Company's investment activities is to preserve its capital for the purpose of funding operations and the Company does not enter into investments for trading
or speculative purposes. The Company invests in money market funds and high-grade, short-term commercial paper, which are subject to minimal credit and market risk. The
Company's cash is deposited in a highly rated financial institution in the United States. Declines in interest rates, however, would reduce future investment income.

Marketable Securities

Marketable securities consist of investments in high-grade corporate obligations that are guaranteed by the United States
government, and government and government agency obligations that are classified as available-for-sale. Since these securities are available to fund current operations they are
classified as current assets on the consolidated balance sheets.

The
Company adjusts the cost of available-for-sale debt securities for amortization of premiums and accretion of discounts to maturity. The Company includes such
amortization and accretion in interest and investment income. Realized gains and losses and declines in value, if any, that the Company judges to be other-than-temporary on
available-for-sale securities are reported in interest and investment
income. To determine whether an other-than-temporary impairment exists, the Company considers whether it intends to sell the debt security and, if the Company does not intend
to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before the recovery of its amortized cost basis.
During the years ended December 31, 2010 and 2009, the Company determined that no securities were other-than-temporarily impaired.

Marketable
securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component of accumulated other comprehensive loss, which
is a separate component of stockholders' equity. The fair value of these securities is based on quoted market prices. Realized gains and losses are determined on the specific identification method.
During the years ended December 31, 2010 and 2009, the Company recorded no realized gains or losses on marketable securities.

Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, which include cash equivalents, marketable securities, accounts payable
and capital lease and term loan obligations, approximate their fair values. The fair value of the Company's financial instruments reflects the amounts that would be received upon sale of an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels:

Level 1quoted
prices in active markets for identical assets and liabilities.

Level 2inputs
other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

F-8

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Level 3unobservable
inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability.

Financial
assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2010,
the Company's financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a U.S. Treasury money market fund and its financial assets valued based on Level 2
inputs consisted of corporate, government and government-agency bonds that are guaranteed by the U.S. government. As of December 31, 2010, the Company had no financial liabilities that were
subject to fair value measurement.

Property and Equipment

Property, equipment and software is carried at cost and depreciated using the straight-line method over the estimated
useful lives of the related assets, which range from three to five years. Leasehold improvements are amortized over the lesser of the lease term or estimated useful life. Repairs and maintenance costs
are expensed as incurred.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs are comprised of costs incurred in performing
research and development activities, including internal costs for salaries, benefits, facilities, research-related overhead and stock compensation, and external costs for payments to third party
contract research organizations, investigative sites and consultants in connection with the Company's preclinical and clinical programs, costs associated with drug formulation and supply of drugs for
clinical trials, and other external costs.

Patents

Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company's
consolidated statements of operations. Patent expenses were approximately $1.9 million, $2.2 million, and $1.9 million for the years ended December 31, 2010, 2009 and 2008,
respectively.

Income Taxes

The Company uses the liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the
expected future tax consequences of temporary differences between the Company's consolidated financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates
expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more likely than not
be realized.

As
of December 31, 2010, the Company had no items that were considered to be uncertain tax items or accrued interest or penalties related to uncertain tax positions.

The
tax years 2007 through 2010 remain open to examination by the major taxing jurisdictions to which the Company is subject.

F-9

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets

The Company assesses the potential impairments of its long-lived assets whenever events or changes in circumstances
indicate that an asset's carrying value may not be recoverable. If the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset,
the Company writes down the asset to its estimated fair value. Management believes that no long-lived assets were impaired as of December 31, 2010 and 2009.

Revenue Recognition

Collaboration and License Agreements

The Company's principal source of revenue is from collaborative research and development agreements, which may include upfront license
payments, development milestones, reimbursement of research and development costs, profit sharing payments, sales milestones and royalties. The application of accounting rules requires subjective
analysis and requires management to make estimates and assumptions about whether deliverables within multiple-element arrangements are separable from the other aspects of the contractual arrangement
into separate units of accounting and to determine the fair value to be allocated to each unit of accounting.

The
Company evaluates the multiple deliverables within its collaborations to determine whether the delivered elements that are the obligation of the Company have value to its
collaborators on a stand-alone basis and whether objective reliable evidence of fair value of the undelivered items exists. Deliverables that meet these criteria are considered a separate unit of
accounting. Deliverables that do not meet these criteria are combined and accounted for as a single unit of accounting. The appropriate recognition of revenue is then applied to each separate unit of
accounting.

The
Company's deliverables under its collaboration agreements, including the related rights and obligations, contractual cash flows and performance periods, are more fully described in
Notes 8 and 9. Certain of the deliverables have been combined as a single unit of accounting.

The
cash flows associated with the single unit of accounting from the research and development portions of the Company's collaborations are recognized as revenue using a
time-based model. Under this model, cash flow streams are recognized as revenue over the estimated performance period. Upon achievement of milestones, as defined in the collaboration
agreements, revenue is recognized to the extent the accumulated service time, if any, has occurred. The remainder is deferred and recognized as revenue ratably over the remaining estimated performance
period. A change in the period of time expected to complete the deliverable is accounted for as a change in estimate on a prospective basis. Revenue is limited to amounts that are
non-refundable and that the Company's collaborators are contractually obligated to pay to the Company.

Royalty
revenues are based upon a percentage of net sales. Royalties from the sales of products will be recorded on the accrual basis when results are reliably measurable, collectibility
is reasonably assured and all other revenue recognition criteria are met. Sales milestones, which are based upon the achievement of certain agreed-upon sales thresholds, will be recognized
in the period in which the respective sales threshold is achieved and collectibility is reasonably assured.

F-10

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Grant Revenue

In November 2010, the Company was informed that all four Therapeutic Discovery Tax Credit applications it submitted under the Patient
Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the Healthcare Reform Act of 2010, had been approved and that the Company had been
awarded approximately $1.0 million in grants. These funds were received in December 2010 and have been recorded as grant revenue in the accompanying statement of operations.

Deferred Collaboration Revenue

Consistent with the Company's policy on revenue recognition, deferred collaboration revenue represents cash received and amounts earned
and invoiced for licensing and option fees and milestones, as well as cash received and amounts invoiced for research and development services to be performed by the Company. Such amounts are
reflected as deferred collaboration revenue until revenue can be recognized under the Company's revenue recognition policy. Deferred collaboration revenue is classified as current if management
believes the Company will complete the earnings process and be able to recognize the deferred amount as revenue within 12 months of the balance sheet date. At December 31, 2010, total
deferred collaboration revenue was approximately $6.7 million, of which $4.6 million is current.

Stock-Based Compensation

The Company recognizes stock-based compensation expense based on the fair value of stock options granted to employees, officers and
directors. The Company uses the Black-Scholes option pricing model as it is the most appropriate valuation method for its option grants. The Black-Scholes model requires inputs for
risk-free interest rate, dividend yield, volatility and expected lives of the options. Since the Company has a limited history of stock activity, expected volatility for the period from
April 1, 2009 through December 31, 2010 was based upon the weighted average historical volatility data of the Company's common stock and the historical volatility
data from several guideline public biotechnology companies similar in size and value to the Company that also have stock compensation plans with similar terms. Prior to April 1, 2009, expected
volatility was based solely on historical data from several guideline similar public biotechnology companies with similar stock compensation plans and terms. The Company will continue using its
historical volatility and other similar public entity volatility information until its historical volatility alone is relevant to measure expected volatility for future option grants. The Company
estimates the forfeiture rate based on historical data. Based on an analysis of historical forfeitures, the Company has applied a forfeiture rate of 10% to all options that vest upon completion of the
first year of service following the date of grant. The analysis is re-evaluated at least annually and the forfeiture rate is adjusted as necessary. The risk-free rate for
periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected lives for options granted represent the period of time that
options granted are expected to be outstanding. The Company uses the simplified method for determining the expected lives of options.

For
awards with graded vesting, the Company allocates compensation costs on a straight-line basis over the requisite service period. The Company amortizes the fair value of
each option over each option's service period, which is generally the vesting period.

F-11

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

The
Company accounts for stock options issued to non-employees by valuing and remeasuring such stock options to the current fair value until the performance date has been
reached.

For
the years ended December 31, 2010, 2009 and 2008, the fair value of each employee stock option award was estimated on the date of grant based on the fair value method using
the Black-Scholes option pricing valuation model with the following weighted average assumptions:

Years ended December 31,2010

2009

2008Risk-free interest rate


2.62
%

2.05
%

3.21
%Expected life in years


6.25 years


5.78 years


6.25 yearsVolatility


102
%

95
%

70
%Expected dividend yield











As
part of its preparation of its quarterly financial statements for the three months ended March 31, 2008, the Company discovered that it had erroneously accounted for certain of
its non-employee stock options during the last three quarters of 2007 as liabilities. Under this accounting it had reclassified approximately $1.9 million from
additional-paid-in capital to liabilities in the second quarter of 2007 and subsequently during the year adjusted the fair value of the liability for changes in the market
price of its common stock, resulting in a $553,000 credit to stock-based compensation expense for the year. The Company assessed the materiality of this error on its financial statements for the year
ended December 31, 2007, using both the roll-over method and iron-curtain method. The Company concluded the effect of this error was not material to its financial
statements for the year ended December 31, 2007 and, as such, these financial statements are not materially misstated. The Company also concluded that providing for the correction of the error
in 2008 would not have a
material effect on its financial statements for the year ended December 31, 2008. Accordingly, the Company recorded a charge to stock-based compensation of $553,000 and a reclassification of
approximately $1.9 million from liabilities to additional-paid-in-capital in the three months ended March 31, 2008 to correct this error.

F-12

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

The
effect of stock-based compensation expense during the years ended December 31, 2010, 2009 and 2008 was as follows (in thousands):

Years ended December 31,2010

2009

2008Stock-based compensation expense by type of award:Employee stock options

$
3,614

$
4,471

$
5,279Repriced employee stock options








169Employee options issued below fair value








8Non-employee stock options





17


588Restricted stock


434


91


1,528Total stock-based compensation expense

$
4,048

$
4,579

$
7,572Effect of stock-based compensation expense by line item:Research and development

$
3,074

$
3,503

$
5,779General and administrative


974


1,076


1,793Total stock-based compensation expense included in net income (loss)

$
4,048

$
4,579

$
7,572


Unrecognized
stock-based compensation expense as of December 31, 2010 was as follows (in thousands):

Unrecognized
stock
compensation
expense as of
December 31,
2010

Weighted
average
remaining
period
(in years)Employee stock options

$
4,111


1.79Restricted stock


222


1.38Total

$
4,333


1.77


Certain
of the employee stock options granted by the Company are structured to qualify as incentive stock options (ISOs). Under current tax regulations, the Company does not receive a
tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition
occurs, at which time the Company will receive a tax deduction. The Company does not record tax benefits related to ISOs unless and until a qualifying disposition occurs. In the event of a
disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. The Company has not recognized any income tax benefit for the share-based compensation arrangement
due to the fact that the Company does not believe it is more likely than not it will recognize any deferred tax assets from such compensation cost recognized in the current period.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and other
events and circumstances from non-owner sources. Changes in

F-13

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

unrealized
gains and losses on marketable securities represent the only difference between the Company's net income (loss) and comprehensive income (loss).

Segment Reporting

Operating segments are determined based on the way management organizes its business for making operating decisions and assessing
performance. The Company has only one operating segment, the discovery, development and commercialization of drug products.

Basic and Diluted Earnings (Loss) Per Common Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period,
excluding restricted stock that has been issued but is not yet vested. Diluted net income (loss) per common share is computed using the weighted average number of common shares outstanding and the
weighted average dilutive potential common shares outstanding using the treasury stock method.

For
the years ended December 31, 2010, 2009 and 2008, common stock options calculated on a weighted average basis with exercise prices greater than the average market prices of
the Company's common stock for these periods are not included in the computation of diluted earnings per share as their impact would have been anti-dilutive.

For
the years ended December 31, 2010 and 2008, diluted net loss per share is the same as basic net loss per share as the inclusion of weighted average shares of unvested
restricted common stock and common stock issuable upon the exercise of stock options would be anti-dilutive.

The
following table sets forth the computation for basic and diluted net income (loss) per common share (in thousands, except per share information):

Years Ended December 31,2010

2009

2008Income (Numerator):Net income (loss) for basic and diluted calculations

$
(37,467
)
$
79,088

$
(92,618
)Shares (Denominator):Weighted-average shares for basic net income (loss) per share


40,365


33,888


33,736Effect of dilutive securities





231


Weighted-average shares for diluted net income (loss) per share


40,365


34,119


33,736Basic net income (loss) per common share

$
(0.93
)
$
2.33

$
(2.75
)Diluted net income (loss) per common share

$
(0.93
)
$
2.32

$
(2.75
)Outstanding securities not included in the computation of diluted net income (loss) per common share as their inclusion would be anti-dilutive:Common stock options


5,327


3,899


4,691Unvested restricted stock


141


46


1735,468


3,945


4,864


F-14

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

In April 2010, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update No. 2010-17, Milestone Method of Revenue
Recognition("ASU No. 2010-17"), which provides guidance on defining a milestone and determining when it
may be appropriate to apply the milestone method of revenue recognition for research or development transactions. Prior to the issuance of ASU No. 2010-17, authoritative guidance on
the use of the milestone method did not exist. ASU No. 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years,
beginning on or after June 15, 2010 with early adoption permitted. Alternatively, ASU No. 2010-17 can be adopted retrospectively for all prior periods. The Company's
historical policy is such that, upon the achievement of milestones, revenue is recognized to the extent the accumulated service time, if any, has occurred. The remainder is deferred and recognized as
revenue ratably over the remaining estimated performance period. The Company is currently evaluating how it will adopt ASU No. 2010-17 and whether it will have a material impact on
its financial statements or results of operations.

In
October 2009, the FASB issued Accounting Standard Update No. 2009-13,Multiple-Element Revenue Arrangements("ASU
No. 2009-13"), which updates the existing multiple-element revenue arrangements guidance currently included in Accounting Standards Codification No. 605-25 in two
ways. The first change relates to the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. This is significant
as it will likely result in the requirement to separate more deliverables within an arrangement, ultimately leading to less revenue deferral. The second change modifies the manner in which the
transaction consideration is allocated across the separately identified deliverables. ASU No. 2009-13 also significantly expands the disclosures required for multiple-element
revenue arrangements. ASU No. 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all
periods presented or prospectively to arrangements entered into or materially modified after the adoption date. The Company does not expect ASU No. 2009-13 to have a material impact
on its financial statements or results of operations.

F-15

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(3) Cash, Cash Equivalents and Marketable Securities

A summary of cash, cash equivalents and available-for-sale marketable securities held by the Company as of December 31, 2010 and 2009 was as follows:

December 31, 2010Cost

Unrealized
gains

Unrealized
losses

Fair
value(in thousands)Cash and cash equivalents:Cash and money market funds (Level 1)

$
25,228

$


$


$
25,228U.S. government-sponsored entities and corporate debt securities due within 3 months of date of purchase (Level 2)


6,082








6,082Total cash and cash equivalents


31,310

$


$


$
31,310Marketable securities:U.S. government and government sponsored entities due within 1 year of date of purchase (Level 2)


19,666





(3
)

19,663Total cash, cash equivalents and marketable securities

$
50,976

$


$
(3
)
$
50,973




December 31, 2009Cost

Unrealized
gains

Unrealized
losses

Fair
value(in thousands)Cash and cash equivalents:Cash and money market funds (Level 1)

$
36,367

$


$


$
36,367U.S. government-sponsored entities due within 3 months of date of purchase (Level 2)


7,788








7,788Total cash and cash equivalents

$
44,155

$


$


$
44,155


(4) Property and Equipment

Property and equipment consist of the following at December 31:

2010

2009(in thousands)Laboratory equipment

$
12,387

$
12,337Leasehold improvements


4,528


4,495Computers and software


2,177


2,128Furniture and fixtures


1,050


1,04620,142


20,006Less accumulated depreciation and amortization


(17,961
)

(16,028
)$
2,181

$
3,978


F-16

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(4) Property and Equipment (Continued)

Depreciation
and amortization expenses of property and equipment, including equipment purchased under capital leases, were approximately $1.9 million, $2.5 million and
$2.7 million for the years ended December 31, 2010, 2009 and 2008, respectively.

The
net book value and accumulated amortization of equipment under capital lease was $0.4 million and $0.9 million, respectively, at December 31, 2010, and
$2.1 million and $8.9 million, respectively, at December 31, 2009.

(5) Stockholders' Equity

Common Stock

Each common stockholder is entitled to one vote for each share of stock held. The common stock will vote together with all other
classes and series of stock of the Company as a single class on all actions to be taken by the Company's stockholders. Each share of common stock is entitled to receive dividends, as and when declared
by the Company's board of directors.

The
Company has never declared cash dividends on its common stock and does not expect to do so in the foreseeable future.

Subscription Agreement

In November 2010, the Company entered into a subscription agreement with a director and largest existing stockholder, pursuant to which
the Company sold 1,440,923 shares of its common stock (the "Shares") at a purchase price of $3.47 per Share, which was the closing price
of the Company's stock on the day prior to the sale. The Shares were sold directly to this director without a placement agent, underwriter, broker or dealer. The proceeds to the Company were
approximately $5.0 million after deducting estimated offering expenses payable by the Company.

Equity Line of Credit

On October 4, 2010, the Company entered into a common stock purchase agreement (Purchase Agreement) with Azimuth
Opportunity Ltd. (Azimuth) pursuant to which the Company obtained an equity line of credit facility (Facility) under which it may sell, in its sole discretion, and Azimuth is committed to
purchase, subject to the terms and conditions set forth in the Purchase Agreement, up to $35 million or 8,106,329 shares of the Company's common stock, whichever is fewer, over the
18-month term of the agreement. Each draw down is limited in size, unless otherwise mutually agreed by the parties, to the lesser of (i) certain agreed-upon draw down
amounts (the largest of which is $4.25 million), based on the threshold price selected by the Company for the draw down, and (ii) 2.5% of the Company's market capitalization at the time
of such draw down. Azimuth is not required to purchase shares of the Company's common stock if the threshold price is less than $2.00 per share. The per share price of the shares sold in each draw
down will be determined based on the daily volume weighted average price of the Company's common stock on each trading day during the draw down period, less a discount ranging from 4.875% to 6%. The
Purchase Agreement also provides that, from time to time and in the Company's sole discretion, the Company may grant Azimuth the right to exercise one or more options to purchase additional shares of
common stock during each draw down pricing period for the amount of shares based upon the maximum option dollar amount and the option threshold price specified by the Company. There were no
transaction fees or warrants issued by the

F-17

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(5) Stockholders' Equity (Continued)

Company
to Azimuth in connection with execution of the Purchase Agreement. Shares under the Facility, if issued, will be registered under the Company's registration statement on
Form S-3 declared effective by the Securities and Exchange Commission on August 28, 2008. Upon each sale of common stock to Azimuth, the Company will pay to Reedland Capital
Partners a placement fee equal to 1.0% of the aggregate dollar amount received by the Company from such sale. To date, no shares have been sold to Azimuth under the Facility. The Purchase Agreement
may be terminated by either party at any time.

Public Offering

In January 2010, the Company raised approximately $28.8 million in gross proceeds from the sale of an aggregate 6,388,889 shares
of its common stock in a public offering at $4.50 per share, including 5,555,556 shares in the initial closing and 833,333 shares in a second closing
for the full exercise of the over-allotment option granted to the underwriters. The net offering proceeds after deducting approximately $2.1 million in expenses for underwriters'
discounts, fees and commissions, legal, accounting, printing and listing and filing fees, and miscellaneous expenses were approximately $26.7 million.

(6) Stock Plans

The Company's 2006 Stock Plan provides for the grant of incentive stock options, nonstatutory stock options and non-vested stock to employees, officers, directors and
consultants to the Company. A total of 6,400,000 shares of common stock have been reserved for issuance under the 2006 Stock Plan. In January 2011, the number of shares of common stock reserved for
issuance under the 2006 Stock Plan was increased from 5,100,000 to 6,400,000 pursuant to an "evergreen" provision, which provides for an annual increase based on the lesser of 1,300,000 shares, 5% of
the Company's then outstanding shares of common stock, or such other amount as the board of directors may determine. This increase was ratified by the board of directors in December 2010. The
administration of the 2006 Stock Plan is under the general supervision of the compensation committee of the board of directors. The exercise price of the stock options is determined by the
compensation committee of the board of directors, provided that incentive stock options are granted at not less than fair market value of the common stock on the date of grant and expire no later than
ten years from the date the option is granted. Options vest over one to four years.

As
of December 31, 2010, under its 2001 Stock Plan, which was terminated in March 2006, the Company had options outstanding to purchase 1,941,278 shares of its common stock and
had no shares available for future issuance.

As
of December 31, 2010, under its 2006 Stock Plan, the Company had options outstanding to purchase 3,385,701 shares of its common stock, had outstanding 140,613 restricted shares
of common stock and had available 1,341,670 shares available for future issuance.

F-18

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(6) Stock Plans (Continued)

The
following table summarizes stock option activity during the year ended December 31, 2010:

Shares
available
for grant

Shares

Weighted
average
exercise
price

Weighted average remaining contractual life (years)

Aggregate
intrinsic
valueOutstanding at January 1


2,301,133


4,900,598

$
8.95Options granted(1)


(1,596,561
)

1,415,842


4.01Options exercised





(132,745
)

2.38Options cancelled(1)


637,098


(856,716
)

8.04Additional shares reserved








Outstanding at December 31


1,341,670


5,326,979

$
7.95


5.97

$
5,498,840Exercisable at December 31





3,864,699

$
9.13


4.85

$
2,994,375


(1)Shares
available for grant include stock options and awards of restricted stock.


The
aggregate intrinsic value of all options outstanding and exercisable represents the total pre-tax amount, net of the exercise price, which would have been received by
option holders if all option holders had exercised all options with an exercise price lower than the closing stock price of $6.12 on December 31, 2010. The weighted-average grant date fair
values of options granted during the years ended December 31, 2010, 2009 and 2008 were $3.27, $1.98 and $5.47, respectively.

The
total intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was approximately $278,000, $30,000 and $4,000, respectively.

As
of December 31, 2010, the total amount of unrecognized stock-based compensation expense was $4.3 million, which will be recognized over a weighted average period of
1.77 years.

Included
in the Company's stock options outstanding at December 31, 2010 were 157,555 options issued to non-employee consultants with a weighted average exercise price
of $8.84 of which all were vested. The compensation expense was recorded over the respective vesting periods and was subject to variable accounting treatment prior to vesting, whereby the Company
remeasured the fair value of the options at the end of each reporting period. Changes in the fair value may result in an expense or a credit in each reporting period. Compensation expense related to
these options was approximately $0, $17,000 and $588,000, including the $553,000 correction referred to in Note 2 in the years ended December 31, 2010, 2009 and 2008, respectively.

Non-Vested ("Restricted") Stock Awards With Service Conditions

The Company's share-based compensation plan provides for awards of restricted shares of common stock to senior management and
non-employee directors. Restricted stock awards are subject to forfeiture if employment or service terminates during the prescribed retention period. Restricted shares issued to
non-employee directors and senior management vest over the service period. The remaining unrecognized compensation expense on restricted stock at December 31, 2010 was $222,000. The
weighted average period over which the balance is expected to be recognized is 1.38 years.

F-19

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(6) Stock Plans (Continued)

The
following table summarizes unvested restricted shares during the year ended December 31, 2010:

Shares

Weighted
average
grant date
fair valueOutstanding at January 1


48,107

$
5.14Granted


180,719


3.72Vested


(56,842
)

3.63Cancelled


(31,371
)

5.48Outstanding at December 31


140,613

$
3.84


(7) Other Accrued Liabilities

Other accrued liabilities consist of the following at December 31:

2010

2009(in thousands)Compensation and benefits

$
2,903

$
2,792Professional fees


921


1,229Other


370


483$
4,194

$
4,504


(8) Collaborative License Agreement with Roche

In December 2008, as amended in February 2010 and February 2011, the Company and Roche entered into a collaborative license agreement (the Roche Agreement) to discover, develop, and
commercialize small-molecule drugs targeting calcium release-activated calcium modulator (CRACM) channels. The goal of this alliance is to develop a novel category of oral, disease-modifying agents
for the treatment of rheumatoid arthritis and other autoimmune diseases and inflammatory conditions. The Roche Agreement consists of the following funding streams: an upfront license payment,
reimbursements of certain research and development costs, product development milestones, sales milestones and product royalty payments.

Pursuant
to the Roche Agreement, the Company received a non-refundable upfront license payment of $16 million in January 2009. Roche reimbursed all of the Company's
research and certain early development costs based upon research and development plans agreed to by the parties. These costs included committed research support over the initial two year research term
that concluded on December 31, 2010. As of December 31, 2010, the Company has received approximately $21.1 million in research and development support under the Roche Agreement.
The Company does not expect to receive any additional research and development support under the Roche Agreement in 2011. Roche received worldwide rights to develop and commercialize certain products,
referred to as Licensed Compounds, which were identified and studied prior to the end of the initial two year research term. For these Licensed Compounds, Roche is responsible for development and
commercialization, while the Company retains certain co-development and co-promotion rights. In February 2011, the Roche

F-20

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(8) Collaborative License Agreement with Roche (Continued)

Agreement
was amended to extend the term of the research license to enable Roche to continue performing research on certain compounds until June 30, 2011. The amendment also provided for the
return to the Company of certain Licensed Compounds. The Company retains all development and commercialization rights for its CRACM inhibitor compounds other than the specified Licensed Compounds
licensed to Roche under the Roche Agreement.

The
Company is also eligible to receive additional payments, for each of three licensed products, should specified development and commercialization milestones be successfully achieved.
Development milestones across multiple indications of up to $245 million could be earned for the first product, and up to half of this amount could be earned for each of the second and third
products. Commercialization milestones of up to $170 million could be earned for each of three products. The Company will receive tiered royalties on sales of all approved, marketed products.
Roche may terminate the agreement on a licensed compound-by-compound basis upon providing advance written notice.

The
$16 million non-refundable upfront license payment is being recognized ratably using the time-based model over the estimated performance period through
June 2012. In the years ended December 31, 2010, 2009 and 2008, the Company recognized $4.6 million, $4.6 million and $0.1 million, respectively, of license revenue under
the Roche Agreement. Reimbursements of research and development costs to the Company by Roche were recorded as cost sharing revenue in the period in which the related research and development costs
were incurred. In the years ended December 31, 2010, 2009 and 2008, the Company recognized $9.3 million, $11.9 million and $0, respectively, of cost sharing revenue under the
Roche Agreement. As the initial research term concluded in December 2010, the Company does not expect to earn any cost sharing revenue under the Roche Agreement in 2011. Development milestones will be
recognized as collaboration revenue using the time-based model over the same performance period. No development milestones have been achieved as of December 31, 2010.

(9) Collaborative Development, Commercialization and License Agreement with GSK

In 2007, the Company and GSK entered into a global collaborative development, commercialization and license agreement (the GSK Agreement) for the joint development and commercialization
of elesclomol. The GSK Agreement consisted of the following funding streams: an upfront license payment, product development milestones, operational milestones, reimbursements of certain development
costs, sales milestones, profit sharing payments and product royalty payments. In 2009, following the suspension of the Company's global Phase 3 clinical trial of elesclomol plus paclitaxel in
metastatic melanoma, called the SYMMETRY trial, GSK terminated the GSK Agreement effective September 10, 2009. In accordance with the termination provisions of the GSK Agreement, all rights to
the elesclomol program were returned to the Company. The Company may continue to develop elesclomol alone or with another partner and may pay GSK a low single-digit royalty on any potential future
sales of elesclomol.

The
$80 million non-refundable upfront license payment, together with $50 million in non-refundable operational milestones, the Company received
from GSK were being recognized ratably using the time-based model over the estimated 15-year performance period. In the years ended December 31, 2009 and 2008, the
Company recognized $121.1 million and $8.4 million, respectively, of license and milestone revenue under the GSK Agreement. Upon the effectiveness of the termination of

F-21

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(9) Collaborative Development, Commercialization and License Agreement with GSK (Continued)

the
GSK Agreement in the third quarter of 2009, the Company accelerated the recognition of approximately $114.6 million of remaining deferred revenue from upfront payments and milestones
received under the GSK Agreement as it had no further obligation for deliverables under the GSK Agreement.

Certain
costs incurred by GSK, which related to the development of elesclomol in metastatic melanoma, were the Company's responsibility and had been recognized as a reduction of revenue
under the GSK Agreement in the statement of operations. In the years ended December 31, 2009 and 2008, the Company recognized, as a reduction to revenue, $4.1 million and
$5.9 million, respectively, of
net cost sharing reimbursements to GSK under the GSK Agreement. The requirement to pay the cumulative GSK cost sharing reimbursements did not survive termination of the GSK Agreement and in the third
quarter of 2009, upon the effectiveness of the termination of the GSK Agreement, the Company reversed approximately $10 million of cost sharing reimbursement liabilities as collaboration
revenue.

(10) Restructuring

On March 12, 2009, the Company committed to a restructuring plan that consisted primarily of an immediate workforce reduction of approximately 90 positions, to a total of
approximately 130 positions, to align its workforce to its revised operating plans following the suspension of its SYMMETRY clinical trial. In the first quarter of 2009, the Company recorded a
restructuring charge of approximately $1.2 million for severance and estimated benefits continuation costs and outplacement services. In addition, the Company paid approximately
$0.2 million in unused paid-time off that had been recognized as expense prior to the restructuring, including $0.1 million in the year ended December 31, 2008 and
$0.1 million in the first quarter of 2009. The approximate $1.4 million in restructuring related payments for severance, unused paid-time off, benefits and outplacement
services was paid in 2009.

To
conserve additional capital resources, the Company did not renew one of its office building leases that expired in August 2009 and consolidated its operations within its three other
facilities. The Company did not incur an impairment charge in connection with the facility consolidation.

F-22

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(11) Income Taxes

Differences between the actual tax provision (benefit) and the tax provision (benefit) computed using the United States federal income tax rate is as follows:

Years ended December 31,2010

2009

2008(in thousands)Provision (benefit) at statutory rate

$
(12,739
)
$
26,890

$
(31,497
)State taxes, net of federal benefit


(1,967
)

5,576


(5,453
)State tax rate change


196


2,129


State net operating loss expiration


3,820


1,292


1,508Stock-based compensation


791


2,251


1,852Tax credits


(1,686
)

(1,886
)

(2,314
)Other


(78
)

96


459(Decrease) increase in valuation allowance


11,663


(36,348
)

35,445Income tax provision (benefit)

$


$


$



The
effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, are presented below:

2010

2009(in thousands)Deferred tax assets:Federal and state net operating loss carryforwards

$
106,585

$
95,351Federal and state research and experimentation credits


15,250


13,737Deferred revenue


2,652


4,507Depreciation and amortization


2,769


2,713Deferred compensation


4,641


4,164Other


441


202Deferred tax assets


132,338


120,674Less valuation allowance


(132,338
)

(120,674
)Net deferred tax assets

$


$



The
total valuation allowance increased by approximately $11.7 million in the year ended December 31, 2010, decreased by approximately $36.3 million in the year
ended December 31, 2009 and increased by approximately $35.4 million in the year ended December 31, 2008.

The
Company has established valuation allowances against its deferred tax assets because management believes that, after considering all of the available objective evidence, both
historical and prospective, the realization of the deferred tax assets does not meet the "more likely than not" criteria. The Company evaluates the need for a valuation allowance on a quarterly basis.

F-23

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(11) Income Taxes (Continued)

In
2005, 2007, and 2010 the Company performed analyses to determine if there were changes in ownership, as defined by Section 382 of the Internal Revenue Code that would limit its
ability to utilize certain net operating loss and tax credit carryforwards. The Company determined that it experienced an ownership change, as defined by Section 382, in connection with its
acquisition of Principia Associates, Inc. on September 20, 2002, but did not experience a change in ownership upon the effectiveness of the Company's IPO, or any other equity offerings
to date. As a result, the utilization of the Company's federal tax net operating loss carryforwards generated prior to the ownership change is limited. As of December 31, 2010, the Company has
net operating loss carryforwards for U.S. federal tax purposes of approximately $288.6 million, after excluding net operating losses that have expired
unused as a result of Section 382 limitations, with the remainder expiring in varying amounts through 2030 unless utilized. At December 31, 2010, the Company has state net operating loss
carryforwards of approximately $160.4 million, which will expire through 2014 unless utilized. The utilization of these net operating loss carryforwards may be further limited if the Company
experiences future ownership changes as defined in Section 382 of the Internal Revenue Code. Approximately $66.1 million of state net operating loss carryforwards expired in 2010.

At
December 31, 2010, the Company had approximately $12.0 million and $4.9 million, respectively, in federal and state research and development credits which expire
through 2030 and 2025, respectively.

The
Company does not consider any of its tax positions to be uncertain and accordingly there are no tax reserves.

The
Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 2007 through 2010.
Carryforward tax attributes generated in years past may still be adjusted upon future examination if they have or will be used in a future period. The Company is currently not under examination by the
Internal Revenue Service or any other jurisdictions for any tax years.

(12) Commitments and Contingencies

Leases

The Company leases its research and office facilities under non-cancelable operating leases with terms expiring in 2011.
The Company is currently in negotiations to renew its expiring leases under its existing renewal options. Each of these leases contains renewal options ranging from one to five years. The Company also
leases equipment under various other non-cancellable operating leases.

Term Loan with General Electric Capital Corporation

On September 30, 2010, the Company entered into a $15 million loan and security agreement with GECC and one other lender,
all of which was funded at the closing on September 30, 2010 (the GECC Term Loan). Interest on the borrowings under the GECC Term Loan accrues at an annual rate of 9.75%. The Company will make
interest-only payments through June 2011, followed by 27 equal monthly payments of principal plus accrued interest on the outstanding balance. In addition to the interest payable under the
GECC Term Loan, the Company paid origination fees in the amount of $150,000 and is obligated to pay an exit fee of $450,000 at the time of the final payment of the outstanding principal. These amounts
are being amortized and accreted, respectively, to interest

F-24

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(12) Commitments and Contingencies (Continued)

expense
over the term of the GECC Term Loan. The Company paid approximately $177,000 of legal fees and expenses in connection with the GECC Term Loan. These expenses have been deferred and, together
with the $150,000 origination fees, are included in other assets, and will be expensed over the term of the GECC Term Loan. In the year ended December 31, 2010, the Company recognized
approximately $67,000 in interest expense in connection with these origination, exit and transaction fees and expenses. In the year ended December 31, 2010, the Company recognized approximately
$453,000 in interest expense related to the GECC Term Loan. No warrants were issued in connection with the GECC Term Loan. The Company may prepay the full amount of the GECC Term Loan, subject to
prepayment premiums under certain circumstances.

The
GECC Term Loan is secured by substantially all of the Company's assets, except its intellectual property. The Company has granted GECC a springing security interest in its
intellectual property in the event the Company is not in compliance with certain cash burn covenants, as defined. The GECC Term Loan contains restrictive covenants, including the requirement for the
Company to receive prior written consent of GECC to enter into loans, other than up to $4.0 million of equipment financing, restrictions on the declaration or payment of dividends, restrictions
on acquisitions, and customary default provisions that include material adverse events, as defined. The Company has determined that the risk of subjective acceleration under the material adverse
events clause is remote and therefore has
classified the outstanding principal in current and long-term liabilities based on the timing of scheduled principal payments. In addition, at the time of the closing of the GECC Term
Loan, the Company was required to repay approximately $787,000 of remaining principal outstanding under its existing equipment leases with GECC.

Future
minimum payments, excluding operating costs and taxes, under the Company's capital and non-cancellable operating leases and GECC Term Loan, are approximately as
follows (in thousands):

Capital
leases

Operating
leases

GECC
Term LoanYears ending December 31,2011

$
208

$
1,717

$
4,7112012


13


28


7,4622013


13


19


5,613Total minimum payments


234

$
1,764


17,786Less: amount representing interest


(7
)




(2,786
)Present value of minimum payments


227





15,000Less current portions of obligations


(201
)




(3,333
)Long term obligation

$
26




$
11,667


Rent
expense under operating leases was approximately $2.0 million, $2.6 million and $2.5 million, for the years ended December 31, 2010, 2009 and 2008,
respectively.

F-25

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(12) Commitments and Contingencies (Continued)

License Agreements

Beth Israel Deaconess Medical Center

The Company acquired an exclusive license from Beth Israel Deaconess Medical Center (Beth Israel) relating primarily to ion channel
technologies. Under the terms of the license, if certain milestones are met, the Company is required to make cash payments up to an aggregate of $1.0 million. If commercialization is achieved,
the Company will be required to pay royalties on the net sales of any product using the licensed technology. In the event the Company grants a sublicense of the licensed technology, the Company is
obligated to compensate Beth Israel a percentage of all fees received from the sublicense. Through December 31, 2010, no milestone, royalty or sublicense payments had been earned by or paid to
Beth Israel.

Consulting Agreements

In October 2002, the Company entered into a consulting agreement with a Scientific Advisory Board, or SAB, member for scientific
advisory services which was amended in October 2003. Under the amended consulting agreement, the term was four years from the effective date of the amendment, and in exchange for a
one-time payment of $400,000, the parties agreed to eliminate a one-time bonus payment to the SAB member based on the achievement of a certain performance milestone that was
included in the original agreement. In addition to an annual consulting fee, the consultant was entitled to a bonus payment of a portion of any upfront or milestone payments received by the Company
related to certain calcium channel technology during the four-year term of the amended agreement. In April 2007, the Company further amended this consulting agreement for a
two-year term from the effective date of the amendment. In addition to the annual consulting fee, the consultant is entitled to potential bonus payments upon the Company entering into a
partnership for certain calcium channel technology and upon the filing of an investigational new drug application (IND) with the FDA for a drug candidate developed under such a partnership. In
connection with the Roche Agreement entered into in December 2008, the Company recorded a $250,000 fee to this consultant in the year ended December 31, 2008. This corresponding payment was
made in January 2009. In April 2009, the Company extended the consulting agreement until December 31, 2010.

Guarantees

As permitted under Delaware law, the Company's Certificate of Incorporation and Bylaws provide that the Company will indemnify certain
of its officers and directors for certain claims asserted against them in connection with their service as an officer or director. The maximum potential amount of future payments that the Company
could be required to make under these indemnification provisions is unlimited. However, the Company has purchased a directors' and officers' liability insurance policy that reduces its monetary
exposure and enables it to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification arrangements is minimal.

The
Company customarily agrees in the ordinary course of its business to indemnification provisions in agreements with clinical trials investigators in its drug development programs, in
sponsored research agreements with academic and not-for-profit institutions, in various comparable agreements involving parties performing services for the Company in the
ordinary course of business, and in its real estate leases. The Company has agreed to indemnify Roche and its affiliates under the Roche Agreement against losses, expenses, cost of defense, and any
amounts Roche becomes legally

F-26

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(12) Commitments and Contingencies (Continued)

obligated
to pay because of any claim that arises out of the breach of any representation or warranty made by the Company under the Roche Agreement, except to the extent that such losses are due to
the gross negligence or willful misconduct of Roche or the breach by Roche of any representation or warranty under the Roche Agreement. The Company also expects to agree to certain indemnification
provisions in any future drug discovery and development collaboration agreements. With respect to the Company's clinical trials and sponsored research agreements, these indemnification provisions
typically apply to any claim asserted against the investigator or the investigator's institution relating to personal injury or property damage, violations of law or certain breaches of the Company's
contractual obligations arising out of the research or clinical testing of the Company's compounds or drug candidates. With respect to lease agreements, the indemnification provisions typically apply
to claims asserted against the landlord relating to personal injury or property damage caused by the Company, to violations of law by the Company or to certain breaches of the Company's contractual
obligations. The indemnification provisions appearing in collaboration agreements are similar, but in addition provide some limited indemnification for its collaborator in the event of third-party
claims alleging infringement of intellectual property rights. In each of the cases above, the term of these indemnification provisions generally survives the termination of the agreement, although the
provision has the most relevance during the contract term and for a short period of time thereafter. The maximum potential amount of future payments that the Company could be required to make under
these provisions is generally unlimited. The Company purchased insurance policies covering personal injury, property damage and general liability that reduce its exposure for indemnification and would
enable it in many cases to recover a portion of any future amounts paid. The Company has never paid any material amounts to defend lawsuits or settle claims related to these indemnification
provisions. Accordingly, the Company believes the estimated fair value of these indemnification arrangements is minimal.

(13) Related Party Transactions

The Company paid its scientific founder and a member of the board of directors consulting fees of $120,000 in each of the years ended in December 31, 2010, 2009 and 2008.

In
November 2010, the Company entered into a subscription agreement with a director and largest existing stockholder (see Note 5).

(14) Retirement Plan

In 2003, the Company implemented a 401(k) retirement plan (the Synta 401(k) Plan) in which substantially all of its permanent employees are eligible to participate. Participants may
contribute a percentage of their annual compensation to the plan, subject to statutory limitations. The Company may declare discretionary matching contributions to the Synta 401(k) Plan.

In
April 2006, the Company began matching participants' contributions up to 50% of the first 6% of the employee's salary. The match is subject to a three-year equally graded
vesting schedule and any forfeitures will be applied to reduce the Company's contributions. Company contributions for the years ended December 31, 2010, 2009 and 2008 were approximately
$429,000, $426,000 and $514,000, respectively, subject to forfeitures.

F-27

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(15) Quarterly Financial Data (unaudited)

The following tables present a summary of quarterly results of operations for 2010 and 2009:

Three Months EndedMarch 31,
2010

June 30,
2010

September 30,
2010

December 31,
2010(in thousands, except shares and per share data)Revenues:License and milestone revenue

$
1,143

$
1,143

$
1,143

$
1,143Cost sharing reimbursements, net


2,880


2,217


2,240


1,916Total collaboration revenues


4,023


3,360


3,383


3,059Grant revenue











978Total revenues


4,023


3,360


3,383


4,037Operating expenses:Research and development


10,195


9,688


11,023


9,347General and administrative


3,086


2,716


2,591


3,055Total operating expenses


13,281


12,404


13,614


12,402Loss from operations


(9,258
)

(9,044
)

(10,231
)

(8,365
)Other expense, net


(50
)

(30
)

(31
)

(458
)Net loss

$
(9,308
)
$
(9,074
)
$
(10,262
)
$
(8,823
)Basic and diluted net loss per common share

$
(0.24
)
$
(0.22
)
$
(0.25
)
$
(0.21
)Basic and diluted weighted average number of common shares outstanding


39,451,592


40,342,671


40,382,862


41,263,628


F-28

---



SYNTA PHARMACEUTICALS CORP.

Notes to Consolidated Financial Statements (Continued)

(15) Quarterly Financial Data (unaudited) (Continued)



Three Months EndedMarch 31,
2009

June 30,
2009

September 30,
2009

December 31,
2009(in thousands, except shares and per share data)Collaboration revenues:License and milestone revenue

$
4,073

$
3,314

$
117,171

$
1,143Cost sharing reimbursements, net


437


1,336


13,234


3,537Total collaboration revenues


4,510


4,650


130,405


4,680Operating expenses:Research and development


22,639


10,098


9,084


9,234General and administrative


4,070


3,005


3,149


2,426Restructuring (Note 11)


1,236








Total operating expenses


27,945


13,103


12,233


11,660Income (loss) from operations


(23,435
)

(8,453
)

118,172


(6,980
)Other expense, net


(64
)

(42
)

(53
)

(57
)Net income (loss)

$
(23,499
)
$
(8,495
)
$
118,119

$
(7,037
)Net income (loss) per common share:Basic

$
(0.69
)
$
(0.25
)
$
3.49

$
(0.21
)Diluted

$
(0.69
)
$
(0.25
)
$
3.48

$
(0.21
)Weighted-average common shares outstanding:Basic


33,872,016


33,877,075


33,882,760


33,918,887Diluted


33,872,016


33,877,075


33,904,842


33,918,887


F-29

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